Rapid growth of digital economy in the Association of South East Asian Nations (ASEAN) and Dubai has created large bilateral investment opportunities in the sector between both countries.
According to the United Nations Conference on Trade and Development (UNCTAD), the investment in the digital economy and in activities related to Industry 4.0, is rising in ASEAN. The countries in the region are also pushing forward with digital infrastructure development, and some are actively attracting FDI in data centres and cloud facilities to improve digital ecosystems. The growth of the digital economy in Dubai has attracted many startups and foreign direct investments and many ASEAN countries can be a part of this development. All these digital developments have increased the investments of many multinationals in the digital technology of ASEAN.
Investment Opportunities in the ICT sector of ASEAN
According to UNCTAD, announced greenfield investment projects in the information and communication sector of ASEAN grew from an annual average of $2.6 billion in 2010-2014 to $3.3 billion in 2016-2020, a 24 per cent growth between the two periods. Experts predict that with a 5G rollout and growth in demand for cloud services, investment in ICT infrastructure in the region is expected to rise rapidly through 2025.
The development of the 5G network in most ASEAN countries already started in 2021. According to experts, by 2025 the penetration rate of 5G in Singapore will be 50 per cent and in Malaysia, Thailand and Vietnam it will be between 25 per cent and 40 per cent. The introduction of the 5G technology in the region will unlock new digital capabilities and investment opportunities. With the development of the 5G network in ASEAN countries and a high internet penetration rate, there can be new business opportunities for Dubai startups in e-commerce, online delivery, telemedicine and cloud gaming.
Growth of Industrial Automation in ASEAN
Industrial automation in ASEAN, excluding Singapore, is below the world average. Singapore is the leader among ASEAN countries in the total number of installations of industrial robots, followed by Vietnam, Thailand and Malaysia. Moreover, Singapore is one of the most automated countries in the world, and the density of industrial robots in Singapore (918 robots per 10,000 workers) is above the world average. Singapore can play an important role in the industrial automation of Dubai, particularly in the manufacturing of electronics. Dubai is one of the largest importers of electronics in the world and large opportunities exist in the manufacturing of electronics. According to UNCTAD, 75 per cent of industrial robots deployed in Singapore are in the electronic industry. There is a scope of opportunities for the companies involved in this sector to develop their automated electronics production in Dubai.
According to the UN data, Malaysia has 17 out of the top 50 global MNEs in industrial automation (IA) in the manufacturing sector, the highest number among ASEAN countries. Indonesia and Singapore also have a significant number of IA-related manufacturing companies. The UAE aims to increase manufacturing by 30 per cent with its industry 4.0 strategy and add a value of $6.8 billion by 2031. Therefore, ASEAN’s IA-related manufacturing companies may help the UAE to achieve this goal and bring multinationals with industrial automation.
Among ASEAN countries, industrial Internet of Things (IoT) is also growing due to the digitalisation of manufacturing activities, upgrading of production facilities and the growth of the digital economy. As per the UNCTAD report, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam are major markets in the ASEAN region for IoT spending. Experts predict that IoT spending in the region is also expected to grow rapidly over the next few years.
Many industry 4.0 technology companies that have invested in the ASEAN region because of the growing market for industrial devices and connectivity, expect large opportunities from industrial digitalisation, and the growing need for advanced technologies. The UAE also offers large business opportunities for advanced technology companies of ASEAN. The UAE’s strategy of the fourth industrial revolution is focusing on robotic healthcare and nanotechnology, adopting a digital economy and technology of digital transformation as it aims to be ranked number one globally in government procurement of advanced technology products. According to the Global Innovation Index, the share of high-tech products in the UAE imports increased from 5.5 per cent in 2016 to 13.2 per cent in 2019. All these initiatives and interests will support the UAE’s development of digital transformation and attract industry 4.0 technology companies from ASEAN.
Business Opportunities in the ICT sector of Dubai
According to the Dubai FDI Monitor, in 2020, the share of high and medium-tech projects in the total number of FDI projects in Dubai was 56 per cent. Moreover, information services were the third largest industry in Dubai with eight per cent share of the total estimated FDI capital in 2020. The latest data also shows that in 2020, the software publishers ranked third with 10 per cent share of the announced FDI projects in Dubai.
Dubai can be a very attractive place for investors in the ICT sector from ASEAN. For instance, over the past decade, Singapore has significant FDI outflow in ICT sector. According to SingStat, in 2019 Singapore’s FDI outflow in information and communication sector reached $29.9 billion, which was 3.3 per cent higher than the previous year.
Dubai’s many initiatives and incentives can attract the best ICT professionals and businesses to make the emirate a prime destination for influential industry leaders. Many of the world’s leading technology companies are already well established here, particularly in the Dubai Internet City freezone, and the outlook for ICT services is favourable, which can create large business opportunities for ASEAN companies in digital technology.