UAE improves ranking as one of the most attractive places for offshore services

UAE climbs four spots to 21st place on Kearney’s 2023 Global Services Location Index, while Jordan, Saudi Arabia, Qatar, Kuwait, Oman and Lebanon enter the list for the first time

Kearney says the UAE's talent regeneration and relations with nearby countries make it a site of choice for nearshoring. Photo: Expo City Dubai

The UAE continued to improve its global ranking as an offshore location for business services, thanks to its status as an emerging tech hub, its ability to reskill talent and its friendly relations with key regional markets, according to a new report by global consultancy Kearney.

The Gulf country climbed four spots to 21st place on Kearney’s 2023 Global Services Location Index, which studies the main factors that make countries attractive as potential sites for offshore services.

Jordan, Saudi Arabia, Qatar, Kuwait, Oman and Lebanon all joined the list for the first time.

A country’s ability to reskill and use its workforce is a vital part of its attractiveness as an offshore location, according to Kearney.

“In an ever-changing global market landscape, where skills take precedence over cost advantages, a nation's true strength lies in its capacity to foster and unleash the potential of its talented people,” said Rob Van Dale, Middle East and Africa lead for digital at Kearney.

“While countries such as the UAE and Saudi Arabia do not naturally have a cost advantage, we see that their considerable focus on talent regeneration is starting to pay off, and in a world where this is expected to become more important, coupled with their investments in digital resonance and an already attractive business environment, they may in the near future further increase their attractiveness for high-skilled services catering to their region.”

The UAE's gross domestic product reached Dh1.62 trillion ($442 billion) at constant prices in 2022, achieving 7.9 per cent annual growth, supported by its non-oil sector as the country continues with its economic diversification strategy.

Looking ahead, the UAE aims to double the size of its economy to Dh3 trillion by 2031, with a focus on boosting non-oil exports.

An increasing number of companies are bringing their supply chains and manufacturing bases closer to home to reduce risks, avoid disruption, cut transport costs and benefit from government incentives, according to a January report by Dubai-based ports operator DP World.

A total of 96 per cent of company executives surveyed are reconfiguring supply chains because of geopolitical events such as the Russia-Ukraine war and US-China tensions, according to the Trade in Transition study commissioned by DP World and led by Economist Impact.

The number of companies shifting their manufacturing and suppliers last year – either to their home markets or near by – doubled from 2021, according to the survey.

"The UAE talent regeneration, combined with the country’s scale and its relations with nearby countries, will all help it to become the location of choice for nearshoring," the Kearney report said.

The Arab world's second biggest economy is an emerging technology hub in the region, where it is home to more than 4,000 start-ups, or 39 per cent of all scale-ups in the Middle East and Africa region, Kearney said.

Contributing to the UAE's score on talent regeneration are the "intensity of technology innovation" and the focus on digital skill improvement, two areas where the UAE is "focusing significant energy and investment, which is paying off", it said.

In 2022, scale-ups in the UAE raised more than 55 per cent of the $9.1 billion raised by scale-ups in the Mena region.

"The UAE is the second most talent regenerative country in the region. Its scaling capabilities and good relations with key Gulf and African countries position the UAE to become a location of choice for nearshoring for the region," according to the report.

The offshoring of business services is growing strongly across borders as companies try to lower their costs and become more efficient by using a global talent base.

The global market for business services grew from $624 billion in 2022 to $681 billion in 2023, and is expected to rise at a compound annual growth rate of 8 per cent through 2027, according to Kearney.

Companies decide where to locate offshore operations on factors including labour and infrastructure costs, available skills, quality of services rendered, infrastructure, business environment, and political and social risks.

Kearney's 2023 Global Services Location Index focuses on talent regeneration and digital skills, bringing Canada, Poland, and Singapore into the limelight as emerging technology destinations for establishing innovation hubs.

The index's top three countries – India, China, and Malaysia – continue to lead due to their "immense cost advantage, abundant talent pool, and strong skills", the report said.

India and China also showing signs of strength in talent regeneration capabilities, making them global frontrunners in the availability of a tech-enabled workforce, it said.

Brazil and the UK rounded off the top five countries. The UK has experienced a "notable change" with its move up to fifth place – the first time a western economy has entered the top five rankings.