Sustainable development through FDI-driven innovation and technology – what do we expect from a national innovation policy?

Sustainable development in a broader sense means designing the right mix of economic, social and environmental policies for today and for tomorrow. It can however not always be that easy to predict tomorrow.

The main theme of the Annual Investment Meeting in Dubai (29 March – 1st April 2015) is Sustainable Development through FDI induced innovation and technology transfer. Clear parallels can be drawn between the developed world and the developing economies, with the latter benefiting from the experiences of the former.

In Western Europe we have been witness to many waves of economic development policy.

If we take the UK as an example, the gradual decline of the coal and steel industries in the 1970s and early 1980s, led to an FDI-driven strategy that focused on attracting predominantly low-skilled, but labour intensive manufacturing jobs in areas such as electronics assembly.

Let us remember that this solution, at that time, responded to both a sharp peak in unemployment in certain parts of the country, as well as the need for new vocations that corresponded to the transferable skills of a large number of predominantly manual workers.

With the gradual expansion of the European Union to the East and the redefinition of Europe in terms of priority development zones allowing Eastern Europe to offer a more than competitive and subsidised (and skilled) labour base, the UK started to prioritise the promotion of what was labelled “a knowledge-based economy”. This was in order to secure new jobs for the UK that would, in theory, be anchored to the UK via the skillset that had been both found and developed there.

In many ways developing and frontier economies are benefiting from this experience and as such many of these countries are using “innovation” and “technology transfer” as the key buzzwords in their national economic strategies. The notion of sustainable FDI is becoming ever more important: it is not just about ensuring the foreign investment, but also projecting the impact of that investment on the host country – and this in part is about the technology that is transferred into the host country via the investment.

This is a rather important for the United Arab Emirates as this is a country that has experienced strong economic growth over the past years, massively and predominantly driven by via foreign direct investment.

As the UK saw its natural resources and manufacturing industry become less and less competitive over the past decades hence its change in FDI policy, so has the UAE which was largely dependent on oil reserves, focused on successfully diversifying its economy.

The UAE have the foresight however to see that the continued development of their service and manufacturing industries must hinge on technology and innovation development for it to be sustainable.

The UAE also has the ambition to become the largest technological hub in EMEA and this will come in the immediate via the technology transfer that FDI investment can provide.

The Dubai Strategic Plan, launched in December 2014 confirms clearly that the achievement of sustainable development is conditional to the availability of several elements, and most importantly innovation. The ambition is clear for His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, “The UAE is already the most innovative Arab nation. We want to be among the most innovative nations in the world. The UAE invests Dh14 billion each year in innovation, Dh7 billions of which is spent on research and development. We will raise this target significantly.”

One of the main themes of the UAE’s innovation strategy is “to anchor a stimulating environment for innovation in the form of supportive institutions and laws”.

An announcement this month of the opening of a new innovation hub at the Dubai Multi Commodities Centre in April 2015 is just the start of this. A joint venture between Astrolabs and the Dubai Investment Development Agency, the “hub” will provide collaborative working space and an educational centre. This initiative which will create a 6500 sqft facility to house 100 start-ups.

The fact that this facility has been driven and continues to be promoted via the Dubai Investment Development Agency is testament to the UAE’s continued focus on attracting inward investment, as means to rapidly also becoming an international technology centre.

Whilst the quick route to developing an innovative economy and a varied skills base is to import it in, this initiative is of course aimed at encouraging home-grown innovation. This links in with other key themes in the nation’s Innovation policy, notably to “encourage private sector innovation by stimulating companies to establish innovation and scientific research centres, to adopt new technologies, and to develop innovative products and services”.

In the words of Sheikh Mohammed: “Innovation today is driven by effective institutions, strong policies, specialised skills, and an economy where all sectors work together to discover new ways to conduct business. A flexible and creative economy based on a national culture of innovation is the fastest and most sustainable way to reinforce the UAE’s competitiveness on a global level.”

This will also be important for a cohesive economic development of a country where FDI is so present.
Again if we come back to our initial example of the UK, as its FDI-driven economic strategy turned to attracting more “high value-add” foreign investment in the 1990s, economic policy-makers also became more and more aware of developing the home-grown skills base and encouraging not just innovation through FDI investment, but also from the roots-up innovation.

To create not just a sustainable economy but also a sustainable society, this cohesion between technology transfer and home-grown innovation will be important not just for the UAE but for all economies be they labelled “developed” or “developing”, as will the use of some of these anchor FDI projects as a means to continue to develop the local skills base and provide future generations with sustainable jobs.

Sustainable FDI and the topic of economic policy options for the promotion of innovation and technology transfer through FDI is just one of the topics at this year’s AIM summit in Dubai (30 March – 1 April 2015). Come and participate with key institutions and public and private sector players in the debate.

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