An Entrepreneur Spring or Winter for the Arab World?

Originally posted by Brandon Nickerson on the CIPE Development Blog

This fall, I had the opportunity to attend the U.S. Egypt Business Council Luncheon honoring Entrepreneurship Scholars from the MENA Region at the US Chamber of Commerce. It was incredible to witness the level of optimism shared by these young entrepreneurs, and to hear firsthand from them on their ideas to promote job growth and encourage entrepreneurialism in their respective countries.

As I and several of my colleagues interviewed these young entrepreneurs about their thoughts on entrepreneurship and the barriers faced by young entrepreneurs in their countries, it was evident that many of them will go on to do great things.

Whether you describe it as the “enabling environment for entrepreneurship” or the “entrepreneurship ecosystem,” job growth across the region will remain sluggish unless reforms are made to the barriers and challenges facing young entrepreneurs. Whether your business idea is contingent upon outside financing or an entrepreneurship support program, without significant reforms made to the areas that affect starting a business — property rights, access to finance, bankruptcy laws, market exit, corruption — no amount of optimism will deliver on the promise of opportunity and dignity for the average citizen.

Across the region, evidence of these unaddressed barriers to growth and entrepreneurship are everywhere, and are ingrained into the business sector. Summarized briefly in an article in The Economist, “Arab companies tend to come in two types—lumbering giants (which depend on state patronage) and rickety dwarfs (which lack the capital and talent they need to survive). The region manufactures only half as much per head as others at a comparable stage of development. However, it employs twice as many bureaucrats per head as the global average.”

New spending measures to satisfy domestic demand and increase stability are feasible in the near term, but without significant reforms made to the legal and regulatory environments that deter new hiring and foreign direct investment, “increasing public sector payrolls will only dissuade citizens from seeking to become entrepreneurs,” writes The New York  Times. For example, bankruptcy is still considered a criminal offense in several countries across the region, including Egypt.

One idea that has caught on, and is being replicated across the region, is entrepreneur groups. The Daily Star describes these groups in a recent article.” One such group, the Entrepreneurship Club, based in Beirut, allows young entrepreneurs the opportunity to exchange ideas, find investors, and build networks. Abdallah Absi, president of the Entrepreneurship Club – e-Club for short – began the initiative two years ago at the American University of Beirut with the aim of creating a network to connect aspiring businessmen and women with those who have more experience in the industry. I started the club to promote entrepreneurship. I found there was a gap between entrepreneurs and those who support them.”

Investors have begun to take notice. Within the last few years, venture capital firms have been increasingly focused on early and growth stage investing, something that funds have been hesitant to do in the past. With the help of entrepreneurial support companies, young entrepreneurs are able to write more effective business plans, which make them more attractive to incubators and other seed capital firms.

A comprehensive debate on the barriers to entrepreneurship is a discussion that all new parliamentarians should want to have with their constituents, especially during the week of Global Entrepreneurship Week. During the luncheon that I attended, students were asked by a speaker where they thought they would be in 20 years. One cleverly responded that he was going to become a successful businessman by merging Coca Cola and Pepsi. Optimistic is an understatement when used to describe the outlook of the millions of educated unemployed youth across the region. But what about the business and regulatory environments that await them when they return home to put their ideas to work?

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