Thanks to its investor-friendly business environment, world-class infrastructure, and strong government backing, Dubai is fast emerging as the go-to tech hub for the region. What lessons can other rival startup centers around the region, including Jordan, learn from the emirate’s success?
Dubai is investing big to fulfill its ambition to become the Silicon Valley of the Middle East. In 2014, it unveiled a $1.2 billion program exclusively dedicated to developing the home-grown IT industry, which is currently estimated to be worth around $4.5 billion.
Dubai has also established a number of free zones to cater to the ICT sector. It first established the Dubai Internet City (DIC) in 1999, and followed that by the Dubai Outsource Zone (DOZ) in 2007, with more in the pipeline. “Today the DIC and the DOZ comprise the largest ICT hub in the MENA region, with more than 1600 companies in total, more than 60 percent of Fortune 500 companies, and a workforce in excess of 15,000,” the Oxford Business Group said in a report. There are also the numerous accelerators and incubators that have been set up in recent years like ImpactHub, Astrolabs Dubai, In5, and Turn8.
But besides the millions of dollars being spent, what else is Dubai doing right? “Dubai has surely established itself as a major center for technology and media companies in the region. Its excellent infrastructure, multicultural nature, well connected airport, free tax status, and welcoming environment for expatriates from across the world surely serve into that,” said Jawad Abbassi, the founder and former general manager of the Arab Advisors Group who moved from Amman to Dubai to become GSMA’s head of MENA and acting head of Africa.
Besides the top-notch infrastructure and services, Marwan Juma, the founder of Kinz for Information Technology and former ICT minister, believes what makes Dubai attractive to companies, big or small, is its large market, as many of those who operate there end up catering to Saudi Arabia as well.
Other major pull factors, said Juma, include the emirate’s predictable business environment. It has clear laws and tax structures, which unlike Jordan’s seemingly ever-fluid regulatory framework, help businesses plan ahead and encourage them to invest.
What’s perhaps even more important, he added, was how Dubai can attract the best young minds from around the world, not least from Jordan. “Dubai is all about opportunities. Today the young generation doesn’t feel that they’re tied to a place, they will go with the opportunity,” he explained. “(What’s best) for a young graduate, to come here and make JD600 a month and in a few years make JD800, or go to Dubai and live on $3,000 a month, gain mobility, exposure, more professionalism and have more room to grow? They’d rather be there.”
Khalid Wazani, a Jordanian economist who also moved to Dubai to become an advisor to the Mohammed Bin Rashid Foundation, praised Dubai’s government’s support for the sector. One example of that being GITEX 2016, the Gulf Information Technology Exhibition, which attracted more than 4,000 companies and institutions and over 140,000 participants. Add to that the openness of Dubai’s economy, the steps that the government is genuinely taking to transform its economy into a fully smart one, the ease of doing business in the country, and you have a winning formula, he added.
Yet despite Dubai’s many strengths, there are still certain areas where it struggles to compete with other existing tech hubs in the region such as Jordan.
The government of Dubai owns the emirate’s two telcom operators: Etisalat and du. While they provide a bountiful income stream for state coffers, they prohibit the use of voice-over-IP services to do so. “If you really want to be a hub you can’t prevent Skype and Viber. Eventually they are going to have to let go and open up if they are serious about being a hub,” explained Juma. He said Jordan’s open and competitive telecom market, which comprises three private telecom operators and allows all voice-over-IP technologies, makes it more lucrative for some businesses to be based in the Kingdom.
Also, Juma argues that rising living costs in Dubai, particularly in terms of housing and education, was likely to make it a less attractive draw for startups. But to be fair, Amman can hardly be considered a cheap destination, either. The Economist Intelligent Unit named Amman as the most expensive city in the Arab world, followed by Abu Dhabi and Dubai, after having compared the prices of 160 products and services including housing, transportation, food and drink.
The cost of setting up a business is also higher in Dubai, said Juma.
But one of the gaps in both cities seem to be the lack of a bankruptcy law, which both are working to issue to encourage insolvent businesses to exit stage left fast and seamlessly move on to a new venture.
This year’s closely–watched Global Innovation Index ranked the UAE 12th in terms of ICT infrastructure, 26th in ICT access, and 12th in government online services. Jordan, on the other hand was ranked 82 overall, and 77 when it came to the Kingdom’s ICT infrastructure, 70 in ICT access and 62 with its government online services.
But Juma and Abbassi both believe it would be a mistake to frame the development of the region’s IT industry as a race between competing hubs like Amman, Dubai, Beirut and Cairo.
According to Juma, who was one of Oasis500 founders, expanding and scaling outside of Jordan—which is a limited market—is a healthy sign of success, but only if these businesses maintain their kitchen in the Kingdom. “Growth has to be outside Jordan. You can’t stay here. The main idea behind Jordan’s IT sector was that companies maintain their development, core and the majority of employees here.”
Abbassi believes that having more than one ICT center in the region is to the benefit of everybody. “Many companies have mostly moved sales and marketing functions to Dubai but kept much of the work in Amman. This way they are near the exhibitions hub of the region and also benefit from the tax environment while at the same time they kept production in Amman, which has ample skills and nice cost structure. It is not Dubai versus other cities. Rather it is a win-win situation for the region in my opinion.”
Nonetheless, there’s no denying Dubai’s growing status as a significant city for tech innovation. “There is a rule of law, there are processes and professionalism, and you know where you’re heading. They have their ups and downs just like anybody else, but there are opportunities, there’s a market. There’s size,” said Juma.