The Arab world has always been a place where knowledge is valued: the place where algebra was invented and the home of the world’s first university and hospital. Indeed, the ancestors of the Lebanese — the Phoenicians — invented the alphabet.
Papyrus is named after the Lebanese city of Byblos due to its crucial role in exporting the paper on which scholars wrote throughout the Greek Empire. The most prestigious law school of the Roman empire was also situated in Beirut.
Yet, despite past glories, few would argue that the region is at the forefront of ideas and innovation today. A 70-year addiction to oil has resulted in a long-running lack of investment in research and development, the engine of any thriving knowledge economy. In recent years, Arab countries only allocated between 0.03 per cent and 0.73 per cent of their GDP to R&D — compared to EU countries at 1.98 per cent, or Japan at 3.39 per cent.
Without more investment in research, producing world-beating technology companies will be very hard.
The formula for producing successful R&D is well known. Those countries that have successfully developed knowledge economies have done it through collaborations between industry, entrepreneurs and academia. The chemistry between these players tends to spark innovation; sometimes generating whole new sectors.
For instance, the science of gene splicing, which became a widely licensed patent and one of the main tools of the whole biotech industry, was the result of such a tie-up.
Stanford University helped create Silicon Valley by encouraging close interaction between academics and early stage companies that based themselves in their science park, helping incubate giants like Hewlett-Packard and Google. US universities adopting this model of collaboration have spun off nearly 5,000 start-ups since 1980, and university and non-profit patent licensing has created 3.8 million jobs.
In the UK, Cambridge University has helped spawn more than 3,000 companies since it founded its own Science Park.
However, despite a lack of R&D funding in the Middle East, a recent report published in partnership between ArabNet and Dubai SME shows that the animal spirits are awakening. Investments in start-ups are booming. More than $900 million was invested in MENA technology start up funding in 2016 alone, more than the value of all investments between 2013 and 2015 combined.
The investor community seems to be heavily concentrated in a few countries. The UAE is home to about one-third of all investors; Saudi Arabia and Lebanon combined account for another third; and all other countries together make up the remaining third of the investor pie.
What is noticeable however is that Lebanon, a relatively small country, had 37 investment deals in 2016, the second highest number of all the MENA countries.
It has long been known that Lebanon has all the ingredients to incubate technology companies — excellent STEM education, an inward flow of talent, a liberal ethos and a lifestyle suited to young people (like the Bay Area, we also have a coast). Lebanon’s Central Bank has addressed previous problems with funding under its Circular 331 scheme, which guarantees 75 per cent of a bank’s investment in a start-up and gives them seven years of interest-free credit if they invest in the knowledge economy.
Most important, however, is the entrepreneurial mindset of Lebanon’s young population. According to the 2015 Global Entrepreneurship Monitor report, nearly 70 per cent of young Lebanese see themselves as having the qualities to start a business. Thirty per cent of those of working age are running a business or about to start one — a much higher proportion than the West.
Lebanon also came fourth worldwide in Total Early Stage Entrepreneurial Activity in the GEM report.
But perhaps what is most exciting about Lebanon’s start up scene is the establishment of a new International Research Centre (IRC) for tech, supported by £2.5 million from the British government, that will connect Lebanese universities with the global tech industry and other universities around the world. This is a first for the Arab world — a small but very significant sign that the Arab world is waking from its R&D slumber.
The IRC’s first project is a joint venture with the Lebanese University and CERN to produce a more efficient irrigation system that cuts irrigation costs from $500 to under $80 per hectare and saves unto 20 per cent of water consumption.
The second project, announced in the last few weeks, is the development of ediamond (Electromagnetic Diabetes Monitoring Device): a one of its kind non-invasive blood glucose-monitoring device for diabetes patients, which is being developed by the Maroun Semaan faculty of Engineering and Architecture and the Faculty of Medicine at the American University of Beirut (AUB).
With half of the population under 25, Lebanon needs to create six times the number of jobs currently vacant in order to employ those entering the job market year by year. Such opportunities, especially for those with degrees, would also diminish the number of young Lebanese emigrating to start careers abroad.
All this requires an improved R&D capacity — the missing link that could turn Lebanon’s thriving start-up scene into the Arab world’s leading technology centre.
The writer is Chairman of the UK Lebanon Tech Hub and a former minister of telecommunications in the Lebanese Government (2011-14).