LIFE AFTER OIL
Dubai pursues a diversified focus on science, technology and innovation to create a sustainable future. By Nithi Kaveevivitchai
Aware that oil won’t last forever, Dubai has been betting on science, technology and the arts as it pursues economic diversification and sustainability. The initial results suggest it is setting an excellent example for other oil-exporting countries.
Among the developments that have oil-based economies worrying about their future is the rise of electric vehicles (EV). Sooner rather than later, they will become a mainstream means of transport. Their adoption, together with higher fuel efficiency in other areas, could cut global oil demand by 3.5 million barrels per day (bpd) or about 4% of current consumption, according to a forecast from the UK-based bank Barclays.
Even though there are still many barriers to EV growth, several countries are already considering measures to ban or curb sales of vehicles with internal combustion engines. Britain and France will ban all new petrol- and diesel-fuelled cars by 2040, but Paris and some other cities want to enact bans by 2030 or sooner. India wants all new cars sold in the country to be electric by 2030.
The EV movement is just one factor that could hasten the decline of oil and send prices plunging. According to Tony Seba, a futurist and clean energy expert from Stanford University in California, global oil demand will peak at 100 million bpd by 2020, and will then start to drop to 70 million bpd by 2030. The expected fall in demand could send the price down to approximately US$25 a barrel from around $60 now.
“Electric vehicles would destroy the global oil industry after a decade,” Mr Seba wrote in a research report. “And by 2030, 95% of people won’t own private cars, which would wipe out the automobile industry.”
Following on from widespread disruption of the oil-fuelled automotive industry, electric planes could be the next big thing to disrupt the oil industry, he contends. Smaller battery-driven planes are expected to become a popular choice on shorter routes.
Such forecasts have prompted countries dependent on oil exports to diversify their economies and start generating meaningful revenue from non-oil sectors before it is too late.
For more than 100 years, most Arab countries have been defined by oil exploration and production. Now the region is seeking a new purpose and ways to grow beyond fossil fuel. Among the petro states, Dubai has been a standout in terms of success in economic diversification. As the most populous of the seven United Arab Emirates (UAE), which are home to more than 200 nationalities, Dubai has been diversifying its economy since the 1970s. The results of its ambitious policies have been phenomenal.
Ever since the UAE was first formed in 1971, government policy to diversify the economy away from petroleum has created a clear development path. The UAE has become a global financial hub and a major trading centre. It is a location of choice for multinational operations as well as an increasingly desirable tourist destination. Today, the non-oil sector accounts for about 70% of gross domestic product but the government expects the figure to reach 80% in the next 10 to 15 years.
‘REAL’ DUBAI
Believing that innovation is the key to the future of economic development, UAE leaders have emphasised its importance across all sectors through UAE Vision 2021. The goal is to realise the crucial contribution of innovation, research, science and technology which are the pillars of a knowledge-based, highly productive and competitive economy. The government attempts to create a business-friendly environment where the public and private sectors can form effective partnerships and collaborations.
The government’s many targets are very ambitious but they reflect four decades of strong determination, according to Marwan Abdulaziz Janahi, executive director of Dubai Science Park and chair of the Pharmaceutical and Medical Equipment Taskforce of Dubai Industrial Strategy 2030.
“Dubai Science Park is home to some 350 regional and international companies in the life sciences, energy and environment sectors. As the region’s first dedicated science community, our state-of-the-art facilities provide these important sectors with the capability to thrive in an era of technological advancement at a rapid pace,” Mr Janahi wrote in an article published in The National last year.
He noted that innovative research and development is being carried out every day within Dubai Science Park. The success of Mubadala Healthcare’s National Reference Laboratory (NRL), which focuses on supporting the Ministry of Health and Prevention, is an excellent example. The laboratory offers cancer-screening programmes across the Emirates in an attempt to improve early cancer detection rates as well as other areas.
“Our infrastructure is playing an enabling role across other sectors in the field of science,” said Mr Janahi. “The multinational food, beverage and snack corporation PepsiCo has its regional innovation facility at Dubai Science Park, where the focus is on the development of new flavours and recipes that are tailored to the regional market, and on growing issues such as sugar reduction.”
Dubai health authorities have also been successful in promoting medical tourism, with the emirate forecast to attract more than 500,000 medical tourists by 2020.
Dubai is also doing extremely well as a tourist destination overall. It attracted more than 14 million overnight visitors in 2016, making it one of the top 10 tourist hotspots in the world.
The Department of Tourism and Commerce Marketing noted a four-year compound annual growth rate (CAGR) of 8% in arrivals between 2012 and 2016. That is double the global travel industry figure for the same period, as reported by the United Nations World Travel Organization (UNWTO).
The emirate’s tourism marketing strategy has been built around luxury resorts, entertainment and high-end shopping malls. But the factors that created this boom might not last forever. According to Issam Kazim, CEO of the Dubai Corporation for Tourism and Commerce Marketing (DTCM), the city is changing track.
“The emirate’s glitzy side with its sleek restaurants, high-end hotels and luxury shopping malls is no longer the main draw for tourists. Instead, they want to experience the ‘real’ Dubai and how its local residents live their lives,” Mr Kazim said in an interview with Arabian Business.
“The emirate’s glitzy side with its sleek restaurants, high-end hotels and luxury shopping malls is no longer the main draw for tourists. Instead, they want to experience the ‘real’ Dubai and how its local residents live their lives” ISSAM KAZIM Dubai Corporation for Tourism and Commerce Marketing
In order to achieve the goal of attracting 20 million visitors per year, Mr Kazim acknowledges that Dubai must attempt to appeal to a wider variety of visitors from a broader range of markets. Repositioning from being a family holiday destination or an expensive city break to an adventure and cultural destination for all ages and budgets is the way that Dubai would like to market itself.
“We knew we could not continue to rely on the six or seven markets that brought us our first 10 million tourists — the Gulf Cooperation Council (GCC) states, the UK, India, Germany, Russia and the US — we need to go beyond that,” said Mr Kazim. “We are now targeting the Commonwealth of Independent States (CIS), Africa, and other places in Asia and Europe such as Malaysia, Indonesia and the Nordic countries.”
As well, the Mice (meeting, incentive, conference and exhibition) business is growing rapidly in Dubai as it remains the top choice for businesses among the GCC. According to the Union of International Associations (UIA) which ranked 1,157 cities in terms of international meetings that took place in 2016, Dubai moved up from 14th place in 2015 to 10th in 2016, having a total of 180 meetings throughout the year. In 2012, it ranked 26th with 76 international meetings. The city’s infrastructure and global connectivity have been a big factor contributing to the growth.
TECH HUB & ART CITY
With over 2 billion people living within a four-hour flight and the advance of infrastructure development, Dubai is also the right location for a thriving startup business scene. The city has been very successful in drawing tech talent from around the globe. According to the Startup Cities Index, which ranks 85 of the world’s most dynamic startup cities, the emirate has been ranked 29th globally. The survey covered five categories: startup ecosystem, salaries, social security and benefits, cost of living, and quality of life.
Patrick Vosgimorukian, managing partner of Digital Spring Ventures, believes Dubai is moving into the right direction in this regard.
“A powerful regional tech startup hub can evolve only when the ecosystem takes root. The three most important components for that were local talent pool, access to venture capital funding, and a favourable legal framework. All these were present in London, New York and Silicon Valley,” Mr Vosgimorukian said in an interview with The Khaleej Times.
Dubai’s success as an oasis for startups can be reflected in the $290 million in funding across 88 deals throughout the Middle East and North Africa during the first half of 2017. Most of these deals were driven by Dubai-based venture capitalists investing in Dubai-based companies.
Known as an architectural playground, with project approvals for insanely expensive and imaginative design projects seeming to come almost every other week, Dubai has also established itself as a destination for art auctions to serve the needs of wealthy residents and investors from all over the world. Auction houses such as Christie’s and Sotheby’s have been educating the young and new collectors on the appreciation of art for a decade.
According to Michael Jeha, managing director of Christie’s Dubai, the art market in Dubai has developed significantly over the past 10 years. The strategy was first to localise the market, then move on to broaden its regional and then international focus.
“We have spent a long time building up relationships with families, collectors and artists. We helped to regionalise the market and then, beyond that, internationalise it,” Mr Jeha said in an interview with The National.
Approximately 30% of the buyers at Christie’s Dubai now come from outside the region, evidence that the emirate’s art market has become truly internationalised.
The successful economic diversification of Dubai reflects not only careful planning and execution by government but also the support from its residents. For others seeking to emulate the Dubai model, macroeconomic stability and supportive regulatory and institutional frameworks are key prerequisites.
Other countries can take notes from Dubai’s journey, but the appropriate policy packages and sequencing of reforms need to be designed in the context of each country’s specific circumstances and capacity. How Dubai managed not only to survive, but to thrive, in the wake of crisis is no doubt a notable lesson.