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Milken Institute | Newsroom | Currency of Ideas - Entrepreneurship considered the new Arab Spring Currency of Ideas: Entrepreneurship considered the new Arab Spring
May 02, 2012 at 02:26 PM
Entrepreneurship considered the new Arab Spring
  Israel Middle East
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Milken Institute
The Arab youth whose digital skills helped to ignite and mobilize massive protests that upended governments are the same people who can help transform the Middle East into a region of innovative start-ups and entrepreneurs, Arab and Israeli panelists said.

"The Arab Spring created an interesting opportunity," said Abdul Malek Al Jaber, founder of MENAapps, a company that pairs talent with investors to create digital startups. "For the first time, the youth feel they have power."

Newly formed governments in the Middle East and North Africa are still grappling with what shape their new government will take, but panelists said their economies and their unemployed don't have the luxury of waiting around for things to be sorted out.

"They are becoming entrepreneurs in the middle of a revolution," said Mohamed Seif-Elnasr, CEO of Safanad. "We've been very encouraged by what we see." The "youth bulge" accompanied by high unemployment in this group has been a perennial problem for the region. The Arab world's median age is 22 compared to nearly 40 in Western Europe. And about a third of the population in the Middle East and North Africa ages 15-29 are unemployed.

Now, some of those same rebel youths are looking for business prospects. But they are finding competition from unexpected corners.

Zika Abzuk, senior manager for corporate affairs for Cisco Systems in Israel, fretted over the fact that Israel, a technological hub in the region, was outsourcing research and development work to India. Meanwhile, knowledgeable and jobless Palestinians who could do the work are right next door.

Abzuk marshaled the necessary Israeli documents to meet with entrepreneurs in the Palestinian territories. She promptly ran up against a common experience: a closed checkpoint. An Israeli soldier told her there was a nearby gas station that was considered a no man's land. That's where she and the Palestinians held their first business meeting.

She started out connecting about 20 computer engineers with three companies. Cisco now employs 20 engineers. She approached Intel, Microsoft and USAID. About 300 Palestinian engineers are working for international companies.

Chemi Peres, co-founder of Pitango Venture Capital, said early on Israel realized that with no natural resources, it needed to become an "empire of the mind." There are currently 5,000 startups in the country, and about 10 percent of the workforce is employed in science and technology.

Peres said the Middle East is at a pivotal point in history: It is the last region of the world that has not gone through a major economic transformation. If it misses this opportunity, he said, it will be held back for centuries.

He sees a second Arab Spring coming. One that will be entrepreneurial and fueled by venture capitalists in the region and abroad. Israel has launched a program called TIME (Turkey, Israel and the Middle East) whose goal is to make Israel more interconnected in the region, in large part through training Israeli Arabs to do the outreach.

Arabic is the fastest-growing language even though there are only 250 websites. He said demand for Arabic content is huge. Because of the low cost to entry, he said, investors stand to make a much greater return on investment than, say, in Spain, where unemployment is about 25 percent but costs are dramatically higher.

Al Jaber has a more modest and grass-roots approach: No government-backed programs, and few deep pockets investors. His model runs on the audacity of a brilliant idea and minimal investment. He calls this movement, The Arab Renewal. "The name Arab Spring is already taken," he noted wryly.

He is doing this in collaboration with local cafes. That's right, cafes. The winners get two or three tables at a cafe where they will get free tea and sweets to give their clients. To the Westerner, that might seem odd. But to those techies in the Middle East, that's where much of their work gets done.

"We have been meeting with startups," he said. "There is no doubt about the intelligence and innovation. The skill set is there."

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