Boosting innovation is central to the economic transformation strategies of the Gulf countries. Maximising the effectiveness of innovation policies requires supporting sectors based on the degree of scientific interlinkages with other sectors. Britain’s outperformance of France during the initial part of the Industrial Revolution is illustrative of the role played by innovation networks in economic development.
A central pillar of all of the Gulf countries’ economic visions – as they continue to transition from hydrocarbon centricity to diverse, knowledge-based economies – is improving the levels of innovation. This is based on the observed importance of technological advancement to economic growth in virtually all rich economies.
This emphasis is reflected in the large volume of resources that the Gulf countries have allocated to endeavours such as reforming education systems, establishing branches of elite global universities, launching joint ventures with leading multinational manufacturing companies, and supporting the growth of small and medium-sized enterprises. The ultimate goal is for local entrepreneurs to consistently lead the commercialisation of homegrown, cutting-edge technologies that create jobs and raise living standards.
During such transitions, one of the questions that policymakers ponder is: Which sectors should we support?
The traditional criteria include selecting sectors in which the country has, scientifically speaking, a comparative advantage – meaning that they have a decent chance of being contributors to pioneering technological advancements. This is one reason why the Gulf countries are investing heavily in renewable energies: they are looking to build on extensive domestic knowhow in the energy domain, as their local universities already boast competitive engineering departments.
Another important consideration is supply-chain interlinkages. Economists have long espoused investing in sectors where a growth leap “spills over” into other sectors because of vertical and horizontal dependencies.
Gulf countries may wish to ensure that their current technological investments are focused on domains that are close to the centre of the innovation network
For example, when energy prices fall, the productivity of almost every other sector rises, especially energy-intensive ones such as heavy petrochemical manufacturing. This also partially accounts for the UAE’s enthusiasm for developing its homegrown capacity in the area of AI, as this general-purpose technology is likely to provide a boost in efficiency to many areas of economic activity.
However, one area that has not fully been incorporated into the Gulf countries’ innovation strategies is the importance of innovation “spillovers”, whereby technological advancements in one sector spawn innovations in other sectors. This is to be contrasted with the aforementioned supply-chain interlinkages approach, which focuses on how innovation in one sector lowers the input costs – or raises output demand – in other sectors without necessarily having any impact on innovation in those neighbouring sectors.
One reason for this omission is the nascence of economic research on the issue.
This phenomenon has been explored in a new study conducted by Dr Lukas Rosenberger (at the Ludwig Maximilian University of Munich), and Carl Hallmann and Dr Walker Hanlon (both at the Northwestern University), titled “Innovation networks in the Industrial Revolution”. Their study’s starting point is the divergence in Franco-British economic growth witnessed during the first half of the Industrial Revolution in the 18th century.
On the one hand, Britain led the world in the process of centralising and scaling manufacturing, thereby reaching historically unprecedented rates of economic expansion – of about 3.3 per cent annually – during the first half of the 19th century. France, on the other hand, industrialised more slowly, and lagged behind its northern neighbour, growing at about 2.3 per cent annually during the same period.
The authors argue that differences in technological focus were a key cause of these differing trajectories.
In particular, Dr Rosenberger and his colleagues noted that British inventors focused on new technologies such as steam engines, machine tools and metallurgy, which exhibited a high propensity to spawn technological innovations in other areas of scientific inquiry. In contrast, French inventors agglomerated in the more peripheral elements of the innovation network, such as apparel, glass and papermaking.
These differences were exemplified by the patenting behaviour: British and French inventors alike patented heavily in their respective areas of focus, but British ones were much more likely to also patent in areas distinct from their primary focus.
The study concludes that about half of the substantial difference in Franco-British economic growth can be accounted for by this innovation-network channel. In light of these findings, the Gulf countries may wish to ensure that their current technological investments are focused on domains that are close to the centre of the innovation network.
AI – one of the favoured domains at present in several Gulf countries like the UAE – appears to satisfy this criterion. But some of the other areas of focus may lie closer to the periphery, thereby representing suboptimal investments.
Beyond the nascence of this line of inquiry, there is another reason for why some innovation strategies sometimes yield outcomes that are less effective than hoped, which is the overemphasis on global innovation indices. These measures of a country’s capacity to innovate depend on crude factors such as spending on research and development and the rate at which commercial patents are registered.
While these indices are useful for obtaining a rapid assessment of a country’s innovation capabilities, they are not designed to be the foundation for deep reforms seeking to transform an economy into an innovation powerhouse. That is because they do not take into account the sort of nuanced yet pivotal details that the study by Dr Rosenberger and his colleagues have identified.
A number of civil servants in the region understandably gravitate towards these prestigious measures of progress. As a result, they inadvertently skew innovation policies towards short-term interventions that are marginally important, away from complex ones that have a much more profound effect.
No matter what a management consultant might claim, determining optimal economic policy is a non-linear process that requires sound subjective judgment by civil servants and homegrown experts intimately familiar with local idiosyncrasies, rather than following a series of predictable steps.
Further, the study by Dr Rosenberger and his colleagues affirms the benefits of having deep knowledge of historic episodes of economic growth, so as to avoid the cardinal sin in the world of business: reinventing the wheel.
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About Takalam
Date started: early 2020
Founders: Khawla Hammad and Inas Abu Shashieh
Based: Abu Dhabi
Sector: HealthTech and wellness
Number of staff: 4
Funding to date: Bootstrapped
The candidates
Dr Ayham Ammora, scientist and business executive
Ali Azeem, business leader
Tony Booth, professor of education
Lord Browne, former BP chief executive
Dr Mohamed El-Erian, economist
Professor Wyn Evans, astrophysicist
Dr Mark Mann, scientist
Gina MIller, anti-Brexit campaigner
Lord Smith, former Cabinet minister
Sandi Toksvig, broadcaster
It Was Just an Accident
Director: Jafar Panahi
Stars: Vahid Mobasseri, Mariam Afshari, Ebrahim Azizi, Hadis Pakbaten, Majid Panahi, Mohamad Ali Elyasmehr
Rating: 4/5
Classification of skills
A worker is categorised as skilled by the MOHRE based on nine levels given in the International Standard Classification of Occupations (ISCO) issued by the International Labour Organisation.
A skilled worker would be someone at a professional level (levels 1 – 5) which includes managers, professionals, technicians and associate professionals, clerical support workers, and service and sales workers.
The worker must also have an attested educational certificate higher than secondary or an equivalent certification, and earn a monthly salary of at least Dh4,000.
Who was Alfred Nobel?
The Nobel Prize was created by wealthy Swedish chemist and entrepreneur Alfred Nobel.
- In his will he dictated that the bulk of his estate should be used to fund "prizes to those who, during the preceding year, have conferred the greatest benefit to humankind".
- Nobel is best known as the inventor of dynamite, but also wrote poetry and drama and could speak Russian, French, English and German by the age of 17. The five original prize categories reflect the interests closest to his heart.
- Nobel died in 1896 but it took until 1901, following a legal battle over his will, before the first prizes were awarded.
KILLING OF QASSEM SULEIMANI
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The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
Company profile
Name: One Good Thing
Founders: Bridgett Lau and Micheal Cooke
Based in: Dubai
Sector: e-commerce
Size: 5 employees
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Investors: Self-funded and seeking external investors
Basquiat in Abu Dhabi
One of Basquiat’s paintings, the vibrant Cabra (1981–82), now hangs in Louvre Abu Dhabi temporarily, on loan from the Guggenheim Abu Dhabi.
The latter museum is not open physically, but has assembled a collection and puts together a series of events called Talking Art, such as this discussion, moderated by writer Chaedria LaBouvier.
It's something of a Basquiat season in Abu Dhabi at the moment. Last week, The Radiant Child, a documentary on Basquiat was shown at Manarat Al Saadiyat, and tonight (April 18) the Guggenheim Abu Dhabi is throwing the re-creation of a party tonight, of the legendary Canal Zone party thrown in 1979, which epitomised the collaborative scene of the time. It was at Canal Zone that Basquiat met prominent members of the art world and moved from unknown graffiti artist into someone in the spotlight.
“We’ve invited local resident arists, we’ll have spray cans at the ready,” says curator Maisa Al Qassemi of the Guggenheim Abu Dhabi.
Guggenheim Abu Dhabi's Canal Zone Remix is at Manarat Al Saadiyat, Thursday April 18, from 8pm. Free entry to all. Basquiat's Cabra is on view at Louvre Abu Dhabi until October
Killing of Qassem Suleimani
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Ovo's tips to find extra heat
- Open your curtains when it’s sunny
- Keep your oven open after cooking
- Have a cuddle with pets and loved ones to help stay cosy
- Eat ginger but avoid chilli as it makes you sweat
- Put on extra layers
- Do a few star jumps
- Avoid alcohol
