Towards a Knowledge Economy: Is Qatar on track?

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TOWARDS A KNOWLEDGE ECONOMY:

IS QATAR ON TRACK?

AT A CONFERENCE HELD RECENTLY BY HEC PARIS IN QATAR, WE DISCOVER HOW FAR ALONG QATAR IS IN ITS QUEST TO MOVE TOWARDS A KNOWLEDGE-BASED ECONOMY AND THE PITFALLS TO AVOID ON THE WAY FORWARD.

BY AYSWARYA MURTHY 46 > QATAR TODAY >NOVEMBER 2016

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ike Tyson famously said, “Everybody has a plan until they get punched in the mouth.” Qatar has never been short of plans. It has the Qatar National Vision 2030 and the second five-year plan, the National Development Strategy 2017-2022, is due to be out soon.

But the sudden, and seemingly irreversible, drop in oil prices has delivered quite the punch. Budgets have reduced and timelines have accelerated. Keeping to theclimate HEC Paris in Qatar put together a conference to address the pursuit of Knowledge-Based Economies (KBE) in Qatar and it was as good a place as any to ask the question – how are we doing?

Supported by the Qatar National Research Fund (QNRF), the conference brought together experts across the fields of research, industry and policy, to draw on global lessons and regional experiences.

Delivering the opening address at the conference, HE Dr Saleh bin Mohammed Al Nabit, the Minister of Development Planning and Statistics, spoke about how the NDS 2017-2022 will reinforce KBE as a new and more urgent priority and will encourage private sector investment in targeted sectors. Director of Economic Policies and Research at the Ministry of Economy and Commerce, Saud Al Attiya, who spoke later in the day, further elaborated on the current KBE challenges and how the next NDS was drafted to address some of them. “Not only do we have to deal with the legacy of budgetary

deficits from the current economic crisis, but we have to deliver many crucial projects within the next few years. We are now competing directly with many advanced economies, and even regionally, countries like the UAE, Kuwait and Saudi Arabia are aggressively attracting talent, foreign-direct investment, etc., to their own economies,” he says. He also stressed that new solutions were needed to renew productivity growth, which has been on the decline since 2008 due to the increase in percentage of low-skilled labour in Qatar.

He went on to outline some of the propositions in the NDS. “Over the next year, we will be working with Qatar Development Bank and other stakeholders to give out more loans, especially for PPP (public-private partnerships) and home businesses. Right now we don’t have a venture capital community in Qatar and we look into how to develop VC culture,” he says. The Qatar Sports Business Cluster, which was announced in May this year, will

HE DR SALEH BIN MOHAMMED AL NABIT, the Minister of Development Planning and Statistics, who spoke at the start of the conference, said that the NDS 2017-2022 will reinforce KBE as a new and more urgent priority and will encourage private sector investment in targeted sectors.

"In a couple of months, we will also finalise the FDI Law, also known as the ‘100% Law’, which will attract and support big foreign investments in Qatar."

SAUD AL ATTIYA Director of Economic Policies and Research Ministry of Economy and Commerce

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LESSONS FROM SKOLKOVO AND MASDAR

Masdar Institute, and (right) Skolkovo Foundation

According to Geiger, they learnt a lot of lessons from Russia and the UAE, and which may be applicable to Qatar. “Government bureaucrats are terrible managers when it comes to these kinds of projects,” he says. “The best solution is to work with the private sector, which has their skin in the game and so are better judges on where to invest and what risks to take.”

Innovation is inherently global and collaborative; countries who want to work in silos will suffer. In Russia the political climate of suspicion limited this, he says. International collaborations provide credibility, resource and velocity. Additionally they can be early warning systems when you are going off the track and are good indicators of whether you can attract and maintain sustainable partnerships.

Do not be overgenerous with grants to your startups. Spoiling them is harmful, and when they step out into the real world, the private sector won’t support them. Grant only the minimum amount they need to stay lean, mean and hungry.

Do not underrate the value of corporate sponsored research and don’t expect corporations to get this automatically either. “It’s an education process. A lot of outreach has to be done to convince corporations that this is good for them. It’d help them build better companies, create new technologies, improve processes and generate profit,” Geiger says. Qatar has done a good job on this with several oil and power companies invested in research centres in universities like Texas A& M in Qatar and at the Qatar Science and Technology Park (QSTP). “In Russia, we didn’t do enough outreach and so we had to drag them into it. Always make an extra effort with workshops and tell corporations why they need to invest in research, why they need to take in student interns and why they need to create entrepreneurship programmes, jointly funded with the government.”

Geiger warns against the Edifice Complex – the desire to build huge, shiny, multibillion dollar complexes. “It might be that people might need that excitement but it also distracts from the goal.” He talks about Masdar City in Abu Dhabi, a zero-carbon complex (but managers recently decided that it couldn’t be entirely zero-carbon) costing $22 billion and with the capacity to accommodate 50,000 people. “It attracted so much attention and excitement but at the disadvantage of the core element of knowledge building. People were more interested in making money out of selling goods and services to the development,” he says. “Try to keep the architects on a leash or they will hijack the project,” he laughs. “And remember – Microsoft, Google and Facebook were built in dorm rooms and garages.”

“In Abu Dhabi, we were weak in using local entrepreneurs and VC communities. More efforts must be made to build these communities. There is no point in educating your youth at world-class universities but, once they step out, there is no support network to fund their ideas.”

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be the first of many such clusters, according to Al Attiya. In the first quarter of 2017, land will be allocated for this cluster, which will provide $40 billion worth of business opportunities for the private sector in Qatar and also for foreign investors. With the announcement of the legal and technical framework for PPPs (also expected early next year), the government will release a project portfolio for the private sector in services, infrastructure, education, mega projects, healthcare, etc. “In a couple of months, we will also finalise the FDI Law, also known as the ‘100% Law’, which will attract and support big foreign investments in Qatar,” he says. While speaking in public, Qatari government officials are known to play their cards close to their chest. So not too many details about these initiatives were given out. But the crucial question in everyone’s mind was this – how do you know if you are on the right track?

Learning from others’ mistakes The keynote speaker, Steven Geiger, had some answers to that. The former COO of Skolkovo Foundation, Russia, and Founding Director of Masdar Institute, UAE, Geiger has some serious experience in helping resource-dependent nations develop their knowledge societies and innovation systems. “A number of mistakes were made and a lot of lessons were learnt,” he says of his experiences. Can other resource-dependent countries provide a model for Qatar?

“Each country is unique but there are some common elements in building KBEs. The GCC have certain KBE-related challenges. Most of them, and Qatar is an exception in this, have relatively weaker scientific capacity and minimal R&D. Qatar, despite its size and the number of engineers/scientists in respect to its population, has a much more advanced R&D spend per capita compared to the rest of the GCC. They also have relatively weak education systems. And in addition to having small populations, they are typically one-commodity economies and currently have limited innovation infrastructure.”

But the same small population can also be advantageous because there is no large inertia to combat while implementing change. “A small country with the right leadership and resources can take monumental steps in a small period of time,” Geiger says. And that’s something Qatar has going for it – decisive leadership with a vision and ample financial resources.

Although Russia is a huge country and major world economy with 140 million highly educated people and deep technical capacity, Geiger thinks their KBE-push is worth studying. For a long time the legacy of the Soviet Union’s ‘command economy’ was blocking Russia’s KBE development, he says. “While they had this huge research capacity, it had no linkage to the market and so there was no translation of this huge tech base into the products and services that the market required.”

This gap had to filled with a brand new innovation ecosystem, comprising leading research universities that did fundamental and applied research; corporates who fund those research; entrepreneurs and students from these research universities who started spinoff startup companies with some support from the government; and angel investors, seed investors and VC communities. All these four components will have to be supported by strong government policies and also a competitive infrastructure, both physical and otherwise. All KBEs have all these components working together on invisible interfaces to produce meaningful output, Geiger says. “The challenge is getting all the policies governing all these components simultaneously right. Our advice for countries is to figure out what those invisible interfaces are and design policies accordingly.”

Abu Dhabi got some of this right. “Back in 2005, the emirate had an image problem.

They were the third biggest polluters in the world in terms of CO2 per capita and were viewed as a purely oil & gas economy with not much capability beyond that,” Geiger says. But they aggressively sought a diversification strategy that leveraged

"Qatar, despite its size and the number of engineers/ scientists in respect to its population, has a much more advanced R&D spend per capita compared to the rest of the GCC." STEVEN GEIGER Former COO Skolkovo Foundation, Russia, Founding Director Masdar Institute, UAE

existing knowledge and assets, namely expertise in energy. The government was willing to experiment and take chances, he says. The result was Masdar City which now is home to the world’s first graduate school specialising in renewable energy research and the global headquarters of the UN’s International Renewable Energy Agency (IRENA). “They have made huge image strides since then and shown real development. But they have also made some mistakes,” he says.

Recognising the context One of the most informed and concise KBE strategies that we have heard came from the new Managing Director of QSTP, Dr Maher Hakim. In under ten minutes, he lays out a path forward that doesn’t seem daunting, feels manageable and makes perfect sense. He says he approaches the question of KBE as an entrepreneur, which is what he was and continues to be.

“The question has to be answered within the context. The context of moving towards KBE in Qatar is different from somewhere else in the world and the solutions will be different too. For China, it meant getting into manufacturing. In India, it meant information technology. In the

A healthy innovation ecosystem has a few fundamental components – leading research universities that did fundamental and applied research; corporates who fund those research; entrepreneurs and students from these research universities who started spin-off startup companies with some support from the government; and angel investors, seed investors and VC communities.

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360-DEGREE RESEARCH OFTEN COUNTED AMONG THE WHO’S WHO OF RESEARCH FUNDING GLOBALLY, DR ABDEL SATTAR AL TAIE, EXECUTIVE DIRECTOR OF QATAR NATIONAL RESEARCH FUND, IS NOT JUST INCHARGE OF THE PURSE STRINGS BUT IS ALSO STEERING THE DIRECTION OF RESEARCH IN QATAR INTO RELEVANT AND ESSENTIAL AREAS. HE TALKS EXCLUSIVELY TO QATAR TODAY ABOUT HOW RESEARCH IS BRINGING THE KBE GOAL CLOSER.

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y any standards, Qatar’s dedication to research is applause-worthy. Close to 2.8% of Qatar’s GDP goes towards research (see graph), almost equal to what most OECDs spend on their R&D. QNRF funds research across all disciplines, with a special focus on the four grand challenges or pillars. While traditionally, social science, arts and humanities are incorrectly considered unrelated to KBE, Dr Al Taie says the tide is turning. “It’s evolving and the quality and quantity of proposals submitted in this pillar is going up, which is a good omen,” he says.

Why are the social sciences important?

“You can’t drive technology without human interaction. Sometimes this will call for behavioural and attitude changes among the DR ABDEL SATTAR AL TAIE Executive Director citizens of the country. One very important Qatar National Research Fund milestone for making this change in societal behavior is education reform, which Qatar has already started. While initially kids were spoon-fed facts you measure progress and impact when most of the outcomes are and figures, now the system is more open. Now kids have the long term? Dr Al Taie smiles. "It moves in stages. Initially, our top opportunity to discover, interact and learn entrepreneurial skills priority was to build a research culture and infrastructure, and at an early age,” he says. (QNRF’s K-12 progarmmes are a good create human capacity. Then we activated the system with the example of how things are moving in the right direction). In fact, right policies and procedures, which took a while for us to develop.

QNRF’s strategy identifies the importance of entrepreneurship A very important short-term impact was enabling our universities in the development of KBE and this is an important research to excel in research,” he says. For example, Qatar University’s topic within the social sciences pillar, according to Dr Al Taie. compounded annual research growth in 2014 was 39%, one of “Experiments should not be restricted to the lab. Business the highest in the region, if not the world.” This has been possible experimentation, challenging ideas, testing ideas and networking because of a good research culture and funding which attracts and will allow big ideas to turn into action at the nexus of environment, retains the best talent. The top professors in our universities are not there just to teach; research is a very important component.” economic opportunities and human well-being.”

“And through our research investment, our researchers have QNRF funds research at all levels – from K-12to Nobel laureates.

“We cover the full spectrum of beneficiaries, from academia managed to publish and present papers and consequently interact andgovernment sectors to independent research institutions and with other researchers worldwide. Through our funding and private companies. This is how we can be impactful. The focus is collaboration opportunities, we are working with 500 global not just the academia. A university working on their own is the institutions from 55 countries. It’s a snowball effect. This definitely old model of doing things. Now we need to get whole societies reflects in the level of recognition Qatar has achieved as a hub for research in the region,” Dr Al Taie says. “In the future, we will reap involved,” he says.

It has been almost a decade since the QNRF was established results in terms of patents, inventions, spin off companies, and and the research landscape in Qatar has changed unrecognisably startups, that will eventually lead to diversification. Our overall in that time. It is credited with visualising the research and investment will eventually lead to huge ROI. But we have to be development sector strategically and innovatively. But how do patient. It will take at least 15-20 years,” he says.

"Through our funding and collaboration opportunities, we are working with 500 global institutions from 55 countries. This definitely reflects in the level of recognition Qatar has achieved as a hub for research in the region."

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US, it meant changing human behaviour through brilliant marketing and cultural exportation, which they are great at. What is Qatar’s context?” he asks.

“We are a tiny country. Once we take out those who won’t participate in a KBE, like the blue-collar workers, that leaves us with one million people, maybe two if we continue to grow. That’s the size of a middle city in the US. So we really need to focus; we can’t be doing too many things.”

Another question about context is what is our competitive advance? What will we have left when oil & gas is replaced or runs out and how can we take advantage of that? Dr Hakim enumerates three things.

“Capital. In Qatar, individuals are wealthy, the private sector is wealthy and the government is wealthy. So we are starting with a huge asset. Second, we have invested heavily in R&D and are viewed as a world leader. And third, we know and understand the energy industry – not necessary just the extraction of gas and oil but distribution, logistics, demand generation, creation and prediction, buying and selling and the middle men – we are familiar with every single aspect of the value and supply chain.

So tomorrow, even if the core components change, i.e renewables instead of oil and gas, our knowledge doesn’t become obsolete.”

This is our context. What’s missing in taking the context and turning it into a mechanism?

“We have capital but no asset managers.

By not investing in developing an asset management industry that is homegrown, we have to rely on the Morgan Stanleys and Mckinsies of the world. We have R&D but no product innovation. While we generate a lot of research, patents and white papers, our private sector doesn’t build or export products. We know energy but there are no true experts who understand the industry end to end. The knowledge is scattered,” he says.

"The context of moving towards KBE in Qatar is different from somewhere else in the world and the solutions will be different too."

DR MAHER HAKIM Managing Director Qatar Science and Technology Park

“If we build all this, we could own the concept of being innovators in the energy industry, one that will never go away, even if the type of energy changes. And this is the perfect time to prepare for this – the energy sector is already being disrupted today in two dimensions – the move towards alternative fuels along with the increasingly role of IT.” Everything is fluid, being taken apart and rebuilt. If Qatar plays its cards right, it can carve a niche for itself at the centre of it all.

A KBE doesn’t happen by accident.

It requires long-term commitment, persistence, national targets and international collaboration. But Geiger leaves us with a sobering thought. Are we building our KBE fast enough?”

Technology growth is not linear. Look at the fast penetration of mobile phones and the Internet. Once technology reaches a certain saturation or price point, it goes exponential. Certain advances are now coming at this exponential speed – chemical battery storage, renewable energy, electric cars. This is going to directly impact resource-dependent economies of the gulf and their future revenue stream,” he says. So we ask again: are we building our knowledge-based economy fast enough?

QATAR CONTEXT COMPETITIVE ADVANTAGES AMPLE CAPITAL LARGE INVESTMENT IN R&D EXPERTISE IN ENERGY

HOW DO WE LEVERAGE THESE ADVANTAGES DEVELOP ASSET MANAGEMENT CAPABILITIES IMPROVE PRODUCT DEVELOPMENT EXPERTISE CREATE END-TO-END ENERGY SPECIALISTS

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