Monday, November 2, 2009

Shifting Sands: Recent growth highlights the Middle East's technology potential

Jordan's budding IT industry got a big boost recently with the announcement of a new fund intended to help meet the financing needs of the country's growing crop of startup firms. Backers aim to launch the fund in 2010 with a combination of local enterprise and bank resources, along with support from the government and multinational investors in Jordan. The country's leader, King Abdullah, has made growing Jordan's $900 million technology industry a key part of his economic policy and is supporting the fund's creation. Initiatives like this are intended to give a further lift to indigenous firms and raise Jordan's status as a hub for the Arab technology industry, a position highlighted by Yahoo's recent acquisition of Amman-based Maktoob, the leading Arabic Internet portal.

These developments underscore the emergence of Middle Eastern countries as players in the global technology and communications industries as they try to diversify their economies. Abu Dhabi's Advanced Technology Investment Company (ATIC) made a big splash with its multi-billion dollar investment in AMD/GlobalFoundries and Chartered Semiconductor this year, while the brand new King Abdullah University of Science and Technology and its $10 billion endowment are attracting leading talent to Saudi Arabia. Mobile penetration has skyrocketed across the region and homegrown companies like Egypt's Orascom and Kuwait's Zain have become major operators both inside and outside of the Middle East.

The growth of Middle Eastern markets presents opportunities and challenges to multinationals. As noted above, companies based in the region are raising their profile both as acquirers and targets for foreign acquisition. Arab countries' populations are growing quickly and are disproportionately young, which makes them attractive markets for products and services in areas like education and entertainment. Despite recent liberalization, though, countries like Egypt, Morocco and Algeria remain heavily regulated in many aspects of their economy. The region is culturally diverse and politics remain a fault line. Learning the ins and outs of each national market may enable firms to better capitalize on this growing and multifaceted region.

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