Investment to rise in digital economy as e-commerce booms globally
A softer global economy, trade tensions and protectionism are hampering financial exchange and returns on foreign direct investments.
However, the global digital economy is on the rise and technology is certainly an avenue for FDI going forward, government officials, policymakers and bankers say.
“There is a decline in return in FDI and, more importantly, we are seeing trade tensions translating into investment protectionism, which explains slackening, almost stalling, of traditional financial flows in investment and trade [globally],” Mukhisa Kituyi, secretary general, United Nations Conference on Trade and Development, said yesterday.
Conversely, the economy 4.0 – often a reference to digital and data driven sectors such as e-commerce – is on the rise. Between 2015 and 2017, the value of global e-commerce trade rose to $9 trillion (Dh33.06tn) from $6tn. Two years ago, about 1.3 billion people across the globe were shopping online with 1 per cent purchasing goods from abroad and that ratio has gone up to 15 per cent, he said.
There is phenomenal growth in trade and e-commerce as digital giants such because Google and Amazon can mine and monetise data, which has enabled them to overcome hurdles associated with the traditional analogue economy.
“This resulted in a massive expansion in the data economy at a time when traditional economies and [foreign direct] investments are slowing down,” Mr Kituyi told the ninth Annual Investment Meeting in Dubai.
Abdullah Al Nuaimi, UAE Minister of Infrastructure and Development said the UAE, which is at the forefront of the digital economic revolution in the broader Middle East, is also inviting more foreign investments into technologies that could help narrow the divide between the digital and
“The UAE believes in the importance of technology as a major catalyst for economic growth and has been keen to keep abreast of new trends and their application in various areas [of trade and economy], he told the AIM conference, which brought together senior government officials, bankers, investors and the global corporations from more than 140 countries.
The Emirates, the second-biggest economy in the Arabian Gulf, ranks first in the region in terms of FDI inflows, which in 2018 amounted to $10.4bn, the minister said, citing estimates by the Central Bank.
“Our outlook for the future remains optimistic,” Mr Al Nuaimi said. “The UAE has paid great attention to the development of infrastructure and roads, being aware of its importance in promoting investments [in the country]”.
While the developed nations transition to economy 4.0, governments and the private sector will have to work to protect both developing and emerging economies, by building solid policy frameworks and regulations, Mr Kituyi said.
“The world cannot afford to make the mistakes made in globalisation, leaving market forces on their own to fix the problems,” he said. “Developing countries need to identify the gap in their digital divide, what are their data protection and privacy laws and how are they bridging the gap of talent in the digital age.”
While many believe that the rise of digitalisation of the global economy will result in job losses, Ayman Sejiny, executive officer of Islamic Corporation for the Development of the Private Sector, said that is more myth than reality.
“You hear a lot of news that economy 4.0 is going to eliminate a lot of jobs, but it is going to create a lot of jobs as well and it will be much faster [job creation] in my opinion,” he said. “Once you have more productivity and an efficient supply chain, and understand where the demand is, businesses will be flourishing much faster. Hence, we will be experiencing a better jobs market.”
His sentiment was echoed by the Adnan Chilwan, the group chief executive of Dubai Islamic Bank, the biggest Sharia-compliant lender in Dubai, who said a more efficient banking industry will result in increased profitability. This, in turn, will allow the banks to move in to other markets where they will be creating more jobs.
“Digitisation is here to stay. It is part of the new economy,” he said.