Time For The Middle East To Invest In Youth And Innovation

I am a big fan of Chappatte, the Lebanese-Swiss cartoonist who often draws for the New York Times. I find a lot of wisdom in his drawings. When I saw this recent comic above, I thought it illustrated a moonshot opportunity for the Middle East. Current oil prices have put all Arab countries on an equal footing: whether oil producing or not, they are “oil-poor” given current oil prices. The moonshot opportunity is to reach 30% of GDP coming from the digital economy in any Arab country within 10 years. Leaders in these countries should start this process today by priding themselves on being “youth-rich” and investing in sectors that employ their predominantly young and growing population.

 

The digital clock is ticking. Its pace is exponential. The Internet has reached a scale and level of impact that no business, industry, or government can ignore, and its playground has shifted to emerging markets: almost 70% of Internet users are in emerging markets, compared to only 30% 10 years ago. Like any technological phenomenon, with its scale and speed the Internet presents huge opportunities, which Arab consumers have been quick and enthusiastic to grasp. For instance, the Arab world has the highest video consumption per capita in the world on YouTube and Facebook FB -0.12%, twice the world average. Smartphone penetration is one of the highest in the world and adoption of social media platforms, from Twitter TWTR -2.02% to Snapchat to Facebook and Instagram, is rocket high. With 70% of the population under age 30, the Arabs are a hyper social and hyper digital population. What a great opportunity!

 

Yet Arab governments and investors seem to have missed that point. Their spending on the digital economy is close to zero: The digital economy’s share of the combined GDP of Arab countries as of 2015 is a mere low single digit, compared to 33% in the US and 11% in China. As a venture capitalist in the Arab region, I find that it is frustrating to watch the slow pace at which Arab governments and Arab private investors alike are reacting to this phenomenon with oil, real estate and conventional sectors still monopolizing their investments, spending and conversations.

 

If we are to develop digital and technology sectors in the Arab region, the first step is to invest in such sectors. Below is a table comparing major countries in their venture capital investments as a percentage of GDP in 2014.

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