Economic 360 for UAE: Growth Prospects and Emerging Opportunities in the ICT Industry

2012-06-08
Published : Jun-2012

The ICT industry is one of the major non-oil-and-gas-based industries in the UAE. In 2010, it contributed 3.2 percent of the gross domestic product (GDP). The UAE Government has invested in the development of ICT infrastructure with different free-trade zones and the ongoing installation of a fiber-optic network. In addition, the government’s liberalized policy initiatives have induced market flexibility to attract multinationals. Investment opportunities are envisaged in the fixed-line, mobile-phone, hardware, software, and IT-services sectors.

Executive Summary

Political Analysis

  • The United Arab Emirates (UAE) is a federation of seven emirates/monarchies headed by Sheikh Khalifa bin Zayed Al Nahyan. The Federal National Council, the nation’s legislative branch, is unicameral and comprises 40 members. The position of that of a political head in the UAE is hereditary, therefore successors are announced according to the traditional rule of governance.
  • The UAE is favorably positioned relative to the other southern Gulf nations. It is expected to attract large investors to Dubai, leading to increased deposits in Dubai banks and, in turn, increasing the lending capacity of the nation.
  • The UAE has not been much affected by the political turmoil in the Arab world. Factors such as declining growth, rising food prices, and youth unemployment, which have contributed to unrest elsewhere in the region, are less prevalent in the UAE. As the local population is content with their standard of living, the government has not prioritised political reforms. The UAE is likely to remain politically stable in the short to medium-term.

Economic Analysis

  • The pace of economic growth is expected to gain momentum between 2011 and 2012. An increase in the government’s expenditure and a rise in oil production and prices between 2011 and 2013 are likely to promote economic growth.
  • The government’s debt burden is under control. Real estate and the banking sector are predicted to grow between 2011 and 2015.
  • The growth of the non-hydrocarbon sector and the capability of the economy to diversify between 2011 and 2015 are forecast to support the UAE economy. Hydrocarbon production and counter-cyclical fiscal spending are expected to drive real output growth between 2011 and 2012.

Social Analysis

  • The UAE’s demographic trends are characterized by rapid urbanization and rising population growth. The UAE consists of the most varied population groups in the Middle East region. The population is majorly grouped into native Emiratis, Arabs, Iranians, Westerners, South Asians and East Asians.
  • The UAE’s economy is expected to achieve its Millennium Development Goals (MDGs) by 2015. The primary education enrolment rate is 98.0 percent and the literacy rate among the population aged xx-xx years is xx.x percent. The government is focusing on national human resources and creating job opportunities in the private sector. The government has concentrated on building hospitals and townships as part of its humanitarian aid policy. It also focuses on building organizations such as the Abu Dhabi Fund for Development (ADFD), Red Crescent Authority (RCA), and the Humanitarian Foundation (HF), which provide billions of dollars to support disasters and drought-stricken areas across the globe.

Technical Analysis

  • The science and technology undertakings in the UAE are governed by the state. Most of the expenditure is undertaken by the government. There has been an increased private participation, with foreign direct investment (FDI) inflow into research and development (R&D). There is increasing research on new sources such as solar, wind, and geo-thermal energies. The Masdar Institute of Science and Technology (MIST) is expected to advance entrepreneurship and help technology-led companies to grow through the use of shared resources, management expertise, and intellectual capital. R&D investments in areas such as drugs, defense, fuels, biotechnology, information technology, automotive, telecommunications, and health care are anticipated to strengthen the UAE’s technology base.

Legal Analysis

  • The UAE has a liberal law system compared to other Middle East (ME) nations. It follows civil law jurisdiction, but Islamic law is applied to family and inheritance issues and certain criminal acts. The Sharia law is applicable to all individuals or groups involved in business activities. A federal court system applies to all Emirates except Dubai and Ras al-Khaimah. Sheikh Zayed bin Sultan Al Nahyan led the era of liberalization and development in the UAE.

Environmental Analysis

  • The UAE’s key environmental issues are rapid urbanization, rising pollution, loss of wildlife habitat, carbon-dioxide emissions, and global warming.
  • Demand for ground water for farming and green belt plantations have led to an increased rate of extraction.
  • The government is focused on preserving and maintaining plant cover and the biodiversity of the region. It is incorporating strategies to reduce greenhouse gas (GHG) emissions. The UAE has begun to construct a major solar power plant, it is expected to help them to achieve the target of x.x percent renewable energy by 2020. It is likely to invest $xxx.x million for renewable energy projects between 2011 and 2015. The government is likely to focus on maintaining water resources and air quality, health and safety, biodiversity, and mitigation of and adaptation to the climate change.

Information and Communications Technology (ICT)

  • The ICT industry in the United Arab Emirates (UAE) is gaining momentum as one of the key high-growth, non-hydrocarbon industries and it contributes around x.x percent to the gross domestic product (GDP). The government has initiated multiple projects and also injected funds to stimulate growth in the industry.
  • The government’s focus areas are e-governance and infrastructure developments. It has set up ICT clusters such as Dubai Internet City and Dubai Silicon Oasis to promote the use and development of ICT.
  • Companies such as Cat Logistics and HCL are investing in the development of ICT, research and development (R&D), green ICT, and fiber-optic networks.
  • Spending on the ICT industry is increasing steadily, with a focus on the education related ICT.

Telecommunication (Telecom)

  • Etisalat had monopolized the UAE telecom market 2007. However, after 2007, Du also began operations there.
  • In 2004, the government of UAE created the Telecommunications Regulatory Authority (TRA), to develop, regulate, and monitor the telecom industry in the UAE.
  • The market is segmented into fixed-line phones, pay phones, and mobile phones. While there is moderate to low growth for fixed lines and pay phones respectively, the mobile market is growing. With a penetration rate of around xxx.x percent, WiMAX technology, broadband, and other technologies are a mainstay in the UAE mobile segment.

Information Technology (IT)

  • Hardware component manufacture is minimal in the UAE, but software is developed on a large scale, especially in the free zones.
  • The major sub-sectors of IT services include systems integration services, software support and installation, hardware support and installation, and outsourcing. The government as well as the finance, construction, agriculture, and mining sectors use IT services in the country. The prominent and growing IT areas include mobile, video, and data services. Demand for uninterruptible power supplies (UPS) with higher capacities is also increasing.
  • The UAE has a large IT outsourcing market, approximately xx.x percent of which is based in Dubai. This market is likely to grow in Abu Dhabi and Sharjah, as well.

Economic 360 for UAE: ICT Industry Growth Prospects and Emerging Opportunities

Published: January 2012        No. of Pages: 89       Price:  US $ 1495

Table of Contents

Executive Summary

Political Analysis

Economic Analysis

Social Analysis

Technology Analysis

Legal Analysis

Environmental Analysis

Information and Communication Technology (ICT) Industry

About Frost & Sullivan

Telecommunication Market

Information Technology Market

List of Figures

List of Charts

Filed in: Market Research Database, Telecommunications
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