Local Economic Growth Will Propel Arab Spring Nations


Political upheaval has left many Arab economies undeniably weak. In Egypt, for instance, tourism is down, poverty is up, and foreign direct investment (FDI) has dropped hard and fast. PolicyMic contributor David Dietz writes that foreign investors require, above all else, stability. Unfortunately, stability is hard to come by in the Arab world today.

It is exactly for this reason that Egypt – and the other Arab Spring nations – should forgo efforts to attract foreign companies at present and focus on tapping into the wealth of talent they have at home. The Arab region is teeming with potential for budding entrepreneurs.

The benefits of fostering local entrepreneurship in this region are boundless. The OECD Centre for Entrepreneurship, SMEs, and Local Development claims that entrepreneurs are a vital component of market economies. They “ensure the efficient use of resources, create employment opportunities, and help expand boundaries of economic activity.” Globalization and new technologies allow small and medium-sized businesses the opportunity to make a larger economic impact.

Their potential is so great, Arab countries are attracting a global network of actors, who are eager to develop a strong start-up culture. The NexGen IT Entrepreneurs Boot Camp – organized by agencies of the U.S., Danish, and Egyptian governments – was held earlier this month. This mentorship program, led by young American and Danish entrepreneurs, was aimed at teaching “Egyptian youth how to turn a simple idea into a viable business in the IT space.”

For governments, local entrepreneurship is a viable and positive alternative to FDI. Doubt over security and stability in the current political climate make foreign investment an unreasonable goal. The argument that foreign companies entering post-conflict markets will bring development and new jobs is unsound. In post-Saddam Iraq, the foreign companies granted oil contracts were greatly criticized for failing to benefit Iraqi communities. China National Petroleum, rather than hiring and training local people, imported its workforce. Iraqi hopes for employment were dashed, as were the hopes of reaping the financial benefits from their oil fields. Local provinces’ demands for a $1 per barrel royalty – to allocate toward public needs including schools, roads, health services, and clean water – also fell on deaf ears.

New and reforming governments in this region should not mourn the loss of foreign investors. They should instead recognize the opportunity, and necessity, to foster local entrepreneurship that would directly benefit the communities.

Still, there are challenges. It needs to be easier to start and build businesses. In Egypt’s metropolitan areas – Cairo and Alexandria – it takes more than 25% of one’s annual income to open a business, which stifles economic growth. Moreover, the difficulty of maneuvering tax codes and accessing finance smothers potential entrepreneurship. Governments need to streamline their processes, get creative, and offer incentives for regional actors to invest in local economies.

By empowering communities at home through entrepreneurship, Arab individuals can own not only their political revolutions, but they can also take ownership of the nations they are helping to rebuild.

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