While the Dubai Smart IoT strategy reads like any other ambitious – and equally ambiguous – plan for the overhaul of a gulf state economy, there is still a clear message that the country is serious about technology
Pat Brans Associates/Grenoble Ecole de Management
Published: 28 Jun 2023 11:00
In keeping with all other technology plans in the region, The Dubai Internet of Things (IoT) Strategy has the lofty ambition of building the world’s most advanced internet of things (IoT) ecosystem. The plan is to protect Dubai’s digital wealth and get all government departments to undergo digital transformation, and one of the objectives of the transition is to become a 100% paperless government.
The strategy was first announced in October 2017, and is regularly updated. From the beginning, it was set to be implemented over a three-year period in four consecutive phases, which were very vaguely defined. The first phase would be about coordinating activities to implement IoT policies across government departments. The second phase was to harmonise efforts towards implementing the IoT Strategy. The third was to optimise, and the final phase was to apply blockchain.
While more than three years have passed since 2017, the current version of the plan still mentions that the work will take three years and occur in four phases. However, regardless of the unclear schedule and fuzzy definitions of those phases, if you read between the lines, there actually is a clear message: Dubai and the rest of the UAE want to undergo digital transformation, and they have the money to make it happen.
“Smart city and smart IoT concepts overlap quite nicely with the broader economic development trends in the UAE and the country’s economic policy ambitions,” said Robert Mogielnicki, senior resident scholar at The Arab Gulf States Institute in Washington. “At the emirate level, in places like Dubai and Abu Dhabi – and even in the northern Emirates like Ras Al Khaimah – there are a lot of technology-focused initiatives.”
The Emirates are trying to infuse technology into their economies at every level. IoT-related technologies are appealing to UAE policymakers, who like to experiment with a particular type of initiative. If that initiative succeeds in attracting residents, investors and startup companies, they replicate the initiative in another domain.
“The calculation at the moment is that the high-net-worth individuals, the multinational firms and the entrepreneurs Emirati officials want to attract to the country are going to be attracted to cutting-edge developments,” said Mogielnicki. “While top-level government officials do recognise that technology can streamline government services and make both the government and the broader society more efficient, they are also intent on keeping Dubai very attractive for high-net-worth individuals, and for tourists in general.”
One of the key barriers to a broader application of technological services across the economy is the abundant availability of low-skilled, low-cost labour. For a long time, this has allowed local firms, and foreign firms operating in the Emirates, to continue to be profitable, despite having low levels of productivity.
Low-skilled, low-cost labor is in almost indefinite supply because there are strong links to countries in South Asia, from where they can import cheap labour. For a long time, that has enabled firms to remain highly profitable compared with global counterparts.
“But that’s not always going to be the case,” said Mogielnicki. “The firms that have not moved beyond this dependence upon low cost, low skills and low productivity labour are going to really start to fall behind. On one level, this is a concern for UAE policymakers.”
Another concern is the unique demographics of the country, made up of 90% expatriates and 10% citizens. Government officials want technology-focused policies to be driven by the Emirates. They don’t want to be entirely dependent upon foreign providers for critical technological services: they want to have some indigenous capabilities and skills – at least enough to provide support.
“One success story that immediately comes to mind is G42,” said Mogielnicki, referring to the homegrown technology company with strong links to the government. “They are one of the fastest-growing local companies in the UAE, and they form lots of diverse partnerships. They recently inked an agreement with an Israeli firm, and they’ve also worked with Chinese firms.”
He said G42 is trying to protect domestic national interests. “Like all top-tier Emirati firms, they make sure that when they partner with companies like Huawei, Microsoft, Cisco and other multinationals, those companies transfer skills to locals,” said Mogielnicki.
Moving towards a more diversified economy
The UAE sees technology as an important enabler of economic diversification, moving the economies of the Emirates towards being more sustainable and less oil-based. The UAE is already the most diversified economy in the Gulf region, but it still has a long way to go.
Some individual Emirates have made tremendous progress moving away from a reliance on abundant natural resources. Abu Dhabi is probably the slowest, only because they have the most hydrocarbon resources, which makes it more difficult for them to make the break.
Dubai and the other northern Emirates never had substantial energy resources, which means they’ve had to get good at trade, logistics and aviation. Now, they’re full speed ahead on technology.
“It’s still not entirely clear how the technology sector is going to contribute to public sector revenues to the same degree as proceeds from the oil and gas sector do,” said Mogielnicki. “I guess the calculation now is bringing the big technology multinationals to set up regional headquarters and then charge a corporate income tax, which they just brought online this year.
“They will charge other fees and services to these individuals when they’re in the country. That seems to be the model right now, but it’s a work in progress.”