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