A hi-tech future fuelled by an entrepreneurial and technologically savvy generation underpins the vision of governments across the Middle East as they seek to reduce oil dependency and transform their economies.
Challenges persist, not least of a regulatory and political nature, but momentum is gathering. This year is already set to break records for start-ups both in terms of dollars invested ($471 million) and the number of deals (238). Mature sectors are also benefitting from a drive to boost private-sector entrepreneurship.
Within the region there is a vast diversity in terms of levels of development and income, but prevalent trends include reforms aimed at furthering economic access and the promotion of private-sector activity.
With prices for oil and gas on a long-term downward spiral – and a youth bulge that sees more than half the region’s population aged under 30 – the urgent need to diversify is behind many of the more ambitious plans and policies.
From the Gulf to Morocco, the need to move towards a knowledge-based economy is not just recognised but actively embraced through initiatives such as smart cities – including Dubai Silicon Oasis, Neom in Saudi Arabia and Rabat Technopolis. These offer fiscal incentives and support for innovative start-ups and also mature businesses with disruptive strategies.
Boom in projects
In the bid to foster innovation, governments have embraced a host of other projects. These include free-trade zones to boost foreign direct investment, such as the Jebel Ali Free Zone in Dubai, the use of government investment funds to encourage diversification away from commodities, such as Saudi Arabia’s Public Investment Fund, and providing financial infrastructure to ease the growth of business, such as the Qatar Financial Centre.
Governments and companies in the Middle East are looking to invest in British firms with technological expertise in sectors encompassing everything from sport, finance and fintech to education and real estate. There are also myriad opportunities for British companies to invest in this rapidly evolving part of the world.
“We’ve seen many success stories with British companies getting Middle East investment, ranging from financial services to tech to consumer,” says Nadim Meer, partner at Mishcon de Reya. “Companies with products and services that are easily deployable and translatable in the Middle East do well.”
More than 400 million people inhabit a score of countries across the region – and entrepreneurs are thriving.
The number of investors in Middle East-based start-ups more than doubled to 156 in 2018, compared to 2015, according to MAGNiTT, a start-up data platform. In the first half of 2019, there were 238 start-up investment deals, totalling $471 million. Fintech maintained its top position as the most active industry, followed by e-commerce and logistics.
The report also noted that 30 per cent of the institutions that invested in Middle East start-ups were headquartered outside the region, illustrating continued international interest.
Success stories have emerged across the Middle East. One is Badia Farms in Dubai, the region’s first vertical farm that produces vegetables and fruits for the city’s top restaurants. The hydroponic facility is helping the region to pursue food security while cutting water use and air freighting of fresh produce.
Another is Jamalon, an online bookseller based in Jordan, that offers 12 million publications in Arabic and English and sells 15 per cent of its titles outside the Middle East.
“The region could produce even more entrepreneurial companies with government support for all levels of education and a healthier political climate,” says Meer. “A highly skilled workforce with freedom to think creatively has the potential to not only lead to more innovation and grow the economy, but also encourage more people in the diaspora to come back,” he said.
Growth of hi-tech cities
Dubai’s Silicon Oasis, a free-zone technology park, saw its net profits reach $79.6 million last year, compared to $56 million in 2017. The number of companies based there rose to 2,620 over the same period – up from 2,459. Meanwhile, Silicon Park, Dubai’s first smart city within the complex, is due for completion this year and will host commercial and residential space.
In Saudi Arabia, work is underway on the $500 billion Neom development. The promised megacity-cum-independent economic zone will feature smart technologies run by robots, industrial areas and tourist resorts.
Morocco set up Rabat Technopolis a decade ago to promote a knowledge economy in fields such as electronics, nanotechnology and biotech. In 2010, early-stage investor and accelerator Oasis500 was launched in Jordan and has since invested in more than 150 creative and technology start-ups. These dynamic hubs demonstrate that the Middle East is clearly embracing an entrepreneurial and digital future.