By TAMARA EL-SHIBIB
Thursday 2nd of July 2020.

Like most countries, the UAE is keen on building a secure and sustainable economy for the future, one that is less dependent on natural resources and less exposed to volatile markets. In 2010, the UAE government announced its national growth strategy known as the ‘Economic Vision 2021’. One of the goals of the Vision is to transform the economy into a ‘knowledge-based, highly productive and competitive economy’ built on innovation, research, science and technology1. To achieve its objectives, the Vision recognises the need to strengthen the information and communication technology infrastructure and establish legal frameworks that will support businesses and protect their intellectual property (IP). To support the development of home grown innovations, the UAE steadily increased its annual investments in research and development reportedly spending 1.3% of its GDP in 20182. To enable businesses to protect and exploit their innovations, IP laws and systems were developed which are continually modernised to ensure harmonisation with international laws and practices. To attract foreign companies and support the growth of startups and small businesses, economic ‘free zones’ were set up which provide tenants with more favourable business conditions. Access to venture capital is also increasing, particularly in Dubai, as investors look to the emirate as a regional hub for expansion into other countries in the Middle East and North Africa region. It is clear that the fundamentals of an ‘innovation ecosystem’ in the UAE are slowly coming together.

Although not all innovations are patentable inventions, all patentable inventions are innovations and contribute to a country’s innovation performance. In this article, we briefly look at the role of innovation in supporting economic growth and study the UAE’s innovation performance according to the Global Innovation Index. We also look at why IP is important in advancing its innovation performance.

The role of innovation in economic development

A knowledge-based economy is an economy based on creating, evaluating and trading intangible knowledge assets. Numerous reports have been published on the value of intangible assets to global companies. In 2018, intangible assets for S&P500 companies was valued at US$ 21 trillion and accounts for over 80% of company value.3 This means the market value of the largest global companies is essentially unaccounted for in physical and financial assets. This ‘unseen’ value is in the intangible assets, namely the brand, relationships, know-how, user base, and IP rights that a company owns which are collectively recorded as ‘goodwill’ on company balance sheets. Strategically managing and leveraging these assets through licensing and collaboration allows companies to access new technologies and new markets and deliver higher quality lower cost products and services to customers more quickly. In today’s global economy, the innovators in technology and business are rewarded success.

Innovation has also been recognised as a central driver for economic growth and development by governments, made evident by the increasing investments in research by developed and emerging economies. According to the National Science Foundation, US expenditure on research and development has increased steadily since 2010 reaching US$ 548 bn in 20174. China’s booming economy is close behind with expenditures in research and development just under US$ 500 bn in 20175.

Although global economic growth has since been slowing and economic uncertainty is high, innovation expenditures are still growing in many countries. Today developing and developed countries have a better understanding of the role of innovation in promoting social and economic development. One of the main objectives of the UAE Economic Vision 2021 is to diversify the economy away from hydrocarbon reliance into a competitive knowledge-based economy. Following the release of the Vision in 2010, the government released the National Innovation Strategy in 2014 which recognises innovation as the ‘cornerstone’ to social and economic development. In support of this, the government reportedly committed AED 14 bn to innovation with AED 7 bn allocated for public research to support the country’s diversification and growth plans.

UAE’s innovation performance today

To track its progress towards achieving its vision of developing a diversified knowledge-based economy, the UAE government uses 12 Key Performance Indicators6. A country’s innovation performance is generally measured using global indexes such as those published by the World Bank, the Economist or OECD. Among the most commonly recognised indicators is the Global Innovation Index (GII) developed by INSEAD. The GII is used by the UAE to measure its innovation performance. The GII ranks the innovation performance of 129 economies around the world based on 82 sub-indices split into innovation inputs that include human capital, research investment, ICT infrastructure, business and market sophistication; and innovation outputs broken down into creative outputs and knowledge and technology outputs. Each year the GII publishes a ranking for each country which is generated from their combined performance in innovation inputs and outputs.

In 2015, the UAE’s overall GII ranking was 47. In 2019, the UAE climbed to 367. This remarkable improvement has been attributed to strengthening of local institutions, human capital and research, business sophistication as well as developments in information technology and communications infrastructure. In order to advance more quickly in the innovation ranks, improvement is needed in the innovation outputs, namely: (1) knowledge and technology outputs; and (2) creative outputs. The knowledge and technology outputs is ranked at 63 globally and represents the lowest rank for the UAE. This rank is measured using three components: knowledge creation, knowledge diffusion and knowledge impact. According to the report, although research talent ranks high at 8 in the world, the number of patent filings and scientific publications represent a ‘weakness’ and currently rank at 106 and 101 respectively. Consequently, high-tech exports as a proportion of total trade is low and ranked at 107 in the world.

The UAE is also ranked among the top 3 innovation economies in the Northern Africa and Western Asia region, along with Israel and Cyprus. According to the Global Innovation Index report, some countries get more return on their innovation investments because they are more effective in translating innovation inputs into innovation outputs. This applies to high-income economies including Singapore and the UAE. Therefore there is a need to shift the focus from innovation quantity to innovation quality in order to see higher value returns on innovation investments.

What role does IP play?

All innovation indexes use patent filing activity as one of the key metrics for measuring innovation activity. Some indexes look at the rate of filings at one of the major national patent offices. Others track the rate of national filings by residents. The GII measures the number of filings by residents at the national patent office to assess the strength of a country’s innovation ecosystem. It also measures the number of PCT ‘international’ applications filed by residents. Therefore, a strong IP system is key to improving a country’s innovation performance.

Strengthening the IP system requires improving administrative processes in the registration of national patents. UAE applicants utilising the national filing system frequently run into issues meeting the formality requirements for registering UAE patents. The government is currently reviewing these issues in an effort to incentivise an increase in national filings by local universities and research organisations.

Improving the IP system also requires national IP laws to be harmonised with international IP laws and improving the national enforcement system to enable rights holders to enforce their rights and justify the investment in patent protection. Steps towards this have already been taken as a new patent law is expected to issue in the UAE soon repealing and replacing the former law. With regards to enforcement, there is currently little precedence on patent litigation in the region. Clearer guidelines are needed for enforcement of UAE and GCC patents and on the remedies available to a rights holder. Education is key in building awareness and a culture of protecting and enforcing IP rights.

While many countries focus on research and development, the UAE is focusing on building a holistic innovation ecosystem. As important as high quality research is, without an established industry and access to accelerators, incubators, and venture capital to support the transformation of patentable inventions into impactful innovations, patent activity means very little to the growth of a knowledge economy. These elements must come together to create an innovation ecosystem capable of bridging the gap between research, innovation and economic impact.

 

Authors : David Harper & Tamara El-Shebib</