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  • Laying the foundations A new era for R&D in the Middle East A report from the Economist Intelligence Unit

    Sponsored by

  • Laying the foundations A new era for R&D in the Middle East

    © The Economist Intelligence Unit Limited 20111

    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

  • Laying the foundations A new era for R&D in the Middle East

    © The Economist Intelligence Unit Limited 20112

    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

  • Laying the foundations A new era for R&D in the Middle East

    © The Economist Intelligence Unit Limited 20113

    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.

  • Laying the foundations A new era for R&D in the Middle East

    © The Economist Intelligence Unit Limited 20114

    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

  • Laying the foundations A new era for R&D in the Middle East

    © The Economist Intelligence Unit Limited 20115

    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

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