Us and the Rest

Why are economies around the world steadily powering ahead while ours remain stifled?

Six months into 2014, and we’re faced with a mix of good and bad currents shaping both the world and our region. Some of them are old, some are new.

Global businesses are seeing a surge in M&A activity. Hundreds of billions have been booked since January in mega deals spanning health care, telecoms, mining, and technology. This frenzied activity is being driven by several factors. There is a general uptick in developing economies; a prevailing sentiment that the financial system has weathered the storm and that the demons of the euro sovereign debt crisis are under control with fiscally strict governments. The world is on a path to growth, albeit slow and bumpy. The main factor at play, however, is cheap funding. Having restructured their books, banks are sitting on large cash piles and are more than happy to lend. But we are seeing little, if anything, of this bonanza.

Another major trend we see is the rise of Chinese brands as global contenders. Alibaba is in a league of its own in China and is going public in the United States. Huawei challenged the whole telco industry and powers more mobile networks than ever before. Xiaomi mobiles outsell their Apple counterparts in China. The Chinese manufacturer plans to sell 60 million phones this year and penetrate deeper into surrounding Asian markets. If that’s not impressive, I don’t know what is.

But our region is quite distinct and often seems to be in a different dimension altogether. Little seems to be changing for the better. If we look at the net effect, one can strongly argue that we are receding. Our major economies are still oil dependent, cap-ex hungry, and risk averse. It’s still about government-controlled funds and organizations driving activity. Large family conglomerates own most of the retail and hospitality businesses around the region. They’re doing very well at hiring foreign labor and maintaining an ever growing, bank-pleasing, consumption level.

However, the region is anything but short of exporting new brands. ISIS is one brand quickly making its mark in traditional and social media. There are case studies on their social media effectiveness and how well they manage their Twitter exposure to drive their message. It’s quite disheartening to see the biggest stories coming out of the region being about gangs of thugs causing death and destruction.

In all this, we do risk remaining on the sidelines. And the more we wait, the more difficult it is to catch up.

We need the startup and SME trend to pick up and be the next trend in the region. It has been years since pockets of funding and initiatives started. To date, we have nothing to show for this beyond the few players who can’t be deemed startups forever. Most entrepreneurs describe the same macro-structural pains they were facing five years ago. They can rarely find an investor who understands their business and eventually they end up settling just to get the cash and avoid default. Monetization is still a myth to many, and the legal and tax components of operating a company are guaranteed to cripple the strongest of minds.

It’s make or break time for most of the region’s startups and SMEs over the next few years. If they fail, then the only people who will do well will be the organizers of gigantic, three-day conferences with meaningless, flashy titles; promising all the right answers and buffet meals to attendees at the most lavish of hotels. When will we catch up with the rest of the world?