Arab Start-ups Key to Building Localised Digital Economy

posted on: Nov 11, 2017

SOURCE: THE NATIONAL

BY: SARAH TOWNSEND

Start-ups and small businesses play a key role in helping the Arab world shift towards becoming a digitally-based economy, yet they face significant barriers to their growth, the World Economic Forum (WEF) in the UAE heard.

The ‘Fourth Industrial Revolution’ – the next major industrial era, characterised by rapid evolution of disruptive technologies – is one of the region’s “greatest challenges”, Sheikha Bodour Al Qasimi, chairperson of the Sharjah Investment and Development Authority (Shurooq), told a WEF event in Sharjah on Friday.

It will require companies, governments and entrepreneurs to help ‘digitise’ existing economies and prevent the region falling behind the rest of the world.

“I think we all agree this is the region’s greatest challenge: how to build future economies in the Arab world. More precisely, how can we build economies that are being shaped by Fourth Industrial Revolution technologies,” Sheikha Al Qasimi said.

Such advancements include robotics, AI (artificial intelligence), nanotechnology, 3D printing, Internet of Things (IoT) and autonomous vehicles – “truly transformative technologies that are the key to job creation”, she said, as she announced a panel session moderated by The National’s editor-in-chief Mina Al-Oraibi.

Panel speakers warned that, while start-ups and small-to-medium enterprises (SMEs) can play a big role in developing a knowledge-based economy, many Arab countries have failed to put in place the ecosystems to nurture their growth.

“There are a lot of things that need to be changed, it’s very frustrating” said Joy Ajlouny, co-founder of UAE-based logistics start-up Fetchr. “The bureaucracy [in the UAE] is painful and the costs of setting up a business are astronomical. In the US, you only pay taxes on profits; here, you pay fees [for healthcare, licensing, visas], whether you make money or not.”

Education and lack of skilled talent is another barrier, according to panel speakers, which included well-known figures from Middle East businesses and institutions.

Political instability in the region can cause a “brain drain” where talented people seek opportunities elsewhere, noted Imad Elhajj a professor at the American University of Beirut.

“I don’t think there is a lack of education here, but if there’s no stability [in Lebanon, especially], start-ups will start up elsewhere, taking away technologies that could help grow our economies,” he said.

Another challenge is that consumption of technology is higher in the Arab world than production of technology – despite high internet penetration rates.

“The community of people entering production is quite small,” warned Sarah Al Amiri, UAE minister of state for advanced sciences. She said a government priority was to create a “talent pool of people” whose knowledge is transferable across industries. The UAE last month launched an initiative to train one million Arabs in computer coding.

This week, a report by Orient Planet Research and SME Advisor Middle East claimed the UAE is primed for a new wave of SMEs, with 91 per cent of millennials surveyed saying they had either started their own business or were looking to start one in the near future.

At the other end of the spectrum, however, large corporates have a role to play in making the digital economy a reality. “It’s how we utilise the talent we have,” said Khaled Biyari, chief executive of Saudi Telecom Company (STC).

“You need an ecosystem,” he added. “You need a friendly regulatory environment that can not only create boundaries but open up investment. Then, you need a digital infrastructure that enables everyone to participate and compete, for example, by giving SMEs access to cloud data and IoT platforms so they can do stuff in a completely new and different way.”

Alain Bejjani, chief executive of UAE conglomerate Majid Al Futtaim Holding, added: “We have to be better, in order to compete globally. Competition in bricks and mortar is now global, let alone in digital. Whoever can’t get there has not future.”