The UAE and India are currently the best places to start a business, but the West still outperforms them in one important respect.

The United Arab Emirates (UAE) is the best place in the world to start a new business, according to the latest Global Entrepreneurship Monitor (GEM) annual survey. The Arab country took first place for the third year in a row, thanks to a major push by governments into cutting-edge technology to diversify away from oil.

Four of the top five countries in the GEM ranking are located in the Middle East or Asia, with India in second place, Saudi Arabia in third place, and Qatar in fifth place, with the only exception being Lithuania in fourth place. This is characteristic of a clear eastward shift in the quality of the entrepreneurship ecosystem over the past five years, closely reflecting a similar shift in the global economic center of gravity.

The UAE has made particularly steady progress, moving from fifth place in 2019 to first place on the list. Saudi Arabia rose from 17th to 3rd place during the same period, while India rose from 6th to 2nd after shaking off a pandemic-induced drop.

During the same period, Western economies also slumped. So why did this happen and what will be most important in the future?

How the investigation works

Entrepreneurship is a key driver of global economic growth. It is heavily influenced by a country’s regulations, education system, financial institutions, and overall culture. Assessing these variables provides a better understanding of entrepreneurship.

GEM understands this each year through a national expert survey of various stakeholders in the entrepreneurship ecosystem, including business leaders, government officials, and academics. This year, 49 countries participated in the survey, including most of the G20 (with some exceptions such as Australia, which did not participate in the latest survey). Based on this, GEM develops assessments of 13 different entrepreneurial conditions and creates an annual index.

GEM Ranking 2019-2023

shift to the east

Explanations for the rise of Eastern Bloc countries include increased government promotion of business creation, emphasis on entrepreneurial education, and changing cultural views of business activities.

For example, the UAE has initiatives such as the Project of the 50, which includes priority visas for entrepreneurs and talented students, particularly in areas such as artificial intelligence, digital currency and coding. This includes promoting the nationwide adoption of advanced technologies.

The government has used Expo 2020 as a campaign to promote the Emirates as an attractive destination for business, and has changed certain rules to make it easier for foreign investors to participate. Notably, this included allowing 100% foreign ownership of companies in 2021. The Ghadan 21 business accelerator program has also disbursed Dh50bn (£11bn) to Abu Dhabi since 2019.

Saudi Arabia is also focused on diversifying away from oil, and entrepreneurship is one of the top priorities of Saudi Vision 2030. As a result, Monchaat, the national enterprise development agency, carries out activities such as promoting university start-ups and fast-growing ventures.

The country is working to improve entrepreneurs’ access to finance through initiatives such as the Saudi Public Investment Fund and the Saudi Venture Capital Company, as well as targeted support for women entrepreneurs.

To attract foreign talent, the Saudi government approved a new residency regime in 2019 and immediate work visas in 2023.

In India, innovation has been given great emphasis in the country’s new education policy introduced in 2020 to improve education standards across the board. Students in many schools are also inspired by a national initiative called the Atal Tinkering Lab, which inculcates curiosity and design thinking through science projects, and is inspired by the popular TV show Shark Tank (in some countries (called Dragon’s Den) is sparking discussion at the dinner table. Regarding “fairness” and “product-market fit.”

east vs west

Over the past five years, the economic downturn in the Western world has been very pronounced. In 2019, four of the top 10 countries were Switzerland, the Netherlands, Norway, and the United States. By 2023, both had fallen, with Norway and the United States not even making the top 15, and Switzerland and the Netherlands falling from the top two to ninth and seventh place respectively.

The deterioration in business confidence in these countries may be explained by the sharp rise in inflation and higher interest rates that they have endured since the pandemic. For comparison, the UK was 21st overall five years ago, but is now 22nd.

But in one important respect Western economies are still progressing. If you look at countries such as Switzerland, France, Norway and Germany, more than 30% of entrepreneurs are involved in business services.

The situation is very different in the leading Eastern countries in the GEM rankings, where most entrepreneurial activity focuses on consumer services such as retail, hotels, restaurants, and personal services. These represent 80% of the company in Saudi Arabia, more than 70% in India, and in the UAE the latest figures put it at more than 60% in 2022.

In Saudi Arabia and India, business services such as IT and professional services account for less than 10% of total entrepreneurial activity, while in the UAE the figure was less than 20% in 2022.

This low number is important because companies that provide business services tend to have higher profit margins, greater expansion potential, and higher barriers to entry. Therefore, more impetus and support is needed to promote business services, both in the World East and in low-income countries.

It is also worth pointing out that entrepreneurship education needs more attention in most countries. Thirty-one out of 49 countries were rated as having the weakest economic situation assessed in the survey. If this is not addressed, many potential new businesses may never materialize simply because a generation of schoolchildren grew up not knowing that entrepreneurship was an important option for their future.

The skills imparted through entrepreneurship education, such as creativity, innovation, experimentation, growth mindset, and overcoming fear of failure, are fundamental requirements in a world where disruptive technologies are evolving at a breakneck pace.