The Exodus - Why Talented Middle Eastern Entrepreneurs Leave and What Needs to Change

 

 

Major events in the Middle East command global headlines every day. Typically, the stories focus on unrest in various countries, the Israeli occupation, and lately the impact of a falling oil price. However, there is an important story that has been completely overlooked by the media and it centers on a social phenomenon that could play a major role in solving many of the problems that have plagued the Middle East for decades: the plight of the Middle Eastern entrepreneur.

 

It is certainly easy to imagine how impossible it would be for a budding entrepreneur to establish any kind of enterprise in one of the currently war-torn nations, but the problem runs much deeper than that. Even in Middle Eastern and North African (MENA) countries that are generally stable, the obstacles that stand in the way of creating a successful entrepreneurial “ecosystem” are daunting, if not overwhelming.

 

A Personal Journey

 

To be honest with you, I don’t come to this subject as an uninterested third party, but as a participant. As a young man in my 20s, I developed some business ideas that I knew had good growth potential and while I understood that launching a startup from the Middle East would be difficult, I made the decision to face the challenges. I hoped that with excellent talent on board, a solid product, a good business plan and perseverance, I could make it there.

Ultimately, after several years of hard work, I had to accept the fact that the obstacles were too high. I packed my bags and joined the current exodus of Middle Eastern entrepreneurs who are finding welcoming communities abroad. I am now headquartered in Waterloo, Canada and working alongside many other creative, talented and driven entrepreneurs who have roots in the Middle East, including some who have enjoyed success in North America and are working to bring ventures back to their Middle Eastern nations.

On first inspection, it seems that the Middle East is primed for a boom in entrepreneurship. It boasts world-class colleges and universities and its people are hardworking and extraordinarily persistent. Yet there are other attitudes common among Middle Easterners that are antithetical to the entrepreneurial spirit as well as a web of business, cultural, political, economic and governing structures that greatly inhibit individuals who dare to try something different.

Perhaps my first clue to the difficulties that lay ahead in my journey was the reaction I received from family and close friends when I expressed my desire to pursue entrepreneurism. I took a short break from college to get some practical business experience. Many viewed this as an unwise and dangerous choice. Putting it simply, to most Middle Easterners success is measured by landing a stable career position in a large company.

 

Palestine Unwilling to Change?

 

Khaled Al Sabawi is Canadian, but his roots are in Palestine. While he was educated in Canada and began his career in developing geothermal energy there, he has been working hard to bring technology and development to the Palestinians through his for-profit social enterprises; MENA Geothermal and TABO Palestine. As Khaled has tried to introduce his ideas into Palestine, he has encountered some of the same attitudes that prompted me to leave. And in many ways, Khaled explains, Palestine is a microcosm for much of the Middle East.

“(In Palestine) it’s far more about who you know, far more about what relationships you have, than [about your ability] to benefit from your hard work and contribution,” he says. Further, a substantial middle class is critical to economic development. A strong middle class provides a financial foundation from which businesses can be born.

“In most of the countries in the Middle East, you have enormous disparity between the rich and the poor and a very small middle class, so you have a very [limited] opportunity for small business to grow and to rise,” says Khaled. “You also have very limited facilities to help make that work. For that reason, most of the economy is controlled by the elites. It’s usually a handful of companies in each industry that are the big players.”

This is why my family and friends placed such a huge value on landing a professional position in a large company and criticized my desire to start my own business. For most in the Middle East, it is important to connect to the elites in order to assure your long-term prosperity and security. In fact, starting your own company can be seen as a challenge or a threat to the elites. Khaled experienced this first hand when he sought to bring renewable geothermal energy to Palestine.

Energy use is very inefficient throughout MENA and the situation is even worse for the Palestinians. They pay very high prices and depend on Israel for energy. Using entrepreneurial principles to establish a renewable source of energy that would help make Palestinians energy independent seemed like a great idea. However, Khaled ran into severe difficulties.

While his project was praised by the Israelis, officials in the Palestinian Authority were not in favor of the project. “Quite simply, top Palestinian Authority officials demanded bribes. We refused to bribe them, so they fought our businesses. The obstacles that were thrown in my way by the Palestinian Authority were very disorienting,” Khaled explains. “It made me question things.” Referring to his second business, Khaled stated, “When our TABO project, which protects Palestinian land from illegal settlement expansion by focusing on expanding property rights in the West Bank and allowing Palestinians to own affordable land, exposed the enormous ineptitudes, corruption, and inefficiencies within the Palestinian Lands Authority, the Palestinian Authority directly fought our project. We had to sue them in the Palestinian High Court of Justice and after a year of legal battles and our project being illegally suspended, we won.”

 

Keeping Control a Priority

 

This illustrates the difficulty many newcomers experience when trying to establish a business in the Middle East. Those in power are more concerned with maintaining their position than allowing startups to compete in the marketplace and either succeed or fail on their own merits.

Even when wealthy Middle Easterners have money to invest, it seldom goes to fund startups. In North America, “angel” investors are willing to make significant “bets” by funding startups in their formative days. Middle Eastern investors are less likely to take these kinds of risks, says Hussam Ayyad, a Palestinian from Gaza who now manages the Startup Services Group at Communitech, a world-renowned startup technology incubator located in Waterloo, Canada.

High wealth individuals in the Middle East often stick with “Traditional notions and investment approaches in hard assets, mainly real estate. This is one of the reasons why we (Middle East) have one of the world’s largest real estate development markets. But the question is: What long-term economic value does this create? How will this enable the Middle East to become a net exporting region, for example?” asks Hussam.

Entangled with the cultural and economic realities that define the chasm between the rich and the poor in the Middle East are the governing structures and legal structures of most Arab nations.

“I was raised in Canada, where there are laws. There is an ethical fabric that holds society together. In Canada, you give your neighbor the benefit of the doubt that he’s not going to cheat you or steal from you. I was taken from that society and thrown to fend for myself in a place, where there was very little rule of law, corruption and few ethics it was a shock to my system,” Khaled says, reflecting on his efforts to do business in Palestine.

 

Stifling Bureaucracy

 

In addition to ethical lapses and corruption, excessive bureaucracy hampers business development. “Public administrations have to let go and empower the region’s entrepreneurs to excel at executing their ideas,” says Communitech’s Hussam, adding that when he was in the Middle East, “harsh government bureaucracies” caused him to lose “millions of dollars due to spontaneous law revisions and enforcements.”

Hussam’s criticism of the governing structures in the Middle East are echoed by Shawky Fahel, a Palestinian who immigrated to Canada with his family as a teenager. Shawky is a prominent award-winning businessman and key entrepreneur in Canada who is currently establishing strong trade relations between Canada and the Middle East through his Canada-Middle East Connections initiative.

“In the Middle East we have young entrepreneurs, we have people with vision, but they cannot utilize their abilities because of the archaic political systems that we have; the lack of economic development programs, the lack of the fundamental infrastructures that are needed for societies to prosper and move forward,” Shawky says.

Jordanian born Fayez El-Far, Founder, CEO, and Chief Engineer at VotR, an innovative social platform that allows users to ask questions in poll format and gather votes, outlines the improvements that need to be made to the infrastructure throughout the Middle East to create an environment that will allow entrepreneurs to pursue their ideas and be successful.

 

Poor Infrastructure

 

“The major obstacle to a truly competitive startup ecosystem is the lack of proper infrastructure and governmental support. Both obstacles are slowly being addressed, but I believe that more effort needs to be made by governments and financial institutions to nurture and encourage growth and prosperity,” explains Fayez.

“To be more specific, startups should have access to competitively priced workspaces, startup funds, technology infrastructure, and hardware. Larger pieces of governmental budgets need to be directed towards assisting promising startups,” he adds.

Fayez took his startup efforts to Canada where subsidized legal advice, experienced entrepreneurs in technology incubators, technology meet-ups, a vast network of connections, and financial vehicles that cater to startups were available.

Reviewing the constructive criticism of these entrepreneurs, all of whom are experienced with business formation in the Middle East, the problems can be put into two main categories: barriers that must be torn down and programs that must be built up.  While the criticism is often quite pointed, most also see potential in the region, some of which is beginning to be realized.

 

Cautious Optimism

 

“Now is a critical time to properly establish a solid foundation for nurturing and catering to the entrepreneurial spirit in the Middle East,” says Fayez. “With enough high-level support, and assessment of lessons-learned from ecosystems abroad, there truly is no reason why the Middle East cannot be the next great startup scene. Again, the amount of educated, talented, and creative people is staggering.”

Shawky can even envision a day when Middle Eastern nations will assume positions of world leadership: “We (the Middle East) have to settle our political differences in our world before we can move forward to an economic revolution. We have the human resources and natural resources. By utilizing these two in a manageable and good way we can rule and control the economies of the world.”

I hope the optimism is justified. All of the entrepreneurial Middle Eastern expats I know, long for the day they can return and bring their visions back to their homeland. However, until some of the cultural attitudes of the Arab world begin to change, and governments start to relax their authority, I suspect we will continue to see an exodus of young entrepreneurs to nations that are more welcoming, more supportive and more free. 

 

 

 

 

About Hamzeh Al Fuqha

Hamzeh Al Fuqha is a serial entrepreneur, inventor and angel investor. He founded Next Presentations and co-founded SmartAd. Hamzeh is a frequent speaker at industry seminars and guest lecturer at the American University of Sharjah on entrepreneurship and leadership. He has received several awards and won numerous national public speaking and debating competitions. Hamzeh has trained various public figures and high-level managers on executive communication skills and speech delivery techniques.

 

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