Can the region be home to the new Silicon Valley?
The bureaucracy that exists in the region is one of the root causes of resource brain drain
The Middle East has the resource and potential to become home to the new Silicon Valley – what is getting in the way is not investors, entrepreneurs, or the lack of ambition, rather the legal pitfalls that threaten young people in the early stages of transforming their ideas into businesses. The region is home to several start-up incubator hubs that offer co-working pace, but before entrepreneurs can find a desk, they must go through a series of difficult legalities.
Start-up communities require driven, qualified, and capable individuals – the personnel resource exists, but the bureaucracy that exists in the region is one of the root causes of resource brain drain. After all, the godfather of Apple’s hit iPod, Tony Fadell, is Lebanese.
There have been success stories like Bayt.com and 6alabat, a job-hunting site and an on-line food-delivery website respectively, but there are still plenty of low-cost opportunities and efficiencies that the region can offer to ease the process and drive economic and social development.
Freelancing and finding office space is as difficult as drawing water from a stone
In the early stages of formulating a business, one might decide to freelance or operate the business from their home until they can afford office space – both of these methods are illegal in numerous countries, including Kuwait. This means that adequate capital must be raised before a start-up is even born.
The “Facebook” method that saw Mark Zuckerburg start his world leading site from his college dorm room would be completely illegal if it was attempted in the Middle East. The laws that restrict the location of business operation must be relaxed in order to advance the start-up community.
In countries where bankruptcy laws don’t exist, as was the case in Egypt until January 2017, this means that entrepreneurs are legally responsible and can face jail time if their ideas do not flourish to the extent that they expectedYara al-Wazir
Start-up failure should not lead to jail time or expulsion
One of the key issues that affect entrepreneurs and investors is the ambiguity related to bankruptcy laws. While Egypt passed a bankruptcy law earlier this month, it has been highlighted by the World Bank that the legal proceedings related to insolvency take an average of 3.5 years, compared to just three months in Ireland.
For countries where bankruptcy laws exist, this means that the company and personal assets of entrepreneurs can be tied up for years, making it unnecessarily difficult to start an alternative business, or put off the idea altogether in the first place. In countries where bankruptcy laws don’t exist, as was the case in Egypt until January 2017, this means that entrepreneurs are legally responsible and can face jail time if their ideas do not flourish to the extent that they expected.
This exponentially increases the risk factor: entrepreneurs are no longer investing their time, assets, but they are also literally putting their legal status and life on the line as they are risking time behind bars if things don’t go the way they planned. This goes against the basic business fundamental principle that with investment there is risk, and sometimes investors will lose their money.
The right to own a business shouldn’t come with
While Lebanon may be the birth country of many successful entrepreneurs, there is no denying that the excruciatingly slow Internet services and patchy electricity make it difficult to run a start-up, especially if it is based on-line. Wanting to immigrate to neighboring countries with established infrastructure that supports start-ups, like Kuwait, can be difficult as there is simply no legal ‘self-employed’ residency option offered to expats.
While it is understandable that governments may do this to advance their own people rather than expats, what the social structure must recognize is that some of the greatest businesses, operations, roads and transport systems were in fact built on the backs of expatriates. These are the very same expats who then go on to invest their earnings in the country that they live in, and their startups provide opportunities for the local population.
There must be greater legal transparency and ease for entrepreneurs who wish to set up their own start-ups, regardless of the location. The registration process for people who wish to be ‘self-employed’ must become more attainable and transparent. If governments are really worried about the impact foreign startups would have on their local population, they are free to introduce taxation laws.
Start-ups: a posh golf club
The legality of startups in the region has made startups the equivalent of a posh golf club, available by invitation only. The club welcomes people who have great ideas, but also the financial backing that allows them to register their business in a safe location, gather investors to share the responsibility, and have the legal residency status to operate. This gentrifies those who are less fortunate or able to support their ideas financially.
The year 2016 brought great achievements to the start-up community in the region with investments of over $1billion to start-ups based in the region, including Careem, Souq.com, and various other start-ups, according to the MENA Private Equity Association. The progress has been great, especially considering the political turmoil and difficulties faced by young people in the region.
However, legislators have the power to inspire even more young people to tap into their skills and provide society with tools to make life easier, all the while easing pressure on the economy. Simple steps to relax the legal status and risks associated with being an entrepreneur in the region are required to ensure that the Middle East becomes the new Silicon Valley.
Yara al Wazir is a humanitarian activist. She is the founder of The Green Initiative ME and a developing partner of Sharek Stories. She can be followed and contacted on twitter @YaraWazir.