Recent decreases in oil prices have induced economic panic in many Middle Eastern countries formerly considered “oil-rich,” but this phenomenon has had the added effect of putting nearly the entire region on equal economic footing. Many countries have begun to channel their resources into other opportunities to diversify their income sources and avoid similar situations in the future. One of the biggest areas of focus is technological innovation. With its large base of young, engaged individuals, the region is currently well-situated to drive technological advancement. In addition, because youth employment rates remain at staggering levels, the Middle East needs to create nearly 20 million jobs for its under-25 population. The solution to both of these problems is to foster an environment that allows young people to invent their own jobs.
The Internet has empowered developing markets in ways that would have seemed impossible only a decade ago. Today, about 70 percent of Internet users are located in emerging markets. This number is more than double what it was 10 years ago. People in the Middle East have been particularly quick to adopt Internet technologies, as evidenced by the nearly ubiquitous nature of Internet-enabled cell phones. The young population in the Middle East grew up using these technologies and consumption has not slowed. For example, the Arab world has the largest per capita consumption of video on both YouTube and Facebook among all regions in the world. In fact, the rate in the Middle East is nearly twice the world average. Also, rates of social media usage are extraordinarily high, especially since 70 percent of the region’s population is under the age of 30.
Missed Opportunities for Middle Eastern Governments and Investors
With energies concentrated on the oil industry and other established industries, Middle Eastern governments and investors have largely ignored technology and entrepreneurship. Throughout the region, spending on the digital economy remains dismal despite the highly connected youth population and its potential for innovation. In the entire Middle East, the share of the digital economy GDP is a single digit, compared to 11 percent for China and 33 percent for the United States. As the venture capitalist ecosystem in the Middle East slowly grows, people are slowly staring to pay attention to entrepreneurship and technology, yet governments and private investors seem stuck on real estate, oil, and other conventional sectors.
Many people consider the United Arab Emirates and Saudi Arabia among the best countries for startups, yet their venture capitalists have invested very little money in the technology sector. In fact, the only Middle Eastern country with a decent investment in technology is Lebanon, according to data recently released through the World Economic Forum. Much of the investment money in countries like the United Arab Emirates, which is arguably the regional leader in entrepreneurship, comes not from local funds, but from international investors.
Technology appeals to more than 70 percent of the Middle East population, and young people are eager to put their minds to use. In the United States, the digital sector accounts for more than 40 percent of all employment. With an average youth unemployment rate of 30 percent in the Middle East, it seems obvious to expand the digital sector and create new jobs. This expansion begins with entrepreneurship and giving people the money they need to make jobs for themselves.
Putting Faith in Middle Eastern Youth and Investing in the Future
Local investors are hesitant to invest in entrepreneurship and especially in youth because such a move represents a major risk. To diversify the economy and make technology a substantial part of the Middle East’s GDP, it is necessary to make a leap of faith and believe in the young generation’s potential to achieve great things. Now is an exciting time for entrepreneurship among Millennials in the Middle East, which a recent study showed had the largest proportion of millennial business owners of any region in the world. These young entrepreneurs are interested in making money, but they also have a passion for social entrepreneurship and using business to address some of the greatest challenges facing the region.
The opportunities for investment are endless with excellent ideas emerging on an almost daily basis. With a little searching, investors can quickly identify startups that they believe can succeed. Once local funds start investing in young entrepreneurs, more foreign investors will also begin paying attention, which will in turn create even more opportunity. Examples of incredible technological ideas are not hard to come by in the Middle East, from Uturn to Careem.
The move toward investing in startups will admittedly be a difficult one for many local investors. Investing in technology, in particular, has a pace and rule set that differs from other investments and may make many people uncomfortable. Public entities and large corporations are not the ideal investment vehicle for driving technological development. Instead, individuals should look into venture capital firms that specialize in seeking out talent and vetting new ideas. For many people in the Middle East, this is an entirely new approach to investment.