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This industry will revolutionize the Middle East


Commentary: Give tech entrepreneurs in the Arab world money and time

I know a country whose June exports jumped 21% from a year earlier.

That same country is rapidly adopting technology, and the Internet contributes as much as a percentage point to its GDP. A nascent but vibrant start-up and venture-capital community is emerging, supported by the likes of Google GOOG -1.00%  , Intel INTC +0.53%  , Microsoft MSFT -0.71%  , Facebook FB -0.42%  , Twitter, LinkedIn LNKD -1.75%  and other global tech titans.

I like this country’s demographics. It has the largest population of Internet and mobile users in its region, with one of the largest youth populations in the world. It’s a large consumer market in the early days of e-commerce, and one day it will be a global tourist destination.

Such a country might be an interesting place to invest.

Welcome to Egypt.

In a time of great uncertainty, dramatically demonstrated in Wednesday’s crackdown on sit-ins by supporters of ousted president Mohammed Morsi, something dynamic is clearly going on in Egypt and elsewhere in the Arab world. Why have we been loath to embrace these emerging markets but not others? No question: Political and social turbulence keeps investors from focusing on positive economic trends in Egypt and across the Middle East.

Egyptian security forces move in Wednesday to disperse a protest camp set up by supporters of ousted president Mohammed Morsi and members of the Muslim Brotherhood.
But the Arab world is home to more than 350 million people, making the region almost twice the size of Brazil. The aggregate GDP is larger than Russia’s and India’s, and per capita GDP is nearly twice China’s. Disposable income has grown 50% over the past three years, surpassing $1 trillion in 2012. For more than a decade, Egypt, Turkey and Saudi Arabia have consistently ranked in the top 10 growth markets in terms of potential.

That such growth fuels clear needs in places like the construction, retail and health-care industries alone is certain. One leading investor has told me that there is demand for more than a million houses to be built in Saudi Arabia over the next three years; credit- and debit-card penetration is rising exponentially from a small base in the larger regional economies; hospital beds will double in the Gulf countries over the next 15 years.

But what excites me the most is how technology is changing the game. In many Gulf countries, better than 50% of the population has smart phones — real supercomputing capacity on their person, allowing them unprecedented access to goods, services and each other. The demographic shifts, connections and desires of the new generation are unleashing an entirely new era of entrepreneurship in the Middle East.

An extensive study by Booz & Co. and Google last fall — “The Arab Digital Generation” — is breathtaking. Focused on 3,000 digital users in nine countries, all born after 1997, the findings suggest that the Arab world’s Internet appetite has been moving at a clip rivaling that of any other region in the world.

While the Middle East lags other regions in Internet penetration, the number of Internet users in Arab countries has been growing faster (23% annually versus a global 14%), and the total is expected to exceed 140 million next year.

Those who are online tell a remarkable story of change over the past five years, with clear ramifications for the future. Eighty-three percent use the Internet daily, and half of those for at least five hours a day. Notably, 78% said they prefer the Internet to television, and 44% say they spend less time meeting friends face-to-face than online or on their mobile devices.

More than half want to pursue their own ambitions in both education and career. The region has a tradition of entrepreneurship thousands of years old, and today more college and graduate students and trained engineers are turning to start-ups and medium-sized ventures than ever before. No surprise, then, that 40% say they would like to start their own businesses.

These young people want what entrepreneurs need everywhere: capital, business-development opportunities, mentorship. And they need time. The Middle East is a bet for the medium and long terms. But so were India and Brazil a decade ago.

Emerging-growth markets are not for the faint of heart, but greater access to technology leads to a larger middle-class population. This transformation brings uncertainty, but it also brings opportunity.

Christopher Schroeder is a U.S.-based Internet entrepreneur and venture investor. His new book, “Startup Rising: The Entrepreneurial Revolution Remaking the Middle East,” is the first to document the rise of tech startups in the Arab world. Follow him on Twitter at @cmschroed. 

Originally posted on Marketwatch on August 14, 2013.

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