Why the Middle East is fertile ground for business

What do you do when your business becomes over-dependent on one client, one sector? You diversify. And right now, leaders of the six Gulf Cooperation Council (GCC) states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, reckon that countries should take the same approach.

The GCC countries are planning for what happens when oil and gas run out. Their aim is simple: to get people back into business activities that are important to a vibrant and diverse economy, such as retail, fashion, fast food (with a cultural dimension) and high-tech sectors.

Private sector activity is growing across all GCC economies: Dubai is counting on its successful bid to host the World Expo 2020 to stimulate growth in the UAE’s non-oil sector, including increased spending on construction, tourism and hospitality; the same sectors are also booming in Qatar, where growth in the non-oil sector is predicted to increase by more than 10 per cent in 2014, generated by major infrastructure projects like the Doha Metro and Hamad International Airport; and the Saudi economy, the GCC’s largest, continues to diversify too – non-oil sector growth is strong and is forecast to average 4.7 per cent in 2014-2017.

The result is a very active enthusiasm to encourage entrepreneurship. The internal infrastructure has been addressed, the education system has improved significantly and the cultural landscape broadened. This can be used as a springboard to encourage innovation and entrepreneurialism. New enterprises have the potential to grow and produce economies that are more balanced, more mixed and have a wider range of industry sectors.

Among the most interesting entrepreneurs I have worked with in the past couple of years, for example, are two brothers who have set up the first automotive manufacturing business in the Gulf region, called the Gulf Automobils Industry Corporation. They make a 1.5 tonne pick-up truck and they are designing their own car. The volumes are relatively small at the moment but it is the first automobile manufacturing facility where the cars and the trucks are mainly designed and built locally. The business is owned locally and they’ve decided to set up and build their own trucks.

And the changes are happening rapidly. It was only five years ago that a survey of young Arabs aged 15 to 29 in the Gulf region found that they viewed government regulations as an obstacle to business creation. But growing calls for entrepreneurial freedom have produced an increased willingness among policy makers to support private sector expansion; governments become more pro-active in encouraging the launch of small businesses.

Qatar is a good example of this. The Qatar Business Incubation Center was established in March as a joint venture between the Qatar Development Bank and the Social Development Center, part of the Qatar Foundation. Its aim is to become “the largest mixed business incubator in the Middle East”. And in April, the UAE announced that 10 per cent of government tenders had to be awarded to SMEs. This will make it easier for qualified entrepreneurs to gain access to the public sector market.

Entrepreneurialism, however, requires funding. In the Middle East particularly, friends and family have always been a common source. But increasingly there are others, such as angel money or government seed funds, along the lines of the Khalifa Fund in the Emirates, a source of help for early stage ventures.

Nonetheless, the reality is that many new business ventures are plagued by a high failure rate, often the result of insufficient training, mentoring and support for the management team. Fostering a successful team is all-important. But in my experience with students in the UAE, I’ve found a culture where men like to work in groups with other men, while women entrepreneurs are often uncomfortable with men in their teams. Evidence suggests that female entrepreneurship rates in the GCC lag behind those for men, and their focus is often on the fashion industry. I would encourage them to think more widely, but I also think it would be a good thing if businesses could find ways to have mixed teams in the future, to broaden their ability to access the relevant skills. I know they would get better results.

The environment in the Middle East is changing, and opportunities are there. I’d encourage would-be entrepreneurs to take the plunge, and not just sit thinking about it. Understand what your customers really want and need, stay focused, and the rewards could come your way.

Peter Hiscocks was part of the panel discussing ‘corporate governance and business policy: spurring greater private-sector impact in the Middle East’, at the Middle East Leadership Research Centre launch event in Sharjah, 14 May 2014.