The Arab world is currently undergoing dramatic economic changes as oil prices plummet and transformations in the global market impose deep structural challenges to Arab economies. The recent economic instability in the region brought on first by the financial crisis of 2008 and further exacerbated by political turmoil in 2011 created a precarious environment for investment. Nonetheless, financial hubs have been cultivated in emerging cities such as Dubai, where technological innovation is flourishing in the region. Even so, the existing political framework in the Gulf and across the region remains in urgent need of reforms to solidify recent economic successes and ensure that future generations of entrepreneurs can follow in their footsteps.
On November 10th, the Annual Harvard Arab Conference Business Edition sought to address these changes and concerns in its first session on innovation, investment, and economic development in the Middle East. A fascinating panel entitled Investing in the Arab World hosted successful business men and women with extensive experience working in top financial firms in the Gulf. They took on the challenge of answering difficult questions referring to the feasibility of investment in the Arab World, who the desired investors would be, and their expectations for the next five years.
The panel hosted Amjad Ahmad, the founder and managing partner of Precinct Partners, a company that provides support for entrepreneurs in the region; Noor Sweid a general partner at Global Ventures, a venture capital firm based in Dubai; and Abbas Zuaiter the co-managing member and chief investment officer of Zuaiter Capital Holdings. The panel was moderated by Chris Schroeder, an American entrepreneur and author of “Startup Rising-The Entrepreneurial Revolution Remaking the Middle East.”
To kick off the discussion, Schroeder asked the panelists to reflect on economic growth in the Middle East in the past five years. In response, Sweid commented not only the slowdown inflicted on the region by the 2008 financial crisis, but also on how this instability created an opportunity for investors to reconfigure their approach to doing business in the region. That reorientation facilitated a move towards greater investment in tech as business leaders realized stimulating economic growth required that they encourage innovative, tech-centered production and consumption. Sweid emphasized how the rise of the Asian Tigers was an eye-opening moment for many businesspeople in the region. She was referring to the boom in economic growth and rapid industrialization that took place in Hong Kong, Taiwan, Singapore, and South Korea in the late 60s and early 90s. According to Sweid, the Arab world began looking East for a business model that was both profitable and applicable to the Arab context.
Zuaiter, for his part, reiterated the possibilities for economic prosperity in the region and the potential for investing in its people. He believes that one of the greatest hindrances to economic growth in the Arab world has been public sector mismanagement and misallocation of resources. The solution, according to Zuaiter, lies in absolute privatization, whereby governments would play a considerably smaller role in the economy. To Zuaiter, the government’s main concern should be ensuring strong rule of law to protect investors and should refrain from controlling all the means of production. Zuaiter believes that efforts for greater economic liberalization will help alleviate the inevitable recession that he believes will occur in the coming years because of the plummeting oil prices.
Amjad Ahmed focused his attention on the need for local change and investment in local talent to ensure that growth in the region is both drastic and sustainable. He pointed to the success of Careem, a Dubai-based transportation company that provides ride-sharing services to consumers across the Middle East and South Asia, as an example of successful local investment. In May 2018, Careem became one of the few Middle East-based startups valued at a billion dollars. Ahmed emphasized that replicating that success requires improving the education of local citizens. According to Ahmed, one of the greatest obstacles facing the region is attracting funds. This challenge, he elaborated, can only be resolved when locals invest in themselves. This means that rather than allowing expatriates to take on an outsize role in regional economic activity, local institutions need to start filling the gaps in fundraising to stimulate more enduring and diversified economic growth. Ahmed reminded the audience that foreign investors were less likely to support startups; boosting innovation to remain relevant would require greater effort to both increase the competitiveness of locals and safeguard the rights of local investors. “The best companies grow locally and invest locally,” Zuaiter chimed in, supporting Ahmed’s sentiments.
Schroeder wrapped up the discussion by asking the panelists what they envisioned the next five years would look like for the Arab world. The panelists agreed that in the the current economic climate, the coming years are likely to be anything but simple for the region. The importance of education, rule of law, and empowering local innovators will become central to policy-making decisions. Likewise, they emphasized that political leaders will need to dismantle the outdated and stifling economic structures such as public ownership of goods that prevent their citizens from achieving their full potential. The panelists emphasized that those restrictive economic structures prevent citizens of the Middle East from relying on their own contributions to the economy rather than the welfare state. Although much of the conversation focused on the achievements of the financial industry in the Gulf, the panelists articulated the need for greater openness and collaboration in the region. They specifically emphasized the need for better immigration laws that enable freedom of movement across the region, a reform that would decrease the cost for entrepreneurs to establish successful businesses. Promoting relationships like these and remaining dedicated to these reforms will play a significant role in shaping the future of business, investment, technology, and innovation in the Arab World for years to come.