Jordan's Dream: Is it enterprise-friendly?

Hardly a week seems to go by in Jordan without some high-ranking government official or influential business figure praising the plucky entrepreneur. If properly nurtured, their thinking goes, these bold individuals will lead us to a future where the Kingdom’s economy can finally stand on its own two feet. But are they getting the support they need?

By Laith Abou-Ragheb. This article first appeared in Venture magazine.

It’s no secret that too few people read books in the Arab world. But three young men from Jordan are now striving to reverse this sad trend. Zaid Manasra, Nidal Hannoun and Ma’moon Hattab, 2009 graduates of the Jordan University of Science and Technology (JUST), have developed what they describe as an online e-reading system that will operate on multiple formats and platforms.

“It will make reading and reaching books much easier for Arabic citizens,” said Manasra. They already have a working prototype of an e-reader that will complement the system, and are now looking for funding for further research and development. So far, their idea has attracted support from several organizations, including the Queen Rania Center for Entrepreneurship, which awarded them its much-coveted annual award.

Manasra appears pleased so far with the level of assistance his team has received. “Compared to many neighboring countries, Jordan is considered one of the most entrepreneur-supportive,” he said. “This has been proven by the existence of several government initiatives that we have personally benefited from.”

The support system

Manasra and his friends could be held up as an example where the institutional support for entrepreneurs was largely forthcoming. But how do things fare in the broader picture? Is enough really being done to help these bright young minds achieve their full potential?

“Entrepreneurship in Jordan is on the right track,” said Marwan Juma, the Minister of Information and Communications Technology. “We are seeing higher maturity levels reflected by more success stories and a growing number of up and coming entrepreneurs with world-class ideas seeking funding and mentoring.” He stressed this expansion particularly applied to the Kingdom’s ICT sector, with its low capital requirements and attractiveness to tech-savvy youngsters.

But before we delve any deeper, perhaps it’s appropriate to pause for a moment and outline what’s really at stake here. The importance of entrepreneurs to Jordan, with its scant natural resources, poverty and unemployment, has been stated countless times before – but still, it bears repeating.

“Entrepreneurship carries with it the possibility of exponential economic growth,” explained Nayef Stetieh, the President and CEO of the Business Development Center. “Not only do entrepreneurs create much-needed jobs in their local communities, they also have the potential to spur technological innovation as they strive to increase their competitiveness. Such technical innovation can, in turn, lead to new businesses and even more opportunities.”

Stetieh cited Samih Darwazeh, the founder of Hikma Pharmaceuticals, as a classic example of a Jordanian entrepreneur who managed to create a world-class business through “vision, expertise, courage and hard work.” While in the main, he believes the Kingdom currently provides excellent opportunities for aspiring entrepreneurs, with his own organization supporting them through the United Nations Conference on Trade and Development’s Empretec program.

Statieh added his organization also works alongside the USAID-funded Tatweer initiative, whose past efforts have included providing computer training to small to medium enterprises, helping them develop on-line purchasing capabilities and connecting them with international technical expertise.

Stetieh’s Business Development Center isn’t the only body that offers help to entrepreneurs in Jordan – there’s also the Information Technology Association of Jordan (INTAJ), the Jordan Enterprise Development Corporation (JEDCO), the Young Entrepreneurs Association (YEA), the National Fund for Enterprise Support, the Injaz program, as well as the aforementioned Queen Rania Center for Entrepreneurship.

Then there are the Kingdom’s entrepreneur incubators. These include the iPARK technology incubator at the Royal Scientific Society campus. And of course, it’s also important to note the new Oasis 500 seed capital fund, which Juma described as a “major undertaking that could transform the country’s landscape.”

But despite all the efforts of these organizations and programs, other experts in the field still feel entrepreneurs aren’t getting all the backing they need in Jordan to reach their full potential. “I think we need improvements at all levels in order to create a new entrepreneurial ecosystem. This consists of many elements, you can’t just focus on one and forget the others,” said Mohamad Khawaja, who until recently was the Executive Director of the Queen Rania Center for Entrepreneurship.

As evidence for his concerns, Khawaja pointed to this year’s edition of the respected World Bank Doing Business report. In it, Jordan was ranked in 13th out of a total of 19 countries surveyed in the MENA region for the ease of starting a business – and this in a state where small to medium enterprises make up the vast majority of companies. Egypt, Tunisia and even Yemen were all listed in the report as places where it was simpler for entrepreneurs to get up and running.

“This report reflects that we’re not improving fast enough,” said Khawaja, who is now a business development manager for the Internet holding company, N2V. For his part, Manasra sees official red tape as a serious problem, in that it can gobble up precious time and money, and perhaps even stop entrepreneurs in their tracks completely.

“Bureaucracy…often represents a kill point in the life of a start up,” Manasra told Venture. “Government operations and procedures concerning entrepreneurs and start ups should become easier, quicker and smoother.”

Diagnosing in detail

In its defense, the Jordanian government does at least appear to be taking steps to improve the situation, particularly in terms of adjusting the regulatory environment. Juma said his administration is working hard to make it simple for new start ups to register and operate a company with limited resources.

In late June, for example, the Minister of Industry and Trade announced that the government soon planned to allow Jordanians to operate businesses from their homes. Furthermore, they might only have to hand over a paltry JD1 to register a company.

The World Bank report also rated Jordan in 12th place regionally in terms of the ease of closing a business. Juma said a new insolvency law was in the works which would address how companies can exit a market quickly and efficiently in the event of liquidation. “This is very important for all investors, regardless of size or scope,” he said.

Of course, it remains to be seen whether all this will encourage Jordanians to become more entrepreneurial. But evidently something has to be done to convince more of them to make the leap. For an indication of just how pressing this matter might be, we can look to a recent report published by the Qatar-based Silatech initiative, which aims to support large-scale job creation, entrepreneurship and access to capital for young people across the Arab world.

Earlier this year, Silatech teamed up with Gallup to produce a far-reaching survey of 20 countries that are members of the Arab League and the Somaliland region of Somalia. In one poll on entrepreneurship, Jordan was ranked last, with only 9 percent of respondents in the Kingdom indicating they were planning to start their first business within the next 12 months. Compare this to Sudan, where the figure was 45 percent.

So how can all this be remedied? As far as Khawaja is concerned, there are several big issues that need to be singled out and tackled. The most pressing concerns Jordan’s universities, the potential birth place of future entrepreneurs.

“Our universities are still set up in an anti-entrepreneurial way… University professors need to be educated in what makes an entrepreneur,” Khawaja said. “We’re not really educating our entrepreneurs enough to think of their research and intellectual property as having potential for commercialization. If you don’t commercialize technology, you kill a whole stream of entrepreneurship development in the country.”

Juma conceded there was some truth to this. “We have a critical missing link in the value chain system of idea/innovation commercialization,” he said.

Khawaja said he visited a lot of universities during his time at the Queen Rania Center for Entrepreneurship, and was disappointed with many of the final year projects he saw being undertaken by students. In his view, they need be pushed to think more dynamically. “If we want to create YouTubes, Twitters and world class businesses, we have to invite our students to be disruptive and try something different,” he said.

Khawaja also said changes need to be made at the incubators that are located on campuses around Jordan, the number of which have grown significantly over the past five years. Specifically, he believes too many are helping start-ups that haven’t sprouted from the student body itself. “I’ve visited all the business incubators in all of Jordan’s universities, I know them very well. Each time, I’ve found people there who are outsiders, not students,” he said.

Furthermore, he suggested that a time limit should perhaps be set on how long a start-up can remain under the protective wing of an incubator. This would free up space and resources for other entrepreneurs to try their hand at developing an idea.

As for mentorship, Khawaja said there simply isn’t enough available to entrepreneurs. “There are great efforts happening on line, like Arabcrunch.net, which is a community for entrepreneurs that offers advice on such matters as how to get in contact with investors. But to be honest, you need mentors on the ground,” he said.

All about the…

Then there’s the awkward matter of money. According to Khawaja, entrepreneurs around the world areusually faced with two options when it comes to finding funds to develop their ideas. They can either secure seed capital from a central government or from an angel investor. Khawaja identified severalproblems in this regard. He said the government and other entrepreneur-supporting organizations are often reluctant to provide funding for ideas in the first stages of development.

“A great missing part of our ecosystem is the early-stage risk capital. It’s something everyone is talking about but no one is addressing,” he said. As for subsidies, Khawaja said these were on the whole given to small and medium enterprises, which in Jordan usually refers to companies that have five existing team members and have been operating for at least six months. “But this means it’s hard to find subsidies to fund the process of getting a young entrepreneur’s idea off the ground,” he said, adding that officials should also make access to incubators and seed funding more integrated.

Moving on to the matter of angel investors, Khawaja said they exist in significant numbers in Jordan, but that a more efficient method of utilizing them was needed. “We have a list of angel investors, but not an active network yet,” he explained. “On an ad hoc basis we introduce them to entrepreneurs and good investment deals happen. But there would be more if there was a real network.”

With a fully functioning network, Khawaja argues, the syndication of deals could be reached far easier. He suggested that a panel of investors could meet on a regular basis, which would mean that multiple investors could team up to support one or more projects presented to them.

Cultural hurdles

Jordan is trying to set itself up as an ICT hub, and tech entrepreneurs are going to prove crucial in its effort to one day compete alongside the likes of India and Singapore. But worryingly, Khawaja said, the Kingdom is still lagging behind in the domain of supporting web start-ups. “We’ve been trying to call and brand Jordan as the Silicon Valley of the region. But I have to admit that there’s a long way to go,” he said.

For example, he identified mobile applications as a white-hot sector of the global ICT scene. But while applications developers are already mushrooming in Saudi Arabia and Egypt, the first ever workshop in Jordan on the topic has just recently been slated to take place this summer.

Also, Khawaja saw cultural factors holding entrepreneurs back in Jordan, a country where many people are conservative and risk-averse when it comes to investing time and money into endeavors which don’t fit the traditional mould.

Manasra summed this up neatly and offered a potential solution. “Arab society in general, and not just in Jordan, leans toward the idea of financial security that’s achieved through stable employment, and doesn’t have that much faith in, or give support to, entrepreneurs and the idea of starting your own business,” he said. “Sufficient and effective awareness media campaigns could help in resolving the situation.”

Khawaja agrees that this naturally cautious mindset has to change. “Our biggest opportunity is to inspire kids while they’re at school to try something and to prove to their parents that they can do something,” he said.  He noted that the sale of Maktoob to Yahoo last year developed a positive “buzz” and clearly demonstrated what Jordanian entrepreneurs are really capable of. But according to him, there are still sections of Jordanian society that remain oblivious to Hussam Khoury and Samih Toukan’s entrepreneurial brilliance.

Regardless of what happens next, everyone appears to at least agree that entrepreneurs have become a permanent feature of Jordan’s economic landscape. But the challenge now facing all concerned is to find ways to build on past successes and convince more Jordanians of the true meaning and importance of taking an innovative idea and developing it into a viable business venture.

Manasra said: “Being an entrepreneur is more like a lifestyle rather than just having your own business, and it’s becoming more important and necessary, especially in the current world economics. So for those who aren’t thinking of becoming one, we say: think again.”

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