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Two, Three, Many Middle Easts: A Region’s Economic
Prospects
Date: Monday, April 29th, 2013
Time: 09:30am – 10:30am
Room: Dayton
Source: IMF.
Private capital flows are vulnerable
Net financial flows in MENA, % of GDP
-6.000
-4.000
-2.000
0.000
2.000
4.000
6.000
8.000
10.000
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
PercentDirect investment Private portfolio flows Other private flows
Source: IMF.
Per capita growth lags behind other regions
Real GDP per capita, average 1980-2010
0
1
2
3
4
5
Asia Emerging anddevelopingeconomies
Latin America Africa MENA
Percent
Source: IMF.
Variation in development levels within MENA
GDP per capita
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2001 2003 2005 2007 2009 2011
GDP per capita (US$)
UAE
Kuwait
Oman
Saudi Arabia
Gulf states
0
1,000
2,000
3,000
4,000
5,000
6,000
2001 2003 2005 2007 2009 2011
GDP per capita (US$)
Jordan
Syria
Yemen
Core Middle East
GDP per capita (US$)
0
1,000
2,000
3,000
4,000
5,000
6,000
2001 2003 2005 2007 2009 2011
GDP per capita (US$)
Algeria
Tunisia
Morocco
Egypt
North Africa
Source: IMF Direction of Trade Statistics, April 2013.
Stagnant intra-regional trade levels in MENA
Intra-regional exports as a percent of region total exports
0
2
4
6
8
10
12
14
16
18
20
1980 1985 1990 1995 2000 2005 2010
% of total exports
Developing Asia
MENA
56
58
60
62
64
66
68
70
1980 1985 1990 1995 2000 2005 2010
% of total exports
Europe
Source: World Bank.
Fertility rates in MENA have fallen dramatically
0
1
2
3
4
5
6
7
Euro area North America East Asia & Pacific World MENA
Fertility rate, total (births per woman)
19802011
Source: World Bank.
MENA is not benefitting from globalization
Non-fuel exports (% world non-oil exports)
0
5
10
15
20
25
30
35
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Percent
Emerging Asia
Low & Middle Income
MENA
Source: Arab Investment and Export Credit Guarantee Corporation.
FDI flows to the MENA region make up a small portion of global
inflows
Inward FDI flows, MENA and world totals
Note: MENA total does not include Iran or Iraq.
0
500
1,000
1,500
2,000
2,500
1995 1997 1999 2001 2003 2005 2007 2009 2011
US$ billions
Th
ou
sa
nd
s
World
MENA
Source: Arab Investment and Export Credit Guarantee Corporation.
Intra-regional FDI has declined during global economic downturn
Inter-Arab inward foreign direct investment inflows, reporting countries
0
5
10
15
20
25
30
35
40
1995 1997 1999 2001 2003 2005 2007 2009 2011
US$ billions
Total MENA
Middle East
North Africa
Note: MENA total does not include Iran, Iraq, or Israel.
Source: UNCTAD.
More consistent capital flows to non-oil export countries
FDI inflows to MENA oil and non-oil exporters
0
1
2
3
4
5
6
7
8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
US$ billions
Oil
Non-oil
Source: World Bank.
MENA’s GDP has multiplied more than other regions since 1970
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009
MENA
Latin America
East Asia
Euro Area
Index (1970 = 100)
Source: IMF.
Plus-5% growth expected for many MENA countries
GDP growth rate, select MENA countries
-15
-10
-5
0
5
10
15
20
Egypt Morocco Tunisia Iraq Yemen Jordan Qatar SaudiArabia
UAE
Percent
2011 2016(estimation)
Core Middle East Gulf statesNorth Africa
Source: Datastream.
Egypt’s economic uncertainty
FDI as a percent of GDP and percent change in GDP
-2
0
2
4
6
8
10
2002 2004 2006 2008 2010 2012
Percent
FDI (% GDP)
GDP growth
Source: Arab Investment and Export Credit Guarantee Corporation; World Bank; Milken Institute.
Intra-regional FDI contributes almost 25% of total FDI inflows to the
region
Total and intra-regional FDI inflows , MENA
0
20
40
60
80
100
120
1995 1997 1999 2001 2003 2005 2007 2009 2011
US$ billions
Th
ou
san
ds Total FDI to MENA
MENA intra-regional FDI
Source: World Bank.
Use of mobile technology surged in in second half of 2000’s
Number of cellular subscriptions per 100 people
0
20
40
60
80
100
120
1995 1997 1999 2001 2003 2005 2007 2009 2011
Per 100 people
Latin America
MENA
South Asia
SSA
Source: OECD/DAC.
Ten-percent of total official development assistance (ODA) goes to
the MENA region
0
20
40
60
80
100
120
140
160
1997 1999 2001 2003 2005 2007 2009 2011
US$ billion
World ODA
ODA to Middle East
ODA to North Africa
Source: WDI.
The region is more dependent on tourism than others
International tourism, receipts (% total exports) 2010
0
5
10
15
20
25
MENA (non-GCC)
MENA Sub-SaharanAfrica
Euro area OECD LatinAmerica
East Asia
Percent
Source: IMF.
Many MENA countries have unemployment rates over 10%
Unemployment as a percentage of total labor force, 2012
0
2
4
6
8
10
12
14
16
18
Morocco Sudan Egypt Jordan Iran Tunisia
Percent
Source: World Bank.
MENA: large gender gap in workforce participation
Labor participation rate, % of female and male population 15+
0
10
20
30
40
50
60
70
80
90
MENA South Asia OECD Latin America SSA East Asia
Percent
FemaleMale
Source: World Bank.
Instability is increasing in many MENA countries
Political stability and absence of violence/terrorism index (-2.5 = greatest instability)
-2.5
-2
-1.5
-1
-0.5
0
0.5
1
1.5
Yemen Syria Lebanon Iran Israel Egypt Libya Morocco Jordan SaudiArabia
UAE
20111996
Political Stability Index
Source: World Bank.
Cost of doing business in MENA is steadily decreasing
Cost of business start-up procedures, % of GNI per capita
0
20
40
60
80
100
120
2004 2005 2006 2007 2008 2009 2010 2011 2012
MENA
East Asia and Pacific World
OECD
Percent
Source: Milken Institute.
The investment environment in several MENA countries is far from
optimal
Global Opportunity Index rankings, out of 96 countries (1=best environment for investment)
30 33 3439
51 51
71
91
0
10
20
30
40
50
60
70
80
90
100
Oman Israel Kuwait UAE Jordan Tunisia Egypt Lebanon
Rank
Source: World Bank.
MENA region burdened by difficulty in doing business
Ease of Doing Business Index, 2012
0
20
40
60
80
100
120
OECDmembers
Euro area East Asia &Pacific
World Middle East &North Africa
Latin America& Caribbean
Ease of doing business index (1=most busienss-friendly regulations)
Source: World Bank.
MENA surpasses many other regions in domestic investment
Gross capital formation (% GDP), 2011*
0
5
10
15
20
25
30
East Asia &Pacific
Middle East& NorthAfrica
LatinAmerica &Caribbean
World Euro area OECD NorthAmerica
Percent
Note: * MENA data from 2010.
Source: IMF.
International reserves in MENA: mostly positive changes in 2012
Percent change in international reserves, 2011 and 2012
-100
-80
-60
-40
-20
0
20
40
60
80
100
120
Qatar Yemen UAE SaudiArabia
Tunisia Kuwait Lebanon Algeria Oman Sudan Morocco
Percent
2011 2012
Source: World Bank.
Export diversification is needed in the Middle East
Exports composition, 2011
0
10
20
30
40
50
60
70
80
90
100
Iraq Kuwait SaudiArabia
Yemen Oman Qatar UAE Syria Egypt Tunisia
Percent Fuel Manufacturing Other
Source: Emerging Markets Private Equity Association.
Distribution of emerging market private equity investment by
region
2012
0
2
4
6
8
10
12
14
16
Emerging Asia Central andEastern Europe
Latin America MENA Sub-SaharanAfrica
US$ billions
Th
ou
sa
nd
s
Source: World Bank Global Financial Development database.
Developing regions are still underbanked
Bank accounts per 1,000 people, 2011
0
100
200
300
400
500
600
700
800
900
1,000
Euro Area Highincome
LatinAmerica
DevelopingMENA
Middleincome
DevelopingAsia
Sub-SaharanAfrica
Usama Fayyad, Executive Chairman
usama@oasis500.com Twitter: @usamaf
Kick-starting a Technology Entrepreneurship Ecosystem
in MENA: The Oasis500 Experience and Initial Results
Some Questions
• What do you need to have an “entrepreneurship ecosystem”?
• Why is it that our region does not produce large/valuable companies in IT?
• What are the real issues that must be addressed to create a healthy environment for tech startups?
• Why are most incubators in the region a failure?
• Are we missing entrepreneurs? Can entrepreneurship be learned?
The “Kitchen Cabinet”
• HM King Abdullah II of Jordan assembled a group of business leaders for informal discussion
• His rules:
–Private sector only, no government
–Answer the tough questions
–Propose a plan
–Implement as soon as possible
Current Funding Gaps in the MENA Region
Seed /Early stage Funding
Angel Funding
VC/Later Stage Funding
X
X
32
Many options for growth capital for Post-revenue later stage funding
• Venture capital firms, Private equity funds, banks
No options for funding for Pre-revenue start-ups or seed/early stage funding
• The initial personal/family funds raised by entrepreneurs
• Entrepreneurs face a harsh DESERT after starting work on an initial idea when it comes to:
•
• Few ever make it across this desert
Many great ideas never get a chance, and others are discouraged from even attempting when they see no survivors…
The Early Stage Desert Challenge
Training Boot Camp
Train entrepreneurs on business management, business planning and venture fund-raising – How to pitch
Designed to educate, stress test, and select
Startup Funding & Acceleration/Incubation
1st investment ($ 30K ), with possible follow-on investment
Funded companies are accelerated for 4 months
Mentorship
Incubated companies are mentored by local and international industry experts (e.g. Silicon Valley) – 250+ mentors in network
Angel Network Oasis500 invites investors to well-prepared investment opportunities
Oasis500 may co-invest in some of these deals
Oasis500 operates 4 major activities to address the missing gaps in the ecosystem:
1
3 4
2
Oasis500 – What We Do?
Existing Companies Investment Track “Grow”
Investing in already established companies seeking to grow their business for up to USD $ 500 K
5
Oasis500 - It is Not Just About Funding
• Oasis500 not only provides seed
capital for companies, it adds unique
value by offering entrepreneurs:
– Intensive training (boot camp)
– 100-day acceleration plan with
continuous guidance/follow-up
– Valuable mentorship and guidance
from industry leaders
– Help in raising follow-on capital
• Such mentorship has been proven to
increase the likelihood of startup
success
35
Oasis500 – What We Do?
1 Training Boot Camps
• Developed an intensive and widely comprehensive training curriculum for our boot camp
• Graduated 18 waves of
entrepreneurs from our training boot camp (1 of which was held in Palestine)
• Trained 900 entrepreneurs
(Target for year 1 and 2, 150 entrepreneurs)
Oasis 500 – What We Do?
37
Angel Network
4 Angel Investor Network
• Held 9 Angel Network Events
(Amman, Dubai, Qatar)
• 5-9 companies pitch per event
• 80-120 investors attend per event
from all over the region - 400+ network
• 36 companies presented in total, 26 of
which were Oasis500 startups
Oasis500 – Seed Funding & Acceleration
Since September 2010:
38
Invested in selected entrepreneurs from
Wave 1-16, 58 companies (Target for
years 1 and 2, 32 companies)
average investment USD $30K
2 Startup Funding & Acceleration
• Developed an intensive and widely comprehensive training curriculum for our
boot camp
• Trained 900+ entrepreneurs (Target for year 1 and 2, 150 entrepreneurs)
• 250 engaged mentors in the Oasis500 Mentor Network ( avg4 /company)
• 20 Oasis500 companies attracted nearly USD $15M follow-on investments, 3
currently closing
• At valuations 3x to 10x Oasis500’s initial valuation before 100-day
acceleration program
• Investment offers range from $200K to $2.5M
• 25 % of trainees are women entrepreneurs, and 40% of investments are lead
by women
Oasis 500 – Achievements Two years of Operation 2010 - 2012
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