Economic Update

Published 26 Jul 2016

A solid regulatory base, strong government support and rising demand from a young population are fuelling Dubai’s efforts to foster technology-driven entrepreneurship.

This push dovetails with the government’s Smart City initiative formally launched in March 2014, which looks to harness technology for social and economic development, particularly in key areas such as telecoms, tourism, utilities, education, buildings, public safety, transportation and health care.

The UAE ranked 19th  – an increase of one spot from the previous year ­– in the 2016 Global Entrepreneurship Index, which collects data on entrepreneurial attitudes and a country’s economic infrastructure.

Smart start-up opportunities

To help encourage the uptake of technology to achieve its Smart City goals, the government has developed a number of incubators to foster start-ups.

In its first year of operations, the Dubai Technology Entrepreneur Centre (DTEC) – one of the largest incubators and co-working spaces in the region – attracted more than 500 start-ups from 62 countries.

Since its launch in March 2015 DTEC has facilitated more than Dh50m ($13.6m) in investments for the start-ups operating under its umbrella, according to press reports, as well as offering mentorship through partnerships with tech companies such as SAP, Intel and Microsoft, among others.

Recently, efforts were given a boost by a public-private partnership launched by the Dubai Chamber and IBM, which also falls under the emirate’s Smart City initiative.

Unveiled in mid-May, DubaiStartupHub is an online platform hosted on IBM Cloud which connects tech start-ups, entrepreneurs, developers and venture capitalists to accelerate innovation, as well as economic development.

With access to more than 2bn consumers in the region and beyond, Dubai is well placed to serve as a focal point for tech-based growth and development, according to Dubai Chamber’s senior vice-president of the institutional support sector, Essa Al Zaabi.

Growth potential

While there has been substantial growth so far, opportunities for start-ups still abound, with many moving into the travel and hospitality, food and retail sectors, according to Louis Lebbos, founding partner of tech hub and start-up facilitator AstroLabs.

“There is a lot to do going forward. Dubai is on the global radar and is in a good position to consolidate companies and talent from the broader region,” Lebbos told OBG.

Though the region’s tech sector is in an early development stage, Lebbos noted that Dubai has advantages over its neighbours due to its international openness and well-developed infrastructure and logistics network. Stakeholders also point to the established rule of law and the regulatory framework as a competitive advantage.

“There are no issues in terms of regulation as the government is keen to develop the sector,” said Ulugbek Yuldashev, founder and managing director of Awok.com, a Dubai-based e-commerce platform. “Full regulation for the e-market is already in place.”

Dubai’s generous tax scheme, which includes no income taxes for companies and individuals, free trade policies and special economic zones targeting particular industries are also a draw for entrepreneurs, according to local media reports.

That said, the introduction of a value-added tax in 2018, as well as ongoing discussions regarding introducing income tax for companies, are likely to change the current tax situation in the coming years.

Moreover, some zones – such as the Dubai Internet City and Dubai Media City – do not impose the same work visa requirements found elsewhere in Dubai, which enables freer movement of employees, a key benefit for international companies.

Venture capital is also an expanding segment of Dubai’s burgeoning entrepreneurial sector.

“Five years ago there was no venture capital sector at all in the region, just a few super angels. Today, there is between $1bn and $2bn available. Funding is really important and these ventures need to be equity-financed,” Dany Farha, CEO and managing partner at BECO Capital, told OBG.

Despite the emirate’s advantages and the potential for strong returns, Dubai’s entrepreneurs need to take a long-term outlook, according to Omar Kassim, CEO of sales portal JadoPado.

“E-commerce is a marathon and a long-term commitment,” Kassim told OBG. “You cannot get in, make money, and leave. We are still some way from explosive growth in the near term.”

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