Author: Cale Salih Posted November 6, 2012
Fadi Ghandour, founder and CEO of Aramex, says that entrepreneurship is “the primary problem solver for youth in the Arab world.”
In an exclusive interview with Al-Monitor, Ghandour said that economic grievances lie at the heart of the popular uprisings across the Arab world. Democracy and economic empowerment, therefore, go hand-in-hand for Arab youth.
Ghandour, who founded Aramex in 1982, is a passionate promoter of social entrepreneurism in the Middle East and one of the region’s most prominent investors in start-ups.
Aramex, a global express and freight-forwarding-services company that specializes in the Middle East, is one of the top entrepreneurial success stories in the region. In 1997, it became the first international company in the Middle East to be listed on the NASDAQ. Ghandour is also the chairman of Wamda, which invests in Middle Eastern entrepreneurs, and a founding partner of Maktoob.com, the largest Arab online community, now owned by Yahoo Inc.
Ghandour told Al-Monitor that private-sector growth is critical to democracy and prosperity for the region.
“Without an independent source of income or wealth for these youth,” Ghandour said, “their democracy becomes hollow. If you continue to be dependent on the state, the state will always be pervasive in your life, so the sense of democracy gets diluted.”
A 2012 survey conducted by Burson Marsteller showed that in the past year, home ownership and fair pay have replaced democracy as the top priorities for Arab youth. For Ghandour, these priorities are interdependent.
“Democracy is meant to protect the citizen from the heavy hand of government. Wherever it is, it’s about empowerment, and empowerment without economic empowerment is an unequal equation,” he said.
In a region largely dependent on natural-resource wealth and foreign aid, Arab governments have traditionally propped up outsized public sectors and prescribed low taxation. This has translated into little government accountability and few incentives for education and diverse skill development.
“Government was the biggest employer, with very little focus on education or employment,” said Ghandour. “So most youth don’t have the skills. Today we have a massive job problem … the Arab Spring is all about that, in my opinion.”
He said that entrepreneurism is the key to solving this education deficit and bringing youth into a comprehensive plan for economic growth. Ghandour explained that the inspiration to create Wamda, chaired by himself and launched by Abraaj Capital, a private equity firm based in Dubai, originated from the fact that “over 75% of companies in the Arab world are small and medium-sized-enterprise companies. So we felt the need to focus on entrepreneurship because that’s where job creation happens.”
Internet start-ups are one of the new forms of entrepreneurship in the region.
“The start-up scene is just starting to catch momentum,” said Ghandour. “Internet start-up growth in its broad definition … is extremely exciting and in my view it is the investment of the future.”
Ghandour said that Jordan is the regional hub for Internet start-ups. Jordan leads “in terms of animation, e-commerce, creating original Arabic content online and in terms of pure outsourcing opportunities,” with Egypt as a close second.
Lebanon still produces many start-ups in creative and media industries, but is slowed by a weak broadband infrastructure.
Despite a financial crisis in 2009, Dubai remains the hub for e-commerce and advertising. “Most Internet companies that want to establish advertising-based revenue streams have to be in Dubai, because that’s where the buying happens,” explained Ghandour. “Even if you are a start-up that is not in Dubai originally, you need to establish your physical movement of goods specifically to serve the [Gulf Coorperation Council], and Dubai has quite an easy way of doing business in terms of taxation, customs duties and facilitation.”
The use of social media in the Middle East has surged since the anti-government uprisings across the Arab world, as youth have relied on Facebook and Twitter to organize demonstrations and communicate with international media about developments in the region.
Social media, Ghandour said, has empowered Arab youth because “it lets you have a voice and it democratizes and consolidates the voice of the individual today. You’re no longer dependent on traditional media. You can go out and complain about whatever you want. Today, you are being heard; you are able to bring that story to the public wherever you are, on any issue that you want.”
This drive for empowerment through entrepreneurism has given rise to a new ecosystem in support of start-ups.
“More venture capital [comes] into the region. Slowly but surely you are seeing high-net-worth individuals investing in start-ups; private equity is taking that direction too — even foreign-aid institutions.”
In Ghandour’s vision for the Middle East, democracy is incomplete without economic growth.
“You can celebrate democracy as long as you want, but if there is no economic growth, if you don’t invest in education — because jobs of today and the future are knowledge-related — if you’re not able to really have a national rebuilding process, which at its core is education and job creation, then you’re letting down the Arab youth.”
Ghandour was optimistic about the future.
“The start-up scene is just starting to catch momentum. There is more capital coming into it, more companies popping up, massive amounts of business plans every day. There is a sense of empowerment among the youth going out and coming up with ideas that need investments. I see governments waking up to that story and trying to find ways to facilitate funds, or there are some stock markets that want to establish small and medium-size enterprise and start equity markets in the region — something like mini-NASDAQs, if you want.”
“The region is the last frontier,” he said, adding that “Internet start-up growth in its broad definition — we’re talking from content to knowledge industries to e-commerce, everything that relates to creating knowledge and commercial life, research and development and everything in between — is extremely exciting and in my view, it is the investment of the future.
Ghandour believes there is a role for government to facilitate and encourage investment. “It requires patience, capital and that people create the infrastructure for it to protect intellectual-property invention,” he said. "Some countries in the region have these laws, but don’t implement them well. Others don’t have them at all … if we want our brain drain to reverse, we better protect the ideas that come out from these brains.”
Cale Salih is a video editor for Al-Monitor based in Washington, DC. Previously, she was a fellow at the International Crisis Group writing reports on Lebanon and Syria. Follow her on Twitter @callysally.
Read More: http://www.al-monitor.com/pulse/originals/2012/al-monitor/arab-entrepreneurs.html