In the previous article, my colleague explained on FDI Law Update on 100% ownership in the Manufacturing Sector. Here I will take on the Services Sector in UAE. Services Sector forms the highest percentage in the GDP of UAE and also contributes the highest percentage in employment in UAE.
Businesses focused on the services sector are expected to flourish compared to other sectors in the UAE’s trade growth post-Covid-19. The UAE has been one of the most successful countries in the region for its diversification efforts and due to this economic diversity, UAE’s service sector will drive the rate of UAE’s trade growth till 2050. Expo 2020 postponement to 2021 and Abu Dhabi’s Surface Transport Master Plan are anticipated to accelerate growth in services. Healthcare and Pharmaceutical sector, Construction and Architectural sectors, Food and Beverage sector and Packaging sector are expected to drive the services growth. R&D labs for health and food industries will create lots of connected businesses in the services sector. Travel, Tourism, Hospitality, Real Estate, Aviation and Hydrocarbon sector services are expected to take a while to lead due to the current global challenges.
Cloud services, Data Centres, IOT, AI, Cybersecurity, Cloud Computing, Data Science & Data Analytics services are expected to grow multifold now post-Covid-19. The pace of digital transformation will increase rapidly with UAE businesses and service providers transforming in a technology-driven new world. UAE is already ranked second globally in the ICT sector with the milestone announcements like-Dubai Future Foundation, Ghadan 21, Hub 71, DTec Ventures, Mubadala’s USD 250 million Tech Fund, Microsoft opening its Middle East data Centres in Dubai and Abu Dhabi and UAE launching the World’s first AI University. Many UAE companies will be deploying machine learning to make more informed decisions on evolving market conditions and strategies and optimize their scale and operations, with focus on procurement, marketing, customer communication and support. The focus will be on digitization and creating the foundations for AI, including infrastructure, Cloud Computing, applications platforms and quality data. More Data Centres are expected to open up in UAE supporting local storage and processing of data and more companies are likely to migrate to Cloud to save on IT infrastructure costs, boost operational efficiencies, increase revenue and for attracting foreign investments for local and regional multifold growth.
The crux for AI projects to be successful locally, is that they need to be ideated, curated and developed locally and so all the related services will be preferred locally post-Covid-19. Hence, major investments by international investors to build huge IT set ups with 100% ownership and PSC advantage will happen in future. Foreign investors can accommodate from 2 to 200 shareholders in the PSC format and that will enable them to large capital accumulation. This will bring in major collaborations in the industry and will trigger investments in the ICT sector with many related services becoming very active. All these will lead to many new ICT giants with large capital base being born in the UAE in future.
Also this focus and the initiatives on new Technologies will create lasting societal impact, boost R&D, accelerate foreign investments in start-ups, SME growth and collaborations and spur innovation in many sectors including healthcare and agricultural services. Distance learning, upskilling the workforce to gear up, equipping and training to use digital tools, innovating educational content, regular communication with parents and well-being programs will boost educational services sector. A new way of learning and learning systems will develop and investments on the ICT sector will be the core of smart investments on educational services. Huge investments are expected in this sector due to the 100% foreign ownership.
Post Covid-19, Digital Infrastructure is key to ensuring business continuity for companies in UAE and the Arab World. Dubai has put in place platforms such as UAE pass, the national digital identity and digital signature solution for the UAE, for all digital transactions. The complete digitalization of public and private sector systems is expected to take lead and the future of business will move into such services. Automation and new Technology services will become the prime requirement in Trade, Manufacturing, Healthcare, Education and in all other sectors. Foreign Investments will play a major role in collaborations and partnerships in these areas.
FDI in Services Sectors – Capital Requirement
The combination of all these services will have a positive effect on business and economic growth. Overall the services sector will move in a new trajectory and will be the key contributor to the UAE economy. The services sector will undergo lot of creativity, innovation, diversification, M&A and collaboration as never before due to the 100% foreign ownership and emerge as the strongest pillar to fortify the future of UAE economy.