< Previous20 AB LEADERS April 2023 FEATURE | INNOVATION reforms as well as investments in further diversification to create a more sustainable, socially cohesive, and more competitive knowl- edge-based economy. This strategy helped the UAE recover from the global fi nancial crisis of 2007/2008. In 2014, the UAE introduced the National Innovation Strategy to promote investments in renewable energy, transportation, education, healthcare, technology, water, and the space sciences. The following year, the National Innovation Committee organised 214 conferences and produced 865 initiatives during Inno- Policy was established in 2016 and allocated a budget of AED300bn ($81.7bn). The UAE certainly has the ambi- tion for more innovation to aid further economic diversifi cation. A sequel to that 2010 policy document -- called Vision 2021-2030 -- encouraged the development of space technologies and new sources of renewable energy, such as solar power, to enable the UAE to meet its goal of net zero emissions by 2050. In February 2021, the UAE became the fi rst Arab nation to successfully reach Mars, creating another giant step towards a knowledge-based economy. Much of the technology aboard its Hope robotic probe in the Martian orbit is home-grown and is sharing the data from Mars with the international scientifi c community. The Emirati government believes the mission will inspire a new generation of local scientists and technologists. By 2031, the UAE aims to become a global leader in artifi cial intelligence (AI), which it deems to be key in advancing innovation. In 2017, it created its own ministry for AI in a bid to become an early adopter of the technology and eventually become a net exporter of AI capabilities. Investments in incubators and accelerators are promoting AI, machine learning, internet of things and blockchain applications, and small and medium-sized enterprises (SMEs) are being encouraged to take risks in this sphere. These technologies will be a central focus of an innovation-driven business ecosystem at District 2020, a new urban sustainable business and living hub designed to emerge from the redevelopment of the Dubai Expo site. District 2020, which will curate businesses believed to be key to the UAE’s future - such as smart logistics, smart mobility, digital healthcare and smart cities - aims to bring together global minds and to use technology and digital innovation to support cross-collaboration. Indeed, the word ‘innovation’ has become a buzzword throughout the vation Week, of which 30 were short- listed. These 30 initiatives encouraged investments in incubators, worker skillsets, public-private partnerships (PPPs), as well as bureaucratic and legislative reforms. To fund these initiatives, the Emirates Science, Technology and Innovation Higher Black gold Abu Dhabi discovered crude oil in 1958, with exports commencing in 1962 2031 The year in which the UAE aims to become a global leader in artifi cial intelligencearabianbusiness.com 21 UAE economy. But a healthy innova- tion ecosystem needs investment in research and development (R&D), human capital, and technology that entrepreneurs can tap into to develop and commercialise innovations. It requires an environment that is receptive to risk taking and it needs learning institutions. This paper examines the founda- tions of the UAE’s innovation ecosys- tem, the country’s innovation strate- gies, how its modern ecosystem compares with that of other countries and analyses the constraints on the evolution of the innovation ecosystem. A survey of UAE innovations The year 1971 saw an explosion of new technology in the Global North, from the fi rst email and fi rst commer- cially available fl oppy disk to the fi rst programmable microprocessor and the introduction of the Nasdaq, the world’s fi rst electronic stock market. The same year, six Trucial sheikhdoms forged the UAE federation (the seventh joined in early 1972), creating a nation free from a British protectorate that could create its own future and capi- talise on recent oil discoveries. Since then, the UAE’s population has surged from 277,463 to almost 10 million, while nominal GDP soared from $1.77bn to $421bn in 2019. Abu Dhabi discovered crude oil in 1958, with exports commencing in 1962, followed by an oil discovery in Dubai in 1966. By 1959, the Dubai emir- ate had spotted an opportunity to invest in a port that could accommo- date modern ships, but its ability to competitively raise funds was hampered by a monopoly granted in 1946 to the forerunner of the British Bank of the Middle East (now HSBC Bank Middle East). In 1963, Dubai breached the monopoly agreement with the British Bank and created the National Bank of Dubai. The emirate’s first domestic bank introduced competition to the banking sector, thereby boosting liquidity and making funds available at cheaper rates. Construction of the port went ahead and the fi rst ship docked in 1972. However, insufficient domestic and bonds. By doing so, not only did the ADIA optimise the oil reserves’ net present value, but its investments in global securities propped up the currency’s security and hedged the economy against infl ation. A commodity-based SWF was not a new concept: 23 years earlier, the Kuwait Investment Authority had set one up. Nevertheless, emulating this innovation served the UAE well as it boosted investor confidence and promoted economic growth, and the ADIA’s success has since been repli- cated in other countries. By 1974, the Sheikh Rashid Tower (now the Dubai World Trade Centre) had broken ground, signaling to the world that the UAE was open to the world as a free and open market. The fi rst Islamic bank in the world, the Dubai Islamic Bank, was estab- lished in 1975, off ering Sharia compli- ant contracts. Its introduction increased liquidity in the banking sector because religious individuals and businesses who had been hoarding cash began to invest in wakala deposits absorptive capacity bloated the UAE’s trade and current account surplus, risking faster infl ation and currency appreciation. Curtailing oil exports was not an option because other producers stood to increase market share and there was concern total revenue would fall should oil prices decline in the future. In 1976, Abu Dhabi established the Abu Dhabi Investment Authority (ADIA), a sover- eign wealth fund (SWF), to convert a potentially depleting asset class -- the oil reserves - into a perpetually grow- ing asset class, namely global stocks Sharia fi nance The fi rst Islamic bank in the world, the Dubai Islamic Bank, was set up in 1975 A healthy innovation ecosystem needs investment in research and development (R&D), human capital, and technology that entrepreneurs can tap into to develop and commercialise innovations | INNOVATION22 AB LEADERS April 2023 FEATURE | INNOVATION and borrow through new instruments such as murabaha, mudarabah, and ijara. Today, the Dubai International Financial Centre is the regional hub for Islamic fi nancial products. The 1979 Iranian revolution desta- bilised the UAE, which responded by promoting tourism. New public-pri- vate initiatives transformed the coun- try into a destination for sport, shop- ping, business and healthcare tourism, thereby helping to diversify the econ- omy and reduce its dependency on crude oil exports. The 1984 UAE Commercial Compa- nies Law (CCL) facilitated the estab- lishment of US-style limited liability companies (LLCs), allowing the formation of business structures that protect its owners and operators from being personally pursued for debts or liabilities. These legal structures can encourage startup entrepreneurs to commercialise new innovations with- out exposing themselves to unaccept- able personal risks. But in the UAE, credit institutions required LLC owners to use their personal assets as collateral, which both defeated the purpose of the business structure and led LLCs in the UAE to adopt a more conservative approach to risk-taking when it came to commercialising innovations. The Jebel Ali Free Zone The 1984 UAE CCL required that all LLCs and trading and manufacturing entities be at least 51 percent owned by UAE nationals in bid to increase citizen participation in private commercial entities. But this did not augur well with the UAE’s free market doctrine, so the country set up the Jebel Ali Free Zone Authority (JAFZA) in 1985. This enabled foreign investors who registered with JAFZA and operated out of the Jebel Ali Free Zone (JAFZ) to own up to 100 percent of their businesses. The JAFZA gambit paid off. A strong logistics cluster with ware- housing, cross-docking, packaging, marshalling and central distributing facilities emerged within the free zone and the foreign direct investment (FDI) created as a result of the measure attracted a new pool of specialised talent. Today, more than 7,500 busi- nesses employ a combined 135,000 people in the free zone. Furthermore, the Jebel Ali Port itself developed into the largest container port between Singapore and Rotterdam and is the ninth-bus- iest port in the world. JAFZA intro- duced a slew of measures aimed at reducing red tape on companies, such as the introduction of one-stop shops for licensing, leasing, work visas and work permits. The author- ity did not impose standard plot sizes on investors and allowed creditors to mortgage fi xed assets built on leased plots, which was not the case further inland. It also made membership of the chamber of commerce optional and did not require goods to be cleared of customs before being stored inside the zone, which freed up cash that investors could deploy more productively elsewhere. All these innovations made businesses within the free zone more effi cient Modernisation By 1974, the Shaikh Rashid Tower (now the Dubai World Trade Centre) had broken ground, signaling to the world that the UAE was open to the world as a free market The free zones also pioneered co-working spaces in the UAE, thereby encouraging the creation of micro- enterprises arabianbusiness.com 23 and productive and heightened demand for JAFZA registrations. The popularity of the free zone led to the 1984 CCL amendment and free zones became legitimate entities. Subsequently, several new free zones emerged and there are now 60,000 businesses at more than 50 trade and non-trade free zones. These busi- nesses boosted overall competition in the UAE and encouraged private-sector innovation, and the free zone administrative solutions have been adopted by other govern- ment authorities seeking to become more business friendly. Indeed, free zones are now used as policy tools for promoting industry clusters and creating well-paid jobs for citizens. These clusters are attract- ing a diversity of talent, new technol- ogies, and FDI, and many creative startups have found these free zone clusters to be a fertile ground for collaboration and synergy. For instance, the merger of the operations of real-estate portal Bayut with those of classifi ed ads portal Dubizzle – both of which originated at Dubai Internet City - enabled the tech fi rms to cross- sell into each other’s markets, expand their combined footprint, and become the dominant portal for their range of products and services. Meanwhile, free zone startups Souk.com and Careem were acquired by Amazon and Uber, respectively. In 2020, the Yalla Group, a social networking and entertainment plat- form set up at Dubai Internet City, became the first UAE-based tech company to list on the New York Stock Exchange. Zeta, a fi nancial app plat- form, and Kitopi, a cloud-based kitchen platform, raised hundreds of millions of dollars through Japan’s SoftBank. The free zones also pioneered co-working spaces in the UAE, thereby encouraging the creation of micro-en- terprises. Many of these co-working spaces evolved into incubators or accelerators that incentivise entre- preneurs to start a business without incurring high costs. July 2021 ushered in a paradigm shift in UAE company law, when the 1984 CCL was amended to allow 100 percent foreign owner- ship of entities. This meant overseas investors were no longer required to partner up with an Emirati citizen to own companies, a move that should further encourage competition and incentivise innovation. Emirates Between 1980 and 1985, the UAE’s tourism industry began to take off in earnest, thanks to initiatives such as the region’s fi rst shopping mall, the Dubai World Trade Centre becoming a preferred venue for regional events and exhibitions, the fi rst professional off -road four-wheel drive Masafi Rally enticing international enthusiasts, and the fi rst cricket stadium to host international cricket tournaments opening up in Sharjah. In response, Dubai upgraded its airport by adding a second runway and modernising the arrival and departure lounges. But, in the early 1980s, Gulf Air, a carrier owned by Abu Dhabi, Bahrain, Oman, and Qatar, enjoyed a virtual monopoly over regional travel. The airline was in a unique position to collaborate with Dubai but chose not to. This led Dubai to launch its own airline, Emirates, in 135,000 The number of staff employed by 7,500 businesses based in JAFZA | INNOVATION24 AB LEADERS April 2023 FEATURE | INNOVATION 1985 in pursuit of its diversifi cation strategy into tourism. While airlines are not new innova- tions, the speed at which Emirates scaled up to become the world’s third-largest airline is attributed to its innovative marketing and high level of customer service. That innovation continues today: instead of depending on imported produce for passenger meals, Emirates recently invested in vertical farms next to its kitchens so it could grow its own fresh fruit, berries, and vegetables. This tackled the diffi culties posed by UAE’s climate and limited water resources, which mean the country cannot usually produce good quality fruit and vege- tables by traditional means. Emirates became a platform for many domestic and international innovators targeting the airline and travel industry. This ecosystem comprises more than 200,000 people working at the core and an additional 400,000 in the peripheries. The creation of Emirates also led to many other successful initiatives that promoted tourism in the country, such as: 1. Gulf News Fun Drive (outdoor family entertainment – 1986) 2. Victory Team (powerboat race – 1988) 3. Desert Classic (world-class golf tournament – 1989) 4. Dubai Air Show (defence and aeronautics exhibition – 1989) 5. Dubai Shopping Festival (family entertainment and discount shopping – 1996) 6. Gulf Information Technology Exhibition (GITEX) (ICT exhibition – 1996) 7. Dubai World Cup (horse racing – 1996) 8. Global Village (family entertain- ment and merchandising – 1997) Emaar Established in 1997, the real estate developer sought and received special rights to sell land, homes and commercial property in multi-story buildings to non-Gulf Cooperation Council (GCC) nationals in designated freehold-zones. By doing so, Emaar – the company behind the Burj Khal- ifa, the world’s tallest building – had tackled a failure by the market to meet pent-up demand for property from non-GCC nationals. The profi ts generated because of the measure attracted several state- owned enterprises (SOEs) to satisfy the demand. Swaths of undeveloped land were designated as freehold zones and the subsequent construc- tion activity triggered a domestic economic boom. And it was only a matter of time before some free hold zones began to off er free zone services and vice versa. Early SOEs duplicated Emaar’s model: they prepared the masterplan, negotiated with utility and transpor- tation link providers, invested in a central hub, and sold land or off -plan properties to fund construction of the infrastructure required for the devel- opments. The model evolved to master developers taking on partner develop- ers and, in some cases, the work was divided among contractors, fi nancers, real estate agents and developers. The SOEs competed against each other and against Emaar by off ering property lifestyles that would suit diff erent budgets, building develop- ments on themes ranging from golf, lakes, and theme parks to high-rises, beachfronts and artificial islands. Today, the Palm-shaped artificial peninsulas and The World archipelago developed by Nakheel are engineering marvels that can be seen from the International Space Station. Masdar City As far back as 2006, when the World Wildlife Fund rated the UAE as having the world’s largest ecological footprint per capita, Abu Dhabi launched Masdar City, billed as the world’s fi rst carbon-neutral city to be built under the One Planet Living framework. Designed by British architectural fi rm Foster + Partners, the futuristic city on a 2.5-square mile patch of desert was intended to house 50,000 people and 40,000 workers. Though progress on the project has been slower than initially projected, the innovation is an example of what a post-petroleum city could look like. Masdar City, which relies on solar Flag carrier The speed at which Emirates scaled up to become the world’s third-largest airline is attributed to its innovative marketing and high level of customer servicearabianbusiness.com 25 power and other forms of renewable energy, is being developed by renew- able energy company Masdar, a subsidiary of Mubadala Investment Company, the Abu Dhabi govern- ment’s strategic investment company. In December, Abu Dhabi announced that three of the UAE’s energy giants – Adnoc, Taqa and Mubadala – would partner under the Masdar brand and combine their renewables and green hydrogen portfolios to form a clean energy powerhouse. The UAE’s innovation engine Fast-tracking innovation became possible with clusters of free zones, which incentivised anchor tenants to move in, thereby becoming network nodes for a range of supporting and competing businesses. These busi- nesses developed and off ered innova- tive solutions. The free zones further fast-tracked innovation by establishing co-working spaces and investing in incubators, innovation centres, and accelerators. They actively promoted start-up entrepreneurs by guiding them on legal and commercial matters, intro- ducing them to industry leaders and angel investors, and preparing them for fundraising, mergers and acquisi- tions, or a stock market listing. The UAE is home to more than 30 incubators, innovation centres, accel- erators, ecosystem builders, and venture studios. Several businesses have graduated from these platforms and some have been acquired by inter- national brands, such as Wrappup, an AI-powered voice-to-text note-taking platform that was purchased by Voicea, which in turn was acquired by tech giant Cisco. Its features were then embedded into Cisco’s Webex video-conferencing application. Others like Anghami became the fi rst Arab tech company to success- fully list on the Nasdaq. Both Wrappup and Anghami were founded at the in5 technology incubator at Knowledge Village. However, while free zones such as Knowledge Village, Internet City, the Dubai International Financial Centre, Twofour 54, and Masdar City have sparked many innovations, others have languished. The UAE is now a regional hub for incubators and is attracting start-ups from across the globe. Some univer- sities have also introduced innova- tion-promoting programs and the local and federal government agen- cies, SWFs, and chambers of commerce are investing in R&D and financing innovative startups. By focusing on promoting cutting-edge technologies and digitalisation, the UAE is seeking to bypass the tradi- tional economic growth stages. Global rankings Between 2012 and 2020, the UAE moved up the rankings on the Global Innovation Index (GII), which is jointly published by Cornell University, INSEAD and the World Intellectual Property Organisation, from 37th place to 34th place. However, the GII said the UAE could become even more innovative if it increased production of creative intangibles and online creativity, expanded knowledge creation, improved its overall busi- ness environment, enhanced R&D capacity, and increased promotion of trade and competition and of innova- tion links with businesses. What can the UAE learn from other countries? In 2020, the top three GII countries were Switzerland, Sweden, and the US, where investments in efficient open-data systems, R&D and educa- tion propelled innovation. In 2018, when the global average of R&D expenditures was 2.3 percent of GDP, these countries spent 3 percent or more. By contrast, the UAE spent 1.3 percent of its GDP on R&D. In educa- tion, the average global spend was 4.5 percent of GDP, but Sweden spent 7.6 percent, the US 6.2 percent, and Swit- zerland 5.1 percent, whereas the UAE spent just 1.1 percent of its GDP. Given Real estate Emaar had tackled a failure by the market to meet pent-up demand for property from non-GCC nationals 1.3% The UAE’s spending on research and development in relation to GDP | INNOVATION26 AB LEADERS April 2023 FEATURE | INNOVATION that education is an essential prereq- uisite for basic and applied research, and that research leads to innovations that are developed and commercial- ised, increasing the percentage of GDP spend on education and R&D would build the UAE’s knowledge capital and improve its innovation capacity. Switzerland, Sweden and the US also leverage their well-developed institutions for basic and applied research, specialised R&D, brokerage services that bring universities and the private sector together to develop and commercialise innovations, and to disseminate research fi ndings. Some of the leading national insti- tutions promoting innovation in these countries include the following: The US: The Defence Advanced Research Projects Agency, the National Aeronautics and Space Administration (NASA), the Health & Human Services Laboratories, the National Science Foundation Switzerland: The Swiss National Science Foundation, ETH Zurich, Swiss Innovation Park, European Organisation for Nuclear Research (CERN), and pharmaceutical giants such as Roche and Novartis Sweden: The Swedish Research Council, the Swedish Research Coun- cil for Sustainable Development (Formas), Forte, Vinnova, the Swedish Foundation for Strategic Research, the Foundation for Strategic Environ- mental Research, and the Knowledge Foundation These countries understand that the private sector typically shies away from the risks that can be posed by investments in basic and applied research. Accordingly, they have been channelling public funds into such research, and they then share the fi nd- ings with the private sector through PPP programmes. In addition to allow- ing access to the research fi ndings, the PPPs also extend technical, fi nancial and occasionally commercial assis- tance to the private sector for develop- ing and commercialising the innova- tions. Companies such as Tesla and Apple Computer have benefi ted from such programmes. Through an elaborate social safety net that can protect citizens from inflation and higher medical costs in their old age, these countries encourage people to risk their savings instead of hoarding wealth such as gold, real estate or art for a rainy day in their old age. Meanwhile, increased national savings make cheap funds available for commercialising inno- vations and investing in production facilities. Cheap funds make busi- nesses more receptive towards taking risks with new innovations and production capacity. These countries also tend to have effective bankruptcy laws that increase investors’ willingness to take on risk. The bankruptcy laws in the US, Switzerland and Sweden allow for an effi cient transfer of the assets and liabilities of bankrupt entities into more capable hands, thereby reducing the amount of time that an asset remains unproductive and allowing a more effective owner to extract greater value from assets. Strong property ownership laws, especially for intellectual property Sustainable plans In December, Abu Dhabi announced that three of the UAE’s energy giants – Adnoc, Taqa and Mubadala – would partner under the Masdar brand and combine their renewables and green hydrogen portfolios to form a clean energy powerhouse 4% The UAE’s non-oil economic growth in 2023, according to IMF projectionsarabianbusiness.com 27 (IP), are also crucial for ensuring ownership rights are not expropri- ated. In fact, these countries work through multilateral organisations and bilateral trade agreements -- and even threaten export restrictions, boycotts and sanctions -- to ensure that the property rights of their busi- nesses are not infringed upon. The key takeaways for the UAE, therefore, are: 1. Increase investments in R&D and education as a percentage of GDP 2. Invest public funds in basic and applied research 3. Create an eff ective and produc- tive open-data mechanism that reduces the cost of gaining information 4. Assist the private sector in developing and commercialising innovations through tailored PPP programmes 5. Invest in specialised research institutions to design, research, develop, and commercialise innovations 6. Broker between academia and the private sector to research, develop, and fi nance innovation 7. Protect property rights against expropriation, especially IP rights 8. Ensure a well-functioning and effi cient bankruptcy regime is in place What can the UAE learn from its own experiences? Eliminating monopolies in the UAE opened up new markets in areas such as banking, air travel, property ownership and business ownership and encouraged entrepreneurs to innovate and invest in new capacities to compete against each other. This led to job creation, an increase in market size, economic growth and an improvement in citizen welfare. Free zones provided the platform for increasing diversity and competi- tion. They fast-tracked economic growth and became the main devel- opment policy tool for creating busi- ness clusters, diversifying the econ- omy, and advancing innovations. Co-working and co-sharing spaces nursed startups. By unburden- ing startups from a need for upfront capital investment - which can prompt entrepreneurs to take up paid jobs rather than incur the cost of starting their own company - these entrepreneurs were instead nudged into taking risks with their time and limited fi nancial resources to promote their ideas and innovate. Businesses were enabled to mort- gage properties on leased lands, thereby allowing them to generate cash flow by converting bricks and mortar into liquid assets. This cash flow provided valuable capital for productive investments, such as busi- ness improvements, R&D, marketing, and capacity increases. The freehold zones unclogged the property market and attracted new investments. Instead of remit- ting their savings, expats invested in property. Meanwhile, financial insti- tutions increased domestic liquidity by tapping into international savings to finance the construction work. Eliminating monopolies in the UAE opened up new markets in areas such as banking, air travel, property ownership and business ownership and encouraged entrepreneurs to innovate and invest | INNOVATION28 AB LEADERS April 2023 FEATURE | INNOVATION The scale and scope of property development triggered a boom that benefited developers, building contractors, property owners, trad- ers, manufacturers, households, and service providers. The country’s security and currency stability attracted FDI and helped drive up domestic savings. Indeed, the UAE attracted the highest FDI fl ows of any Arab country last year, according to the UNCTAD 2021 World Investment Report. FDI attracts talent, managerial skills, technology, and boosts expertise and a country’s capacity for innovation. Public invest- ments in major development projects in the UAE increased entrepreneurial confi dence and encouraged the private sector to take more risks and innovate. Meanwhile, the leadership’s long-term vision and guidance cultivated trust. Restraining factors Even though the UAE federation is a common market, it is not necessarily a unified market. Competition, investment, ownership and market accessibility rules can diff er in each emirate. The differences between free zone, freehold zone and the mainland markets extend diff erent privileges, which occasionally lead to costly and cumbersome barriers. Instead of investing their resources in innovation, entrepreneurs have to preoccupy themselves with circum- venting these barriers to benefi t from the privileges extended. As a result, productivity, efficiency, and the capacity to compete suff ers, hinder- ing productive innovation. Certain barriers are designed to protect or provide an advantage to some citizens or to protect, promote or sponsor monopolies. Other barri- ers repel private investment in desig- nated industries. Even though free zones and freehold zones have opened up new markets by unclogging pent-up demand, these zones have also created enclaves with barriers. Capital mostly fl ows freely in the UAE. But this is not always the case with labour - when an expat is chang- ing jobs, the new employer must apply for a fresh visa and work permit, the administrative cost of which is mostly borne by the business taking on the new hire. Recent liberalisation of the rules means that, for the fi rst time, expats can take up part-time jobs or switch from one employer to another more easily even if the previous employer objects. Nevertheless, these liberalisations have not taken away the administra- tive costs that are imposed on employ- ers seeking to relocate an expat worker from their business in one emirate to their business in another emirate. Such moves require the employer to change the employee’s visa and work permit. Accordingly, such restrictions shrink the labour pool, increase recruitment costs, encourage businesses to hoard labour, and prevent the free movement of ideas, skills and knowledge. A lurking undercurrent that is also undermining innovation is the rent-seeking institution. Rent seeking stymies competition and hampers the country’s capacity to innovate. Such institutions result from policies promoting or tolerating rent generation, extraction, or distri- bution practices, which benefi t a few at the cost of the overall economy’s efficiency and productivity. When such institutions are embedded in a society’s culture, it creates cognitive dissonance and clouds any decisions intended on promoting innovation. One example of a rent-extracting institution is the UAE’s fee-based system for issuing or renewing a commercial license. In his book The Knowledge economy The UAE is home to more than 30 incubators, innovation centres, acceler- ators, ecosystem builders, and venture studios 3.8% Dubai’s real GDP growth in 2023, according to Fitch Solutionsarabianbusiness.com 29 Miracle, Michael Schuman identifi ed India’s “license Raj” as the main culprit behind the country’s economic divergence from other emerging economies. It was not until India reformed this system that busi- nesses started to become more competitive and innovative. An alter- native to a fee-based system is a price-based system for generating public revenue, which tends to be less damaging to innovation. While the UAE’s free zones and freehold zones encouraged foreign and domestic investments and promoted innovation, market liber- alisation was partial and restricted to these zones. This has created opportunities for the extracting, generating and distributing of rent, which hamstrings growth, competi- tion, and innovation. Some laws and practices that protect or promote monopolies, such as the Commercial Agency Law and the Federal Telecommunication Law, are institutionalising rent extraction, thereby leading to an adverse eff ect on competition and innovation. It remains to be seen whether the recent government considerations on abol- ishing the Commercial Agency Law will progress. Even though signifi cant informa- tion is available over the internet, up-to-date and accurate domestic information is not available to inves- tors and enterprises. This means busi- nesses rely on obsolete or speculative information, which restrains their appetite for risk and constrains inno- vation. To stimulate the emergence of a healthy innovation ecosystem, it is vital that timely and accurate informa- tion is available to entrepreneurs. Indeed, the government is in a strong position to collect, compile, and disseminate such information in order to facilitate good business decisions. The race against time The global economic landscape is changing rapidly as advances in digi- tal neural systems take over from muscular and machine-powered systems. Since Steward Brand declared at a 1984 conference that “Information wants to be free,” the world has experienced the rapid rise of the internet and the decline in the power of government to control and monopolise information. Governments that seek to do so stunt economic prosperity, while countries that free information -- by releasing accurate, comprehensive, and timely information to the public – accelerate innovation. The marginal cost of information declines with scale. Cheaper access to information stimulates algorith- mic innovations, which – in turn -- stimulate innovations in quantum mechanics, robotics, life sciences, nanotechnology, and the manage- ment sciences. When innovators can access and use granular data at no cost to crunch and winnow out micro-trends, it stimulates innova- tion. As AI researcher and computer scientist Pedro Domingos pointed out in his book The Master Algorithm, Trade hub Dubai set up the Jebel Ali Free Zone Authority (JAFZA) in 1985 Workforce Expats can take up part-time jobs or switch from one employer to another more easily | INNOVATIONNext >