Roundup: MENA ICT Forum 2013

It’s easy to dismiss industry shindigs like the MENA ICT Forum as mere talking shops, where insiders go to schmooze, tuck into hearty buffet lunches, and idly flick through mountains of fancy promotional brochures – all in five-star surroundings. But if you took the time to cut through the glitz of this year’s forum, you would have found a wealth of information on offer that combined to paint a pretty accurate picture of where Jordan’s ICT sector stands at the moment, and where it needs to head next.

There were many highlights at this year’s event, including a 4G demonstration by Zain and an impressive showcase of Jordan’s first PlayStation-powered supercomputer. But while these were all exciting in their own way, arguably the forum’s most important announcement was an update on the National ICT Strategy, the blueprint for a sector that accounts for 14 percent of Jordan’s GDP.

Using a refreshingly brief and concise presentation, INTAJ’s CEO Abdul Majeed Shamlawi listed the strategy’s achievements since it was launched in 1999. “We’ve come a long way. We started off with low numbers in mobile penetration, low numbers in revenues, low numbers of companies,” he explained to delegates at the start of the forum held at the King Hussein Bin Talal Convention Center.

 

INTAJ CEO Abdul Majeed Shamlawi

 

REASONS FOR CHEER  

There were just 20 ICT companies back at the start of the strategy, compared to between 450 and 500 today. Annual industry revenues have risen steadily from $560 to around $2.5 billion over the same period, while Internet penetration shot up from roughly 4 percent to 63 percent. Still, levels of investment in the sector have been disappointing of late, falling from $328 million in 2010 to around $205 million now. Shamlawi largely blamed this on a cash-strapped government slashing spending on ICT projects over this economically tough period.

Shamlawi then moved on to the draft aims for the 2013 – 2017 phase of the strategy, which his organization is busy finalizing with the Ministry of ICT. The main targets involve boosting investment to $450 million, revenues to $3.15 billion, Internet penetration to 85 percent, and direct employment from around 1,500 to 20,000. Shamlawi is confident these targets can be met. “Our revenues are expected to grow, our investments are expected to flourish, and so are our employment and Internet penetration,” he said, adding this was all to be achieved in large part through export-led growth to key markets around the world, such as the United States, Saudi Arabia, and Africa.

Given the sector’s performance so far, many in the industry agree these targets are realistic and can be comfortably achieved. If anything, the Internet penetration projection seems fairly modest given the rapid uptake of broadband. But while the facts and figures outlined in Shamlawi’s presentations are encouraging, they don’t tell us how the individuals tasked with making them a reality are faring. How are the tech entrepreneurs, the very lifeblood of the industry, finding life on the frontline?

PITY THE ENTREPRENEUR?

Oasis 500 CEO Usama Fayyad told Venture the ICT sector as a whole was feeling pretty bullish. It’s filled with companies working on “greenfield” market opportunities, whichtherefore face much less competition than they would operating in more mature markets. Furthermore, he said his organization was on track to achieving its main goal of funding and incubating 500 companies between 2011 and 2016. They’ve made about 60 investments so far, when according to their initial projections they should have been at just 35. 

But even so, Fayyad stressed it’s not all been plain sailing, and that finding early stage investors for tech startups was still tough. “This is my biggest worry –this zone after you have got your initial investment and maybe some angel funding and before you qualify for venture capital or private equity,” Fayyad said. “Many of our investors in the Middle East are unfortunately late-stage investors. They want to see profits before they put in the money, which means the returns will be lower, but they want to take less risk.”

 

Oasis 500 CEO Usama Fayyad

 

Even with all the glowing exposure that Oasis 500 has enjoyed over recent years, it’s still only raised $7 million. They’re going to have to work hard and fast to raise the $30 million needed to hit their ultimate target. “There’s this misperception that investment funds are available – they are not. Entrepreneurs today thinking about finding somebody to back them to start a company have a very difficult task,” Fayyad explained.

Heba Mansour hardly needs reminding of this. She is the founder and CEO of Sajilni, an online e-ticketing and events promotion platform that began operating in March of last year and has sold over 11,000 tickets so far. She attended the forum in the hope of attracting anything between $200,000 and $350,000 in investments to add to the JD15,000 her company was already given by Oasis 500 as part of its program.

She wants to use the extra funds to expand her company’s services regionally – a move very much in line with the National ICT Strategy’s new export-focus drive. But this jump is proving to be harder than she envisioned. “I’m a bit frustrated because we have been trying to raise capital for about eight months now,” she said. “We build a prototype, we prove the thing is working over here and now once we’re ready to take the next step, there aren’t investors. Where’s the money?”

Founder and CEO of Sajilni Heba Mansour

FADI’S ADVICE

Aramex founder and all-round entrepreneurship guru Fadi Ghandour was also at the forum to offer his insight and guidance. He said he understood the frustration felt amongst many young entrepreneurs – but only up to a point. 

“They are the people who are going to leverage the infrastructure and benefit from that infrastructure that has been built – it just takes time. So they’re impatient because that is the nature of the beast of entrepreneurs and entrepreneurship,“ he said. “But it also depends on the entrepreneur and their business. Not every business that an entrepreneur comes up with is viable. Also by definition, a lot of startups go out of business.”

Even so, Ghandour conceded access to funds was still a major problem for tech startups. He said the government would be wise to arrange guarantees—not loans—with banks so that entrepreneurs could access affordable capital. Fayyad said Oasis 500 was trying to address the gap between early stage and late stage investment by launching a new funding and incubation track tailored for established businesses. But like Ghandour, he still says government funding is “nowhere near where it needs to be,” and called for the creation of funds that make it easier for emerging companies to get financed through one mechanism or another. “So rather than invest in creating 100 jobs, create 100 companies,” he said, urging officials to think of long-term rather than short-term gains.

Both Fayyad and Ghandour will no doubt have been buoyed by the news last month that the World Bank granted Jordan $70 million in financing to help it extend small loans to entrepreneurs in deprived parts of the Kingdom. But this still won’t be enough to help the National ICT Strategy realize its aims for years to come. For this to happen, INTAJ’s Shamlawi believes the industry needs to graduate from the organic growth of the past to more “pushed” or accelerated growth. He wants the industry to shift its focus from mere export promotion to export development, which would work on improving the export readiness of Jordanian tech companies. In short, exports will be key to the ICT sector’s future success. Everyone will no doubt be back in 2105 for the next MENA ICT forum to see if this is being achieved.