Promoting Entrepreneurship in the Gulf Region

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DUBAI -- On a recent Thursday evening, ahead of the Islamic weekend, the newest cafe-office space in Dubai, Make business hub, was busy and buzzy. About 60 guests from the United Arab Emirates and nearby countries were being courted by seven international start-ups, who were presenting their business plans in the hope of attracting angel investors and venture capital funding.

The start-ups had been discovered by SeedStartup, a venture capital fund and start-up accelerator program based in Dubai. "We invest between $20,000 and $25,000 in businesses we believe have potential and take a 10 percent equity," said Rony el-Nashar, the founder of SeedStartup. "It's a higher risk we're taking, because we're investing in essentially nothing."

Entrepreneurs who enter the program are required to spend three months in Dubai, where they are mentored by SeedStartup and given an opportunity to pitch their ideas to investors.

In recent years, entrepreneurship has become a buzzword in the Arab world, operating on the credo that business is an essential engine for social, economic and eventually political progress in the region. The region is also under pressure to generate jobs to employ one of the largest youth populations in the world: half of its people are under 25 and 26.4 percent are unemployed, according to the International Labor Organization. The I.L.O. predicts that youth unemployment rates in the region will rise to 28.4 percent in 2017.

A 2011 report by the Arab youth employment initiative Silatech and the Gallup polling institute showed that the greatest problems for young Arabs in high-income countries like the U.A.E., Qatar, Kuwait, Bahrain and Saudi Arabia, were related to entrepreneurship issues. Their concerns suggest that potential new business creators in these countries view government regulations as an obstacle to their ambitions.

"Entrepreneurship must remain in the forefront of discussion for it to be continuously discussed at a policy-making level. I agree that if an individual left from a certain city in the Middle East to the United States he could realize his dream faster," said Ahmad Bin Byat, the chairman of du, one of two U.A.E. telecommunications operators.

"The youth of today do not have the same mind-set as the youth of the pre-oil era," said Mr. Bin Byat. "The appetite for risk has greatly reduced, and most of the current youth are happy with jobs. I hope that attitude changes and we see more enterprise and innovation from the youth of today."

To encourage the spirit of entrepreneurship, du has launched a television show on the local channel Dubai One.

"The Entrepreneur," which opened on Oct. 3, started with about 100 contestants, including 33 women. A jury of local business personalities whittled down the contenders in the first two weekly episodes to produce a short list of 10 finalists, including two women.

Over the next two months, the finalists will be eliminated one by one to produce a winner, who will earn a 1 million dirham, or $272,000, prize to jump-start his, or her, business plan.

An oft-heard lament within the region's entrepreneur ecosystem is the Arab world's failure to produce a Steven P. Jobs or an Infosys, the Indian outsourcing services giant. Companies are either large institutions dependent on state support or smaller enterprises with limited access to capital and talent.

"Why is the region lacking innovation? Let's take the U.A.E., which is a consumer-oriented society. It has basic services -- although very well managed -- but if someone wanted to innovate and invent, is this local market ready to accept it? Start-ups tend to look locally, but they must be more ambitious, aim regionally and even globally, because the local market is just not big enough," said Evangelos Lianos, an executive vice-president at Etisalat, the older of the two Emirates telecom operators.

In theory, setting up a business in the U.A.E. is fairly easy, especially within any one of the numerous free zones that eliminate the legal requirement for a majority-stake local business partner and thus permit full ownership; a start-up launched out of a garage or basement, however, is not the sort of legend one is likely to hear of.

"License fees and linking business set-up to real estate space are definitely challenges for start-ups in the region," Mr. El-Nashar of SeedStartup said. "Virtual office options are available, and although they are cheaper than settling for a physical office, still come attached with basic fees that are more expensive than in the West," he added. "Entrepreneurs, especially technology start-ups, are looking to minimize risks and find a formula that works. That's the kind of business climate the region needs to encourage."

Nicholas Holmes, a former management consultant at Accenture, founded MediaGraph, one of the seven projects selected by Mr. Nashar for Seed-Startup. Mr. Holmes described his company as "an online public relations service designed to facilitate high-quality contact between small and medium businesses and members of the media."

"Dubai is similar to London in many senses. It has high rents, high living costs, high labor costs for skilled workers -- all those things can kill a start-up," he said.

"What's lacking compared to London, of course, is a developed entrepreneurial ecosystem. But nobody can doubt that huge efforts are being made to change that, with new accelerators popping up, workspaces such as Make and much more attention being paid to entrepreneurialism in general thanks to those famous success stories -- the Dubizzles and Cobones of the world," Mr. Holmes said. Dubizzle, an online classified advertising business and Cobones, a group-buying Web site, are both based in Dubai.

Culturally, emphasis is placed on safer education and career choices and discouraging risk-taking. "The policies in place are probably a reflection of the cultural stigma associated with the fear of failure. A change in policies would doubtless help change cultural taboos," said Mr. Lianos. Bankruptcy is considered a criminal offence in several countries; a bounced check in the Emirates can land a person in prison.

"I hope 'The Entrepreneur' will be a catalyst of change," said Mr. Bin Byat. "It is a completely U.A.E.-developed, produced and supported show, and I think will raise some important issues that could result in positive developments."

world

This article originally appeared in The New York Times.


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