As we turn the final page on 2023, it's time to reflect on a year marked by remarkable achievements and transformative experiences in the UAE’s business landscape. In a dynamic era shaped by global unpredictability, the UAE has once again proven its resilience and innovative spirit in fostering a thriving environment for entrepreneurs.
In the first half of the year, the UAE’s economy expanded by 3.7% annually, and is expected to stabilize at a solid 3.5% at the end of the year. While this marks a moderation from, it signifies the nation's strength and adaptability amid global economic challenges. This steady growth rate is a testament to the UAE's sustained economic vitality and its strategic response to global economic fluctuations.
Looking back, we see 2023 as a year of exceptional dynamism and transformation. The question we now face is: What changes have occurred, and how will they influence our nation’s business future? In this startup year-end review, we delve into these developments, examining their potential to foster sustained growth and innovation in the coming years.
The UAE's start-up ecosystem has flourished remarkably, particularly in acclaimed business centers such as the Dubai Multi-Commodities Center (DMCC). During the first half of the year, the DMCC experienced a surge in growth, welcoming 1,456 new companies and elevating its total membership to an impressive count of over 23,000. This expansion is largely attributed to increasing interest from major international markets, notably China, India, and Turkey, as evidenced by a rise in company registrations from these countries.
Similarly, the Ras Al Khaimah Economic Zone (RAKEZ) observed significant growth in the second quarter, with over 1,500 companies joining, mainly from the general trade and commerce sectors.
This influx aligns with the UAE's achievement of attracting a record US$23 billion in Foreign Direct Investment (FDI) in 2023, cementing its status as a global business hub and laying a strong foundation for future economic growth.
Growth in non-oil sector
The Emirate's strategic diversification efforts have led to impressive growth in its non-oil sector, a major contributor to the UAE's economic prosperity. The non-oil sector, expanding by a remarkable 5.9 per cent, now constitutes 71 per cent of the UAE's gross domestic product. A testament to this growth was seen in October, when business activity in the UAE's non-oil private sector soared to its highest level in over four years. This growth was propelled by robust performances in key sectors such as trade, industry, real estate, construction, financial services, and tourism. In tandem, there was a surge in new business, with companies across the UAE reporting heightened demand, an influx of new clients, and an increase in project work.
The year 2023 stands as a pivotal one for the UAE, highlighted by key legislative changes that are shaping its business landscape and fueling economic growth. These changes have significantly influenced business operations, introducing new dynamics and considerations for businesses.
• UAE Corporate Tax
Perhaps the most notable development in the UAE's fiscal landscape is the introduction of Corporate Tax (CT). Marking a departure from its historically tax-free status, the UAE has implemented a 9% CT rate, among the lowest globally. This tax is applicable to businesses with an annual income that meets or exceeds AED 375,000, bringing a new financial dimension to the corporate sector in the UAE. The new legislation is expected to positively influence the country's economic structure, enhancing tax transparency, and boosting government revenue. With policies like these, the UAE is aligning itself with global practices while maintaining a competitive edge in the international business community.
• UAE Golden Visa
The UAE Golden Visa, first launched in 2019, has seen significant expansion this year, broadening its appeal to foreign investors, entrepreneurs, and top-tier professionals. The scope of the visa now extends to include freelancers, remote workers, and start-up entrepreneurs, among others. Furthermore, the streamlined application process has made the visa more accessible, contributing to the UAE's growing appeal to expatriates. This is evident as three Emirates — Ras Al Khaimah, Abu Dhabi, and Dubai — have been ranked among the top global cities for expatriates in 2023, showcasing their allure as prime destinations for living and working.
• Emiratisation for private sector
To boost Emirati employment rate, the UAE Ministry of Human Resources and Emiratisation (MoHRE) has enacted strategic amendments, aimed at increasing the number of Emiratis working in the private sector. These proactive changes are anticipated to significantly uplift the Emirati employment rate, setting ambitious targets of 6 per cent by 2024, 8 per cent by 2025, and reaching 10 per cent by 2026. This move demonstrates a commitment to cultivating a diverse and inclusive workforce, integrating Emirati talent into various critical industries throughout the MENA region. It also reflects the government's focus on ensuring that economic progress benefits a wide range of the population.
• VC funding
In the venture capital sector, the UAE's strategic business initiatives have been complemented by significant achievements. During Q3 2023, the UAE, along with Saudi Arabia, was at the forefront of capital raising in the MENA region, securing $250 million. This effort significantly contributed to the region's impressive total of $1.4 billion, amassed through 286 transactions in the first nine months of the year. In this period, the UAE stood out for its activity, accounting for a third of all deals in the region.
The country's venture capital scene, particularly noted for substantial deals over $100 million, reflects a dynamic and flourishing environment for startups and innovation. Local entities such as Chimera Capital and Aliph Capital have been key to this growth, with their new funds greatly boosting investment activity. These developments underscore the UAE's role as a vibrant hub for business innovation and entrepreneurship.
• Global collaborations and partnerships
Aside from the business landscape, this year also marked significant partnerships and collaborations in the UAE which has played in the economy of the UAE.
• Inclusion to BRICS
This year, the BRICS association, initially consisting of Brazil, Russia, India, China, and South Africa, is undergoing a landmark expansion. The group is set to incorporate six new members, with the UAE and the KSA being prominent inclusions. This expansion, the most significant since the formation of BRICS in 2009, is expected to be finalized by January 1, 2024. With BRICS already representing about 40 per cent of the world's population and over a quarter of the global GDP, the inclusion of the UAE is anticipated to open new investment pathways and enhance the nation's global economic influence.
For the first time since its inception in 1995, the 28th edition of the Conference of Parties (COP28) was held in Dubai. The event provided a significant platform for discussing and addressing climate change issues. COP28 was an opportune moment for the UAE to showcase its green initiatives, highlighting its ambitious renewable energy plans and sustainable infrastructure projects. This not only enhanced Dubai's reputation as a forward-thinking and environmentally conscious city but also strengthened its diplomatic relationships.
Hosting COP28 facilitated international collaboration on climate action, establishing new partnerships with various global organizations and countries.
Rise of AI, Web3, and cryptocurrency
Across the MENA region, the domains of AI, cryptocurrency, and blockchain are also witnessing remarkable growth this year.
• Artificial intelligence
Since the UAE's National Strategy for AI 2031 was launched six years ago, significant investments in generative AI have been made across the Emirates. By 2030, these investments in Generative AI are expected to yield about $5.3 billion in commercial benefits, indicating a return rate of nearly 990 per cent per dollar. As the Arab world's second-largest economy, the UAE's recent rollout of Large Language Models (LLMs) shows its drive to lead in this sector. In tandem, the business sector, especially startups, is gearing to tap into the potential of generative AI, playing a pivotal role in its growth and development.
In line with its technological advancement goals, the UAE is also actively promoting initiatives to explore the possibilities of Web3. A notable step in this direction was the inauguration of RAK Digital Assets Oasis (RAK DAO), a new economic free zone dedicated to fostering the growth of entrepreneurs and businesses engaged in the Web3 sector. Adding to these efforts, Abu Dhabi has introduced a $2 billion initiative aimed at supporting Web3 and blockchain technology startups in the region.
Between July 2022 and June of this year, the UAE recorded nearly $35 billion in cryptocurrency transactions, highlighting its significant role in the digital asset economy. During this period, the MENA region emerged as the world's sixth-largest crypto economy, receiving an estimated $389.8 billion in on-chain transactions, accounting for about 7.2 per cent of the global total.
To manage this burgeoning sector, the UAE established the Virtual Assets Regulatory Authority (VARA), implementing robust measures to regulate cryptocurrency activities. Notably, 67 per cent of the UAE's cryptocurrency transactions in this timeframe were driven by institutional investments, each valued at over $1 million. These high-value transactions were followed by professional investments ranging from $10,000 to $1 million.
Incubator and accelerator
As start-ups across different sectors continue to thrive in the UAE, they are receiving increasing support from a variety of incubator and accelerator programmes across the region. The country is committed to nurturing a diverse range of initiatives, particularly those aimed at supporting women entrepreneurs.
A notable example is the recent collaboration between the Abu Dhabi Businesswomen Council (ADBWC) and Flat6Labs to launch a boot camp aimed at enhancing the skills of female entrepreneurs. This initiative provides women entrepreneurs with access to valuable coaching and expert advice, which is crucial for the growth and development of their businesses. This not only offers a platform for their growth and professional development but also brings recognition to their efforts.
Such initiatives are a strong testament to the UAE's dedication to supporting a diverse range of entrepreneurial endeavors.
Outlook for 2024
Looking forward to 2024, there is one thing certain: the UAE's business landscape is positioned for sustained growth and innovation. Leveraging the dynamic successes and transformative changes of 2023, the nation is well on its way to further solidify its role as a key player in the global business arena. This growth trajectory is supported by a thriving start-up ecosystem, strategic legislative advancements, and significant investments in cutting-edge technologies and diverse economic sectors.
The UAE's active participation in global economic forums and international collaborations is expected to open doors to new investment avenues, further elevating its position globally. On the other hand, the country's transition from a primarily oil-based economy to a more diversified one highlights its adaptability and appeal as a prime destination for startups to multinational enterprises.
Overall, 2024 holds great promise for the UAE as it presents a landscape ripe with opportunity, characterised by progressive policies, technological advancements, and economic diversity. All these elements come together to forge a dynamic and inviting business environment that's increasingly attractive to entrepreneurs and investors from all corners of the world.
Creative Zone’s role in the UAE business landscape
Echoing the UAE's spectacular performance in 2023, Creative Zone too has witnessed a year of remarkable success and growth. Throughout this period, Creative Zone has been instrumental in shaping the UAE's entrepreneurial landscape, offering exceptional support to a diverse clientele. This year, over 7,500 clients, ranging from start-ups to established multinational corporations, have benefited from Creative Zone's comprehensive services. These services encompass everything from establishing new businesses and assisting with bank account openings to facilitating the acquisition of residency visas.
In sync with global events and an expanding network of investors, Creative Zone has seen significant expansion, with its team growing to over 200 dedicated employees. This growth not only reflects Creative Zone's commitment to fostering business development in the region but also underscores its position as a key facilitator and supporter of the UAE's thriving business ecosystem.