Tag: Arab Spring

How the Arab Spring Creates Growth Potential for Islamic Finance

Posted on February 24, 2012

With Islamist parties dominating recent elections in Arab Spring countries, the Islamic finance industry will likely find opportunities to capture large volumes of new customers and emerging infrastructure projects, according to a report by global law firm Simmons & Simmons.

Intent on maintaining a secular financial system, regimes in Egypt, Tunisia and Libya were not supporters of Islamic finance, notes Tariq Hameed, a Dubai-based managing associate with the firm, and author of the report, “Blue Print for Islamic Finance following the Arab Spring.” But in elections that have seen Islamist parties come to power, such as the Muslim Brotherhood in Egypt, Shariah-compliant banking has been endorsed as part of a larger social and financial reform campaign. “All of the [Islamist] parties have gone on record saying they support Islamic finance,” Hameed says. “It reflects their beliefs.”

Hameed notes that at the consumer product level, there is huge potential for growth. Partly because many people in these countries do not have bank accounts — approximately 25% of Moroccans and 33% of Tunisians have bank accounts, and only 10% of Egyptians, according to his findings. “There was a lack of offerings,” he says. “Many didn’t engage with the conventional banking system.”

While expected customer growth would be in volume, Hameed notes that the majority of such accounts would likely be low-income savers. Compared to Arab Gulf countries, GDP per capita among the Arab Spring countries is low: Libya is the wealthiest, but GDP per capita is estimated at just $14,000. In addition to creating savings products, one opportunity could come from the further development in Islamic microfinance offerings, Hameed states. Currently there is very little being offered to grassroots Muslim entrepreneurs, he says, but institutions will have to respond to demand from rural communities and micro-enterprises. The state can act as sponsor of such an initiative, he suggests.

Separately, Islamic finance may become an option for these governments as they seek foreign investment. According to Reuters, a number of Islamic financial institutions are opening branches in Libya, for instance, as it explores the industry. Successful Islamic financing of infrastructure projects already exist in Bahrain, Saudi Arabia and Bangladesh, Hameed says, so there are models states can study for implementation.

There remain challenges for the Islamic finance industry before they can reap the potential of these markets, Hameed adds. There are several issues that need to be addressed to ensure growth, his report notes, including the strengthening of consumer protection laws, clarifying governance, and establishing central Shariah boards for finance.

For Western financial firms and businesses seeking to be in the region, they will have to have a capability to engage in Islamic finance, Hameed notes. “If the customer wants Islamic finance, competitors will provide it if they don’t,” he says.

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How Arab American Tech Entrepreneurs Can Help Arab Spring Countries

Posted on February 7, 2012

Arab-American technology entrepreneurs have a special role to play in helping Arab Spring nations find their way back to stability and development, according to David Hamod, CEO of the National U.S.-Arab Chamber of Commerce.

Addressing an audience at the Plug and Play Tech Center, a well-known Silicon Valley incubator run by Iranian-born Saeed Amidi, Hamod said such members of the Arab Diaspora could provide the experience and skills needed to jump-start innovation in Arab economies. “For the Arab world to make the transition from hydrocarbon-based economies to knowledge-based economies, the next big thing, in a sense, is innovation,” Hamod noted. “Innovation, hand-in-hand with entrepreneurship, will create those productive jobs that are so vital to growth in the Arab world.

“There is a special role to be played in this process by Diaspora Arabs, who have made it in Silicon Valley, who have learned the lessons of Silicon Valley and who are uniquely situated to share those lessons with the Arab world,” he added.

Hamod spoke at a global forum examining ways to harness the economic potential of the Middle East and North Africa (MENA) region in the aftermath of the Arab Spring revolution. At a time of uncertainty as well as promise, Arab-Americans are looking inward to discover their role in helping usher in democracy and economic stability in their traditional homelands. He told forum attendees that technology alone is only part of the equation. “If the Arab Spring at its heart is about dignity, respect, having a voice, reducing economic disparities and being able to put bread on the table for one’s family, then there’s no time to lose in promoting innovation through entrepreneurial ecosystems,” he said.

Throughout the day, some of Silicon Valley’s leading Arab-American technologists reiterated Hamod’s applause-inducing speech by creating an atmosphere that resembled a high school pep rally. There were discussions about cultivating the start-up ecosystem in the Gulf region and perhaps most important, getting access to venture capital. It is that final hurdle that deserves a watchful eye in the coming months as the grassroots revolutions turn to the formation of new governance, observers said. Political resolution might encourage the citizenry to return its attention to the daily duty of work. Hamod predicted that there will be no return to the status quo, but where that leads the region is anyone’s guess.

The forum was held on Martin Luther King Jr. Day, and Hamod found a parallel between King’s fight for freedom in the 1960s and the protests in the Arab world that have broken the stranglehold of entrenched regimes. He quoted from a portion of King’s famous 1957 speech delivered at the Prayer Pilgrimage for Freedom in Washington D.C.: “Sometimes it gets hard, but it is always difficult to get out of Egypt. The Red Sea always stands before you in discouraging dimensions. And even after you cross the Red Sea, you have to move through a wilderness with prodigious hilltops of evil, gigantic mountains of opposition. But I say to you, keep moving. Let nothing slow you up. Move on with dignity and honor and respectability.”

King’s speech was meant for an African-American constituency. But it sounds less ethereal to modern Arabs, especially those who risked their lives in Tahrir Square protests one year ago, and for those who continue to grapple with how to move forward after creating unprecedented change.

See also:

From Iran to Silicon Valley, a Serial Entrepreneur Leaves His Mark

Aramex’s Fadi Ghandour: Unrest Demonstrates Why It Is Important for Arab Entrepreneurs to Build New Ventures

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Five Ways to Ride the Wireless Wave

Posted on October 14, 2011

Armed with powerful mobile devices, consumers and employees have become the force behind a wireless wave of change. Whether they are seeking discounted prices or looking to coordinate a sales campaign, these mobile end-users are growing impatient with companies that are still trying to control behavior and the sharing of information. Enterprises that fail to learn how to give up some of that control and innovate to meet the evolving needs of their constituents could soon find themselves in the back of the pack. There are five ways to ride this Wireless Wave, according to Todd Hewlin, managing director of TCG Advisors, a boutique consulting firm in Silicon Valley, and Scott Snyder, a senior fellow at Wharton, author of The New World of Wireless: How to Compete in the 4G Revolution and president and chief strategy officer of Mobiquity, a mobile strategy and applications development firm.

In their opinion piece published in Knowledge@Wharton, Hewlin and Snyder point out that the mobile phone was one of the key weapons of battle during the Arab Spring. “Fueled by the rapid proliferation of the mobile and social web, the Arab Spring demonstrates the collective power of technology-enabled citizens,” they write. “While the events of the Arab Spring are still making headlines, another less-publicized technology-enabled revolution is unfolding that also pits connected masses of people against large organizations trying to control them. This revolution is occurring in the business world, and the end-users who are rising up are consumers and employees. These end-users, equipped with powerful mobile devices, are enabling a new wave of disruptive innovation that is transforming the companies they buy from and work for.”

Hewlin and Snyder argue that if you “do not give your customers a way to easily compare and search for discounts on your products, they will use Red Laser or Amazon Price Check. If you do not give your sales team better ways to share knowledge and coordinate efforts, they will useFacebookor Flipboard. Fail to give patients a better way to manage their chronic disease, and they will use Welldoc or Patientslikeme. Mobile technology is creating both an expectation and impatience in users that never existed before. Immediacy is not just desirable; it’s fundamental to the mobile experience. If you fail to deliver on that expectation, impatience will grow – and you will risk losing the business of customers and the loyalty of employees.”   

They quote former Procter & Gamble CEO A. G. Lafley, who once said: “We have to strike the right balance between being in touch and being in control. The irony is the more in control we are, the more out of touch we become.”

To read the complete article, including a description of the five ways that companies can ride the wireless wave, go to: http://knowledge.wharton.upenn.edu/article.cfm?articleid=2860

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Wharton’s Stuart Diamond: Arab Spring Has Provided Little Value for People

Posted on August 16, 2011

When protestors first took to the streets across the Middle East earlier this year, the world watched as thousands of Arabs demanded an end to governments that were corrupt and self serving. Dubbed the “Arab Spring,” it was a movement propelled by technology and imbued with optimism for change toward a more equitable economy.

After the initial blush with relatively peaceful demonstrations in Tunisia and Egypt, the social revolution has led to strife rather than reform, as Yemen, Bahrain and Egypt have all witnessed bloody protests, while Syria and Libya have been plunged into all-out civil war. Much of the violent turn of events, according to Wharton legal studies and business ethics professor Stuart Diamond, is the result of dashed expectations.

“Entrepreneurs know that the idea is just the start; without building out an enterprise, no value is created,” Diamond, who teaches negotiation courses at Wharton and is the author of “Getting More: How to Negotiate to Achieve Your Goals in the Real World,” told Arabic Knowledge@Wharton. “This is the problem with the Arab Spring. Now that many [people] have more power, they actually have to do the hard work to build out a different sort of economy.”

Another failing of the movement is the emphasis on past grievances: Putting Egypt’s former president Hosni Mubarak on trial, Diamond noted, is the wrong way to start rebuilding Egypt. “Negotiate with him on what he and others in his circle will provide,” he suggested. “Leave them with something to get them to agree. Now that would better help in building a new Egypt than the trial of a sick old man.”

For those challenging leadership, such as protestors in Syria, the best thing would be to avoid confrontation, he added. “If Syrian protestors stop the violence, all the negative focus will be on the existing government, which will not be able to withstand the continuing criticism. The goal of the protestors now should be to document everything and keep telling the world.”

According to Diamond, the situation in Libya “is perhaps the best example today of the stupidity of not negotiating.… Libya will never be able to provide a better life for its citizens until the war stops. And the quickest way to do that is negotiate with Qaddafi.”

Read the full interview with Diamond on Arabic Knowledge@Wharton.

Previously:  Stuart Diamond on Middle East Reform: Organize, Start Small, Replicate and Negotiate

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Post-Arab Spring, Confidence in Middle East Business Climate Remains Steady

Posted on July 13, 2011

Despite the tumult witnessed across the Middle East and North Africa in the wake of the Arab Spring, senior executives in the Gulf’s leading economies remain confident in the region’s business climate, according to a new survey conducted by management consultants Oliver Wyman and polling firm Zogby International.

A survey of more than 160 senior executives in the United Arab Emirates (UAE), Saudi Arabia and Qatar found that opinions were mixed about the Arab Spring’s short-term and long-term impact on economic development. Just 35% of respondents took a negative view, and most were expatriate Arabs in the Gulf.

“People still are focused on macroeconomic shocks rather than regional issues,” says John Turner, who leads Oliver Wyman’s public sector consulting practice in the region. “The Gulf, particularly the UAE, was harshly impacted by the global financial crisis, and that is still lingering.”

But Turner notes the research reflects “a sizable increase,” in concerns about regional, ethnic and religious tensions. This is the fourth survey of regional executives conducted by the firms, and compared to the last poll in December, there was a 19% rise of tension concerns in Saudi Arabia, which has taken a leadership role to forcefully contain any unrest in the region, and a 7% increase in the UAE, despite the absence of social or economic disruption associated with the Arab Spring there.

Also, the widely mentioned contributing factors to the Arab Spring — the need for education and labor reform to address the region’s youth unemployment — were considered the biggest threats to the region’s long-term competitiveness, and deemed the highest priorities for quick action, according to the survey. “Human capital is at the top of the list for executives in the region,” Turner says.

He adds that the challenge of youth unemployment shifts by scale across the region — Egypt has a population of over 83 million, while the UAE has a population of only 5 million. But the traditional regional solution of providing government jobs to young Arabs has reached a limit, he says. Regional governments in recent weeks have taken more aggressive approaches to ensure spots for their nationals; in Abu Dhabi, several state-linked bodies have purged expatriates to make positions for Emiratis.

The solution lies with private industry, but that has been difficult to achieve, Turner notes. The survey highlights a key factor in this issue: expatriate executives in the Gulf prefer to hire other expatriates, rather than local Arab graduates. “They are more difficult to hire, and costly to train,” Turner says. “Also, most of these expatriate executives have a three- to five-year horizon. There is a mismatch of incentives.”

The survey also took note of the infrastructure spending spurred by the Arab Spring in oil-rich Gulf states — Saudi Arabia, for instance, announced US$130 billion of additional public spending in recent months.

“All those things, businesses like to see, so confidence rises,” Turner notes. But these measures largely aren’t geared to solving underlying issues, he adds. “In the short term, it boosts businesses and appeases discontent. But in the longer term, does it get rid of the fundamental problems, such as youth unemployment?”

Earlier:

Oliver Wyman CEO John Drzik: The Middle East Needs a Comprehensive Risk Management Strategy

Facebook’s Growth in the Arab World Is Surging with Demands for Political Change

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