2021 Entrepreneurial Activity Review

In 2016, the United Arab Emirates embarked on a new strategy, emphasizing entrepreneurship as a means of diversifying its economy away from oil production. Since that time, the United Arab Emirates’ TEA rate has gradually increased, reaching 16.5% in 2021. Measures of entrepreneurial attitudes among the population have also increased. The extent to which the 2016 policy spurred these increases requires further analysis, but it is clear the country has reached a sustained, higher level of entrepreneurial activity. This is evident by the quick recovery in both TEA rates and attitudes following COVID-19 related restrictions on business.

The improvement in entrepreneurial attitude can be measured through GEM survey responses. In 2021, 73.5% of Emiratis saw good opportunities to start a business where they lived — one of the highest rates among GEM Level A economies and up from 62.1% in 2020 — while 6.1% also reported that they had the skills, knowledge and experience to start a business, compared to 54.7% in 2020. These 2021 rates were also the highest rates measured since 2016, reflecting the upward trends seen across other indicators of entrepreneurship in the United Arab Emirates. This is despite the economic constraints of COVID-19 — which have had a significant impact on the country.

In 2021, 62.3% of Emiratis said their household had lost income as a result of the pandemic, the highest percentage among Level A economies. Yet entrepreneurs also remain confident in the face of these challenges. Among TEA respondents, 59.9% say they see new opportunities as a result of the pandemic and 75.9% plan to use more digital technology to grow their business in the next six months. This reflects well on the country’s entrepreneurs, who are clearly willing to adjust their strategy and invest in response to the ongoing disruption. Perhaps because of this planning, the United Arab Emirates also has the highest rate of entrepreneurs expecting to hire six or more additional employees in the next five years among its peer group of GEM Level A economies. Such confidence and investment will be required to continue the state’s evolving entrepreneurial goals. In late 2021, its Minister of State for Entrepreneurship and SMEs announced a new policy seeking to host 20 new startups aiming to be worth more than $1 billion each by 2031.

2021 Framework Conditions Review

The UAE received high scores on most of its framework conditions, which may help explain the improvement in entrepreneurial attitudes in 2021. Both financial conditions received high scores, rated near the top of all GEM Level A economies. This will need to be sustained, or even improved, to meet the country’s lofty entrepreneurial goals of developing high-impact startups, which tend to be extremely capital-intensive. Even if access to finance were to stay at its current levels, however, this should benefit those new businesses that would like to become established in the next few years. Businesses with more modest goals also need finance to grow operations, but return that investment by hiring employees and offering more products and services.

The United Arab Emirates’ performance on its governance conditions was the most impressive among its 2021 scores. On the conditions Government Policy: Support and Relevance (7.0) and Government Policy: Taxes and Bureaucracy (7.5) the country had the highest scores among GEM Level A economies. The condition Government Entrepreneurial Programs (6.5) was second highest among this group. All three conditions improved over 2020, representing further progress in the country’s march to generating more impactful entrepreneurship. Policymakers will have to be active in maintaining this quality as many regional economies are also pursuing similar entrepreneurial strategies. Despite these successes, the United Arab Emirates cannot rest on its laurels.