UAE spending on digital technology to hit $20bn by 2026, BCG says

The contribution of digital economy to the country's GDP is likely to double to 19.4% within the next decade, new report finds

Etisalat's stand during Gitex Technology Week. Dubai is seeking to cement its position as a global capital of the digital economy. Pawan Singh / The National

Spending on digital technology, including IT, telecoms and emerging tech such as artificial intelligence, Internet of Things, blockchain and robotics, in the UAE over the next three years is expected to reach $20 billion, according to a new report by the Boston Consulting Group.

Digital technology is projected to have accounted for more than two thirds of productivity growth over the past decade, and will account for 25 per cent to 30 per cent of global gross domestic product (GDP) over the next decade, the report said.

The UAE is well positioned to double the contribution of its digital economy to GDP to 19.4 per cent from 9.7 per cent within the next 10 years, according to BCG.

“We the UAE 2031 strategy”, the government’s vision for the next decade, will further support the country’s digital economy strategy, the global consultancy added.

The UAE's digital economy is expected to grow to more than $140 billion in 2031, up from nearly $38 billion at present, according to a recent report by the Dubai Chamber of Digital Economy.

The UAE Cabinet also approved the formation of the Higher Committee for Government Digital Transformation last year.

Advances expected from the use of automation, robotics and a “historic explosion of data and intelligence in the coming years” present significant opportunity for unprecedented disruption and wealth creation in the UAE, according to the BCG report.

“For government decision makers, the digital economy’s expansion carries major strategic implications,” it said.

“Positioning economies appropriately can help them remain competitive, overcome productivity lags and maintain resilience against internal and exogenous shocks.”

Dubai, which is seeking to cement its position as a global capital of the digital economy, recently launched the ambitious Dubai Economic Agenda (D33) plan.

The strategy aims to catapult the city into the world’s top cities by economic strength in the next 10 years and envisages a programme to support 30 private companies to achieve unicorn status ― worth more than $1 billion (about Dh3.67 billion).

The D33 plan also unveiled “Sandbox Dubai” to harness the testing and commercialisation of new technologies and promote Dubai as a market-leading innovation hub, BCG said.

“In a rapidly transforming world, new agile governance structures are required to prioritise considerations around how digital ecosystems can help various sectors grow,” Faisal Hamady, managing director and partner at BCG and co-author of the report, said.

“The digital sector’s multi-trillion-dollar expansion leaves leaders and decision-makers with only two options: adapt to its accelerating pace or be left behind.

“Thus, by considering how systems can change at the same pace as technology, governments can recalibrate the regulatory framework for a digital-first world.”

This approach can help lead to the “right investments” in infrastructure, specifically in emerging value pools, to spur innovation and economic opportunity, Mr Hamady added.

Policies that encourage investments in digital infrastructure and research and development into frontier technologies, such as AI and robotics, and create an environment for innovation that trains or attracts highly skilled and specialised talent must be emphasised, the report said.

By collaborating with other public entities to align strategic priorities, governments can help address wide-ranging issues that are gaining prominence such as digital inclusion, social prosperity and questions around digital ethics.

“For governments, the digital economy is not an elective. It marks a profound departure from the way that economies have historically been organised and regulated,” Mr Hamady said.

“Tackling this brave new world head-on will prove essential to remaining competitive and relevant on the global scene.”