UAE’s Top Emerging Sectors for Investors in 2024

Economic diversification plans in the UAE have catalyzed growth across emerging sectors like hospitality, e-commerce, cryptocurrency, and AI.

By Giulia Interesse

For decades, the UAE’s economic landscape has been firmly rooted in its renowned oil and gas industry, serving as a cornerstone of its prosperity. However, in recent years, a discernible shift towards diversification has taken center stage. With a keen eye on the future, the UAE government has initiated a proactive strategy aimed at nurturing emerging industries. This strategic endeavor is geared towards reducing dependence on the oil sector and catalyzing broader economic growth and resilience.

In this article, we explore some of the most promising sectors within the UAE economy for 2024. Ranging from hospitality to e-commerce, cryptocurrency, and artificial intelligence (AI), each of these sectors is expected to play a pivotal role in shaping the nation’s shifting economic landscape.

Hospitality

The robust growth of tourism in the UAE has been a pivotal factor in driving the expansion of its hospitality sector. Following the economic resurgence witnessed in the post-COVID-19 era and the initiation of major projects in Dubai, the tourism industry in the UAE is poised for substantial growth in the upcoming years.

In 2023, luxury hotel revenue comprised a significant 53.7 percent of the total, reaffirming the country’s commitment to providing refined, high-end experiences. Looking ahead, the hospitality sector is set for further expansion, with over 130 premium sites and approximately 34,000 rooms expected to be introduced in the top-tier hotel segment. Notably, the majority of these forthcoming hotels, accounting for about 64 percent, will fall under the five-star category, totaling 83 sites.

Moreover, Mordor Intelligence anticipates a surge in new properties, with 27 sites scheduled to open in 2024. Among these is The Heart of Europe, a luxurious resort in Dubai situated six kilometers into the sea amidst the World Islands. Developed by the Kleindienst Group, this self-sufficient precinct will feature sixteen hotels and holiday resorts inspired by prominent European cities. This initiative aims to further promote Dubai’s reputation as a premier destination for luxury tourism.

In January 2024, Dubai was once again crowned as the top global destination in the Tripadvisor Travellers’ Choice Best of the Best 2024 awards for the third consecutive year.

The steady rise of Dubai’s hospitality sector, also catalyzed by the establishment of Michelin-star restaurants, reflects the Emirate’s transformation into a preferred destination for high-net-worth individuals. The trend is even clearer when looking at the escalating demand for prime commercial rental spaces in coveted areas like the Palm Jumeirah, Dubai Marina, and Downtown, positioning Dubai competitively against global metropolises such as New York and London.

Within the hospitality segment, the food and beverage sector (F&B) is experiencing noteworthy changes, with the rising popularity of private member F&B clubs reflecting Dubai’s burgeoning global reputation as an exclusive and luxurious destination. This trend is complemented by an increasing demand for global fast-food chains, which are strategically investing in cloud kitchens, taking advantage of Dubai’s robust infrastructure and favorable economic policies.

His Excellency Mohammad Ali Rashed Lootah, President and CEO of Dubai Chambers, reported a remarkable 19.4 percent year-over-year growth in the addition of F&B companies to the Dubai Chamber of Commerce in 2023.

E-commerce

The e-commerce sector has emerged as a key driver of the UAE’s economic landscape, estimated to surpass US$7 billion in total e-commerce retail sales value by 2024. Projections indicate a robust CAGR of 12.6 percent between 2022 and 2026, emphasizing the sector’s potential for sustained expansion within the UAE’s economy.

The COVID-19 pandemic triggered an extraordinary surge in online shopping, catapulting e-commerce to unprecedented levels of growth. Central to sustaining and amplifying this expansion have been the favorable business environment, minimal taxation policies, and strategic geographic positioning of the UAE, which places it within seven hours of reach from two-thirds of the global population. These factors have been pivotal in fostering the growth of the e-commerce sector within the UAE.

Recognizing the opportunities presented by the thriving e-commerce sector, the UAE government has been committed to fostering a conducive business and investment environment. Relevant legislative measures in this area include the Federal Decree Law No. (14) of 2023 on Commerce through Modern Means of Technology (hereinafter, “Decree Law 14/2023”), which has been operational since September 2023. Decree Law 14/2023 specifically aims to encourage both domestic and foreign investment in the Emirates, aligning with global digital commerce regulations and signaling the government’s proactive stance towards supporting and regulating the e-commerce industry.

The UAE government’s backing of the e-commerce sector reflects the growing trend of establishing online businesses from Dubai. The Emirates is projected to reach a market volume of US$9.3 billion by 2028, and a 8.7 percent CAGR in the period 2024-2028.

The allure of conducting online ventures from Dubai, combined with the Emirate’s lifestyle, has proven irresistible to many. This phenomenon has not only drawn global entrepreneurs but has also encouraged local residents to start online enterprises while maintaining their full-time employment. Both stay-at-home spouses and UAE residents are seizing the opportunities presented by the growing e-commerce sector.

Cryptocurrency

Cryptocurrency has quickly become a focal point in the Middle East and North Africa (MENA region). According to the 2023 Crypto Oasis Ecosystem report, the digital asset industry in this region is thriving, with over 1,800 organizations already established and providing employment opportunities for approximately 8,650 individuals.

As of February 2024, the UAE’s share in global cryptocurrency market transactions stands at around 9.2 percent.

Over the past couple of years, the UAE, led by the emirates of Abu Dhabi and Dubai, has significantly ramped up its regulatory efforts to attract a diverse range of global enterprises specializing in digital assets, while also building up a framework to regulate the sector. These initiatives seek to safeguard investor interest and have garnered positive attention and recognition for the region on the international stage.

In August 2023, the UAE introduced a new mandatory regulatory framework for cryptocurrency usage, effective from August 31, 2023. Under this framework, all entities operating in this space are now required to obtain licenses and operate as fully regulated entities sanctioned by the country’s virtual assets regulator. In Abu Dhabi, oversight is managed by the Abu Dhabi Global Market (ADGM), while in Dubai, where the focus leans more towards the e-commerce sector, the Virtual Asset Regulatory Authority (VARA) is tasked with regulating and supervising virtual assets and related activities in all free zones except for the Dubai International Financial Centre (DIFC).

AI

The UAE’s commitment to embracing cutting-edge technologies such as AI is evident. This aligns well with the broader trend in the Middle East and Africa (MEA region), including Israel, where spending on AI is projected to soar. According to data from International Data Corporation (IDC), spending on AI in the MEA region will reach US$6.4 billion in 2026, with a 29.7 percent CAGR over the 2022–2026 period.

In October 2017, the UAE government launched the UAE National Strategy for Artificial Intelligence 2031 (hereinafter “the AI Strategy”), demonstrating its commitment to become a technologically advanced nation. The AI Strategy aims to position the UAE as a frontrunner in AI by 2031, with a focus on building a unified AI framework for key sectors within the country.

In the UAE, Dubai has emerged as a leading force in the AI race. Some of the most notable strategies pursued by the Emirate include:

• The Smart Dubai strategy, which seeks to revolutionize the city through innovation and digital transformation.
• The establishment of an AI smart lab, dedicated to training employees in both the public and private sectors on implementing AI solutions.
• The Dubai 3D Printing Strategy, which focuses on sectors like construction, medical products, and consumer goods, with a goal of having 25 percent of Dubai’s buildings constructed using 3D printing technology by 2030.
• The Dubai Autonomous Transportation Strategy, aimed at reducing transportation costs by 44 percent, carbon emissions by 12 percent, and accidents by 12 percent by transitioning 25 percent of all city transportation to autonomous modes by 2030.

Outlook

The UAE’s proactive approach to fostering innovation and economic diversification is evident in its initiatives in the hospitality, retail, technology, and finance sectors. With a time zone advantage – similar to London – the UAE facilitates seamless connectivity with both Asian and American markets, further enhancing its appeal to global investors.

Additionally, the presence of a vibrant expat community, robust travel infrastructure, and thriving aviation industry, epitomized by carriers like Emirates and Etihad, solidify the UAE’s position as a key player in the global economy.

As the UAE marches towards its ambitious goals outlined in various strategic plans, there are plenty of opportunities for growth, beckoning foreign businesses and investors to explore and participate in sectors such as retail, real estate, and commodities, along with digital finance, AI, and sustainable solutions.

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