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Laying the foundationsA new era for R&D in the Middle EastA report from the Economist Intelligence Unit

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Laying the foundationsA new era for R&D in the Middle East

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Contents

Foreword 2

About the research 3

Executive summary 4

Part I The push and pull of R&D investments 6

From market push to environment pull? 8

Box: Quintiles 10

Part II The need for diversification 12

Box: Petra Solar 13

Part III If you build it, will they come? 15

Education 17

Technology transfer 20

Clusters and ecosystems 21

Box: Shell 22

Conclusion 24

Appendix: survey results 25



Foreword

Conscious of the need to diversify away from dependence on oil and gas revenue, and to increase job opportunities for an increasingly restive youthful population, Arab governments are redirecting

their investments towards knowledge-intensive industries, having recognised the central role that innovation can play in the development of robust economies. Yet, although ambition and financial resources are not lacking, the key challenge will be to convert these advantages into a sustainable ecosystem environment for research and development (R&D). With sound policies and a long-term vision, however, the Arab world has the potential to become a significant hub for R&D over the next decade.

Laying the foundations: A new era for R&D in the Middle East is an Economist Intelligence Unit report that examines the steps that countries in the Middle East are taking to boost their attractiveness as recipients of R&D investment. The report is sponsored by the Advanced Technology Investment Company (ATIC). The Economist Intelligence Unit bears sole responsibility for the content of this report. The findings and views expressed in this report do not necessarily reflect the views of the sponsor. The report was written by Rob Mitchell and edited by Stephanie Studer.

August 2011



In July 2011 the Economist Intelligence Unit conducted an online survey of 214 executives from around the world. Around one-half of the respondents were C-level executives and a similar

proportion represented companies with US$500m or more in annual revenue. All respondents had previously invested in R&D activities in the Middle East and North Africa1.

To complement the survey results, we also conducted a programme of qualitative research that included in-depth interviews with a range of experts and senior executives. The insights from these interviews appear throughout the report. We would like to thank the following individuals (listed alphabetically by organisation name) who participated in the interview programme:

l Marwan Abdulaziz, director of business development, Dubai Biotechnology and Research Park (DuBiotech), a member of TECOM Investments’ science cluster

l Gary Amy, director of the water desalination research centre, King Abdullah University of Science and Technology (KAUST), Saudi Arabia

l Andy Brown, managing director of Pearl GTL, Shell

l Ralph Cavin, chief scientist, Semiconductor Research Corporation (SRC)

l Timothy Dalton, program manager of the nano-science and technology partnership, IBM Research

l Peter Heath, chancellor, American University of Sharjah, UAE

l Wyatt Hume, provost, UAE University

l Sunil Kumar, dean of engineering, NYU Abu Dhabi

l Shihab Kuran, chief executive officer, Petra Solar, US

l Tod Laursen, president, Khalifa University of Science, Technology and Research, UAE

l Vladimir Misik, senior regional director, Middle East, clinical operations, Quintiles

l Fred Moavenzadeh, president, Masdar Institute, UAE

l Navi Radjou, fellow, Cambridge University’s Judge Business School, UK

l Haitham Sibai, regional technical manager for the Middle East, 3M

l Tom Speechley, senior partner, Abraaj Capital, UAE

About the research

1 For the purposes of this report, the Middle East and North Africa region is defined as the region’s Arab countries only, and does not include Turkey or Iran.



For the first half of the previous millennium, the Middle East was the most innovative and technically advanced region of the world. During the so-called Islamic golden age, scholars and scientists

across the Middle East and North Africa made major advances in mathematics, astronomy, medicine and engineering.

But as the scientific revolution took hold in 16th-century Europe, the Middle East’s position as a global scientific hub faded. The industrial revolution later sealed the West’s success, as pole position in science and technology passed to Europe, and then in the 20th century to North America. Meanwhile, the achievements of the Islamic golden age were consigned to history books.

The development of a new golden age for innovation in the Middle East may seem like a distant possibility, but there are signs that the region is starting to regain a foothold in the global innovation stakes. Governments in the region, and particularly the six countries of the Gulf Co-operation Council (GCC), have been investing heavily in the infrastructure and institutions to support research and development (R&D) activity. And although it is still early days, a growing number of multinationals are dipping a toe in the waters and connecting new R&D centres in the Middle East to their global operations.

In this report, we examine the progress that countries in the region are making to create fertile environments for R&D investment. We assess the appetite of multinationals to establish their R&D centres in the region and look at the prospects for the Middle East to become a sizeable hub for global R&D over the next decade.

Here are the key findings of the research:

Companies are deepening and broadening their global R&D footprint. Despite facing continuing pressure to cut costs and trim investment, the companies surveyed for this report remain keen supporters of R&D as a source of competitive advantage and future growth. The vast majority expects to increase their investment in R&D over the next three years. This R&D activity will also become more widely distributed, with most companies boosting the number of their R&D centres and diversifying their investments around the globe.

Most companies regard the Middle East as an increasingly important destination for R&D investment. Over the next three years, more than half of the companies surveyed for this report expect to increase the level of their R&D investment in the Middle East. This result is slightly skewed, however, by the presence of local companies in the survey. Among those companies from outside the Middle East and North Africa, around 40% plan to increase their R&D investment in the region over the next three years. For the most part, R&D centres in the region are currently relatively small, and generally focused on late-stage development, rather than “blue skies” research.

Executive summary



The Middle East possesses many of the key ingredients necessary for becoming an effective R&D hub in its own right. When choosing a location for an R&D centre, companies prioritise the availability of talent and proximity to markets as the key criteria. In theory, this should play well for the Middle East. The region has a large, young population, relatively high per capita incomes and a strategic geographical location that enables it to serve as a gateway to other fast-growing regions, including Africa and the Asia Pacific region.

Centres of excellence in specific sectors are gradually emerging in some countries. Although there is considerable variation across the MENA region, a number of governments are investing heavily in R&D infrastructure and institutions to diversify their economies, to create jobs and to make the transition to becoming knowledge-based societies. Although R&D is still in its nascent stages in the region, there are signs that some countries are becoming internationally recognised as research destinations for a number of sectors, including agriculture, alternative energy and biotechnology.

Governments are naturally key players in building an R&D infrastructure, but greater participation of the private sector will also be required. The countries at the vanguard of innovation in the Middle East combine a clear long-term vision with the resources to turn this into reality. This is ensuring rapid progress in building the institutions and infrastructure that will create the foundations for sustainable R&D investment. But government alone cannot create a fertile R&D environment. More than half of respondents agree that government-led efforts to develop R&D clusters in the Middle East are insufficient to create genuine centres for innovation. To turn robust R&D infrastructure into a hotbed for innovation, greater private-sector involvement will be required. There are also concerns that there may be too much emphasis given to flagship projects. Almost two-thirds agree that government-led R&D in the Middle East is too often focused on mega-projects, rather than more practical, small-scale initiatives.

A lack of management and technical skills remains a barrier to further R&D investment from multinationals. In recent years, the Middle East has made significant progress in establishing educational centres that will provide a pipeline of R&D talent for the future. Respondents say that talent is a key reason why they invest in the region, although they are also conscious that the supply of specialist engineering and management skills does not always meet demand. This apparent contradiction may reflect a recognition that progress is being made in strengthening skills, but that there is still some way to go before the region can compete effectively on a global level. To increase their share of global R&D, it will be important for governments in the Middle East to deepen their investment in education, particularly at the postgraduate level. It will also be important to develop an innovation culture through the introduction of funding mechanisms and greater market competition.



The Middle East region has historically been fairly low on the priority list for companies seeking new centres for R&D. Companies that globalised their innovation processes typically favoured countries

such as India and China, where a combination of low labour costs, abundant skills and massive local markets had created a fertile environment for R&D investment.

But as companies start to look further afield in their search for growth, the Middle East region is beginning to look increasingly attractive. Among our survey respondents (all of whom already have some R&D stake in the Middle East and North Africa), 57% say that they will increase their level of investment in the region over the next three years (see chart 1).

The broader distribution of R&D activities reflects a view that global innovation should remain a strategic imperative across the entire business cycle. There is strong empirical evidence linking a focus on innovation with overall corporate performance. Boston Consulting Group, for example, reckons that innovative companies outperform their peers by 12.4% in terms of total shareholder returns2.

Over the next three years, most companies in our survey will redouble their efforts to use innovation as a competitive differentiator. Almost one-quarter say that they will increase their overall level of

Part I: The push and pull of R&D investments

Africa

Asia-Pacific

Eastern Europe

Latin America

Middle East & North Africa

North America

Western Europe

Chart 1: Over the next three years, what change do you expect to your company’s level of R&D investment in the following regions? (% respondents)

361322111

19112138

311436226

3013322211

6123445

21

12

2325253212

242930279

Increase of 20% or more Increase of up to 20% Stay the same Up to 20% decrease Decrease of 20% or more Not applicable

2 BCG, Innovation 2010.



investment in R&D by 25% or more, and only a tiny proportion (4%) say that they will reduce their spend. Even during the downturn, few cut back on innovation, despite strong pressure to slash costs and rein in capital expenditure (see chart 2).

Past three years Next three years

13

25

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0

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Significant increase—more than 25%

Moderate increase—10-25%

Slight increase—up to 10%

No change

Slight decrease—up to 10%

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Moderate decrease—10%-25%

Significant decrease—more than 25%

Chart 2: What change have you made to your firm's overall levels of R&D investment in the past three years, and what change do you expect to make over the next three years?(% respondents)

Table 1: Regional retail markets (retail sales; US$ trn unless otherwise indicated)

2011 2012 2013 2014 2015

North America 3.99 4.16 4.33 4.54 4.76

% change, year on year (volume) 2.8 2.1 2 2.1 2.1

Western Europe 2.59 2.58 2.62 2.67 2.79

% change, year on year (volume) 0.1 0.9 1.1 1.1 1.4

Transition economies 1 1.11 1.24 1.37 1.53


Asia & Australasia 6.31 7.09 7.99 8.99 10.09

% change (volume) 6 7 6.1 6.1 6.5

Latin America 1.05 1.13 1.19 1.26 1.34


Middle East & Africa 0.43 0.46 0.5 0.55 0.6

% change, year on year (volume) 4.8 4.9 5 4.7 4.8

World 15.37 16.53 17.87 19.38 21.12

% change, year on year (volume) 3.5 3.9 3.8 3.8 4.1Source: Economist Intelligence Unit



Interest in the Middle East as a destination for R&D is growing for a number of important reasons. One is geographical good fortune. Situated halfway between Europe and Asia, and with fast-growing regions such as the Asia Pacific region and Africa within striking distance, the Middle East has an enviable location as a potential hub for global R&D. “Proximity to the world’s fastest-growing markets will make the Middle East very attractive for R&D investment,” says Navi Radjou, fellow of Cambridge University’s Judge Business School.

For some companies, the Middle East may even represent a better opportunity than India for establishing an R&D base. “Instead of grappling with infrastructure issues in India that can cause difficulties doing business there, you could set up shop in Abu Dhabi, which has world-class, modern infrastructure and the latest technology,” says Sunil Kumar, dean of engineering at NYU Abu Dhabi.

The MENA region is also becoming more important as a market in its own right. Between 2012 and 2015 it will grow by an annual average of around 5%. The region is home to around 444m people, with a GDP per capita of around US$10,000. This is a sizeable market and one that many multinationals have not done enough to serve in the past. “If you look at the region as a whole, you’ve got a lack of historic investment, combined with demographic growth, which means you’ve got supply and demand gaps in a variety of sectors,” says Tom Speechley, a senior partner at Abraaj Capital, the largest private equity group in the region.

A number of sectors can expect to see significant growth in the region. In consumer goods, for example, retail sales will grow consistently above the global average over the next four years. By 2015, almost 3% of global retail sales will derive from the Middle East and Africa (see table 1). In healthcare, spending per capita is expected to surge by 40% in dollar terms by 2015.

From market push to environment pull?The increasing share of global sales represented by the Middle East and North Africa is encouraging

45

31

29

23

21

9

3

1

11

Overall importance of local market for our firm

Desire to tap into local talent

To adapt our products/services to local markets

Desire to join a growing R&D ecosystem in our sector

To access government/financial incentives

To build closer partnerships with local firms

It is a key centre of R&D within our industry

Other, please specify

Not applicable, we have not yet set up an R&D centre there

Chart 3: What have been the key reasons for your firm conducting R&D in the Middle East? Select up to two. (% respondents)



companies to increase their R&D footprint in the region. Asked about the main reasons for conducting R&D in the Middle East, respondents point to the local market as the key factor (see chart 3).

Ensuring that products and services meet the needs of customers in the Middle East can require companies to take into account specific environmental factors, such as climate, consumer preferences, spending power or genetics. “Sometimes products may require a slight modification to suit the local climate and nature of the environment,” says Haitham Sibai, regional technical manager for the Middle East region at 3M, the global technology company. “The only way we can grow is by becoming local and building the R&D capabilities to enable these modifications to be understood and made.”

Local R&D can also help to solve problems that are specific to the region. In general, for example, the MENA region is dry and hot, which means that there are specific challenges linked to water scarcity, and good opportunities to research the capabilities of solar power. Asked about the sectors that they think are most closely associated with R&D investment in the region, respondents point to biotechnology and pharmaceuticals, agriculture and water, and alternative energy as the most prominent (see chart 4).

In Saudi Arabia, the King Abdullah University of Science and Technology (KAUST) has established a research centre to conduct R&D into water desalination and reuse technologies that involve

34Agriculture & water

38Alternative energy & cleantech

40Biotechnology, pharmaceuticals & life sciences

18Consumer goods

19Design & construction

18Electronics and electrical engineering

20Information technology

6Technology: medical and optical instruments

3Technology: nanotechnology, robotics

7Technology: semiconductors

8Technology: other hi-tech

8Telecommunications

7Other, please specify

2None of the above

Chart 4: Which of the following sectors do you think are most closely associated with R&D investment in the Middle East?Select up to three. (% respondents)



case study Quintiles

The Middle East and North Africa region is becoming an increasingly important market for large pharmaceutical companies. Currently, it accounts for 2-4% of global pharmaceutical sales, but this proportion is expected to increase in the next few years. The modernisation and expansion of medical provision, growing populations, and the high prevalence of diseases such as Type-2 diabetes are all expected to drive significant growth.

Capturing this growth requires pharmaceutical companies to build a stronger presence on the ground. Many are increasing the proportion of clinical trials that they conduct in the region in order better to understand cultural and genetic differences and ensure that these are taken into account when developing new drugs.

As a company that provides clinical research services to pharmaceutical clients, Quintiles has been well placed to witness this trend. “Regional directors from pharmaceutical companies now have a very strong voice and are using it to ask for a fair share of clinical trials to be conducted in the Middle East,” says Vladimir Misik, senior regional director for Quintiles, clinical operations, in the Middle East. “By demonstrating that they are conducting research locally, pharmaceutical companies can build their reputation in the region. It also helps when they enter into discussions with local regulators or meet the heads of hospitals in the Middle East.”

In recent years, countries across the region have strengthened the regulation of clinical trials in order to attract investment from

pharma companies and ensure that the environment is conducive to rigorous, effective R&D. “It’s encouraging to see governments in the region taking proactive steps to regulate clinical trials and develop a clear understanding of their value,” says Mr Misik. “In some countries, the regulatory framework for clinical trials was practically non-existent just four years ago.”

Better co-ordination between regulators that review marketing authorisation and those that regulate clinical trials should lead to an increasing volume of late-stage R&D taking place in the region. “Regulators may consider requesting proof that some percentage of the trials took place locally,” says Mr Misik. “That would certainly be a vehicle through which the government could apply additional pressure on pharmaceutical companies to channel some of their R&D work into the region.”

But despite this development, Mr Misik warns that potential R&D investors may find it difficult to recruit workers with the necessary skills when entering the Middle East. “You cannot come to a market that is largely clinical-research naïve and expect that your head-hunter would be able to recruit hundreds of clinical research professionals, because they simply do not exist,” he explains. “Companies that come here to conduct clinical trials will need to train their staff.”

He also highlights the importance of developing a local presence, rather than flying in researchers on a temporary basis. “You won’t get anywhere unless you hire local staff and ensure that the company is visible on the ground,” he says. “There is no substitute for local presence.”

collaborating with more than a dozen industrial partners. “This is a very water-scarce region, so there are only two real choices, which are to desalinate sea water or reclaim waste water,” says Gary Amy, director of the water desalination research centre at KAUST.

Genetic and cultural differences within the local population are also prompting new R&D investment. In the GCC countries, there is an unusually high prevalence of Type-2 diabetes among the local population. Tackling this problem has encouraged the development of new research agreements. In 2006, for example, a partnership between Imperial College London and the Mubadala Development Company led to the opening of a major new diabetes research and treatment centre in Abu Dhabi.

By solving problems locally first, researchers can then roll out their innovations to other world regions that are facing similar issues. “These niche opportunities are stimulating lots of research activity. They can be very lucrative and potentially transferable to other parts of the world,” says Peter Heath, chancellor of the American University of Sharjah in the UAE.



This “market push” R&D can be seen as a natural consequence of business and research institutions competing for a share in a fast-growing market with specific unmet needs. Attracted by growth prospects, and recognising that R&D must increasingly be local in order to provide effective solutions, companies are gradually building up their capabilities and combining imported best practice with local talent and infrastructure.

A key question is whether innovation in the Middle East will increasingly be driven by “environment pull” in addition to “market push”. In other words, will companies be attracted to the region first and foremost by a desire to access local skills and resources and to operate in an environment and infrastructure that is regarded globally as best in class?

Our survey suggests that there is some way to go before this is the case. The ability to tap into local talent or to form partnerships with local institutions is generally seen as a less important driver of R&D investment than local market potential (see chart 3). But there are signs that “environment pull” innovation is becoming more important. One indicator of this is the development of R&D centres for global industries, such as semiconductors and aerospace. This suggests that companies are looking at R&D in the Middle East, not just as a destination for researching solutions to local problems, but also as a world-class R&D location in its own right.



T here is no doubting the scale of the ambition behind efforts to position certain Middle East countries as leading centres for R&D investment. At the forefront of the trend are the wealthy, oil-producing

economies of the GCC. Major new initiatives, such as the Masdar Institute of Science and Technology in Abu Dhabi, a research-driven university, and the establishment of outposts for globally recognised universities, such as the Sorbonne and New York University, speak of a firm commitment to bringing about a long-heralded knowledge-based economy.

There are important socio-economic reasons behind this trend. In the GCC countries, for example, oil and gas currently account for around 80% of export revenue. Although the sector continues to be highly lucrative, governments in the region recognise that they must diversify their economies to ensure their long-term prosperity. According to the survey respondents, economic pressure, including the need for diversification, is a key driver behind the uptake of R&D in the region (see chart 5).

Although oil prices are currently high as a result of strong demand from non-OECD countries and a political risk premium across the MENA region, oil-exporting countries are well aware that large swings in demand can see prices fall rapidly. In the past 15 years, crude oil prices have ranged from a record high of US$147 a barrel in 2008 to a low of US$17 in the wake of the Asian financial crisis. When oil prices fall, this can place pressure on public spending, particularly among those countries with smaller cash reserves. This can have an impact on infrastructure projects and, by extension, levels of employment.

In the longer term, the finite nature of fossil fuel reserves means that hydrocarbon-rich countries

Part II: The need for diversification

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17

17

Economic pressures (eg, the need for diversification)

Competitive pressures (eg, outperforming regional rivals)

Environmental pressures (eg, water shortages, climate change)

Social pressures (eg, meeting the needs of citizens)

Chart 5: Which of the following forces do you think will play the most significant role in driving the uptake of R&D in the Middle East? (% respondents)



must prepare for a post-oil future. “There’s a clear recognition that the oil isn’t going to last for ever,” says Tod Laursen, president of Khalifa University of Science, Technology and Research in the UAE. “Having a deadline provides a little bit of urgency to ensure that the economy diversifies and becomes more knowledge-based.”

But even if the oil were to last forever, economic diversification would still be imperative to increase employment. Many countries in the region have fast-growing and very young populations. In Saudi Arabia, for example, 38% of the population is under the age of 14. Between 2011 and 2015, the country will see its labour force jump from 7.6m to 9.2m. Finding jobs for this new generation is a key policy priority—and one that has become particularly pressing in the wake of the Arab Spring, which was partly caused by resentment at high levels of unemployment.

Although lucrative, the oil and gas sector provides few jobs for locals—some estimates put the local employment figure as low as 1%. Governments therefore need to encourage investment in other sectors that are more labour-intensive, in order to reduce unemployment and ensure social stability. This is equally true of non-oil exporting countries, such as Morocco and Egypt, which also have very young populations and high levels of unemployment.

The transition to a knowledge-based economy will be a key component of economic diversification

case study Petra Solar

The countries of the Middle East can be broadly divided into two groups: those that have abundant energy resources and can export them around the world, and those that must rely on imports for their energy needs. Jordan falls firmly into the second camp. It imports around 95% of its energy, mostly from Saudi Arabia and Iraq. In recent years, this heavy dependence on imports has come to be seen as a drag on economic growth, particularly when combined with high oil prices.

When King Abdullah II of Jordan visited Washington in 2010, exploring innovative solutions to the country’s energy situation was an important item on the agenda. In the course of a series of meetings, the King met Shihab Kuran, the Jordanian-born CEO of Petra Solar, a US-based solar energy and smart grid company. Its technology consists of solar panels that can be mounted directly onto utility poles, such as streetlights, which then feed power directly into the grid.

King Abdullah saw potential in the idea, and the use of Petra Solar’s technology has become one approach that Jordan will take to address its future energy needs. In 2011 Petra Solar opened an R&D centre in Amman, Jordan, that would develop solar and smart grid technologies, initially for deployment in Jordan, but ultimately with a broader Middle East market in mind. “The Middle East is a very large

market for solar power,” says Mr Kuran. “The energy needs are there, the funds are available and the solar resource is abundant. What we can do is become the facilitator that matches those funds with the technology and market.”

In addition to helping address Jordan’s energy needs, the R&D centre is also seen as a catalyst for creating a market for jobs in green industries in the country. According to Mr Kuran, the talent available in Jordan is of very high quality. “Jordan has a very broad base of talent,” he says. “And we can speak from experience at Petra Solar, because many of our young PhDs are graduates of Jordanian universities.”

Although the talent is available, what is less well advanced is the ability to link this with market needs. “The talent is there, but the infrastructure is lacking,” explains Mr Kuran. “Jordan needs to develop its sources of funding, its facilities, equipment, and relationships with the industry. We see our role as being the catalyst that brings everything together.”

For Mr Kuran, the development of local R&D activity aimed at solving local problems is an exciting development. “It’s a win-win situation,” he says. “We can gain revenue and access to talent in Jordan, and the Jordanian economy can benefit from technology transfer, job creation, and addressing its energy crisis.”



in the region. Although this has many aspects, a central one will be the promotion of the region as a destination for scientific and commercial research and development. “The approach to innovation in the Middle East has for a long time been that, if they wanted a new technology, they would outsource the expertise required to develop it,” says Mr Laursen. “There’s now a recognition that that will need to change for the economy to achieve its objectives.”



Most countries in the Middle East are currently at an early stage of development in their R&D capabilities. Although official data on R&D spending are scarce, it is estimated that the GCC

countries spend less than 0.3% of their GDP on R&D. The average for OECD countries is 2.26%3. Other, more qualitative measures also highlight the relative immaturity of R&D in the region. In the Economist Intelligence Unit’s 2009 Innovation Index, no Middle East country appears in the top quartile. The highest-ranked country is Kuwait, which places 36th out of 82 countries. Saudi Arabia is ranked 37th, followed by the United Arab Emirates in 44th position.

But over the past few years, investment in the infrastructure and institutions for R&D has accelerated dramatically in some countries. Qatar, the UAE and Saudi Arabia, for example, are formulating a strong vision for a future knowledge-based economy. What’s more, they are putting considerable investment behind the expression of that vision. Qatar, for example, has announced that it will invest 2.8% of its GDP in R&D. “It’s relatively rare to see an alignment between an overall vision and having the resources available to fulfil it,” says Mr Laursen. “Governments don’t have trouble making decisions here. And things actually happen once those decisions have been taken, which is quite refreshing.”

Much of this, of course, is made possible by a political system in which governments play an active role in setting economic and industrial policy. Not having to worry about being voted out of office means that policymakers in some Gulf countries have the luxury of long-term thinking. “Putting aside political views, when governments are not having to prove themselves every election cycle, it is possible for them to have the patience to form a vision and then execute it,” says Mr Kumar.

When combined with deep pockets, a strong vision helps to achieve results quickly. There is, however, no guarantee that a top-down approach to investment means that the right decisions get made. Indeed, a lack of accountability may mean that vanity projects are chosen over those that might have more practical benefit. This does appear to be a risk. Among our survey respondents, more than half agree that governments in the Middle East are too focused on mega-projects, rather than smaller-scale, practical initiatives. A slightly smaller proportion of 46% agrees that, excluding the provision of

Part III: If you build it, will they come?

3 Wilson and O’Sullivan, Shaping the Gulf National Innovation Systems, Gulf Research Meeting 2011, Cambridge University.



funds, reduced state participation in R&D would allow the private sector to innovate more effectively (see chart 6).

Despite these risks, the role of government in helping to steer investment is one that several interviewees see as vitally important, while the region diversifies and puts in place a more knowledge-oriented economy. “There does need to be a component in an innovation culture where a more unbiased broker is saying there are some things we are going to invest in because they are fundamentally good for our people,” says Mr Laursen.

Getting the balance right between public- and private-sector involvement is always challenging. What is clear is that the role of the government in innovation in the Middle East is large by international standards. Some estimates put the percentage of R&D investment that derives from the government as high as 97%4. By contrast, government spending in the US is just 30%, with the private sector making up the remainder.

Mr Speechley would like to see a much greater involvement from the private sector in the Middle East. “Governments have been forced to shoulder the responsibility of investment and job creation for too long,” he says. “The private sector now needs to be encouraged to invest more and I think this will come down to [small and medium enterprises] SMEs. The best innovations take place in entrepreneur-led businesses, not in governments or big corporations. You need somebody who’s willing to test a new business model, and that’s often an entrepreneur.”

In addition to providing the resources and infrastructure for R&D investment, governments can also play a role in facilitating investment through better regulation. This is an area where some commentators think there is progress to be made. “Bureaucracy needs to be reduced,” says Mr Heath. “There is still too much going to different offices for permits. Investors need a system of clear and transparent one-stop shopping when they set up their businesses.”.

Steps being taken to improve the regulatory environment, particularly in the GCC countries, include the strengthening of intellectual property (IP) rights, patent protection and the establishment of free zones that enable 100% foreign ownership and other benefits. “Countries in the region already realise

Barring the provision of funds, reduced state participation in R&D in the Middle East would allow the private sector to innovate better

Government-led efforts to develop R&D clusters in the Middle East are insufficient to create genuine centres for innovation

Socio-cultural factors play a major role in hindering the take up of R&D in the Middle East

Political instability and social unrest will set back R&D in the region in the short term, but boost it in the medium term

The quality of post-graduate qualifications in the Middle East are of a sufficiently high enough standard for international R&D work

The Middle East’s efforts to foster local R&D now has genuine momentum

Government-led R&D projects in the Middle East are too often focused on mega-projects, rather than more practical small-scale initiatives

Chart 6: To what extent do you agree or disagree with the following statements? (% respondents)

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1 Strongly agree 2 3 4 5 Strongly disagree

4 Sasson, A. Research and Development in the Arab States: the Impact of Globalization, Facts and Perspectives, 2007, UNESCO Forum on Higher Education, Research and Knowledge.



that they have to streamline their rules and regulations to appeal to multinationals and spare them extended and confusing bureaucratic procedures,” says Fred Moavenzadeh, president of the Masdar Institute.

Regulation aimed at smoothing regional integration and facilitating cross-border trade could be an important driver of investment in R&D, according to some commentators. “It’s more difficult than it should be to invest and sell across the region,” says Mr Speechley. “If governments can bring down the barriers to the movement of people, goods, capital and ideas, then private-sector companies are likely to invest more.”

EducationInvestment in education is perhaps the single most important component in enabling the development of a knowledge-based society in the MENA region. And although considerable progress has been made in recent years to put in place the necessary foundations—Abu Dhabi, for example, has established an Education Council, which counts among its missions the support of collaborative R&D programmes—building an education pipeline to feed R&D activity is an inherently long-term project.

Consider, for example, the amount of time required simply to develop a young graduate into a PhD degree holder, focused on R&D as a career. “That may require at least eight to ten years of college education,” says Mr Moavenzadeh. “And for that individual to penetrate the market, and establish a venture-capital-backed company, another ten years may be required.”

For now, the quality and availability of key engineering and science skills is seen as the key challenge that hinders progress on innovation (see chart 7). And while technical skills are seen as most important, the management capabilities to bring innovations to market should also not be overlooked.

50

41

33

23

21

19

11

10

0

13

Quality/availability of key engineering/science skills

Quality/availability of key management/leadership skills

Fostering a culture of innovation

Implementing appropriate rewards and incentives

Limited funds and/or resources

Fostering effective collaboration between local researchers and their peers globally

Allocating projects to local researchers that are sufficiently appealing, relative to our global research efforts

Fostering effective collaboration between local researchers and other stakeholders in our innovation ecosystem (eg, partners, universities)



Chart 7: Within your firm’s R&D centre(s) in the Middle East, what are the key internal innovation challenges that hinder progress? Select all that apply. (% respondents)

5 The National (online), April 2011



This is also seen as an area of weakness by many respondents.Governments in the region are well aware of these shortcomings. The speed with which some have

been investing in education over recent years has been astonishing. Since 2003, for example, Saudi Arabia has trebled the number of its state universities from eight to 245. Wyatt Hume, provost of UAE University, notes that, in the space of two decades, the number of universities in the UAE has risen from one to 100. “This makes for a very vibrant place,” he says.

Major universities that have recently been completed or are under construction in the region include:

l Princess Noura Bin Abdul Rahman University, Riyadh, Saudi Arabia. Due for completion in 2012, the Kingdom’s first women-only university will have the capacity to enrol 40,000 students altogether. The campus includes its own automated transportation system and will house research centres for nanotechnology, information technology and bioscience.

l Education City, Qatar. Originally launched in 1998 by the Qatar Foundation, Education City covers 14 sq km in the outskirts of Doha. It houses branch campuses from six US universities, including Carnegie Mellon, Texas A&M University and Weill Cornell Medical College.

l Masdar Institute of Science and Technology, UAE. Developed in close co-operation with the Massachusetts Institute of Technology (MIT), MIST is the world’s first graduate-level research institute dedicated to alternative energy and sustainability. It was officially launched in 2009 with an intake of 88 students.

l Khalifa University of Science, Technology and Research, UAE. An Abu Dhabi government initiative owned solely by the Emirate of Abu Dhabi, the university was inaugurated in February 2007 and opened its interim campus in Abu Dhabi in October 2008.

l NYU Abu Dhabi, UAE. A joint venture between New York University and the emirate of Abu Dhabi, NYU Abu Dhabi opened its doors to students in September 2010. The university is the first comprehensive liberal arts campus to be established abroad by a major US research university. It consists of a highly selective liberal arts and science college (including engineering), and a world centre for advanced research and scholarship—all fully integrated with each other and connected to NYU in New York.

l King Abdullah University of Science and Technology (KAUST), Saudi Arabia. Founded in 2009, KAUST is a research-based university that offers graduate programmes in life sciences, engineering, computer sciences and physical sciences.

l The Columbia University Middle East Research Center (CUMERC), Jordan. Columbia University established its Middle East Research Center in 2009 to conduct research and promote co-operation among research institutes in the region.

Despite considerable investment in education across the region, respondents to our survey think



that more progress is needed. Asked what they thought would do most to boost the investment attractiveness of the MENA region, they point to improved education systems and standards as having

32

2

30

29

29

24

19

18

16

15

14

13

13

Improved education system and/or standards

Increased number of graduates with advanced degrees (eg, PhDs)

Closer links between academia and business

Increased investment incentives (eg, tax breaks)

Increased average government R&D spend

Increased intellectual property protections

Better living environments for knowledge workers

Immigration policies that attract scientists and engineers

More broadly accessible education

Regulatory policies that support R&D investment

Better support for small, entrepreneurial businesses

Development of specific R&D clusters


Chart 8: In your view, which of the following actions would do most in order to boost the investment attractiveness of the MENA region for your firm, in terms of its R&D? Select up to two. (% respondents)

Chart 9: What assessment would you give to the relative strengths of the Middle East as a potential destination for R&Dinvestment? Please rate 1 to 5 where 1 is strong and 5 is weak.(% respondents)

714362814

39403313

815363011

1322331912

111383614

215363611

311423311

52135328

71945254

72039276

1 Strong 2 Above average 3 Average 4 Below average 5 Weak

Government support for R&D

Tax environment

Availability of skills

Political stability

Availability of financing

Size of local market

Geographic location

Quality of local educational establishments

Regulatory environment

Protection of intellectual property



the biggest potential impact (see chart 8). And only 40% of respondents think that, overall, the quality of local educational establishments is strong or above average (see chart 9).

Some interviewees questioned for this report argue that more needs to be done to improve co-ordination and competition between educational institutions. “There’s certainly investment in individual universities, but rarely a nationwide investment structure,” says Mr Heath. “What we need is a competitive environment where professors are forced to compete with each other. This will stimulate research and lead to improved outcomes across the educational system as a whole.”

A greater focus on post-graduate research will also be important to provide the raw materials for high-end R&D work. Currently, only 35% of respondents agree that the quality of post--graduate qualifications in the Middle East is high enough for international R&D work (see chart 6). “There is a realisation that graduate education is becoming more and more important,” says Dr Timothy Dalton, program manager of the nano-science and technology partnership at IBM Research. “There is a real need for deeper specialisation, taking students to Master’s and PhD level.”

In Europe and North America, the popularity of engineering as a research subject has been in decline for a number of years, and policymakers are constantly bemoaning a lack of interest in science among students. By contrast, the Middle East suffers from no such lack of interest. “Engineering is often first choice for the region’s brightest and best students, because it is perceived as having the best opportunities and a high level of prestige within society,” says Mr Kumar.

Encouragingly, engineering is also popular among women. “My sense is that women in the region are more inclined to study science and technology than some of the men,” says Ralph Cavin, chief scientist at SRC. “In addition to forming a higher proportion of the overall student intake in engineering, some of the best students tend to be women.”

Technology transferEven if countries in the region do develop world-class educational institutions, this will not automatically lead to a fertile environment for commercial R&D. Universities need links with business, both as a channel for commercialising research and as a source of future jobs for graduates. “You’ve got PhDs driving taxis here, because, although there are some very good educational establishments, there aren’t enough research jobs,” says Mr Speechley.

In the absence of local R&D jobs, graduates will often look overseas for work. Reversing this “brain drain” and providing suitable opportunities for researchers in their home country has become a key policy goal. “We’ve heard many times when talking with researchers from the Middle East who have gone abroad that they would love to return home and work on cutting-edge research projects that benefit their home country,” says Dr Dalton.

Some universities in the region are taking steps to address this by building links with multinationals to ensure that there are better commercial opportunities for graduate researchers. “Many governments in the region are very much interested in developing relationships with multinationals that go beyond purchasing their products or services,” says Mr Moavenzadeh. “Substantial investment in R&D capacity



over the past few years could be a strong incentive for multinationals to have a presence in the region.”In Saudi Arabia, for example, the King Abdulaziz City for Science and Technology (KACST), a national

science agency, has formed a partnership with IBM. Under the agreement, researchers from KACST travel to IBM research labs and work side-by-side with their engineers. IBM employees will also travel to Riyadh for year-long assignments at KACST. “One of the goals was to bring together the teams and to teach the KACST team the methods that IBM uses not just for conducting research, but for innovation in general,” says Dr Dalton. “We look at this joint research as not just utilising the skills of our partners in the region, but also as the transfer of IBM’s philosophy back to our partners.”

Working with multinationals who have long experience of commercialising IP helps to build a more robust innovation culture, and encourages the formation of spin-off companies from local universities. But to make this a reality, the development of a more robust venture capital sector will also be required. “The greatest challenge in building a strong R&D environment in the Middle East is the unwillingness of local investors to take risks on new ventures,” says Mr Hume. “At the moment, it’s principally the industrial arms of the government that are taking the risks. There is an enormous opportunity for people from outside to invest, and matching external funding with local funds would be a good strategy to adopt.”

But for Mr Laursen, the issue is not so much a shortage of venture capital as a need to generate the ideas that will make the environment conducive to attracting potential investors. “I think the challenge for us at this stage might be creating more interesting inventions that originate here that will in turn attract venture capital to the region,” he says. “Countries like the UAE are still at a point where they are working to set up some of those funding mechanisms that will create a pool of ideas in which companies can invest.”

Clusters and ecosystemsCollaboration between universities, corporates and other members of an innovation ecosystem is often most fluid and effective when the ecosystem members are located in a geographical cluster. The best examples of clusters, such as Silicon Valley in California, US, are a clear demonstration of the benefits

12

31

25

19

12

1

The Middle East already hosts world-class R&D ecosystems and will continue to do so

The Middle East has major potential to operate world-class R&D ecosystems, but some improvements are still required

The Middle East has major potential to operate world-class R&D ecosystems, but significant improvements are still required

The Middle East has moderate potential to operate R&D ecosystems in this timeframe

The Middle East has limited potential for establishing R&D ecosystems in this timeframe

Don’t know

Chart 10: Which of the following statements best captures your view of R&D ecosystems in the Middle East over the next three years? (% respondents)



of concentrating innovation resources within a defined area.In the Middle East, governments have taken this experience to heart, and have worked hard to

build an ecosystem in which innovation capabilities are clustered together around specific sectors or capabilities. Most respondents think this approach has merit. The vast majority agrees that the Middle East has major potential to develop world-class innovation ecosystems, although many still think there are improvements that need to be made (see chart 10).

“Creating a free zone or cluster where the developer understands the nature of the business contributes to ensuring that investors are well aligned with the regulatory framework,” says Marwan Abdulaziz, director of business development at Dubai Biotechnology and Research Park (DuBiotech), a member of TECOM Investments’ science cluster. “Such clusters also provide links to investors and key government departments.”

He notes that, in Dubiotech, multinational investors such as Pfizer and Amgen initially made

case study Shell

The potential for natural gas to replace oil as the dominant source of global energy will come one step closer in 2012, with the launch of Pearl GTL, a joint venture between Royal Dutch Shell and Qatar Petroleum. Costing US$18bn to develop and requiring 35,000 workers at the peak of its construction, Pearl GTL will be the world’s largest gas-to-liquid (GTL) project. It will convert liquefied natural gas (LNG) from Qatar’s vast North Field into liquid fuels, such as diesel and kerosene, with much lower emissions than conventional fuels. Shell expects that Pearl GTL will add 8% to its worldwide production and be its main source of growth in 2012.

This will be the first time that GTL has been used on such a massive scale. To ensure that the project runs smoothly, Shell is investing heavily in R&D. It holds 3,500 patents in GTL technologies and has teams of engineers around the world working on new methods and production processes to make the most of its GTL investments.

Until recently, this R&D largely took place in Shell’s principal R&D centre in the Netherlands. But in 2008 the company opened the Qatar Shell Research and Technology Centre (QSRTC), which is focused on developing GTL technologies. “As the largest investor in Qatar and a company with a large technological footprint, we thought it was wholly appropriate that we should establish a technology centre in Qatar, where we can supplement our existing R&D with additional GTL research,” says Andy Brown, managing

director of Pearl GTL at Shell. “It means that we are closer to where the technology is applied.”

A key role for QSRTC will be to test the catalysts that are required to convert natural gas into liquid fuels and other products at Pearl GTL. Researchers are also working on developing new uses for sulphur, a by-product of the GTL process, and collaborating with scientists from around the world on improving the understanding of carbonate reservoirs.

The company’s research centre, which houses 35 engineers, is located in the Qatar Science and Technology Park, a centre for technology-based companies. The Park itself sits inside Education City, a major school and university campus that contains branches from six major US universities, including Texas A&M and Carnegie Mellon. “I think Qatar is doing a fantastic job of attracting top universities and building an educational infrastructure to support R&D activity,” says Mr Brown. “The government rightly sees this as a significant investment in its future.”

Qatar’s small population means that it will not be able to compete with larger countries in being able to churn out significant numbers of engineers. At QSRTC, for example, only 25% of the engineers are Qataris. But as a hub for research activity and a destination for talented R&D specialists from around the world, it is already punching above its weight. “This is a country with a can-do mentality and enormous ambition,” says Mr Brown. “Around the Middle East, I see a number of countries that have enormous aspirations and I think that in itself is quite a catalyst for innovation and development.”



investments in sales and marketing. But, over time, they have broadened their investment, adding cold storage facilities and, in some cases, manufacturing and Phase-IV development. “The mindset of multinationals now extends to much more than sales and marketing,” he says. “They are increasing their footprint and working backwards through the development and manufacturing process. Eventually, we may see pre-clinical research taking place here.”

Moving to a situation where early-stage biotech R&D takes place in the region will however take time, believes Mr Abdulaziz. “This will require strong support from the government, with the right incentives, as well as greater numbers of graduates coming out of local universities,” he adds.

Mr Laursen believes that it is important to ensure that clusters concentrate on particular sectors or research areas. “When you’re setting up a nationwide research infrastructure, you have to have a certain amount of focus,” he says. “What research clusters enable you to do is align those clusters around national priorities and areas where you really have a distinct opportunity to have an impact.”

But while there is no doubt that innovation clusters can be effective when they develop from the bottom up, as in Cambridge, UK, there is less evidence that a top-down approach to creating an innovation environment around a specific sector will automatically be effective. “It’s one thing to create a park and have some companies there,” says Dr Dalton. “The other important element is having researchers working there who believe in that model and who are willing to utilise it.”

To be successful, clusters need to attract a critical mass of talented researchers and companies, which in turn will stimulate the arrival of venture capital firms, IP lawyers and other intermediaries necessary to support the innovation process. “A lot of R&D is sitting around the coffee pot or in the cafeteria discussing ideas,” says Mr Heath. “And if you don’t have sufficient numbers of people and talent there day after day, stimulating each other and pushing each other on, then that’s not the best environment for innovation.”




Conclusion

International R&D investment in the Middle East remains at an early stage. Most countries only spend a small proportion of their GDP on R&D, and few patents originate from the region, particularly in

comparison with North America or China. But over the next decade, this picture will change. A number of countries in the region are

investing significantly in education and R&D infrastructure. They are providing valuable incentives to multinationals and establishing science parks and other clusters to attract investment to the region. In their turn, multinationals are realising that their R&D facilities need to be local if they are to compete for a share in this fast-growing market. A number of sectors, including alternative energy, agriculture, and water, are currently leading the way. But the region is also slowly becoming a centre for other high-end research activities, including aerospace and biotechnology.

Building a global hub for R&D in the Middle East will not happen overnight. Much work needs to be done to create a local pipeline for talent, particularly at the post-graduate level. In some countries, regulatory systems need to be overhauled, and stronger institutions must be established. Governments must also convince investors of the benefits of investing in the Middle East, when regional powerhouses such as India are not far away.

These are significant hurdles, but there is certainly no lack of ambition to overcome them. For researchers used to cash-strapped, politicised institutions in Europe and North America, the clarity of the long-term vision for R&D in the Middle East, and the scale of resources to achieve it, are highly refreshing. Perhaps more than anything, this will be the factor that helps to build critical mass, and that turns the Middle East into a major innovation hub in a fast-developing region of the world.

25 © The Economist Intelligence Unit Limited 2011

AppendixSurvey results


Appendix: survey results

100Yes

Has your firm invested in R&D in the Middle East and North Africa (defined here as the region’s Arab countries only, excluding Turkey and Iran) or does it plan to do so within the next three years? (% respondents)

100Yes

Do you have knowledge of, or influence over, your firm’s R&D efforts? (% respondents)

8

22

32

14

9

6

8

Less than 1%

Between 1% and 3%

Between 3% and 5%

Between 5% and 10%

Between 10% and 15%

Between 15% and 20%

More than 20%

What percentage of your firm’s revenue does your company typically spend on R&D each year? (% respondents)




Past three years Next three years

13

25

27

28

6

0

23

24

31

17

3

0

Significant increase—more than 25%



No change


11


Significant decrease—more than 25%

What change have you made to your firm's overall levels of R&D investment in the past three years, and what change do you expect to make over the next three years?(% respondents)




51

39

29

19

24

6

1

3

0

11

1

5

1

0

4

1

1

1

0

1

11

25

42

44

19

21

7

5

5

2

10

1

3

2

3

3

1

1

1

0

5

12

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

More than 20

Now Three years' time

How many R&D centres does your company currently have, and how many does it plan to have in three years' time? (% respondents)




Africa

Asia-Pacific

Eastern Europe

Latin America

Middle East & North Africa

North America

Western Europe

Over the next three years, what change do you expect to your company’s level of R&D investment in the following regions? (% respondents)

361322111

19112138

311436226

3013322211

6123445

21

12

2325253212

242930279

Increase of 20% or more Increase of up to 20% Stay the same Up to 20% decrease Decrease of 20% or more Not applicable

43

2

37

35

27

26

26

23

17

17

14

10

2

Availability of engineers/scientists/other specialist skills


Proximity to local market

Quality of local universities

Availability of finance and funding

Existence of R&D clusters specialising in your industry

Economic prospects of local market

Quality of local infrastructure (eg, roads, airports, telecommunications)

Political stability

Government incentives, including tax incentives

Local labour costs

Time zone


Which of the following factors are most important for your company when deciding on a location for an R&D centre?Select up to three. (% respondents)




58

43

39

36

29

27

22

21

2

Political instability

Weak protection of intellectual property

Lack of government support for R&D

High tax rates

Complex or burdensome regulatory environment

Absence of high-quality educational institutions

Weak/limited local R&D ecosystem

Weak infrastructure


Which of the following factors are most likely to prevent your company from investing in a particular location for R&D?Select up to three. (% respondents)

38

23

27

2

10

We do not currently conduct R&D in the Middle East, but plan to start doing so within the next three years

We have set up a fledgling R&D centre in the Middle East to test the waters

We have a small to midsize R&D operation in the Middle East, relative to our other activities globally

We have a major R&D operation in the Middle East, comparable with major centres we operate elsewhere

The Middle East is our primary source of R&D

Which of the following best represents your firm’s R&D efforts in the Middle East? (% respondents)




30

43

9

3

3

1

1

1

0

1

7

6

39

25

10

4

4

1

1

0

2

7

None

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Approximately what percentage of your firm’s global R&D operation is conducted in the Middle East today? And how much do you expect it will account for in three years’ time? (% respondents) Now Three years' time

47

64

41

34

41

34

Early stage: basic science/fundamental research

Middle stage: applied research/product development

Late stage: product adaptation/localisation

In which of the following stages of R&D is your firm active either on a global basis and/or within the MENA region specifically? (% respondents)

Globally MENA




40

22

14

9

6

4

1

6

Customers

Suppliers

Partners

Government

Universities

Grass-roots entrepreneurs


None of the above

Which of the following external stakeholders make the most important intellectual contribution to your company’s innovations within the MENA region specifically? (% respondents)

47

15

14

12

6

0

0

4

Customers

Partners

Suppliers

Universities

Government

Grass-roots entrepreneurs


None of the above

Which of the following external stakeholders make the most important intellectual contribution to your company’s innovations globally? (% respondents)




50

41

33

23

21

19

11

10

0

13

Quality/availability of key engineering/science skills

Quality/availability of key management/leadership skills

Fostering a culture of innovation

Implementing appropriate rewards and incentives

Limited funds and/or resources

Fostering effective collaboration between local researchers and their peers globally

Allocating projects to local researchers that are sufficiently appealing, relative to our global research efforts

Fostering effective collaboration between local researchers and other stakeholders in our innovation ecosystem (eg, partners, universities)



Within your firm’s R&D centre(s) in the Middle East, what are the key internal innovation challenges that hinder progress? Select all that apply. (% respondents)

45

31

29

23

21

9

3

1

11

Overall importance of local market for our firm

Desire to tap into local talent

To adapt our products/services to local markets

Desire to join a growing R&D ecosystem in our sector

To access government/financial incentives

To build closer partnerships with local firms

It is a key centre of R&D within our industry



What have been the key reasons for your firm conducting R&D in the Middle East? Select up to two. (% respondents)




32

2

30

29

29

24

19

18

16

15

14

13

13

Improved education system and/or standards

Increased number of graduates with advanced degrees (eg, PhDs)

Closer links between academia and business

Increased investment incentives (eg, tax breaks)

Increased average government R&D spend

Increased intellectual property protections

Better living environments for knowledge workers

Immigration policies that attract scientists and engineers

More broadly accessible education

Regulatory policies that support R&D investment

Better support for small, entrepreneurial businesses

Development of specific R&D clusters


In your view, which of the following actions would do most in order to boost the investment attractiveness of the MENA region for your firm, in terms of its R&D? Select up to two. (% respondents)




12

31

25

19

12

1

The Middle East already hosts world-class R&D ecosystems and will continue to do so

The Middle East has major potential to operate world-class R&D ecosystems, but some improvements are still required

The Middle East has major potential to operate world-class R&D ecosystems, but significant improvements are still required

The Middle East has moderate potential to operate R&D ecosystems in this timeframe

The Middle East has limited potential for establishing R&D ecosystems in this timeframe

Don’t know

Which of the following statements best captures your view of R&D ecosystems in the Middle East over the next three years? (% respondents)

34Agriculture & water

38Alternative energy & cleantech

40Biotechnology, pharmaceuticals & life sciences

18Consumer goods

19Design & construction

18Electronics and electrical engineering

20Information technology

6Technology: medical and optical instruments

3Technology: nanotechnology, robotics

7Technology: semiconductors

8Technology: other hi-tech

8Telecommunications

7Other, please specify

2None of the above

Which of the following sectors do you think are most closely associated with R&D investment in the Middle East?Select up to three. (% respondents)




11

27

39

22

1

0

0

Significant increase—25% or more



No change



Significant decrease—25% or more

Over the next three years, how much more investment do you expect your industry to make into the Middle East, in terms of R&D? (% respondents)

What assessment would you give to the relative strengths of the Middle East as a potential destination for R&D investment?Please rate 1 to 5 where 1 is strong and 5 is weak.(% respondents)

714362814

39403313

815363011

1322331912

111383614

215363611

311423311

52135328

71945254

72039276

1 Strong 2 Above average 3 Average 4 Below average 5 Weak

Government support for R&D

Tax environment

Availability of skills

Political stability

Availability of financing


Geographic location

Quality of local educational establishments

Regulatory environment

Protection of intellectual property




43

24

17

17

Economic pressures (eg, the need for diversification)

Competitive pressures (eg, outperforming regional rivals)

Environmental pressures (eg, water shortages, climate change)

Social pressures (eg, meeting the needs of citizens)

Which of the following forces do you think will play the most significant role in driving the uptake of R&D in the Middle East? (% respondents)

Barring the provision of funds, reduced state participation in R&D in the Middle East would allow the private sector to innovate better

Government-led efforts to develop R&D clusters in the Middle East are insufficient to create genuine centres for innovation

Socio-cultural factors play a major role in hindering the take up of R&D in the Middle East

Political instability and social unrest will set back R&D in the region in the short term, but boost it in the medium term

The quality of post-graduate qualifications in the Middle East are of a sufficiently high enough standard for international R&D work

The Middle East’s efforts to foster local R&D now has genuine momentum

Government-led R&D projects in the Middle East are too often focused on mega-projects, rather than more practical small-scale initiatives

To what extent do you agree or disagree with the following statements? (% respondents)

16

18

25

21

9

11

17

5123730

473239

373333

392344

6184226

3174128

173638

1 Strongly agree 2 3 4 5 Strongly disagree




18

9

8

8

8

5

4

4

3

3

3

3

2

1

1

1

1

1

1

8

3

3

United States of America

Saudi Arabia

United Arab Emirates

United Kingdom

India

Egypt

Canada

Mexico

Brazil

Germany

Japan

China

France

Spain

Pakistan

Israel

Netherlands

Chile

Colombia

Portugal

Switzerland

Other

In which country is your company headquartered? (% respondents)

27

23

22

18

9

0

Middle East and Africa

Western Europe

North America

Asia-Pacific

Latin America

Eastern Europe

In which region are you personally based? (% respondents)




1

1

13

15

0

9

5

1

4

0

4

1

12

7

0

1

1

2

0

3

0

1

0

8

0

1

7

0

Aerospace & defence

Agriculture and agribusiness

Automotive

Chemicals

Cleantech

Construction and real estate

Consumer goods

Education

Energy and natural resources

Entertainment, media and publishing

Financial services

Government/Public sector

Healthcare, pharmaceuticals and biotechnology

Information Technology

Logistics and distribution

Manufacturing: hi-tech

Manufacturing: medium-tech

Manufacturing: other

Natural sciences: pure & applied research

Professional services

Retailing

Technology: medical & optical instruments

Technology: nanotechnology & robotics

Technology: electronics and electrical engineering

Technology: semiconductors

Technology: other hi- or medium-tech

Telecommunications

Transportation, travel and tourism

What is your primary industry? (% respondents)




26

22

21

7

23

$500m or less

$500m to $1bn

$1bn to $5bn

$5bn to $10bn

$10bn or more

What are your company's annual global revenues in US dollars? (% respondents)

2

18

7

2

19

12

6

12

22

0

Board member

CEO/President/Managing director

CFO/Treasurer/Comptroller

CIO/Technology director

Other C-level executive

SVP/VP/Director

Head of business unit

Head of department

Manager

Other

What is your title? (% respondents)

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