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The United Arab Emirates (UAE) is the best location in the world for new businesses, according to the latest annual Global Entrepreneurship Monitor (GEM) survey. The Arab country ranks first for the third year in a row as the government pushes for cutting-edge technology to diversify away from oil.
Four of the top five GEM countries are in the Middle East or Asia, with India second, Saudi Arabia third and Qatar fifth – the only exception being Lithuania in fourth. This is a characteristic of the obvious eastward shift in the quality of the entrepreneurial ecosystem over the past five years, and is closely related to a similar shift in the center of gravity of the world economy.
The UAE has made particularly steady progress, moving into the lead from fifth place in 2019. Saudi Arabia moved up from 17th to 3rd place, while India moved up from 6th to 2nd place, shaking off a decline caused by the pandemic.
Western economies declined during the same period. So why is this happening and what’s most important going forward?
How the investigation works
Entrepreneurship is a major driver of global economic growth. It is greatly influenced by a country’s regulations, education system, financial institutions, and overall culture. By assessing these variables, you can get a good idea of the entrepreneurial climate.
GEM captures this each year through a national expert survey, conducted among a range of entrepreneurial ecosystem stakeholders, including business leaders, government officials and academics. This year, 49 countries participated in the survey, including most of the G20 countries (with exceptions such as Australia, which did not participate in the recent survey). Accordingly, GEM rates 13 different entrepreneurial conditions and creates an annual index.
2019-2023 GEM Ranking
![2019-23 Entrepreneurship Environment Ranking Chart](https://images.theconversation.com/files/574984/original/file-20240212-29-g6ijzk.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip)
Provided by the author, Provided by the author (not reusable)
shift eastward
The reasons for the rise of Eastern countries include governments strengthening their promotion of entrepreneurship, paying more attention to entrepreneurship education, and changes in cultural views on business activities.
For example, the UAE has launched initiatives such as “Projects of the 50”, which include priority visas for entrepreneurs and top students, especially in areas such as artificial intelligence, digital currency and coding. It also includes promoting the country’s adoption of leading technologies.
The government is using Expo 2020 as a promotional campaign to promote the UAE as an attractive business destination and to change certain rules to facilitate foreign investors. Notably, this includes allowing 100% foreign ownership of companies in 2021. The Ghadan 21 business accelerator program has also spent Dh50bn (£11bn) in Abu Dhabi since 2019.
![GITEX Global 23’s Abu Dhabi Pavilion](https://images.theconversation.com/files/575020/original/file-20240212-22-vdok8w.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip)
Adnan Ahmed Ali
Saudi Arabia is also committed to diversifying beyond oil, and entrepreneurship is one of the top priorities of Saudi Arabia’s Vision 2030. Monsha’at, the national enterprise development agency, is doing things like promoting university startups and fast-growing businesses.
The country has been trying to make it easier for entrepreneurs to obtain financing through initiatives such as the Saudi Arabian Public Investment Fund and the Saudi Arabian Venture Capital Corporation, while also providing targeted support for female entrepreneurs.
In order to attract foreign talents, the Saudi Arabian government also approved a new residency program in 2019 and an immediate labor visa in 2023.
In India, the country’s new education policy launched in 2020 places great emphasis on innovation and aims to comprehensively improve education standards. Many students are also inspired by a nationwide program called Atal Tinkering Lab, which instills curiosity and design thinking through science projects, and the popular TV show Shark Tank (known as Dragons’ Den in some countries). ) sparked discussions at the dinner table about issues such as “fairness” and “product-market fit.”
east and west
The weakness in Western economies has been evident over the past five years. In 2019, four of the top ten countries were Switzerland, the Netherlands, Norway and the United States. By 2023, all countries have lost ground, with Norway and the United States no longer even in the top 15, while Switzerland and the Netherlands have fallen from the top two positions to ninth and seventh respectively.
The softening in business conditions in these economies is likely due to a surge in inflation and rising interest rates since the pandemic. Incidentally, the UK was ranked 21st overall five years ago and is currently ranked 22nd.
However, Western economies still lead in one important respect. Looking at countries such as Switzerland, France, Norway and Germany, more than 30% of entrepreneurs are engaged in business services.
The situation in the Eastern countries leading the GEM rankings is quite different, with most entrepreneurial activity concentrated in consumer services such as retail, hotels, restaurants and personal services. These companies account for 80% of Saudi Arabian companies, more than 70% of Indian companies, and the latest figures for the UAE will exceed 60% by 2022.
In Saudi Arabia and India, business services such as IT and professional services account for less than 10% of total entrepreneurial activity, while in the UAE, the figure will be less than 20% in 2022.
These low numbers are important because companies that provide business services tend to have higher profits, greater potential for expansion, and greater barriers to entry. So whether it’s in the East or low-income countries, there needs to be more motivation and support to encourage commercial services.
![Arabs walk past the fountain of a large hotel in Riyadh](https://images.theconversation.com/files/575036/original/file-20240212-20-krtozg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip)
U.S. Environmental Protection Agency
It is also worth pointing out that most countries need to pay more attention to entrepreneurship education. Of the 49 economies, 31 were rated as having the weakest conditions assessed by the survey. If this problem is not addressed, many potential new businesses may never materialize, as a generation of schoolchildren grow up without the awareness that entrepreneurship is an important option for their future.
In a world of rapidly evolving disruptive technologies, skills imparted through entrepreneurship education such as creativity, innovation, experimentation, growth mindset and overcoming the fear of failure will become essential requirements.
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