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Policy Brief
Reference Guide for Fostering
Entrepreneurship in Abu Dhabi
February 2016
Issue 03-29012016

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Policy Brief
Reference Guide for Fostering Entrepreneurship in Abu Dhabi

Contents
Context and importance of the problem 

Critique of policy options 

Policy recommendations

10

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Matthias Herles
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Abu Dhabi Chamber of Commerce & Industry,
P.O. Box 662, Abu Dhabi, U.A.E.
Ohan S Balian, Ph.D.
Chief Economist Abu Dhabi Chamber
of Commerce & Industry
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February 2016

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Executive summary
Entrepreneurship and diversification of the

is far from reaching world leaders such as the United

economy are two sides of the same coin. Thriving

States, Canada, and Australia, and uneven results

entrepreneurs are essential for Abu Dhabis growth

for key characteristics signal room for improvement.

outlook and welfare. Abu Dhabi leaders have

The most important bottlenecks that slow down

recognized this link and embarked on a broad range

development for Abu Dhabis entrepreneurs are

of initiatives to develop and foster entrepreneurship.

relatively weak technology absorption, start-up skills,

Entrepreneurial culture is characterized by a

and risk acceptance by the society. According to the

multitude of factors, although not all are developed

GEDI survey, policy measures to mend bottlenecks

with similar quality and quantity. A survey by the

are essential for the further improvement of Abu

Global Entrepreneurship and Development Institute

Dhabis entrepreneurial culture.

(GEDI)based on data from the United Arab

Emiratesreveals that the local entrepreneurial
culture is on par with most European nations, but it

Context and importance of the

problem

Entrepreneurs are the heroes of the modern market

economy. Policymakers around the world court
them, prestigious prizes are awarded to successful
entrepreneurs, and policy strategies are devised to
lure them and facilitate their business.
Joseph Alois Schumpeter, the Austrian-born
Harvard economist, regarded entrepreneurs
as individuals who exploit market opportunity
through technical and/or organizational innovation.
Peter Drucker, the late American management
guru/economist, also Austrian-born, said
entrepreneurship is about taking risks. Successful
policies are about enabling entrepreneurs to grab
opportunities and take risks.
For Abu Dhabi, like any other country, a thriving
entrepreneurial culture is essential. Fortunately,

2015

was branded as the Year of Innovation in the UAE

Abu Dhabi has already been a leader among Gulf
Cooperation Council (GCC) countries in this respect.
Entrepreneurial culture and values have become
recurring themes for the political process, business
institutions, academia, and other educational
institutes. Abu Dhabi University launched an
innovation and entrepreneurship center in 2010.
Fostering entrepreneurship is a key condition
for a vibrant, fast-growing, and high-income
economy. Diversification, shrinking dependence on
hydrocarbon resources, and sustained long-term
economic growth are hardly possible without a

2016 Abu Dhabi Chamber of Commerce & Industry

Policy Brief
Reference Guide for Fostering Entrepreneurship in Abu Dhabi

is the average number of days taken to

register a business in the UAE
thriving entrepreneurial culture.
The United Arab Emirates (UAE) government has
recognized the importance of entrepreneurship
and has been actively promoting entrepreneurial
initiatives. The Khalifa Fund is a key source of
funding for start-ups, while institutions like the Abu
Dhabi Chamber of Commerce and Industry have
played a pivotal role from the private sector. The year
2015 was branded as the Year of Innovation in the
UAE, kicking off many related activities and events.
Administrative hurdles to set up a business are
low in the UAE. According to the World Banks
Doing Business in the Arab World 2014, the
UAE performed quite well on that count: average
registration time is just eight days for a business.
Costs for these procedures equal 6.4% of income
per capita, which is competitive compared with
European countries. Paid-in minimum capital
was abolished in 2010. This released liquidity
for growing a business, but also reduced safety
cushions for tougher times.
Facilitating the formation of high-growth startups also calls for reliable contract enforcement
schemes and solid procedures for resolving
insolvency. The UAE could improve in those
categories. UAE ranks 96th for investor protection
in the World Bank survey listing (e.g. Saudi Arabia
ranks 22), 100th in enforcing contracts, and 101st in
resolving insolvency.
The actual performance of entrepreneurs in
contemporary Abu Dhabi is difficult to assess,
though. There is simply a lack of hard data. Data
from the Statistics Center-Abu Dhabi (SCAD)

February 2016

for small and medium-sized enterprises (SME)

provide only a crude proxy for start-ups and their
performance. (see charts 1 and 2)
SME apparently play a more modest role for the
economy of Abu Dhabi when compared with their
counterparts in Western market economies. Micro,
small, and medium-sized enterprises accounted
for slightly less than a quarter of all employees in
Abu Dhabi in 2013, according to SCAD. In terms
of production and gross value added, the share is
even lower, just above 10%.
For a typical Western market economy, the
employment share is around 5060%. Part of the
discrepancy is down to different statistics, because
SCAD has a much narrower definition of SME than
the Organisation for Economic Co-operation and
Development (OECD). Excluding medium-sized
enterprises, OECD data are better comparable, but
this still leaves a gap of around 10% for the SME
share between Abu Dhabi and a typical Western
market economy. In the case of Germany, micro
and small enterprises alone account for around
40% of employment.
Still, Abu Dhabis track record of SME development
is impressive, especially when taking the legacy
of the hydrocarbon dependency into account. For
entrepreneurs, the playing field has rough patches,
though. There is room for improvement in several
policy areas critical for entrepreneurial ideas. How
can Abu Dhabis entrepreneurial playing field and
related policies be measured and evaluated, though?
The Global Entrepreneurship Index, or GEI,
developed by the GEDI in Washington D.C., is
generally accepted as an analytical system for
the fertility of an economy toward entrepreneurial
activities. GEI defines so-called entrepreneurial
ecosystems, for which measurable, specific
characteristics are defined. The GEI does not have
data for Abu Dhabi alone, but published survey
results for the UAE may serve as a good proxy.
(see table 1)

Chart 1: Distribution of employees by firm size and sector 2013 in %

Micro enterprises

Small enterprises

Medium enterprises

Large enterprises

4%

10.5%

9.5%

75%

G
B

E
C

A
B
C
F
G

14.2%
5.9%
43.7%
17.1%
19.1%

13.7%
B 15.5%
C 39.3%
G 31.5%

13.0%
B 18.5%
C 44.1%
G 24.4%

9.9%
47.5%
9.6%
6.9%
26.1%

A
B
D
E
G

Industry key

Manufacturing

Wholesale and retail trade

Accommodation and food service

Construction

Administrative service and support

Other services

Other activities
Source: SCAD

2016 Abu Dhabi Chamber of Commerce & Industry

Policy Brief
Reference Guide for Fostering Entrepreneurship in Abu Dhabi

Chart 2: Distribution of GDP by firm size and sector 2013 in %

Micro enterprises

Small enterprises

Medium enterprises

Large enterprises

0.7%

2.6%

6.9%

89.8%

G
F

C
E
F
G
H

F
E

B
C
E
F
H

9.6%
38.5%
9.6%
12.3%
30.0%

42.4%
10.9%
10.4%
7.9%
28.4%

50.8%
C 18.6%
D 5.3%
H 25.3%
A

60.0%
B 10.0%
D 6.4%
H 23.6%
A

Industry key

Mining & quarrying

Wholesale and retail trade

Real estate

Other services

Construction

Financial and insurance

Professional, scientific and technical

Other activities
Source: SCAD

February 2016

19th

Table 1
Country

GEI

GEI rank

United States

86.2

Canada

79.5

Australia

78.0

Denmark

76.0

Sweden

75.9

Taiwan

69.7

Iceland

68.9

Switzerland

67.8

United Kingdom

67.7

France

66.4

10

Singapore

66.0

11

Ireland

65.6

12

Netherlands

65.4

13

Germany

64.6

14

Austria

62.9

15

Chile

62.1

16

Belgium

62.1

17

Finland

61.8

18

United Arab Emirates

61.4

19

Norway

61.1

20

Israel

57.4

21

Estonia

57.3

22

Luxembourg

57.2

23

Qatar

56.7

24

Lithuania

54.8

25

Source: GEDI 2016

is where the UAE currently rank in the Global

Entrepreneurship Index
a country scores relative to the international
benchmark. The closer a value is to the center, the
further away it is from the benchmark.
The GEI results signal that the UAE has a high
level of entrepreneurial aspirations in the economy,
such as early-stage innovation by entrepreneurs,
penetration of foreign markets, rapid accumulation
of staff, and availability of venture capital. The
results signal that both hiring of new personnel and
the availability of risk capital for entrepreneurs is at
or close to the international benchmark.
However, the UAE is lagging behind the international
benchmark with regard to most categories for
entrepreneurial attitude and ability. Technology
absorption, recognizing start-up opportunities, and
competition issues have a comparably low score
2016 IHS

The UAE currently ranks 19th in the overall world

GEI table. With that, the UAE leads the GCC and
in fact the entire Middle East region. The UAE is
still a good deal behind world leaders such as the
United States, Canada, Australia, and Denmark, but
scores similar to most European countries. This is a
remarkable and commendable result.
The breakdown into key entrepreneurial
characteristics reveals an uneven picture, though.
The GEI is based on 14 individual characteristics,
which are tied to the entrepreneurial aspirations,
entrepreneurial attitude, and entrepreneurial ability
of a society. (see chart 3)
Chart 4 shows these 14 characteristics and their
values for the UAE. The chart displays how close

Chart 3: Categorizing characteristics

of entrepreneurial systems

Aspirations

Product innovation, process

innovation, high growth,
internationalization, risk capital

Abilities

Opportunity start-up, technology

absorption, human capital, competition

Attitudes

Opportunity perception, start-up skills,

risk acceptance, networking, cultural
support
Source: GEDI 2016

2016 Abu Dhabi Chamber of Commerce & Industry

Policy Brief
Reference Guide for Fostering Entrepreneurship in Abu Dhabi

Chart 4: Pillar-level comparison of UAE's entrepreneurial ecosystem

A
N

1.0

0.8

C
0.6

0.4

0.2

G
H

Chart key
United Arab Emirates

Opportunity perception

Cultural support

Competition

Internationalization

United States

Startup skills

Opportunity startup

Product innovation

Risk capital

Denmark

Risk acceptance

Technology absorption

Process innovation

Singapore

Networking

Human capital

High growth
Source: GEDI 2016

to the international benchmark regarding abilities,

whereas the availability of human capital is a strong
positive for the UAE.
Attitudes are slow to develop with respect
to spotting and, in particular, thriving on
entrepreneurial opportunities; risk acceptance, often

February 2016

correlated with the acceptance of a society toward

failure as well as legal and contractual procedures
for bankruptcies, is also perceived as subpar to
the benchmark. Networking and cultural support,
reflecting the emergence of networking events in the
recent past, are comparably strong. (see chart 4)

The philosophy behind the GEI concept and related

research by the GEDI team suggest that the best
ecosystem for entrepreneurs is one with even
pillars, a well-balanced system of components.
Therefore, an ecosystem with some highly developed
characteristics but low scores on others might be
inferior to a system that is more evenly balanced,
albeit without high marks for selected characteristics.
This matters for choosing the right policy strategy.

Critique of policy options

The overall objective for policymakers is to optimize

the entrepreneurial ecosystem. Based on the GEI
philosophy, this basically means picking measures
to better balance the pillars of the entrepreneurial
ecosystem and eliminate critical bottlenecks.
The GEI system is able to signal how critical a
bottleneck currently is. Chart 5 quantifies that
bottleneck, the lag between the UAE and the
desired index level of a component, and how
quickly an improvement of the overall GEI score
can be achieved. In technical terms, the chart
describes how much more effort policymakers must
direct toward specific components of the start-up
ecosystem to trigger an increase of the overall GEI
score by 10 points.

Evenly balanced is better than high marks for some

For example, the chart signals that an increase of

27% of resources on the technology absorption pillar
will lead to an increase of the overall GEI score by
10 points. Of course, this system simplifies matters,
and reality is much more complex. However, it
gives a good indication of where to look for critical
bottlenecks and how to target entrepreneurial policy
strategies.
Chart 5 shows that, for the case of the UAE, the
most important bottlenecks to tackle are technology
absorption, start-up skills, and risk acceptance.
Process innovation and competition follow with less
critical catch-up potential. All other pillars are already
well-developed and deserve less policy attention.
Technology absorption tries to capture the extent to
which an economys businesses keep up with the
modern knowledge economy and information and
communication technologies, reflected by the number
of businesses in technology sectors, and a countrys
capacity for firm-level technology absorption.

Chart 5: Critical bottlenecks and policy impact

Pillar scores from worst to best
Technology absorption
Start-up skills
Risk acceptance
Process innovation
Competition
Opportunity start-up
Opportunity perception
Internationalization
Networking
Cultural support
Product innovation
Risk capital
Human capital
High growth

Percentage of total new effort for a 10 point improvement in GEI score

0.36
0.36
0.40
0.46
0.53
0.63
0.66
0.74
0.76
0.79
0.87
0.99
1.00
1.00

27%
27%
23%
16%
6%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Source: GEDI 2016

2016 Abu Dhabi Chamber of Commerce & Industry

Policy Brief
Reference Guide for Fostering Entrepreneurship in Abu Dhabi

Process innovations capabilities are an important

bottleneck too

Start-up skills of an entrepreneur are crucial for

creating sustainable, potentially fast-growing, and
technology-driven firms.
Risk acceptance is not only represented by the
individuals aversion to set up high-risk start-ups,
but also by the institutional settings of availability
and reliability of corporate financial information,
legal protection of creditors, and institutional support
of intercompany transactions.
A less urgent but by no means less important
bottleneck are process innovations, i.e. applying
and/or creating new technologies. Future fields for
start-up policy measures may be opportunity startups whose entrepreneurs are believed to be better
prepared, to have superior skills, and to earn more;
and opportunity perception alluding to the share of
a population that can identify good opportunities to
start a business, the size of a countrys domestic
market, and the level of urbanization.

Policy recommendations

According to the GEI, the following policy

recommendations can be distilled:
Policy measures should involve education. Tertiary
education is particularly important as it determines
a persons specialization and professional
orientation. It affects the individual dimensions
of technology absorption, start-up skills, process
innovation, and start-up and opportunity
perceptions. In a way, this actually confirms that
Abu Dhabi is already on the right track.
Further policy actions may focus on legal rules and
regulations, and if necessary, amend them in a way
to foster well-functioning inter-firm and investorfirm relations and thereby favor a dynamic start-up
ecosystem.

10

February 2016

Procedures for resolving insolvency are important

for the personal risk of the entrepreneur when
the venture turns out to be less successful. They
are equally crucial for investors. However, in the
UAE, the efficiency is relatively low as insolvency
proceedings take on average 3.2 years, which
is almost double the average of the OECD highincome countries. That can still be improved.
Improving these regulations will strengthen
the position of an entrepreneur, balance the
components of the entrepreneurial ecosystem, and
thereby boost entrepreneurial activities. Flanking
major efforts in tertiary education could create a
start-up climate in the UAE that has the potential to
shift entrepreneurial activities to innovative highgrowth fields.

Sources consulted or
recommended

cs, Z.J., Szerb, L., Autio, E., 2015, The Global

Entrepreneurship Index 2016, The Global
Entrepreneurship and Development Institute,
Washington D.C.
Doing Business 2016, Measuring Regulatory
Quality and Efficiency, World Bank.
Doing Business, Doing Business in the Arab
World 2014, World Bank.
Erolu, O., M. Piak, Entrepreneurship, National
Culture and Turkey, International Journal of
Business and Social Science Vol. 2 No. 16;
September 2011.
Singer, S., J.E. Amoros, D. Moska, Global
Entrepreneurship Monitor: 2014 Global Report,
Global Entrepreneurship Research Association
(GERA).

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Contacts

IHS Global GmbH,

Bleichstrasse 1, 60313 Frankfurt, Germany
Ralf Wiegert
Director Consulting IHS Economics & Country Risk
Ralf.Wiegert@ihs.com
+49 (0)69 20973 320
+49 (0)151 42628 143
Matthias Herles
Director Consulting IHS Economics & Country Risk
Matthias.Herles@ihs.com
+49 (0)69 20973 218
+49 (0)174 1946560
Abu Dhabi Chamber of Commerce & Industry,
P.O. Box 662, Abu Dhabi, U.A.E.
Ohan S Balian, Ph.D.
Chief Economist Abu Dhabi Chamber
of Commerce & Industry
o.balian@adcci.gov.ae
www.abudhabichamber.ae
+971 2 617 7470

IHS
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