1. Laying the
foundations:
A new era for R&D in
the Middle East
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2. The start of another Golden Age?
• For 500 years, the Middle East was the most technically advanced
region of the world
• The scientific revolution of the 16th century saw the start of Western
dominance
• In the 21st century, the Middle East is again investing in innovation
and research
• The start of another golden age?

3. Global investment in R&D is increasing
• R&D is seen as a source of competitive advantage
• Investment in R&D continues to increase, despite cuts elsewhere
• Nearly a quarter of businesses aim to increase their investment in R&D
by 25% or more
• Businesses want to diversify their R&D investments around the world
What change have you made to your firm’s overall levels of R&D investment in the past three years?

4. The Middle East – why now?
• Having invested heavily in India and China, businesses are looking further afield
• An historic lack of investment means there is plenty of room for growth
• A youthful demographic, well-placed to enter the job market
Over the next three years, what change do you expect to your company’s level of R&D investment in the
following regions? (All respondents)

5. What makes the Middle East so attractive?
• A prime location, mid-way between Europe and Asia
• A world-class, modern infrastructure in places such as Abu Dhabi
• A local market in its own right: 444m inhabitants and a GDP per capita of
US$10,000
Projected real GDP
growth rate in 2012
Source: IMF

6. Why the Middle East needs R&D
• Middle East countries are heavily reliant on finite gas and oil reserves
• A fast-growing and youthful population will need jobs
• Diversification is essential for long-term economic prosperity
• The transition to a knowledge-based economy is key to successful diversification
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?
Economic pressures (eg, the need
43 %
for diversification)
Competitive pressures (eg,
24 %
outperforming regional rivals)
Environmental pressures (eg, water
17 %
shortages and climate change)
Social pressures (eg, meeting the
17 %
needs of citizens)

7. How the market is growing
• Between 2012 and 2015, the population will grow by an annual average of around 4.9%
• Sales of consumer goods will grow above the global average for the next four years
• Spending per capita on healthcare will grow by 40% between now and 2015
Regional retail markets (retail sales; US$ trn unless otherwise indicated)
Region 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
% change, year on year (volume) 3.8% 4.2% 5.1% 4.8% 4.8%
Asia and Australasia 6.31 7.09 7.99 8.99 10.09
% change, year on year (volume) 6% 7% 6.1% 6.1% 6.5%
Middle East and 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% 4.1%

8. From market push to environment pull
• Most R&D currently focused on solving local market problems: “market push”
• Often related to meeting specific needs associated with differences in the climate,
consumer preferences and health needs
• By solving problems locally, innovations can be rolled out to the rest of the world
What have been the key reasons for your firm conducting R&D in the Middle East?
Overall importance of local market for our firm 45 %
Desire to tap into local talent 31 %
To localise/adapt our products/services to local markets 29 %
Desire to join a growing R&D ecosystem in our sector 23 %
To access government/financial incentives 21 %
To build closer partnerships with local firms 9%
It is a key centre of R&D within our industry 3%
Other, please specify 1%
Not applicable, we have not yet set up an R&D centre there 11 %

9. Centres of excellence
R&D investment is taking place in key areas:
• Dealing with water scarcity, desalination and developing drought-resistant crops
• Alternative energy (particularly solar)
• Biotechnology and life sciences (particularly into problems, such as diabetes, that are
prevalent in the region)
Which of the following sectors do you think are most closely associated with R&D investment in the Middle East?
Agriculture & water 34 %
Alternative energy & cleantech 38 %
Biotechnology, pharmaceuticals & life sciences 40 %
Consumer goods 18 %
Design & construction 19 %
Electronics and electrical engineering 18 %
Information technology 20 %
Technology: medical and optical instruments 6%
Technology: nanotechnology, robotics 3%
Technology: semiconductors 7%
Technology: other hi-tech 8%
Telecommunications 8%
Other, please specify 7%
None of the above 2 %

10. From “market push” to “environment pull”?
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?
Still early days…
R&D investment in the Middle East is historically small – less than 0.3% of GDP
OECD countries invest an average of 2.26% of GDP in R&D
But important progress is being made…
Saudi Arabia, Qatar and UAE are all now investing heavily in R&D
Qatar is investing 2.8% of GDP in R&D

11. The role of government
• Governments in the region play an active role in setting economic and industrial policy
• There is an “alignment between having the vision and the resources to achieve it”
• Approximately 97% of R&D investment in the Middle East comes from government
• Sentiment among respondents that reduced government participation would allow the
private sector to innovate more effectively
To what extent do you agree or disagree with the following statements?

12. The importance of the private sector
“Governments have been forced to shoulder the responsibility of investment
and job creation for too long. The private sector now needs to be
encouraged to invest more and I think this will come down to 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.”
Tom Speechley, senior partner, Abraaj Capital

13. Encouraging inward investment
GCC governments are starting to:
• Strengthen intellectual property rights
• Improve patent protection
• Establish free zones to enable 100% foreign ownership
“It’s more difficult than it should be to invest and sell across the region. 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.”
Tom Speechley, senior partner, Abraaj Capital

14. Investment in education
The quality and availability of engineering and science skills is seen as the key challenge
that hinders progress on innovation. Shortage of management skills also seen as an issue.
Within your firm’s R&D centre(s) in the Middle East, what are the key internal innovation challenges
that hinder progress?
Quality/availability of key engineering/science skills 50 %
Quality/availability of key management/leadership skills 41 %
Fostering a culture of innovation 33 %
Implementing appropriate rewards and incentives 23 %
Limited funds and/or resources 21 %
Fostering effective collaboration between local researchers and their peers globally 19 %
Allocating projects to local researchers that are sufficiently appealing, relative to our global
11 %
research efforts
Fostering effective collaboration between local researchers and other stakeholders in our
10 %
innovation ecosystem (eg, partners, universities)
Other, please specify 0%
Not applicable, we have not yet set up an R&D centre there 13 %

15. Governments in the region are focusing
on education
• In Saudi Arabia, the number of universities has increased from 8 to 24 since 2003
• UAE has created nearly 100 new universities in two decades
Major universities in the region include:
• Princess Noura Bin Abdul Rahman University,
Riyadh, Saudi Arabia
• Education City, Qatar
• Khalifa University of Science, Technology and
Research, UAE
• Masdar Institute of Science and Technology, UAE
• NYU Abu Dhabi, UAE
• King Abdullah University of Science and
Technology (KAUST), KSA
• The Columbia University Middle East Research
Center (CUMERC), Jordan

16. Boosting the attractiveness of the Middle East
Four key actions that will boost the region’s attractiveness for R&D investment:
• Improved education system and/or standards
• Increased number of graduates with advanced degrees
• Closer links between academics and business
• Increased investment incentives
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?
Quality/availability of key engineering/science skills 50 %
Quality/availability of key management/leadership skills 41 %
Fostering a culture of innovation 33 %
Implementing appropriate rewards and incentives 23 %
Limited funds and/or resources 21 %
Fostering effective collaboration between local researchers and their peers globally 19 %
11 %
Allocating projects to local researchers that are sufficiently appealing, relative to our global research efforts
10 %
Fostering effective collaboration between local researchers and other stakeholders in our innovation ecosystem
Other, please specify 0%
13 %
Not applicable, we have not yet set up an R&D centre there

17. Improving investment in research
“There’s certainly investment in individual universities, but rarely a nationwide
investment structure. 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.”
Peter Heath, chancellor of the
American University of Sharjah in the UAE

18. Technology Transfer
• Many Middle East graduates take job opportunities overseas
• Reversing this brain drain is a key policy goal
• Partnerships with the private sector are becoming increasingly important
• There needs to be a focus on commercialising research

19. King Abdulaziz City for Science and
Technology and IBM
• KACST in Saudi Arabia has formed a partnership with IBM
• KACST researchers have placements at IBM research labs
• IBM employees have year-long assignments at KACST
• KACST benefits from IBM’s research and innovation skills

20. Clusters and ecosystems
• Middle East government are investing in new research clusters
• To succeed, it is essential to attract researchers, businesses and funding
• 68% of respondents think the Middle East has potential to create world-class ecosystems
Which of the following statements best captures your view of R&D ecosystems in the Middle East
over the three years?
The Middle East already hosts world-class R&D ecosystems and will
12%
continue to do so
The Middle East has major potential to operate world-class R&D
31%
ecosystems, but some improvements are still required
The Middle East has major potential to operate world-class R&D
25%
ecosystems, but significant improvements are still required
The Middle East has moderate potential to operate R&D ecosystems in
19%
this timeframe
The Middle East has limited potential for establishing R&D ecosystems
12%
in this timeframe
Don’t know 1%

21. Conclusion 1 2 3 4 5
Not there yet…
• International R&D investment in the Middle East
remains at an early stage
• A lack of managerial and technical skills is a barrier to
further international investment
• Only a small portion of GDP is spent on R&D
• Few patents originate from the region, particularly in
comparison with North America or China

22. Conclusion 1 2 3 4 5
Local barriers remain
“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.”
Wyatt Hume, provost of UAE University

23. Conclusion 1 2 3 4 5
Investment in education will make region more attractive
“There is a realisation that graduate education is
becoming more and more important.”
Timothy Dalton, program manager of the nano-science
and technology partnership at IBM Research

24. Conclusion 1 2 3 4 5
Incentives for multinationals to invest in the region
• Countries are cutting red tape
• Substantial investment in R&D infrastructure
• Strong focus on sectors such as biotech and agriculture
• Several centres of excellence are emerging

25. Conclusion 1 2 3 4 5
The region is developing
• Significant investment in education and skills, although will take time to
bear fruit
• Willingness to partner with multinationals
• Opportunities available in specific sectors, such as solar power
• Strong government backing for becoming a world class centre for R&D

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