Archive photo from SHARE in Beirut, October of last year
© Nadim Kamel
Archive photo from SHARE in Beirut, October of last year
Last updated: August 23, 2013

Entrepreneurship for growth – starting small not a bad idea

Banner Icon The entrepreneurial sector in the Middle East has picked up the slack where corporations have become ephemeral at best, and has consequently emerged as one of today’s engines of growth for the regional economy, writes Bassam Aoun.

The lackluster job market has been less than merciful to numerous aspects of contemporary life. From the detriment of careers to the foreclosure of homes and the subsequent rise in the cost of unemployment insurance programs, the effects are pervasive and considerably malignant to the average individual.

This trend is predominantly due to the cost-cutting measures that have become the norm among major private sector corporations. Unfortunately, this business paradigm has supplanted the idea of expanding capital investments.

The entrepreneurial sector in the Middle East, however, has picked up the slack where corporations have become ephemeral at best, and has consequently emerged as one of today’s engines of growth for the regional economy.

Jordan has been an exceptionally vibrant atmosphere for entrepreneurs

In 2012 alone, start-ups and entrepreneurial ventures were able to accumulate $124 million in investments – a commendable figure for an often fiscally conservative corner of the world. Proportionally, the most attractive market was the United Arab Emirates, which was able to account for over $74 million of the aforementioned funds. With its relatively open business environment, moderate entry costs and well-established infrastructure, the nation essentially sells itself. However, the facet of this trend that is salient in portraying the significance of entrepreneurship in today’s market does not lie within prosperous economies, such as the United Arab Emirates or Saudi Arabia. It lies within markets where the youth are struggling to find employment in a stagnant economy – nations such as Lebanon and Jordan.

Young individuals who would normally thrive in a labor market with adequate opportunities have taken to creating their own jobs in lieu of waiting for an anticipated recovery – especially one that seems to have been promised time and time again.

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An exemplary embodiment of employing innovative techniques in the context of one’s surroundings is a new online job platform based in Lebanon, appropriately dubbed Achieve. Established by a group of individuals involved in the fields of HR and organizational development, the Achieve team is attempting to streamline the manner in which job seekers are connected with potential employers. Ultimately, by enhancing the efficiency of the matching algorithm between applicant and firm, this particular start-up is making a capital investment in more ways than one. And with incubators like Berytech and AltCity, the Lebanese start-up scene has been on the rise and will continue to prove its worth in a difficult operating environment.

Correspondingly, Jordan has been an exceptionally vibrant atmosphere for entrepreneurs, especially in the information technology sector. Since the sale of Maktoob, a Jordanian Internet portal, to Yahoo! for $175 million in 2009, venture capitalism has spiked in the Hashemite Kingdom. King Abdullah has historically been an ardent backer of the start-up community, most particularly when it came to internet-based initiatives. By facilitating Internet access and reducing the red tape involved in registering a new company, the King has contributed to the blossoming of numerous capital investments.

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As a whole, the nation has also managed to bring about another form of social innovation. Incongruously to the rest of the world, women entrepreneurs have made up over one third of the national group of risk takers, whereas the global figure averages at approximately 10%. With over one quarter of the region’s youth still unemployed, it is apparent that job opportunities are scarce, and even more so to the average Arab woman. That is why start-ups like Zaytouneh, an online recipe hub established in 2011 by a Jordanian woman, have been held in high regard by local and regional investors.

Not all ventures will achieve favorable returns

The lack of private spending in several of the world’s markets is one of the factors that have impeded these economies from climbing out of their respective economic droughts. Governments have attempted a number of methods to replenish the solvency of the domestic economy, the majority of which include artificial state-level spending on infrastructure projects and other grander plans. 

However, sustainable growth can be attained when momentum in the capital investments market picks up in the private sector, which should naturally lead to job creation. A bolstered labor market will bring augmented disposable incomes and improved spending power, consequently invigorating the goods and services market. Ultimately, capital spending creates a foundation for the economy centered on a sustainability motif – one that all facets of the market will thrive off of.

Self-evident risk factors notwithstanding, governments and public lending institutions alike have recognized the value in the open provision of funds to entrepreneurs. This has led to the birth of aberrantly low interest rates and a multitude of lending schemes designed to encourage venture capitalism and lower barriers into the start-up industry. Theoretically, this should prove to result in far more favorable and substantially less artificial growth metrics than a number of public spending initiatives, albeit on a significantly smaller scale. Not all ventures will achieve favorable returns, and the majority is unfortunately expected to fail within the first few years. They will, however, provide an active avenue for investors to replenish capital accounts in economies craving a growth catalyst, especially among numerous dormant sectors. For the time being, starting small may not be such a bad idea.

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Bassam Aoun
Bassam Aoun is a Business Editor at Your Middle East. He is currently based in Abu Dhabi and holds a BA in Economics from the American University of Beirut and an MPP (Master of Public Policy) from the University of Chicago. He has written for the Chicago Policy Review and is interested in economic and fiscal policy in the Middle East.
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