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Silk Road

Putting The Middle East Back In The Middle (As The World Order Shifts East)

We could be looking at a new Silk Road, where the MENA once again finds itself situated in the middle, geographically and strategically.
Putting The Middle East Back In The Middle (As The World Order Shifts East)
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Contributor
Founding Partner, VentureSouq
6 min read
Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur Middle East, an international franchise of Entrepreneur Media.

People of the MENA region are some of the best conspiracy theorists in the world. From the back seat of a taxi, to the office water cooler, to the dinner table, to the diwan, everyone believes that the MENA is the epicenter of global geo-political intrigue.

In truth, the MENA, historically, has had an outsized role in the global political economy. There are a number of factors behind this: geography, demographics, colonial history, as well as a global industrial growth engine driven by commodities. And the people of the MENA have proudly carried that torch of relevance. For whatever our faults may be, we will never allow ourselves to be neglected or ignored; we cannot be compartmentalized and managed by anyone on a bilateral basis, or as an afterthought. Like it or not, we’re in the middle, and so at some point, you’re going to have to deal with us.

But the contemporary industrial revolution that the world finds itself in now, the digital transformation of everything, has certain characteristics that tend to neutralize the significance of the MENA.

Firstly, it has been less reliant on global commodities. Secondly, it has been largely driven by private sector protagonists, not nation states. In fact, one could argue that the primary inputs required to develop and scale digital products consumed worldwide have been sourced from a single point of origin: the people congregated on the west coast of the United States. In this equation, the MENA is a market amongst many into which neo commercial titans can ramp up more sales volume. And an awkward one at that. 420 million Arabic speaking people sitting across 20 or so countries, each with particular regulatory regimes, national agendas, and demographic specificities. This makes MENA an exceptionally challenging expansion target.

An argument can be made that we still have relevance from the standpoint of being a capital provider– MENA-based investors have funneled huge sums of money into US-based VC firms. However, in doing so, they ceded control to the managers of those firms, further entrenching these managers as the kingmakers of the tech world. Hence, in this equation, the MENA is no longer a point of convergence for the interconnected global economy. Far from it, the MENA is actually somewhat of a “lower tier” strategic target. It’s no surprise that the regional ecosystem is still nascent. We’re way out of our comfort zone of being a major geopolitical chess piece, and this confused identity may be holding us back.

The unipolar world order of technology development has until now been treated as a condition of fact. We commonly hear and perpetuate an almost automatic refrain, delivered through a completely presumptive question: which company’s business model are you using? The answer to the question, until now, has almost uniformly been a US-based company. Maybe an occasional team of London blokes (just to add some diversity to the mix). The insinuation is that the only real “exit strategy” is when that company, the original creator of the concept, has plateaued in other markets, it looks to the MENA as the next conquest, and buys out your company. As investors, we would therefore spend a lot of time looking at that prototype company, understanding how they grew, trying to predict what moves they would make, because that dictated the fate of our potential investment.

Related: The Middle East Is Ripe For Technology Entrepreneurship

But we are starting to see major indicators that the days of this unipolar world are numbered. Eight of the top ten deals globally (in terms of amount of capital raised) in 2018 were in China. Through acquisition and internal development, BAT (Baidu, Alibaba, Tencent) are now dominant across multiple product lines– e-commerce, social media, fintech, education, autonomous vehicles. Indian internet companies are growing out of their outsourcing cocoon, leveraging their massive consumer market to build giant companies.

Here in the MENA, it’s also open sesame. Some of the soundbites about what is happening regionally are staggering to hear: China has become the single largest foreign investor into Middle East companies. Chinese companies comprise of half of the top 10 e-business companies in MENA; Chinese companies have created more than 5,000 jobs in Arab countries. We see companies that are living and breathing on Chinese e-commerce trade right now, and don’t really need anything else, and the investment money is flowing in too. A few months ago, big name US and European investors pulling out of an investor conference in Riyadh was the talk of the town. When the day of the conference arrived, for every western investor who was absent, there was a Chinese or Russian investor of equal or greater stature there in attendance. The world order is shifting east.

This means that investors like us, as participants in the MENA tech ecosystem, need to recalibrate. If these are the new acquirers, or the new threats, we need to develop an understanding of how they operate. What are their growth models? How do they work with other investors? Does your company, or a company in which you are a stakeholder, have a clear understanding of how these companies effect it?

For the MENA as a whole, this has materially more meaning than a simple recalibration towards the east. It means we could be looking at a new Silk Road, where the MENA once again finds itself situated in the middle, geographically and strategically. New concentrations of operators, emanating from hubs that have lifted and improved the Silicon Valley blueprint. Bigger consumer markets that now have full access to and empowerment from the digital economy. New major trading corridors. Perhaps in this new world order, the MENA will find its way back to a role of the meddlesome but pivotal and indispensable middleman, and this will help its ecosystem find the sure footing that it needs to take off. And perhaps it will give its citizens and residents new fodder for the plots, schemes, and intrigues of the world, which all seem to run through them- as they always should.

If you’re interested to learn more, join us at Angel Rising on March 23, 2019 in Abu Dhabi. We’ve assembled seasoned entrepreneurs and investors in the regions that are most essential to this new Digital Silk Road- China, India, Sub-Saharan Africa, and of course, the MENA. Think of this as a masterclass on what we consider to be one of the most significant themes in technology and venture capital today. 

Related: Rise Of The Rest: Why Tech Startups No Longer Need To Be In Major Tech Hubs To Succeed

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