Spark Plugged
Journalist: Ian Munroe
Original Post: Spark Plugged
Type: News Article
May 20, 2009 — Last year, 21-year-old Huawei Technologies did something unthinkable for a Chinese company. By investing a tenth of its revenues and 40 percent of its staff in research and development (R&D), the networking and telecommunications giant registered more patent applications than any company worldwide (unseating Philips Electronics in the process).
Huawei’s focus on R&D seems to be paying off. Its sales jumped nearly 50 percent to $23 billion in 2008, and are projected to keep growing this year. A small but growing portion of that income was generated in the Gulf Cooperation Council (GCC) countries where, since 2003, Huawei has been serving clients like Saudi Aramco and Etisalat. “It might be easier to count who isn’t our client,” laughs Ihab Ghattas, assistant president of Huawei’s Middle East arm. “We have been very aggressive in the market.”
Like the rest of Huawei’s regional management, Ghattas is based out of the firm’s Middle East headquarters in Dubai Media City. The company also has marketing staff scattered across the Levant and Gulf region, as well as a few hundred technocrats that serve major local clients. But when it comes to R&D, Huawei, like most technology firms in the Gulf, does most of its heavy lifting many time zones from the Arabian desert. The company has research centers from Silicon Valley to Beijing, but the nearest such facility to the GCC lies across the Arabian Sea in Bangalore, India.
“You have to select a place where there is a suitable amount of manpower to generate ideas,” Ghattas says. “The GCC has a reasonable amount of expats living in it – that might not be the best situation for an R&D center, because people do come and go.”
While the GCC’s diversification endgame involves huge technology investments, experts say a lack of stable scientific expertise and resources stands in the way of creating a homegrown Huawei of its own. With few outputs insight, the question looms: will the Gulf’s embryonic “post-carbon” economy include technology production?
Microscopic returns. In the UAE, Dubai is adding Silicon Oasis, billed as a magnet for software developers, and Dubiotech, a potential hub for life sciences firms, to its slew of industry clusters (each one costing several hundred million dollars to build is adorned with attractive tax-free perks). Abu Dhabi is also spending $22 billion to create Masdar City, an imagined community of 40,000 that’s expected to grow into a leading center of green-energy research and commercialization.
Elsewhere, the $600 million Qatar Science and Technology Park in Doha was inaugurated in March. And on Saudi Arabia’s west coast, workers are building the King Abdullah University for Science and Technology, which is slated to house the world’s sixth most powerful super computer, as well as 20,000 students, staff and faculty when finished.
But there are few signs yet that Middle East-made Microsofts will flourish along the Gulf. Not because of a lack of effort, but because other corners of the world have enjoyed a giant head start in the global competition for prowess in high-tech production, while the GCC has had to start more or less from scratch. South Korea registered 10,260 US patents between 2005 and 2006, for example.
The UAE registered 11. “The problem is other regions are progressing even faster. … Gulf states are going to have to work very hard not to fall further behind,” says Kristin Lord, the author of a 2008 report that measured how far Middle East countries have come towards building knowledge-based societies in recent years. “Investments haven’t always paid off. So one of the questions the report raises is, will these be different?”
The good news is that Gulf companies and governments seem more than happy to buy and apply new technologies. Four of the GCC’s six members ranked in the top 40 countries worldwide on a recent information technology report by the World Economic Forum and INSEAD business school . But those rankings were based largely on the region’s ample technology investments, and its purchasing power as a wealthy technology consumer.
“You show them something new and they want to do it,” says Pooya Darugar, platform and technology evangelist at Microsoft Gulf. “There are no legacy systems [old computers and software] that they worry about. That’s one of the great things about working in this market.”
The US software behemoth moved to the Arabian Peninsula way back in 1992, eons ago in terms of the region’s recent breakneck development. Like Huawei though, Microsoft’s operations here haven’t expanded much beyond sales, marketing and customer support. So the $8.2 billion it spent on R&D last year flowed mostly to the company’s corporate headquarters in California, or to development centers in China and India. But Darugar sees no reason the Gulf States can’t produce the next great wired invention. “The Internet is a very equalizing technology,” he says. “These small startups like Twitter – they could be run out of Bahrain, or out of Oman.”
“If you look at the university students in this area, they have the skills, they have the hunger,” he adds. “We have to make sure they have the capability to go to the market, so they don’t necessarily have to become public-sector workers.”
One project that the UAE hopes will attract young technology firms is Dubiotech, a handful of buildings under construction near one of Dubai’s arterial roads, on a two-square-kilometer patch of desert that was bequeathed to the project by the emirate’s ruler. The first building – a four-storey laboratory facility – is expected to open by summer. And the science park’s director, Marwan Abdul Aziz, says a dozen firms, from pharmaceuticals to medical-device manufacturers, have signed on as tenants since January alone.
“Most of their activities are market driven,” Abdul Aziz says of Dubiotech’s growing list of host companies. “They want to make sure they have a strong base. Once that happens, they will be more comfortable, know the market better, invest more money and do more R&D work as well.”
“This is something that will take some time, and we knew that,” he adds. “For R&D to happen you need a good academic base, and that’s something the UAE is starting to have.”
Indeed, creating new Silicon Valley stakes legions of highly specialized workers, which emerging technology producers like China and India are churning out by the hundreds of thousands each year.
But the Arabian Peninsula – actually, the entire Middle East – lacks its own world class technical institutes. So a growing number of the Gulf’s rich petro states are courting tech-savvy Indian and North American universities to set up local branch campuses nearby.
One is the University of Waterloo (UW), a Canadian institution famous for spurring high-tech startups like Research In Mot ion, creator of the ubiquitous Blackbery. UW plans to set up two engineering programs in Dubai this fall, although a permanent home for its campus is being built in Abu Dhabi.
“There are a lot of entrepreneurial activities on campus,” says Leo Rothenburg, UW’s acting dean of engineering.
“It’s not uncommon that our students graduate and already have businesses started. ... We intend to bring that same spirit to the United Arab Emirates.”
Further up the coast, Qatar’s new14-square-kilometer Education City development already hosts a handful of engineering programs from Texas A & M University, and a computer science program from Carnegie Mellon. The billion dollar complex dispatched its first round of graduates last year, but many of the students that have enrolled so far have been foreigners. Even though university education is free for citizens of the tiny, petroleum-bathed country, tertiary enrollment for Qataris hovers around 20 percent – a third the rate of most high-income countries.
“They’re starting slowly, but with confidence and quality,” says Hady Amr, director of the Brookings Doha Center, the Qatar branch of a prominent, Washington-based think tank that was established last year, a few kilometers from Education City.
When asked how close the Gulf has come to cultivating its own technology export industries, he says: “They’re preparing the ground, so that one day those seeds can be planted.” “If you want to see the results of these things, call me in 10 years.”
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Topic(s): Regional Security Challenges, Development and Diplomacy
People: Dr. Kristin M. Lord
