Gulf states look beyond oil for the future
- 19 July 2011
- From the section Business
It has been less than a century, but in that time, the Gulf states have changed beyond all recognition.
Before the discovery of oil, the region's vast desert was home to Bedouin tribes and their camels. The desert may still be close to peoples' hearts but you are more likely to find the Bedouin's grandchildren churning up the sand in their 4x4s than riding on a camel.
After the oil
Oil-wealth has helped this region boom. But governments are realising that they need to prepare their economies for when the oil runs out. They are trying to show the world that they are more than just one big oil field.
The United Arab Emirates is among the region's biggest spenders.
Just outside the capital Abu Dhabi is a project called Masdar City. It means 'source' in Arabic and has been billed as a zero-carbon sustainable city.
Complete with experimental solar panel farms, a research institute and electric cars, it will cost a cool $16bn to complete.
It is a project that few governments could afford. A green city is the ultimate vanity project for an oil-exporter you could say.
And you may have a point - despite this heavy spending on trying to innovate and experiment with new projects, the results are not there to show.
In INSEAD's recent Global Innovation Index, the United Arab Emirates came 34th out of 125 countries when it came to innovation. Qatar was slightly higher at 26th but no other Arab states even reached the top 40.
These are some of the richest nations on the planet yet they are not producing the results that you would expect with the money they have.
But here are some examples of success stories.
Twenty minutes from the centre of Dubai, off the main highway and in the middle of the desert, is a glass building - no different from any other office building, apart from the fact that it stands alone in the sand.
The building is owned by technology company Pacific Controls. Inside is the company's 'global command control centre', one large room with dozens of people looking at computer screens with flashing lights and maps.
From here, they monitor thousands of buildings across Dubai and abroad, using wireless technology.
They keep an eye on fire hazards, technical issues and control energy use. It is certainly very innovative, and Pacific Controls is reaping the rewards as its business grows and grows.
Every Gulf city here has a 'technopark' or a 'science and research city' or 'knowledge village'. Buzzwords abound and money is being poured into trying to make this region a research hub, a place where people can innovate.
But experts say governments have to go beyond funding impressive projects, that a sustainable eco-system for innovation is what is needed.
That takes time and time is money, especially when it comes to setting up a small business.
May Habib is 26. She has spent the past six months developing her business, aiming to become the world's biggest Arabic digital publisher.
She came to the United Arab Emirates because that is where her market is and where the money is but it is not without its challenges.
"The hypergrowth in the region has really been driven by multinational corporations," she says.
"The ability of the system to be hospitable to small companies who are trying to stretch shoe-string budgets is not in the mentality. If you're trying to run a lean, mean startup organization, it's tough to do."
But experts urge patience. The economies here are young and time is needed for governments to develop their innovation projects.
"This region came to the whole agenda of social and economic development very late in the process. In a single decade, they have achieved what probably took three to four to five decades for other mature markets," says Karim Sabbagh from Booz & Co and one of the authors of the Global Innovation Index.
"My expectation will be that over the next three - five years, the region will be in a position to move up the ladder. We just have to accept the fact that it takes time to set up these institutions."
And things are changing. There is talk of Dubai offering an entrepreneurship visa to give people the freedom to set up their own business here, rather than being tied to a big company.
And bodies like Abu Dhabi's Technology Development Committee have been set up with the aim of providing support for small businesses in the technology sector.
Great initiatives but for some, they have come late in the day.
"I think the question is not why not before, why now." says Wasfi Abu Ghazaleh, the Chief Operating Officer at the Technology Development Committee.
"This is a path that we know we have to be part of if we want to maintain our relevance."
Spending money on maintaining that relevance isn't a problem for the likes of oil-rich Abu Dhabi. But it'll have to wait a few more years to see if that spending translates into actual results.