Petroleum, on which Dubai’s economy was based a generation ago, now constitutes just 2% of its economy. This is because the emirate of 2 million people has capitalised on its location as a trading port to invest seriously in tourism and free zones and, with preparations under way for Dubai Expo 2020 – the first world expo to be held in the Middle East – it is on the brink of moving into the knowledge economy. 

Dubai FDI CEO Fahad Al Gergawi explains that Dubai is now seeking to become a knowledge-based economy, with a particular focus on investment in R&D and innovation, and an emphasis on diversification and sustainability. “We have been witnessing investor confidence in Dubai improving consistently in recent years and Dubai matching it with unique projects in innovative sectors, such as smart services and IT, green technology, aviation services, education and healthcare,” says Mr Al Gergawi. While logistics, tourism and retail are Dubai’s chief growth engines, the emirate is also focusing on the Islamic economy, with the goal of becoming a hub for specialised services and emerging sectors.

Given Dubai’s dependence on the international economy, it has moved to protect itself from external shocks by developing the most diversified economy in the region. “Dubai has withstood the recent eurozone crisis, falling oil prices and other regional traumas,” says Mr Al Gergawi. His biggest challenge, he says, is “educating investors on Dubai’s economy in the face of gloomy media headlines”. The United Arab Emirates is often criticised for its high cost of living, unsustainable environmental practices, labour and human rights policies, and its lack of press freedom, among other things.

“That is why we have successfully launched Dubai Investment Forum in October [2015] to identify and promote growth, partnerships and innovation opportunities in the region,” says Mr Al Gergawi. While foreign ownership outside free zones cannot exceed 49%, Mr Al Gergawi points out that this has never been a barrier for international business – and that in Dubai’s 23 free zones, investors can have 100% ownership. Dubai attracted $7.8bn in FDI in 2014 alone and hosts companies from 70 countries. 

New concepts

A rising contender in Dubai’s pursuit of R&D excellence is Dubai Science Park (DSP) – the umbrella entity for the Dubai Biotechnology and Research Park (DuBiotech) and the Energy and Environment Park (EnPark) – which aims to play a key role in Dubai’s Vision 2021, a mission to improve sustainability practices and increase the development of indigenous talent.

“DuBiotech started in 2005, and the vision was to create a centre for life sciences focused on fostering R&D and healthcare opportunities – not only in the UAE but in the entire market,” says Marwan Abdulaziz, executive director of DSP. When EnPark was created in 2007, Mr Abdulaziz noticed possible synergies, so he later merged the labs to create DSP. In total, DSP has five groups – human sciences, plant science, food sciences, material sciences and environmental sciences. The latter includes renewable energy and energy efficiency. DSP also pursues sustainable practices, to the point that treated sewage water is reused for landscaping, the lab building is Leadership in Energy and Environmental Design certified and solar powered, and other buildings are to be retrofitted with solar power.

Mr Abdulaziz explains that since Dubai started with a weak R&D base, DSP first attracted companies to sell their products and technologies. “Our model is very different. We started from the end and worked backwards – from sales and marketing to distribution and storage to local manufacturing – and it has been really successful,” he says. DSP now hosts 300 companies from 30 to 40 countries, 40% of which are SMEs. Among the well-known names established in the park include multinationals Pfizer and Medtronic.

In establishing the parks, Dubai spent about $400m on physical infrastructure, then signed a memorandum of understanding with the Ministry of Health to develop close relationships with both academia and regulators to bridge the gap between the government and the private sector. DSP has also started an incubator for SMEs so that they can take advantage of DSP’s network. The commercial laboratory building is what sets DSP apart from other free zones – that and a tax-free guarantee for 50 years.

There are some challenges to introducing DSP’s vision, according to Mr Abulaziz. “Scientific research is a new concept for the region and thus a challenge in getting people to connect with it. It’s been difficult to explain to people the potential of science,” he says. But DSP is working to counter this, creating science courses in local schools to get young people on board.

Meeting demands

Dubai is also investing heavily in the rapidly growing healthcare sector, largely through Dubai Healthcare City (DHCC), the world’s largest healthcare free zone. “The growth and development of any successful economy depend heavily on the health of its citizens,” said Sheikh Mohammed Bin Rashid Al Maktoum, ruler of Dubai, during its launch in 2002.

DHCC operates in healthcare, medical education, research and investment, according to Dr Raja Al Gurg, DHCC’s vice-chairwoman and executive director. Phase one covers 380,000 square metres and has 130 medical facilities, including hospitals, medical centres and diagnostic laboratories. Phase two, a wellness centre currently under development, will cover 2 million square metres.

“Being in a free zone gives DHCC an important image for investors,” says Ms Al Gurg. DHCC has a total of 5060 healthcare professionals and continues to see growth in licensing. It also offers healthcare providers a 'one-stop shop' to set up operations and receive free zone benefits, which include 100% foreign ownership and repatriation of profits. 

Phase one has a 96% occupancy with a 5% attrition rate – the industry average – and Dubai’s new mandatory health insurance law should increase demand. DHCC is responding to the regional demand for oncology with a new oncology unit built by Medicine Middle East, part of Mediclinic International, one of the 10 largest private hospital groups in the world. 

Medical tourism numbers have grown enormously in the past three years, according to Ms Al Gurg. “We looked at every angle to attract tourists to DHCC – and that means giving them the right environment, the best medication and the best treatment. While cost is a factor, quality takes precedence, and the trends are shifting towards a comprehensive experience for patients and families,” she says.

Pursuit of value 

DHCC sees healthcare innovation in terms of better delivery of care, better methods including diagnostics, drugs and technology, and better business models. “Our model thus works to attract the best medical expertise and global partnerships to share expertise and thus encourage continuous learning,” says Ms Al Gurg. It includes the Mohammed Bin Rashid Academic Medical Center, which has the first comprehensive training using interactive human-patient simulators – a new concept in medical education.

Looking to its youth, DHCC’s second medical college – the College of Medicine for undergraduates – will see 50 students graduate by 2016, with a total of 150 from both colleges, says Ms Al Gurg. Colleges for nursing and midwifery, health sciences, public health and pharmaceuticals will also be added.

Mr Al Gergawi of Dubai FDI is optimistic about Dubai’s ability to respond to changing global demands. “Our goal is to attract knowledge-intensive, high value-added international companies to Dubai and I am confident that Dubai can leverage its dynamism and flexibility to offer innovative solutions for sustainable growth,” he says.