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Leading management consultancy Boston Consulting Group (BCG) said in a new report that the UAE is well positioned to meet its goal of doubling the contribution of the digital economy to GDP from 9.7% to 19.4% over the next 10 years.
Under the core pillars of the country’s digital future, the “We UAE 2031” vision will further lay the foundation for the country’s fast-growing digital economy strategy, according to the report titled “Portraiting Economic Opportunities in the New Digital Paradigm”.
The report shows that digital technologies are expected to account for more than two-thirds of productivity growth over the past decade and 25-30% of global GDP over the next decade. Properly positioning economies can help them remain competitive, overcome productivity lags, and remain resilient against internal and external shocks.
Dubai’s recent D33 program is supporting competitive interventions to scale up the digital initiatives of 30 companies, making them potentially global unicorns in the new economy. To this end, D33 has launched the ‘Dubai Sandbox’ to leverage the testing and commercialization of new technologies, thereby further strengthening Dubai as a market-leading innovation hub.
Faisal Hamady, managing director and partner at BCG and co-author of the report, said: “In a rapidly changing world, new agile governance structures are needed to prioritize how digital ecosystems can help industries grow. Furthermore, as existing value Pools are flooding into the digital economy, and new value pools with increasingly diverse participants continue to emerge.”
Defining the digital economy
The digital world includes economic activities created by producers and suppliers at three levels: core (digital technology sector), narrow (digital utilities and enterprises) and broad (digital economy).
• Core: Economic activity from producers of digital content, ICT goods and services (including IT and communications businesses covering hardware, software and services).
• Narrowly defined: Add economic activity originating from companies that rely on digital inputs (such as digital services and platform businesses) – these are often defined as “digital-only” businesses.
• Widespread: Businesses’ economic activities are significantly enhanced by the use of digital inputs (including significant digitization of business in areas such as e-commerce, Industry 4.0, etc.).
“Digital technology spending in the UAE (including IT, telecoms and emerging technologies such as AI, IoT, blockchain, robotics, etc.) , the narrow layers of the digital economy may gain ground, leaving businesses very different from what they are today,” said co-author Thibualt Werle, managing director and partner at BCG.
“The emergence of decentralized and community-driven creation models powered by Web 3.0 is driving user ownership in new parallel virtual economies and allowing businesses to manifest themselves in other ways.”
UAE metaverse market revenue is expected to surge as metaverse-led investments diversify beyond augmented and virtual reality entertainment into identity, security and productivity-focused workplace collaboration engines.
At the level of the broad digital economy, various industries may face a “bionic future”, with new competitive logic and economic digital advantages heralding success. In this case, firms would compete on “speed of learning” rather than economies of scale. Iterative improvements to AI models and algorithms, and enhanced cognitive machine capabilities combined with flexibility, adaptability, and full human experience, could lead to “superhuman enterprises” that generate competitive advantage.
Government’s response
Given the massive growth expected, intermediate solutions that allow free data flow while promoting data security and sovereignty require critical considerations. It is also important to identify critical infrastructure sectors whose assets, systems and networks (whether physical or virtual) are critical and implement initiatives to manage their risks.
“The multi-trillion dollar expansion of the digital industry leaves leaders and policymakers with only two choices: adapt to its accelerating pace, or be left behind. So by considering how systems change in tandem with technology, governments can realign digital priorities The regulatory framework of the world. This perspective helps guide thinking about making the right investments in infrastructure, especially in emerging value pools, to spur innovation and economic opportunity,” added Hamady.
It is important to highlight the macro trends that most enhance total factor productivity, namely the future addressable market that allows the digital economy to make a meaningful contribution to overall GDP. This can be achieved through policies that encourage investment in digital infrastructure and research and development of cutting-edge technologies such as artificial intelligence and robotics, and create an innovation environment that trains or attracts highly skilled and specialized personnel.
By working with other public entities to align strategic priorities, governments can help address broad issues that are increasingly prominent, such as digital inclusion, social prosperity and issues around digital ethics, including how to remove social bias in artificial intelligence (both derived from structured data) perspective, and from algorithm definition and training).
“For governments, the digital economy is not an elective. It marks a profound departure from the way economies have been historically organized and regulated. Facing this brave new world head-on has proven critical to remaining competitive and relevant on the global stage ,” concluded Hamady. – trade arab news agency
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