The Middle East business trap: From buying brands to creating them

Dubai will soon add another “biggest” and “largest” and “world-record” to its growing list when the global consumer technology giant Apple launches a new mega-store in the Mall of the Emirates. According to news reports, the store will surpass London’s Covent Garden location as the largest Apple store in the world.

Apple’s executives see what other retailers see in Dubai: a powerhouse retail hub with one of the most diverse and robust tourism bases in the world and a local and expat population with considerable buying power for consumer goods. According to the 2014 Mastercard Global Destination Cities Index, Dubai attracts more international visitors than New York. Only four cities attract more international visitors than Dubai: Singapore, Paris, Bangkok, and London.

When the mega Apple store opens in the mega Mall of the Emirates perhaps sometime in the fall, it will surely elicit glowing headlines in the local media. It’s a noteworthy moment, no doubt, a reflection of the rise of emerging markets middle classes and the stunningly fast adoption of mobile technology across these markets. Still, this is not a new story – big global brand comes to the Middle East, and makes even more money, while enriching their agents. That’s a movie we’ve seen before, many times over.

Indeed, one of the historic ways to generate wealth in the modern Middle East has been to become an agent of a global brand – be it Toyota or BMW cars, Caterpillar or John Deere tractors, or Coca-Cola or Pepsi – and watch the money flow. The other two traditional ways of generating wealth have been access to government contracts, or the accumulation of real estate assets. This triple-A triumvirate of agenting, access, and assets has built many a family empire in the region.

It’s time for the region to move from this triple-A to the two big B’s: Building sustainable companies and then Branding them for global growth. Consider Apple for a moment. The market capitalization of the California-based company is about $750 billion. To put it another way, Apple’s market cap is larger than the economies of Morocco, Lebanon, Oman, Sudan, Syria, Tunisia, Yemen, Jordan, and Bahrain – combined.

Thus far, the Middle East/North Africa region, for the most part, have been global brand buyers, not global brand creators. There have been some notable exceptions to this rule: the rise of Emirates, Etihad, and Qatar Airways has disrupted the global aviation industry, and jolted U.S. carriers into a defensive crouch of protectionism and sparked a commercial air war as those carriers fly across U.S. cities, while winning plaudits for exceptional service.

One of the region’s most successful technology companies, Maktoob, should be lauded for building a viable, profitable, and commercially sustainable business in the frontier days of the internet. Its founder, Samih Toukan, is the ideal entrepreneur: a success story who gives back to his industry in numerous ways, cultivating the next Maktoobs. But the reality is that what made Maktoob truly famous is the fact that the company was bought in 2008 by Yahoo!. It wasn’t just the high ticket price ($175 million), but the fact that a regional company was endorsed by a major U.S. technology brand.

A world of viral growth

In the world of brands, the U.S. – and the Western world -- still dominates. In the most recent Financial Times Global Brands report, there not a single Middle East/North Africa company made the top 100 list, though several Chinese companies cracked it, notably Tencent, Alibaba, and China Mobile in the top 15.

We are living in a world of viral growth if a product or innovation hits the sweet spot. That’s the good news. Just ask the Egyptian designers of Weather HD, now known as Clear Day, one of the world’s most successful weather apps.

Christopher Schroeder, author of the extraordinary work Startup Rising: the Entrepreneurial Revolution Remaking the Middle East, famously quoted Fadi Ghandour, another hero of Arab entrepreneurship who has both built an extraordinary company (Aramex) and gives back to the entrepreneur community through investment and advice, as saying: “there is no wasta on the internet.”

We are living in a world of viral growth if a product or innovation hits the sweet spot

Afshin Molavi

Yes, the corrosive concept of wasta that prizes connections above merit is not a feature of the technology space, but let me add an addendum to Ghandour’s note: there is no origin or race or geography when it comes to building technology companies either. Amid the region’s heightened sectarian and ethnic and national divides, this is a comforting thought.

Good ideas know no geographic borders

In a world where collaboration and cutting edge knowledge has become a few clicks away, it does not matter if your garage is in Silicon Valley or Alexandria, Egypt. Good ideas know no geographic borders. Still, what’ missing across the Middle East and North Africa region is the risk capital ecosystem that allows the best Silicon Valley companies to grow through funding and mentorship – and scale to global levels.

The Middle East region is on the cusp of a significant start-up growth spurt. Just spend some time on the Wamda web site, and you’ll see a region of entrepreneurs and dreamers building companies, innovating, creating. Or, if you are in Berlin in early June, check out the iBridges conference, the largest gathering of Iranian start-ups and tech entrepreneurs in the world, and you will see a different Iran from the news headlines. Or just visit Saudi Arabia, as I did last month, and watch a nation of young people that is among the most wired to social media in the world, some of whom are actively engaged in the incubator and start-up community.

Entrepreneurship has become a fashionable topic in regional forums, but it’s more than just fashionable. Entrepreneurs are vital to the region’s future. As entrepreneurs build the next big brands and companies, they will play a role in alleviating the jobs crunch the region will face over the next decade.

And just maybe, one day, not far in the future, a U.S. newspaper will offer a headline about a Middle East-based global brand that has decided to open a store in a U.S. mall amid much fanfare. That’s a news story I’d like to see.

 

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Afshin Molavi is a senior fellow and director of the Global Emerging and Growth Markets Initiative at the Foreign Policy Institute of the Johns Hopkins University School of Advanced International Studies (SAIS) and a senior research fellow at the New America Foundation, a Washington DC-based think tank.

 

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Last Update: Wednesday, 20 May 2020 KSA 09:47 - GMT 06:47
Disclaimer: Views expressed by writers in this section are their own and do not reflect Al Arabiya English's point-of-view.
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