While COVID-19 pandemic inflicts a painful blow to world economies, GCC governments and businesses operating in the region have a unique opportunity. A chance to nurture a world-class of startups that can grow from the region and become global quickly.
In the last couple of weeks, many experts have spoken about the new norms that will evolve in business. Our logistics must adopt to stricter rules, businesses must automate and digitize, and international collaboration will expand requiring a range of new services that are yet to be developed. Many emphasized how digitization and automation have moved from a corporate initiative to an “urgent” objective on fast-track. A business that will start in these times will have to be automated, digitized, efficient and agile. A startup with these features and with the right funding and incentives have a good chance of growing fast and competing in a global-scale.
What about the timing?
Startups in the next 12 to 24 months will -inevitably- be automated and digitized and will deploy less people. They will be designed for future from day one. They will be built with a culture of efficiency and agility. Something that was not easy to develop with the low-labor-cost. With the right funding, new ideas and startups can be taken through their first few phases (seed, startup, proof of concept) while world economies are still recovering. By the time the startup matures, world economies will have recovered and become potential markets.
GCC human capital
GCC population is among the lowest in median age forming a society of youth. Median age in Saudi Arabia is at 32 years according to gapminder.org. Internet usage is among the highest. More than 80% in KSA and more than 90% in UAE according to the same source. In addition to that and for more than a decade now, scholarship programs sent hundreds of thousands of students abroad for advanced education. Similar programs were carried out by all GCC governments ultimately making GCC population young, connected, highly educated and technologically savvy.
Government & Funding
GCC Governments enjoy high reserves, low dept to GDP ratios and a strong drive (need) for diversification. In fact, the need for diversification resulted into a bundle of infrastructural reforms that enhanced the business climate. In last couple of years, Saudi Arabia have moved up in the world bank “ease-of-doing-business” ranking. So did UAE, Oman, and Bahrain (global ranking: UAE 16, Bahrain 43, Saudi 62). In the present crisis, aid packages were announced to help businesses cope with the hardships. In Saudi Arabia, several packages were launched aiming to minimize job loss, protect SME’s and shore up businesses. Other GCC governments did the same -more or less-.
The combination of the timing, the technologically savvy population, and government drive formulate a fertile environment for startups that can grow fast and target regional and global markets. And while economies globally grapple with the implications of the pandemic, GCC startups can grow and fill the vacuum created by the shift in market needs.
How to Seize the Opportunity?
In order to seize the opportunity, GCC governments and corporations must allocate a portion of their mitigation budgets (or aid packages) to support new projects, whether these are in the seed phase or they are ready to commence. The attention should be broad enough to encourage the localization of knowledge-based businesses. This could be manufacturing or services. Policies governing the process must focus on the objective that businesses will utilize automation techniques and will deploy technology to minimize workforce. Expats and foreign entrepreneurs should be welcomed and encouraged to set up their initiatives and have access to support (i.e. finance and so on). Ultimately, localizing creativity will generate much more value to the surroundings.
There are various vehicles for GCC governments to channel finance & support to the startups sector. These include providing backing to bank loans, utilizing government investment arms, and providing incentives to Venture Capital funds and incubators. It is also important to couple incentives with appropriate KPI’s to encourage faster development/approval processes and ensure decent amount of local content. The success rate will probably be lower than usual, but that is a reasonable price considering the reward. The initiative should produce several startups that will take advantage of the vacuum created by the shifting business norms and grow globally.
The global shift of economic norms caused by COVID-19 spread is a once in a lifetime event. This shift can work well for GCC economies and inhabitants. All what it takes is upgrading the objective and being more ambitious. Instead of minimizing damage, maximize the gain. Instead of seeking remedy, seek a permanent upgrade. And as they say, “never waste a good crisis”.
* Any opinions expressed in this article are the author’s own
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© Opinion 2020