Since June 2014, the price of a barrel of Brent oil plunged by more than 70 per cent creating shockwaves across sovereign balance sheets from Caracas to Riyadh.
Out of the various lessons gleaned from this market decline, the one that has resonated most deeply is that economic homogeneity is “economically assured self-destruction”. Said differently, economic diversification breeds economic stability which precipitates political stability - both a cause and effect that is particularly acute to the region.
In order to breed robust economic diversification, an entrepreneurial ecosystem must be actively nurtured and supported through a dense matrix of public policy and private-sector participation. In a practical sense, the level of institutional support can be measured through metrics such as, first and foremost, a given market’s aggregate cost of starting a new business, secondly, the transparency and robustness of their legal framework, and, last but not least, the ability to attract world-class talent.
When done right, co-working can play a critical role in materially improving upon these metrics and thus play an integral role in cultivating and sustaining a localised entrepreneurial ecosystem. From the Bay Area to New York's Silicon Alley to London Tech City, co-working is a consistent feature that allows for the affordable aggregation of world-class talent, resulting in the formation of economic and intellectual hubs that serve as global centre of innovation.
High barriers to entry
There are various domestic hurdles that inhibit the UAE from creating a similar model as seen in these leading markets. In fact, all three metrics mentioned above require significant improvement in order for a sustainable and robust entrepreneurial ecosystem to take root. Talk to any entrepreneur in the UAE and there will be unanimous agreement that local start-up costs for office space and licensing are excessive, the legal framework is onerous, and the ability to attract and retain world class talent is problematic.
The result is a market with punitively high barriers to entry for most start-ups which discourage entrepreneurs from innovative risk taking, reward the status quo for anachronism, leading to anemic economic diversification.
Whether one rents an unfurnished office or conventional serviced office space, entrepreneurs in Abu Dhabi will easily face start-up costs ranging between Dh70,000 and Dh200,000, including licencing costs. These are substantial figures and serve as a significant disincentive for many would-be entrepreneurs.
This is where the concept of co-working can play an effective role. An efficiently managed co-working platform can reduce start-up costs by as much as 96 per cent and can generate long term savings of 40 per cent compared to conventional office or serviced office space.
Additionally, co-working space is modular and can offer extremely flexible terms that conventional space does not, such as the ability to scale up or down in size, monthly or even daily rental contracts. This is particularly attractive to the entrepreneurial community who are sensitive to long-term contractual obligations such as leases. Coworking then provides affordable scalability, reduced capital investment which derives lowered startup and operational risk. These are fundamental building blocks for incentivising entrepreneurs to enter the market and they must be present in order to sustain an entrepreneurial ecosystem.
Aside from cost savings, co-working spaces can also be used as a powerful tool to attract and retain talent. The contemporary workspace archetype has evolved. In order to compete for the best talent, employers must offer a workspace that appeals to the sensibilities of the modern, technology centric workforce. Unless you are a research lab, you will never attract the world’s best talent and build the world’s next Uber or Airbnb if your workspace does not compete to a proportionate degree with world’s best companies. This means that in order to attract top talent, your workspace must reflect the modern workplace paradigm of collaboration, technological and social connectivity and comfort.
Simply providing shared space is not enough. Workspace must be thoughtfully designed and purpose-built to encourage random interactions and collisions on a daily basis. The best co-working spaces in the world understand this and provide disproportionately large communal areas, sacrificing rentable space in exchange for large swaths of interactive common space.
The government’s role
The one thing that co-working space in the UAE cannot improve on alone is the domestic legal framework. However, with a transparent commitment from the public sector coupled with strategic coordination with the private sector, the current framework can, at minimum, be easier to navigate, and hopefully improved upon. In this instance as well, coworking can play a definitive role, acting as a one-stop conduit for entrepreneurs engaged in legal company formation. This would serve to create transparency and simplify a process that is widely perceived as highly onerous. Start-ups could then form more quickly, more affordably and more often.
With a dedicated commitment from the public sector to alleviate some of the administrative burdens, the private sector and coworking in particular can play extraordinary role in the evolution of the UAE’s economy and its effort to diversify away from “economically assured self-destruction”.
- The writer is the Co-Founder and CEO of GlassQube Coworking, a co-working operator in the UAE