The writer is BonelliErede’s Dubai managing partner

After long being intrinsically linked with the oil sector, the Middle East’s economy is changing. Not only is it expanding its renewable power capabilities, it is also expected to witness an explosion of tech-related investment and deal activity in the coming years. The region’s digital economy is projected to grow 20% annually to become a $780bn industry by 2030, according to investment bank UBS. 

The UAE has been making significant strides to position itself as a key beneficiary and driver of this digital transition, and become the region’s pre-eminent tech hub. Commitments by its government and investors suggest it stands a good chance of succeeding, provided it can keep its traditional economic rival, Saudi Arabia, at bay. 

The world’s AI leader

The UAE’s efforts to accelerate its movement towards a digital future are in line with the We the UAE 2031 vision, which aims to double its gross domestic product to Dh3tn ($817bn). Strategies and programmes have been introduced at both the federal and emirate level to support the country’s technology sector growth and digital transformation.

Recognising the important role that artificial intelligence (AI) plays in the economy’s digitisation, the UAE has set a clear vision to become the global AI leader within the next decade, as laid out in its national AI strategy launched in 2017. The government’s commitment has been demonstrated by its appointment of the world’s first AI minister and the creation of the world’s first university dedicated to AI research. 

In January, Abu Dhabi established an AI and Advanced Technology Council which is charged with implementing research and investment strategies regarding AI. Three months later, the emirate’s efforts received a boost when Microsoft announced a $1.5bn investment in Abu Dhabi-based AI company G42. The partnership between the two firms will have ramifications for the UAE and the Middle East as a whole, facilitating the rapid adoption of advanced AI technologies throughout the region. Microsoft’s commitment is expected to act as a catalyst for further investment and galvanise other tech firms to follow suit. 

Meanwhile, Dubai’s establishment in 2022 of the Virtual Assets Regulatory Authority (VARA) — which claims to be the world’s first independent regulator for virtual assets — has contributed to a sharp rise in interest in the emirate as a go-to destination for tech firms. VARA was created to provide a stable and trustworthy digital framework for the regulation of virtual assets like cryptocurrencies and non-fungible tokens (better known as NFTs). Considering the potential for scams in the virtual asset industry, VARA has brought a welcome reassurance of regulatory oversight to corporates and investors eyeing expansion in Dubai. The likes of OKX, BitOasis and Komainu have already been licensed by VARA to operate in Dubai, and more are expected to be on their way. The emirate also recently launched the world’s first digital economy court.

More on Middle East tech ambitions:

• Sovereign investors are the new conduits of FDI
• Opinion | AI has a natural home in the Gulf
• UAE seeks to forge a path on climate adaptation

Oil rivals to tech rivals

Despite government initiatives and investor interest, the UAE’s tech leadership of the region is not a foregone conclusion. Saudi Arabia has similarly been hard at work to bolster its tech credentials. Its sovereign wealth fund, the Public Investment Fund, is reportedly in talks with Andreessen Horowitz, one of Silicon Valley’s biggest venture capital firms, to create a $40bn fund to invest in AI. Although plans for the tech fund are not yet confirmed, if the project materialises it would make Saudi Arabia the world’s largest investor in AI. Facing such stiff competition, the UAE will need to increase its own AI investments, alongside the various initiatives which are underway, to further enhance the country’s attractiveness as a tech destination.       

Data from fDi Markets shows that both countries have seen a surge in greenfield FDI announcements in software and IT over the past two years. The UAE has an edge over its rival, attracting 580 projects since the start of 2022 compared with 133 in Saudi Arabia. Competition to become the Middle East’s leading tech hub will only intensify as both countries ramp up efforts to attract investment. 

No matter the outcome, it is clear that the coming years will witness a boom in the Middle East tech industry. It signals good news to investors and firms in the region’s tech sector — whether established players or start-ups — that a digital future is on the horizon.

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