The Middle East needs a technological revolution. Start-ups can lead the way

Dubai 2019

Dubai, United Arab Emirates (Nick Fewings, Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Khalid Al Rumaihi, Chief Executive, Bahrain Economic Development Board


Globally, economies with agile ecosystems that are equipped with the infrastructure to support innovation in technology are witnessing a revolution. In order for governments, large-scale multinationals and new start-ups to take advantage of this revolution, the right support systems and regulations must be in place. And the movement of data needs to be low-cost and flexible.

Nowhere is this more apparent than in the Middle East. In 2016, 33% of companies were at an advanced level of digitization, according to PwC, and this is expected to more than double to 72% by 2020. Data centres could be the Gulf’s new refineries.

But it’s not all plain sailing. The Middle East was late to the first, second and third industrial revolutions. This time, it must be ahead of the curve. There are certain common elements to strong entrepreneurial ecosystems. Some of these are within policy-makers’ control, such as reducing bureaucracy and moving government online. Others stem less directly from government action, such as social changes to foster a strong academic base and encourage greater diversity of talent and more women in the workforce. Fortunately in Bahrain, more than 70% of coders are female. But just as important as these changes are actions to create an entrepreneurial environment and provide easy access to funding for start-ups.

Our region has its challenges, including legacy issues such as difficulties in registering businesses, job protectionism, and low investment in research and development (R&D). In the Middle East, countries generally spend less than 1% of their GDP on R&D, compared to the OECD average spend of 2.5%. According to a Strategy & Middle East report, Gulf Cooperation Council (GCC) states could achieve 2.2% growth by increasing R&D spending by 1%.

There are other inhibitors of innovation, including a general lack of skills and training; closed visa policies which restrict entrepreneurship; and complex customs processes. Across the Middle East and North Africa (MENA), intra-regional trade as a percentage of total trade is traditionally much lower than other regions, at just under 10%.

On the other hand, we have a significant advantage thanks to our youthful demographic profile. The region’s median age is under 30, and strong population growth continues. There is no country in the GCC where people under 25 make up less than 30% of the population.

This makes technological revolution both relevant and urgent. Relevant because we have a young, digitally-savvy population with some of the world’s highest levels of smartphone penetration – in Bahrain and the UAE, there are up to twice as many phone subscriptions as people. Urgent because the region suffers from high youth unemployment rates – nearly 30% in many of our countries.

So how can we support start-ups and create jobs? We must reduce the pain points around e-commerce. We also need to embrace open banking, crowdfunding and cryptocurrencies, as well as focus training on digital and data skills and professions. Above all, we need to develop entrepreneurial ecosystems to go into the cloud.

Yet cloud spending in the Middle East “is among the lowest in the world when measured as a percentage of total IT spending”, according to a report by research consultancy Gartner. One of the biggest inhibitors to cooperation is data sovereignty. Governments are fearful of data moving out of their jurisdictions and across borders. Accordingly, Bahrain has just announced a law that is the first of its kind, allowing other countries to “bring their own legal jurisdiction” to Bahrain when they store data with us in the cloud.

All this creates fertile soil for generating start-ups. But how can we encourage them to thrive? Access to funding is crucial. A culture of government spending and subsidies is entrenched. Gulf countries have often deployed their capital abroad rather than at home, and often in real estate, not new technologies. But it’s investment that is needed, not subsidies. Accordingly, Bahrain has set up the $100 million Al Waha Fund of Funds, of which 45% has already been allocated. Start-ups account for 90% of enterprises in Bahrain.

There are further promising signs across the region. It is already home to innovative start-ups and businesses such as Careem and Talabat App. MENA Research Partners says it expects investment in the region’s fintech firms to rise from $150 million to $2 billion, as interest increases in digital offerings from banks and government initiatives, including accelerator programmes.

One example is Lebanon’s Circular 331, which promotes investment of $400 million in start-ups and aims to stop the Lebanese brain drain. If a bank invests in a start-up, it only loses 25% of its investment if the start-up goes bankrupt. This has spurred the creation of new VC funds and accelerators, as well as a broader ecosystem. It has even encouraged some of the talent lost to abroad to return home.

UAE start-ups attracted some $400 million of VC funding in 2017, according to the MENA Venture Report. Jordan has worked hard to make itself the Silicon Valley of the Middle East. With an impressive 25% annual growth in investment technology, its start-up culture has seen several companies develop new apps, such as Abjjad (an Arabic Facebook for bookworms) and social app Friendture.

The region wants to attract foreign direct investment (FDI) that grows new industry clusters. Consider what has happened in Nokia’s hometown, Espoo in Finland. Because of Nokia’s presence, the Espoo Innovation Garden has become the largest innovation community in the Nordic region.

In Bahrain, we are hoping that the new data centre created by Region Amazon Web Services (AWS) will be our equivalent tectonic shift. Nearly 2,500 people signed up for AWS Educate training programmes within a few months, a rate exceeding that in China and India. And there are more jobs to come. Amazon has said they estimate the cloud industry in the Middle East will need 10,000 data scientists.

Could this be a blueprint for the whole region? We hope so. As the “gateway to the Gulf”, Bahrain is committed to fostering dynamic ecosystems that give start-ups across MENA the chance to scale regionally and internationally. At the World Economic Forum for the Middle East and North Africa in April, the 100 best Arab start-ups will come together in Jordan.

It is time for our region’s countries to push harder on their path from carbon economies to knowledge economies. Start-ups are key to the journey.

For to find out more about the 100 Arab Start-ups shaping the Fourth Industrial Revolution, click here.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Macron defends the idea of European sovereignty

Thursday’s Daily Brief: Safeguarding civilians, strengthening Ebola response in DR Congo, marking Fistula Day, updates on CAR and Syria

How a more integrated approach could help to end energy poverty

Ecofin: ‘The Friday battle’ for the banking union

The British “nonsense”, the relaxed Commissioner and the TTIP “chiaroscuro” at this week’s Council

Sweden has invented a word to encourage people not to fly. And it’s working

Human rights breaches in Iran, Egypt and Tanzania

Lorenzo Natali Media Prize 2019: winners of EU’s development journalism award unveiled

Commission: Do it like the Americans in the food sector

A safer, more dignified journey for all migrants, tops agenda at global conference in Marrakech

Gender equality, justice in law and practice: Essential for sustainable development

AI will drive the societies of the future. Will the governed consent?

Parliament approves €34m in EU aid to Greece, Poland, Lithuania and Bulgaria

ECB’s trillion has to be printed and distributed fast before Armageddon comes

Italy’s M.Renzi and Germany’s S. Gabriel veto austerity, ask EU leaders to endorse growth measures

FROM THE FIELD: Murals help heal wounds of bloody conflict in Guatemala

Only a few months away from the single European patent space

What’s really driving corporate climate action?

Digital Assembly 2019: new actions on quantum, EU-Africa taskforce report and digital start-ups

Trying to cure bank cancer with analgesics

New EU rules ensure better protection for 120 million holidaymakers this summer

German egotistic inward turn to badly hurt Europe after Merkel’s exit

Google once more under EU crossfire from a possible record fine and new Right to be forgotten case

International Women’s Day: Where does she belong?

Hiring is broken. Here’s how to fix it

FROM THE FIELD: Liberia boosts efforts to guard against rising seas

Globalization 4.0 means harnessing the power of the group

Libya: UN Mission condemns deadly attack against police in country’s south-east

Financial Transaction Tax: More money for future bank bailouts?

These countries are the most peaceful – in 3 charts

‘Jerusalem is not for sale’ Palestinian President Abbas tells world leaders at UN Assembly

Towards a seamless internal EU market for industrial goods

UN expert ‘shocked’ by Egyptian reprisals against human rights defenders she met

Canada grants asylum for Saudi teen who fled family: UNHCR

Italy and Greece zeroed their fiscal deficits, expect Germany’s response

An open letter from business to world leaders: “Be ambitious, and together we can address climate change”

Belgium: Youth Forum takes legal step to ban unpaid internships

Trump’s trade wars: Aiming at long term gains for America

Technology can help us save the planet. But more than anything, we must learn to value nature

Heat-resistant crops, ‘green’ infrastructure, can prepare Near East and North Africa to better tackle droughts – UN agency

International co-operation vital to improve integration of refugees

EU seems to fail its moderate migration promises postponing them for end 2015

“The Belt and Road Initiative aims to promote peace, development and stability”, Ambassador Zhang of the Chinese Mission to EU highlights from European Business Summit 2018

Haiti: ‘Laden with challenges’ but also hope, Mission chief tells Security Council

Agreement reached on new EU Solidarity Corps

Wednesday’s Daily Brief: updates from the Near East and Libya, Ebola in DR Congo, World War remembrance

UN chief condemns killing of ‘blue helmets’ in DR Congo, as violence erupts prior to elections

More solidarity and interaction between generations needed to challenge age stereotypes and ingrained ageism

G20 LIVE: “This was not an attack against France, this was an attack against the universal human values!”, EU President Juncker cries out from G20 in Antalya Turkey

Trade barriers: EU removes record number in response to surge in protectionism

Erdogan’s Turkey in dire straits for flip flop policies in the Middle East

Cape Town’s crisis shows us the real cost of water

UN ‘financial crisis,’ years in the making, Guterres tells budget body, proposes solutions

Finnish Council Presidency priorities debated in plenary

International Court of Justice orders Pakistan to review death penalty for Indian accused of spying

In dreams and in love there are no impossibilities

The influence of the multilateral agreement on migrant health

Austrian Presidency priorities discussed in committees

Better sanitation for India is in the pipeline

Why economic growth depends on closing the interview gap

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s