SMEs in the Middle East and North Africa (MENA) contribute approximately $1 trillion to the region’s economy per year, accounting for 96% of registered companies and employing approximately half of the workforce. Unsurprisingly, these businesses are the backbone on MENA’s rapidly evolving economies and are being recognised as a priority among the region’s governments. However, SMEs face fundamental obstacles to their potential growth, namely stringent regulations and compliance procedures, but chiefly access to finance. Indeed, traditional lenders have typically shied away from smaller and less established businesses in the wake of the financial crisis, instead opting for the assurances of larger companies.
However, as the region’s SMEs grow in importance, opportunities for alternative finance providers are emerging to plug the finance gap. Traditional lenders, including banks, are having to adapt and are increasingly responding to these needs and leveraging technology to ensure SMEs can tap into their full potential.
SMEs emerging as a priority
As the region shifts its economic focus away from oil to economic models that enhance the role of the private sector, governments have recognised the importance of SMEs. The added value of jobs and economic growth offered by these businesses has meant that SME have become a priority. For example, Dubai’s Department of Finance has most recently announced a set of initiatives to boost the UAE’s fledgeling SMEs, which have grown by over 30% in the last decade. Among these initiatives, the government has committed to allocating 5% of the government capital projects to SMEs.
Financial crisis still resonates for banks
With SMEs therefore seen as a catalyst for economic growth, they still face major obstacles that stop them from reaching their potential. Following the financial crash in 2008, access to funding has been more limited in the region and indeed globally.
SMEs face a $260 billion credit gap in the region, with just one in five SMEs benefitting from traditional finance and accounting for only 7% of bank lending. But now, the attitude of lenders, such as banks, is having to catch up as these businesses take on their role as pivotal contributors to economic growth.
Various types of alternative finance emerging
As a result of the credit gap faced by SMEs, innovative alternative financing options have emerged, fuelled by the increasing digitalisation of businesses in the region. Funding models, such as Peer-2-Peer lending are seeing growth increase, from $4.5 million total market volume in 2014 to $32.5 million in 2016. Over the same period, equity-based crowdfunding has enjoyed growth from $62 million to $100.32 million.
However, there are indications that this growth is slowing, where the lack of regulatory clarity and flexibility is making the activity of alternative finance providers more complicated.
Opportunity for traditional lenders fuelled by technology
The lack of regulatory clarity for alternative finance providers has created an opportunity for traditional lenders, such as banks – an opportunity they are beginning to tap into. The increasingly sophisticated digitalisation of finance has also enabled traditional lenders to adopt these processes, allowing them to mitigate risk and broaden their offering, making bank lending more accessible to SMEs.
One example of this is the growth of established models such as asset based financing and factoring. As this form of finance has evolved, the emergence of new technologies has improved its appeal to banks, making a long-established model increasingly effective, efficient and ultimately more attractive. This has resulted in asset based financing growing by 7% in the Middle East in 2018 alone – not far behind the global figure of 9%.
The increased take-up of such technologies by banks means that they can now not only compete with alternative finance providers to provide modern financing to SMEs, but they can also partner with these providers to evolve their offering even further.
MENA is experiencing a period of exceptional growth for SMEs, but in order to realise the true potential of these businesses, we must place greater focus on access to funding. Only with better access to finance can these businesses unlock growth as they navigate supply chains, working capital gaps and encourage innovation. Well established lenders have in recent years shied away from such businesses, but as technology evolves and the popularity of alternative finance providers signal the changing demands of businesses, there is an opportunity for them to tap into this market once again. Banks that recognise the opportunity to seize digitalisation and work to learn from the innovation in alternative finance, will be the ones who are working hand in hand with the region’s governments to ensure that the businesses that form the backbone of their economies reach their full potential.
This year marks a decade since Yahoo acquired Maktoob, in a deal worth $164 million. It was the first time that a technology company based in the Middle East had attracted such significant interest from a giant of its day.
At the time, the deal paled in comparison to the acquisitions and mergers typical in the region, between telecoms operators, industry and real estate. But for the entrepreneurship ecosystem, it was a seminal moment, validating the region as a place for technology and startups.
Back when this happened, there were no venture capital (VC) funds, mobile and internet penetration was low, Apple’s iPhone was still out of reach for most people and unicorns were mythical creatures with the power of flight.
Maktoob was founded in Jordan by Samih Toukan and Hussam Khoury as an Arabic webmail service. It grew to become the main destination for Arabic speakers on the internet and amassed 16 million users. Beyond the main portal, Maktoob offered online payments through CashU, an e-commerce platform that resembled US-based eBay called Souq and gaming company Tahadi MMO Games.
Yahoo was only interested in the main portal and so Toukan and Khoury established Jabbar Internet Group to absorb Maktoob’s other assets. In hindsight, Yahoo failed to see the consumer trends that unfolded in the region and the inevitable rise of online payments and shopping.
Souq became the biggest asset in Jabbar’s network. Emaar Malls reportedly made an offer of $800 million in 2017, but it was Amazon that would come to acquire the e-commerce site for $680 million of which $580 million was paid in cash. Emaar’s chairman Mohamed Alabbar decided to pump $1 billion into launching his own e-commerce platform, noon, as a result.
In between these two acquisitions, the technological landscape in the region had changed drastically. Internet penetration was on the rise, mobile penetration was close to or exceeded 100 per cent in every country of the Middle East and North Africa (MENA). Smartphones were also popular and Nokia’s dominance in the mobile phone market had been dismantled across the region, replaced by the app-friendly iPhones and Android-based Samsung and Huawei phones. With the introduction of 4G technology, the cost of mobile broadband fell from an average of $9.50 for half a gigabyte in 2016 to $5.27 for double the amount of data.
Empowering The Youth
Amid the protests and revolutions that disrupted the region’s economies in the so-called Arab Spring, the high youth unemployment highlighted the importance of the private sector for job creation. Entrepreneurship was presented as the silver bullet to stymie the rise of unemployment and a way to empower the youth, who make up two thirds of the region’s population.
Government policies and regulations across the Middle East and North Africa (Mena) slowly became friendlier to entrepreneurs and investors. Efforts to cut down startup costs continue as regional competition to become a hub for entrepreneurship has ignited. Startups have been recognised as a way to create not only employment but a means to solve for problems that societies and economies face in the Middle East.
The general shift in attitude and government policies created fertile ground for companies like Dubizzle, Talabat and Babil to emerge, most replicating models and ideas that had proved successful in other parts of the world. Germany’s Rocket Internet arrived in 2011 and began founding startups aggressively, replicating successful business models to launch companies like Namshi, which was recently acquired by Emaar Malls, wadi.com and Carmudi. Serious investors began to emerge and institutionalise and the region became home to VCs and angel investors with an eye to reap lofty returns. Today, there are several funds dedicated to entrepreneurship and a few governments have established fund of funds, to co-match VCs and help develop a local ecosystem that can generate economic growth.
One of the most prolific of these early angel investors was Aramex founder and Wamda chairman Fadi Ghandour. He was one of the initial investors in Maktoob and then in Jabbar Internet Group before establishing Wamda Capital.
“The world was changing and I had felt the internet change the world, I already felt it affecting Aramex, so when Samih and Hussam came for investment, for me, it was a no-brainer,” he says.
Still On The Backfoot
But even after all these years, there has only been a handful of exits valued at more than $100 million across the Middle East. Oil still accounts for the majority of gross domestic product (GDP) in the GCC, youth unemployment is the highest in the world at 26.5 per cent according to the World Bank and costs to start a business in the current hub of the region, Dubai is among the highest in the world. For almost every country, regulations still need improvement beyond registering a business. Innovation is also lacking, the highest-ranking MENA country in the Global Innovation Index is the UAE at 36th place, behind smaller economies like Cyrpus and Malta.
Yet, there is hope.
“There are more mature companies and more mature VCs, so there are better deals happening. Exits like Careem and Fawry, those kinds of big companies that are having a real impact is one key metric of a potentially successful ecosystem,” says Abdelhameed Sharara, founder of RiseUp. “I think we are still very early compared to the US and China, but it’s a very promising space compared to the past.”
The region also has a more active female population in the startup sector, with 23 per cent of startups in Gaza and the West Bank led by women, while 19 per cent are led by women in Beirut, both ahead of New York which stands at 12 per cent. Even at RiseUp, women accounted for almost 40 per cent of the attendees last year.
“The region has really become a place where entrepreneurs can thrive and provides supportive environments for startups,” says Amina Grimen, co-founder of e-commerce beauty site, Powder. “In the beauty space, looking at the accomplishments of big female players like Huda Kattan and Dr Lamees Hamdan is truly inspiring.”
For purposes of mainly Invigorating Female Entrepreneurship in Egypt’s ecosystem, a “SHE CAN – 2019” organized by Entreprenelle, kickstarted by Rania Ayman in 2015 as an organization eventing conferences as a mean to empower and motivate women so as help them believe in their ability to change their destiny.
You’re reading Entrepreneur Middle East, an international franchise of Entrepreneur Media.
SHE CAN 2019, a conference dedicated to MENA women entrepreneurs, hosted its third annual edition at the Greek campus, Downtown Cairo, Egypt, with the theme ‘Successful Failures’. Launched by Entreprenelle, an Egypt-based social enterprise which aims to economically empower women through awareness, education and access to resources, the conference held a wide range of panel discussions, talks and workshops on innovative thinking, creativity, technology, raising capital and invigorating female entrepreneurship in the ecosystem.
Gathering more than 5,000 participants and 50 partners, including UN Women, the Swedish Embassy, the National Council for Women, Nahdet Masr, Avon, Orange and Export Development Bank of Egypt, it also highlighted the endeavors of Entrepenelle alumni. It was also an opportunity for aspiring entrepreneurs to learn from sessions featuring tips on pitching business ideas, mentorship, as well as startup competitions. Female-founded startups were also able to showcase their products and services in an exhibition area.
Speaking about the conference focusing on the necessity to experience failure on one’s entrepreneurial path, Dorothy Shea, Deputy Ambassador of the US Embassy in Cairo, commented, “As far as I’m concerenced, the sky is the limit. Women should be able to achieve whatever their dreams are. What I was struck by was this idea of “successful failures,” we need to not fear failure, it’s not a destination, it is a stepping stone to success. Sometimes there can be a fear of failure, but as part of this entrepreneurship ecosystem, they are really trying to move that inhibition away. We learn from our failures and then we take our plans to the next level. I was really inspired by this theme.”
Founded in 2015, Entreprenelle has more than 10 entrepreneurship programs conducted in nine governorates, including Cairo, Alexandria, Mansoura, Minya, Assiut, Sohag and Aswan.
This article by Anthony Bartolo is about the Digital Transformation of all market sectors using Platforms in the context of the Middle East. Digital Platforms were in their worldwide application been copiously covered up until now. Could this essay published by TahawulTech be regarded as not only applicable to the Middle East but to the rest of the world.
There was a time when disrupting the status quo was the way to become a market leader. Now it’s simply a way of surviving. With the rise of the so called ‘platform economy’, it’s not just the likes of Uber and Amazon that are harnessing digital transformation – everyone is ‘moving fast and breaking things’, primarily to stave off competition and stay in business.
We have been witnessing technological innovations since the beginning of the 21st century. However, if you thought the past 10 years were disruptive, the biggest transformation is yet to come – especially in the form of employee mobility. Various researches have proved that mobility increases employee satisfaction, and subsequently improves their productivity. It is estimated that by 2022, 42.5% of the global workforce will be mobile.
Employees will be able to work anytime, anywhere, and can use their smart devices for work as much as they use it for leisure. Blue-sky thinking? It’s already happening and smartphones with a network connection or a device that is connected to the Internet of Things (IoT) is the go-to implement for this ‘mobile-first’ workforce.
So how will this mobile workforce shape in the new digital platform economy?
Anthony Bartolo, Chief Product Officer, Tata Communications
Supply isn’t satisfying the demand
With mobility, suddenly employees are liberated from being tied to a physical workplace. Enterprises now have their own social media space, using functionalities such as crowd-sourcing and the shared economy to create new ways of working.
To meet the needs of this rapidly mobilising workforce, CIOs must focus on a mobile platform approach that enables access to a multitude of corporate applications in real time via mobile, irrespective of the location or network.
Yet communications service providers (CSPs) are lagging behind. Although there are about 900 network based mobile CSPs, there is a reticence to expose networks and services to access via application programming interfaces (APIs).
Existing and emerging enterprises are now hungry for that exposure. They want to use that capacity to mobilise their workforce and open up access to a vast range of rich mobile services on a global scale.
There is a way forward
The next step then is to move on from simplistic mobile services – where end users simply send a message or make a call – to something much more sophisticated.
If service providers are prepared to offer more advanced mobile network services, then it’s win-win for buyers as well as sellers. Enterprises will see a significant shift in what’s possible via mobile – be it richer unified communications and collaboration experiences or easy access to cloud-enabled services. Meanwhile, the new business models and services that are created, can give rise to billions of dollars of added value for the mobile industry.
To get there is going to require another shift in thinking, where employers and employees start seeing mobility in the same way they view the worldwide web or cloud today. All apps, content and services should be accessible via mobile, irrespective of location and without the high cost of data roaming.
As the world moves towards 5G, we will see new models being adopted by mobile communications service providers. Mobile services can be delivered in a way that reflects how the worldwide web is constituted – offering a consistent, seamless experience and on a global basis.
The time to deliver is now
Ericsson forecasts that by 2022, we can expect 6.8 billion smartphones subscriptions around the world along with 29 billion connected devices.
Mobile services need to start delivering to this vast market now. And CIOs need to know that they can rely on programmable, borderless mobile services without any of the cost, security or access constraints they face today. The mobile communications platform of the future can serve as an innovation engine for next-generation mobile services, while acting as a powerful new revenue stream for mobile network operators
During various visits to both Algiers and Brussels, wishes for a fruitful dialogue promoting a win-win partnership of Algeria and the EU as well as a common determination to enhance relations to the heights of the existing Agreement’s proclaimed ambitions were reaffirmed.
The picture above (Copyright The Financial Times Limited 2018. All rights reserved.) is of Algeria: A giant afraid of its shadow, depicting the country as a regional powerhouse, having been reluctant to flex its muscle despite the turmoil surrounding it in an article of the FT by Borzou Daragahi posted on APRIL 3, 2013.
Algeria is an actor of stability in the Mediterranean and North African region and as a strategic player for Europe’s energy supply through notably the Medgaz and Transmed pipelines.
The intention would be to “densify” this cooperation, as per the Algerian Foreign Minister, for whom “the evaluation process requested by the Algerians does not aim at calling into question the Agreement but, on the contrary, to use it fully in the sense of a positive interpretation of its provisions allowing for a rebalancing of the links of cooperation. According to the European side, the bilateral relationship, which is promising both in the field of energy and in business and trade, has unexplored potential, even if encumbered by persistent administrative burdens and unpredictable political decisions. The European side must look at Algeria as a partner and not only like a huge market for receiving all “Made In Europe” products as Algeria must understand that in this 21st Century, network relationships have replaced personalized relations between heads of States or Ministers through credible networks.
Settling the different Algeria/Europe: for shared prosperity
Before the French National Assembly, the European Trade Commissioner, Cecilia Malmström, had stated, on Tuesday, April 10th, that the restrictions on imports introduced by Algeria were “not in conformity with the free trade agreements” contained in the Association Agreement between the Union EUropean (EU) and Algeria and that in case of failure of the dialogue between the two parties on this subject, “The dispute settlement clauses” of this agreement will have to be mentioned. However, according to the Algerian Government on the period 2005-2015, Algeria’s non-hydrocarbon exports to the EU stood at $14 billion, while Algeria imported $220 billion from the EU. In terms of customs revenue, the Algerian government estimated in 2015 the loss of profits as caused on the same period, at more than €6.7 billion (at the rate of 2015). For the Europeans, it is up to Algeria to recognize that it is its total exports to Europe that should and not just non-hydrocarbon products therefore to move towards reforms of the investment legislation, particularly regarding all SME-SMEs in all sectors of activity.
I’ve been recipient thanks to friends in Brussels, at the end of December 2016 of the new mount of the partial revision proposed by the EU following the Algerian proposals of the Association Agreement that comforts some Algerian proposals but is not in any way concerned with amending the main Agreement framework. This confirms the recent declaration of a Ministry of Foreign Affairs official for whom the document containing 21 recommendations would enable the cooperation between Algeria and the EU to be revived in order to put economic relations at the centre of this cooperation, to give this agreement all its importance and To use all its enormous potential in its three Components: Political, economic and human.
As recalled in my contributions and taking up some ideas at my conference at the invitation of the European Parliament, after a real concern of the international community where some Algerian media have speculated on the breakdown of the agreement which links Algeria to the Union EU, the Algerian officials were clear. For Algeria, there is no question of breaking the Association agreement. The situation in the country remains, however, dependent on developments in the oil markets, the sales of which the country derives the bulk of its income. It is in this capacity that the Council of Ministers of 06 October 2015 considered it necessary to re-evaluate the economic and commercial aspects of the Association Agreement with the European Union (EU) which did not achieve the expected objectives for European investment in Algeria. The Agreement’s Article 32 stipulates for any commercial presence that Algeria should reserve to the establishment of any EU’s companies in its territory, a treatment that is no less favourable than that granted to third-party country companies all in accordance with its legislation and that no less favourable treatment with regard to their exploitation than that granted to its own companies or branches or to Algerian subsidiaries or branches of other third-party country companies should be considered.
The general provisions of article 37 stipulate that the parties avoid taking action or engaging in actions that make the conditions for the establishment and operation of their companies more restrictive than they were on the day before the signature of this Agreement.
With regards to article 39, it is the EU and Algeria that shall ensure, from the entry into force of this agreement, the free movement of capital relating to direct investments in Algeria, carried out in companies established under the Legislation in force as well as the liquidation and repatriation of the proceeds of these investments and any profit therefrom.
Lastly, article 54 for the promotion and protection of investments, it is stipulated that cooperation aims to create a climate conducive to investment flows and is carried out in particular through the establishment of harmonised and simplified procedures for mechanisms of co-Investment (especially between small and medium-sized enterprises) as well as identification and information of systems on investment opportunities, conducive to investment flows, the establishment of a legal framework promoting investment, the conclusion between Algeria and the Member States, investment protection agreements and agreements designed to avoid double taxation and technical assistance in promoting and guaranteeing actions domestic and foreign investments.
There is, in view of the high number of tabled demands, an urgency to review the current Algerian industrial policy. It concerns all those car assembly plants.
The automotive sector is experiencing restructuring, mergers and relocations of large groups, with high production capacities. In the face of all these global changes, what is the profitability threshold for all the Algerian car assembly mini-projects?
The national fleet is 8.4 million of vehicles in 2016, of which more than 65% are tourist vehicles according to the Ministry of Transport giving an average of 1 vehicle for 7 citizens in 2016 against 5.7 for 2015 and 4.75 for 2014. About 53% of this park has an average age of less than 10 years, while 37% are over 20 years old. More exactly according to the ONS, the official statistical body cited by the Algerian Press Service, the national fleet had 5,986,181 vehicles at end 2016, compared with 5,683,156 vehicles at end 2015, up 5.33%, corresponding to an increase of 303,025 units. According to the Ministry of Energy, by end of 2016, Algeria would use nearly 15 million tons of road fuels of which more than 350,000 tons of LPG. There are also several questions to which any coherent economic policy must respond in order to avoid the failure of many of the manufacturers who would have in the meantime reaped huge profits to the detriment of the Treasury.
Car assembly plants set within global changes
So, what is the future when according to some analysts, the size of the Chinese car market, not to mention India, if one remains in the current consumption model, should be multiplied by ten. The experts from the International Monetary Fund (IMF) provided the picture of a World park of 2.9 billion passenger cars by 2050; this vision starting from the assumption of an increase in household income especially from emerging countries especially those with large populations such as Russia, India or China.
So about 77.83 million cars should have been sold in 2017, against 74.38 million in 2016 according to international estimates. Meanwhile, world production of cars in 2015 was 90.68 billion of which
China: 24,503,326 vehicles (+ 3.3%), –
United States: 12,100,095 vehicles (+ 3.8%), –
Japan: 9,278,238 Vehicles (-5.1%), –
Germany: 6,033,164 vehicles (+ 2.1%), –
South Korea: 4,555,957 vehicles (+ 0.7%), –
India: 4,125,744 vehicles (+ 7.3%), –
Mexico: 3,565,469 vehicles (+ 5.9%), –
Spain: 2,733,201 vehicles (+ 13.7%), –
Brazil: 2,429,463 Vehicles (-22.8%), –
Canada: 2,283,474 Vehicles (-4.6%), –
France: 1,970,000 vehicles (+ 8.2%), –
Thailand: 1,915,420 vehicles (+ 1.9%), –
United Kingdom: 1,682,156 vehicles (+ 5.2%), –
Russia: 1,384,399 Vehicles (-26.6%), –
Turkey: 1,358,796 vehicles (+ 16.1%), –
Czech Republic: 1,303,603 vehicles (+ 4.2%), –
Indonesia: 1,098,780 Vehicles (-15.4%), –
Italy: 1,014,223 vehicles (+ 45.3%), –
Slovakia: 1,000,001 Vehicles (+ 3.0%),
Iran: 982,337 vehicles (-9.9%).
So, the international constraints for Algeria are there. The situation of the global car market is evolving through being an oligopolistic market, depending on purchasing power, infrastructure and the possibility of substitution of other modes of transport, in particular the collective specific to each country according to its transport policy, having known since the crisis of October 2008 major upheavals, mergers succeeding takeovers and various equity acquisitions. Currently, the largest multinationals are General Motors despite its recent restructuring, closely followed by Volkswagen and Nissan, which since its alliance with the French manufacturer Renault, Chrysler, FIAT, Honda, Mitsubishi and Mazda share the limelight of the top six global manufacturers, all of which have a production capacity of over four million vehicles, accounting for 61 percent of the global automotive market, followed by South Korean Hyundai, Daewoo, Kia; Sang-Yang and Samsung have joined the ranks of independent builders, able to finance, design and produce their own vehicles and that European multinational companies are the most Important manufacturers of spare parts and the largest manufacturers of trucks, including Mercedes-Benz and Volvo. In the rest of the world, most car manufacturers are subsidiaries of American, Japanese and European manufacturers. In countries like Malaysia, China and India, production is managed by local companies, but always with the support of large foreign groups. We observe two opposite tendencies that are happening at the same time: The location of the production in certain geographical areas and on certain countries and the relocation; And for what is The location of world car production, it focuses on the Regional over three Areas: Europe, North America and Asia. In addition, on each of them the manufacturing is located on some Countries; In Europe, the main manufacturers are Germany, France, the United Kingdom and Italy, all belonging to the European Union. In North America, production is mainly concentrated on the United States, and in Asia it is in Japan and South Korea and for world exports of automobiles, the concentration is even higher, since it is limited Mainly in two areas : Europe and Asia. And that the near future with the loss of competitiveness of some countries for the benefit of some emerging countries (Russia, India, China, Brazil) we should witness the reorganization of world production of vehicles in relation to the levels of training of The size of the factories and with the research carried out by the motor companies and clearly, the factories which will maintain themselves on each country will be the most competitive, the priorities of the leaders of the car manufacturers being thus: technology and innovation with notably automation, especially in Japan, whose labor cost is about ten times higher than China’s, ethics and corporate governance, collaborative approach, best strategies for success, environment and globalization. Future technological prospects taking into account the new Ecological Challenge, (hybrid, electric cars) taking into account the new model of energy consumption which is slowly in place, the crisis of October 2008 foreshadowing important Strategic and economic upheavals, as China is on the move to become the world leader in Clean cars All categories thus taking advantage of the first plans “Greens” of the United States, Europe and Japan. In the short term, we are moving towards optimising the operation of petrol and diesel engines, with a reduction of 20/30% of the consumption, because for electric cars, the lithium resources for the famous lithium-ion batteries are Limited and that electric motors require magnets that are also manufactured with rare metals, a market of 70/80 million vehicles per year that cannot absorb large Volumes in electric cars and that for another ten years the engines Classics should remain in the majority. To make things even less amenable, the US will slap a tax on cars made on the continent if the European Union (EU) retaliates against its recently adopted tariffs on imports of steel and aluminium.
As foreseen by many, this article titled ‘Inside the dark web of the UAE’s surveillance state’ could only be an illustration of the UAE’s increasing involvement in regional tensions. This has as per the article been kicked off by the 2011 spring uprisings in the region but would signal the likelihood of a long period of severe frictions between the members of the GCC. In effect, the nationals as well as the foreign residents of this membership are closer to one another as flows after flows in all direction of social media commentaries could prove and ascertain their ethno-socio and business proximity. The UAE’s surveillance infrastructure by international cybersecurity “Dealers” could well have ignored that aspect of the populations.
This article is written by Joe Odell, press officer for the International Campaign for Freedom in the UAE. It was published by the Middle East Eye and is available in French on Middle East Eye French edition.
The above picture taken on January 11, 2018, shows the skyline of the Dubai Marina (AFP)
The nuts and bolts of the Emirati surveillance state moved into the spotlight on 1 February as the Abu Dhabi-based cybersecurity company DarkMatter allegedly stepped “out of the shadows” to speak to the international media.
Its CEO and founder, Faisal al-Bannai, gave a rare interview to the Associated Press at the company’s headquarters in Abu Dhabi, in which he absolved his company of any direct responsibility for human rights violations in the UAE.
Established in the UAE in 2015, DarkMatter has always maintained itself to be a commercially driven company. Despite the Emirati government constituting 80 percent of DarkMatter’s customer base and the company previously describing itself as “a strategic partner of the UAE government”, its CEO was at pains to suggest that it was independent from the state.
According to its website, the company’s stated aim is to “protect governments and enterprises from the ever-evolving threat of cyber attack” by offering a range of non-offensive cybersecurity services.
Seeking skilled hackers
Though DarkMatter defines its activities as defensive, an Italian security expert, who attended an interview with the company in 2016, likened its operations to “big brother on steroids” and suggested it was deeply rooted within the Emirati intelligence system.
Simone Margaritelli, also a former hacker, alleged that during the interview he was informed of the UAE’s intention to develop a surveillance system that was “capable of intercepting, modifying, and diverting (as well as occasionally obscuring) traffic on IP, 2G, 3G, and 4G networks”.
Although he was offered a lucrative monthly tax-free salary of $15,000, he rejected the offer on ethical grounds.
Furthermore, in an investigation carried out by The Intercept in 2016, sources with inside knowledge of the company said that DarkMatter was “aggressively” seeking skilled hackers to carry out offensive surveillance operations. This included plans to exploit hardware probes already installed across major cities in order to track, locate and hack any person at any time in the UAE.
In many respects, the UAE’s surveillance infrastructure has been built by a network of international cybersecurity “dealers” who have willingly profited from supplying the Emirati regime with the tools needed for a modern-day surveillance state
As with other states, there is a need for cybersecurity in the UAE. As the threat of cyber attacks has increased worldwide, there have been numerous reports of attempted attacks from external actors on critical infrastructure in the country.
Since the Arab uprisings of 2011, however, internal “cyber-security governance”, which has been utilised to quell the harbingers of revolt and suppress dissident voices, has become increasingly important to the Emirati government and other regimes across the region.
In the UAE, as with other GCC states, this has found a legislative expression in the cybercrime law. Instituted in 2012, its vaguely worded provisions essentially provide a legal basis to detain anybody who criticises the regime online.
A network of Emirati government agencies and state-directed telecommunications industries have worked in loose coordination with international arms manufacturers and cybersecurity companies to transform communications technologies into central components of authoritarian control.
In 2016, an official from the Dubai police force announced that authorities were monitoring users across 42 social media platforms, while a spokesperson for the UAE’s Telecommunication Regulatory Authority similarly boasted that all social media profiles and internet sites were being tracked by the relevant agencies.
Crown Prince Mohammed Bin Zayed Al Nahyan of Abu Dhabi meets with US President Donald Trump in Washington in May 2017 (AFP)
As a result, scores of people who have criticised the UAE government on social media have been arbitrarily detained, forcefully disappeared and, in many cases, tortured.
Last year, Jordanian journalist Tayseer al-Najjar and prominent Emirati academic Nasser bin Ghaith received sentences of three and 10 years respectively for comments made on social media. Similarly, award-winning human rights activist Ahmed Mansoor has been arbitrarily detained for nearly a year due to his online activities.
This has been a common theme across the region in the post-“Arab Spring” landscape. In line with this, a lucrative cybersecurity market opened up across the Middle East and North Africa, which, according to the US tech research firm Gartner, was valued at $1.3bn in 2016.
A modern-day surveillance state
In many respects, the UAE’s surveillance infrastructure has been built by a network of international cybersecurity “dealers” who have willingly profited from supplying the Emirati regime with the tools needed for a modern-day surveillance state.
Moreover, it has been reported that DarkMatter has been hiring a range of top talent from across the US national security and tech establishment, including from Google, Samsung and McAfee. Late last year, it was revealed that DarkMatter was managing an intelligence contract that had been recruiting former CIA agents and US government officials to train Emirati security officials in a bid to bolster the UAE’s intelligence body.
UK military companies also have a foothold in the Emirati surveillance state. Last year, it was revealed that BAE Systems had been using a Danish subsidiary, ETI Evident, to export surveillance technologies to the UAE government and other regimes across the region.
‘The million dollar dissident’
Although there are officially no diplomatic relations between the two countries, in 2016, Abu Dhabi launched Falcon Eye, an Israeli-installed civil surveillance system. This enables Emirati security officials to monitor every person “from the moment they leave their doorstep to the moment they return to it”, a source close to Falcon Eye told Middle East Eye in 2015.
The source added that the system allows work, social and behavioural patterns to be recorded, analysed and archived: “It sounds like sci-fi but it is happening in Abu Dhabi today.”
Moreover, in a story that made headlines in 2016, Ahmed Mansoor’s iPhone was hacked by the UAE government with software provided by the Israeli-based security company NSO Group. Emirati authorities reportedly paid $1m for the software, leading international media outlets to dub Mansoor “the million-dollar dissident.”
Mansoor’s case is illustrative of how Emirati authorities have conducted unethical practices in the past. In recent years, the UAE has bought tailored software products from international companies such as Hacking Team to engage in isolated, targeted attacks on human rights activists, such as Mansoor.
The operations of DarkMatter, as well as the installation of Falcon Eye, suggest, however, that rather than relying on individual products from abroad, Emirati authorities are now building a surveillance system of their own and bringing operations in-house by developing the infrastructure for a 21st-century police state.
All the countries of the GCC have over the years employed expatriate manpower of mainly Asian origin. This working population was needed by the booming economies that have benefitted from a decades long surge and high levels of oil prices related revenues. Relatively good living standards and total absence of income tax followed on and were appreciated by all expats. Amongst these, some sort of a social decantation process took place and a number of leaders came into the light of day. A great number of successful Expatriate Businesses started up across the GCC and expanded across its member countries. Some of these are now claiming their share in the prosperity they helped engender if only for posterity’s sake.
It all started when oil prices having tumbled and lately been volatilising upward more than down for reasons outside their control, made the GCC respective authorities introduce various regulation items such as those applicable to all foreigners applying to work in the UAE. These come at a time when, according to many experts, salaries in the UAE are not expected in 2018 to keep up with inflation after the introduction of a 5% value added tax rate. They all nevertheless agree that wages across the Middle East would increase if at all but at a rate that is certainly lower than that of last year’s. Apart from that, any foreign worker will as of now be required to obtain a good conduct and behaviour certificate in order to be granted a work visa, state news agency WAM confirmed last Monday. This certificate must be issued from the applicant’s home country and certified by the UAE mission in that country.
The UAE looking at attracting and retaining the best talent from around the world has engaged into a program of reshaping the country’s economy through notably its diversification.
The reality on the ground is that whether from the huge numbers or origins of the diverse communities of the expatriate workers, the countries of the GCC will definitely be impacted by their passage as reported in this article of The National of January 9, 2018. We must say that in this article, it is question of people originating from a south west country of India, namely Kerala from which a great number of “NRIs” as these are best known as Non-Resident-Indians in every country of the GCC.
From supermarket magnates to industrialists who have built education conglomerates or established hospitals, some of the UAE’s biggest business names come from India’s Kerala state.
A large portion of the one million people from Kerala who work in the UAE are employed as nurses, drivers, technicians, electricians and accountants.
But there are also those who can be found in the self-made billionaires list and philanthropists who give back to the community by building local schools and clinics.
Yusuff Ali, managing director of the UAE-based Lulu Group left a village in Kerala for a job in his uncle’s distribution business in the 1970s. Described by Forbes as the Middle East’s retail king, his group owns close to 140 hypermarkets and supermarkets across the Middle East, Africa, India and the far East.
Handed the Queen’s Award last year for his contribution to international trade and employment generation in the UK, Mr Ali has diversified into hotel development and food processing.
Dr Azad Moopen, chairman of the DM Healthcare group, spearheads a healthcare chain that operates 18 hospitals, close to 100 clinics and more than 200 pharmacies in the Middle East and India.
A general physician who taught at a government medical college in Kerala, he moved to Dubai in 1987 to help an Indian doctor in an Ajman clinic.
Mr Moopen runs a foundation to help women and the elderly.
One of the most successful education entrepreneurs, Sunny Varkey, is the son of teachers who migrated to Dubai in 1959. Gems Education, of which Mr Varkey is founder, now runs more than 70 schools in 14 countries.
Mr Varkey’s group funds the training of thousands of teachers in programmes in Africa.
The Financial Times, a British daily newspaper produced Analyse-Africa recently published the second of its new series on African countries report. It is about Morocco in a Report that is proposed as put in its title Morocco : By the numbers by all relevant numbers, graphics, charts and of course all related explanatory notes, etc.
as per leading global sources on African countries, etc. on its economy, political stability, foreign direct investment, trade, banking & finance, infrastructure, telecoms, labour, education and healthcare.
An introductory text sets the background by giving some key dates of the country’s contemporary history such as those of the short and ephemeral French protectorate prior to independence in 1956 before dwelling at length on its relationship with its immediate neighbour Algeria. It reviews also some of the most obvious aspects of its internal political life to end by Morocco’s reinsertion into the African Union.
Some description of the land and resources held therein are covered in one page. Demographics details on life expectancy, natality rates, religion, languages, ethnicities, etc. are splashed around for a better visualisation of the country’s human characteristics. Population estimated in 2016 at 32.84 million preponderantly young and with a penchant for emigrating has been noted towards Europe.
Politics and stability ensued in some detail on governance quality with details of the central and local authorities and ranking according to the proposed Mo Ibrahim Index of African Governance. Morocco comes second to Tunisia after the passage of the Arab Spring. Corruption and freedom of the press are schematically reviewed as being somewhat lacking in girth and depth. Not forgetting the importance women in the country’s politics, the status is that these have some way to go to catch up with its neighbours.
The economy as it is expected takes up few pages, starting with an evaluation of the country’s GDP and its ranking over time as compared to other North and sub Saharan African countries. It is dominated by the agricultural sector and the automotive industry. The renewables industry has sprung to be an asset which the authorities are tabling on for the future development of the country. Other sector of the economic activities such as trade, banking and finance, state of the infrastructure, the telecoms generally are reviewed and statically ascertained.
Labour, education and healthcare are reported in great details as compared to other neighbouring countries. The great leap forward is without any doubt the ICT infrastructure that allows an ever increasing number of the population access to the Internet media, social, e-commerce, e-government, etc.
Certain of the trends are highlighted in Morocco’s estimated GDP of $105bn that grew by 1.85%. Morocco is ranked as the third easiest place in Africa to do business in and that it has in 2016, approximately 11.28 million people employed, with a labour force participation rate of 49%.
Problems of the Rif’s populations enduring difficult relationship with the central authority were not covered though some mention of the Spanish establishments of Ceuta and Melilla were. Conversely, Western Saharan peoples striving for auto determination long lasting issue was duly reported with however a certain impartiality.
The recently published Doing Business Report 2017 of the World Bank, has generally undergone some methodological changes over that of last year, to better reflect the business climate in the countries covered by the classification. Labelled Equal Opportunity for all, these include notably indicators such as tax procedures before and after declaration and equal opportunity facilitation.
As per The Times of India Economic Times the definition of Ease of doing business is an index published by the World Bank. It is an aggregate figure that includes different parameters which define the ease of doing business in a country. It is computed by aggregating the distance to frontier scores of different economies. The distance to frontier score uses the ‘regulatory best practices’ for doing business as the parameter and benchmark economies according to that parameter.
For each of the indicators that form a part of the statistic ‘Ease of doing business,’ a distance to frontier score is computed and all the scores are aggregated. The aggregated score becomes the Ease of doing business index.
Indicators for which distance to frontier is computed include construction permits, registration, getting credit, tax payment mechanism etc. Countries are ranked as per the index.
Amongst the Middle East and North African countries, fifteen out of the 20 economies have implemented at least a reform facilitating Business Environmental Climate last year. The largest number of reforms implemented by the economies of the region focused on the simplification of the Business Creation (with 9 reforms) followed by the improvement of cross-border trade facilitation.
Thanks to sustained reform efforts, Morocco is 68th overall and Tunisia 77th out of 190. Algeria came at 156th but as for Morocco and Tunisia, it nevertheless has improved its absolute score.
The United Arab Emirates (UAE) is the Middle East and North Africa (MENA) region’s top ranked economy in ease of doing business, with a global ranking of 26, followed by Bahrain (63) and Oman (66), finds the World Bank Group’s annual report.
Based on reforms undertaken, the UAE and Bahrain are also among the global top 10 improvers.
The pace of business reforms in MENA accelerated considerably in the past year, despite conflict and turmoil in the region, finds the report.
In its global country rankings of business efficiency, Doing Business 2017 awarded its coveted top spot to New Zealand, Singapore ranks second, followed by Denmark; Hong Kong SAR, China; Republic of Korea; Norway; United Kingdom; United States; Sweden; and Former Yugoslav Republic of Macedonia.
Released yesterday (October 25), “Doing Business 2017: Equal Opportunity for All” finds that 15 of the Mena region’s 20 economies implemented a total of 35 reforms to facilitate the ease of doing business. This is a significant increase from the annual average of 19 reforms during the past five years.
“The acceleration of business reform activity in the Middle East and North Africa is noteworthy, considering the severity of challenges faced by many governments in the region,” said Rita Ramalho, manager of the Doing Business project. “It is particularly encouraging to see economies in the region carry out reforms in the area of Getting Credit, which remains harder in the Middle East and North Africa than anywhere else in the world.”
Taking steps to strengthen the credit reporting system, Morocco, for example, began providing credit scores to help banks and other financial institutions assess the creditworthiness of borrowers. However, getting credit remains a major obstacle for entrepreneurs in the region as collateral regimes are highly restrictive.
The region also performs poorly in the area of Starting a Business. For example, starting a business in the region costs 26 percent of income per capita on average, compared with 3 percent in OECD high-income economies. However, economies in the Middle East and North Africa region are taking steps to improve the process for start- ups and, in the past year, nine economies carried out reforms in the area of Starting a Business.
For the first time, the report includes a gender dimension in three indicators: Starting a Business, Registering Property and Enforcing Contracts. The report finds that the Middle East and North Africa fares poorly on the new gender measures, with 70 percent of the region’s economies imposing more regulatory hurdles for women entrepreneurs than men. For instance, in Saudi Arabia, three extra procedures are required for married women to start and operate a business. One requirement in Saudi Arabia is that married women must hire a man to manage the business.
The report also features an expanded Paying Taxes indicator, which now covers post-filing processes, such as tax audits and tax refunds. The economies of the Middle East and North Africa generally perform well in these new areas. A notable exception is Lebanon, where compliance time for a VAT refund is considerably high, taking 45 hours.
Bahrain implemented reforms in the areas of Starting a Business, Getting Credit and Trading Across Borders. It made the start-up process easier for entrepreneurs by drastically reducing the minimum capital requirement from 190 percent of income per capita to 3 percent. Bahrain also improved access to credit information by legally guaranteeing borrowers’ right to inspect their own data, and made exporting easier by improving infrastructure and streamlining procedures at the King Fahad Causeway.
Morocco and the UAE undertook five reforms each during the past year. Morocco made Starting a Business easier by introducing an online platform to reserve a company name and reducing registration fees. And it strengthened minority investor protections by clarifying ownership and control structures and by requiring greater corporate transparency.
The UAE implemented risk-based inspections during construction, thereby joining the 13 other economies in the world implementing this best-practice feature. The UAE also made it easier to start a business by streamlining name reservation and articles of association notarization and merging registration procedures.
Globally, a record 137 economies around the world adopted key reforms that make it easier to start and operate small and medium-sized businesses, the report said.
The new report finds that developing countries carried out more than 75 percent of the 283 reforms in the past year, with Sub-Saharan Africa accounting for over one-quarter of all reforms.
The report cites research that demonstrates that better performance in Doing Business is, on average, associated with lower levels of income inequality, thereby reducing poverty and boosting shared prosperity.
“Simple rules that are easy to follow are a sign that a government treats its citizens with respect. They yield direct economic benefits – more entrepreneurship; more market opportunities for women; more adherence to the rule of law,” said Paul Romer, World Bank Chief Economist and Senior Vice President. “But we should also remember that being treated with respect is something that people value for its own sake and that a government that fails to treat its citizens this way will lose its ability to lead.”
Doing Business data points to continued successes in the ease of doing business worldwide, as governments increasingly take up key business reforms. Starting a new business now takes an average of 21 days worldwide, compared with 46 days 10 years ago. Paying taxes in the Philippines involved 48 payments 10 years ago, compared to 28 now and in Rwanda, the time to register a property transfer has dropped from 370 days a decade ago to 12 days now. –
UAE launches rescue initiative for struggling small firms
According to Reuters, UAE banks agree some “Mini Insolvency Law” to help struggling SMEs whereby Banks in the United Arab Emirates would suspend legal action against small and medium sized enterprises (SMEs) struggling to repay their debt. The understanding is for up to three months aimed at preventing a surge in defaults that may jeopardise the whole economy of the UAE.
The initiative, involving members of the business sector coordinating with the finance institutions, is intended to give the SMEs that represent approximately 60% of UAE’s gross domestic product, some extra room and time to manoeuvre. Banks have been hit by the downturn in contracts turnover as a result of prices volatility of commodities. . . .
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