Can startups help economic growth in Arab countries?

Arab countries are placing a big bet on startups to achieve sustainable economic growth. In recent days, great interest and incentives have emerged in this sector from Egypt and the Emirates.

Despite the importance of emerging companies as a driver of economic development today, experts saw the need to be careful not to expose these companies to faltering or going bankrupt, as happened in some international or Arab markets.

Well-established environment in the UAE

Last Friday, November 10, 2023, the UAE Minister of Economy, Abdullah bin Touq Al Marri, announced that his country’s government has worked over the past years to establish an environment that supports the growth and prosperity of emerging companies’ activities, and enhances the access of their products to foreign markets.

Al Marri added that this is through the flexibility of the economic legislative system and the adoption of initiatives that contribute to providing all types of training and qualification, and the necessary financing tools for entrepreneurs, in cooperation with a wide segment of strategic partners locally, regionally and globally.

Egyptian incentives

On the same day, the Egyptian Minister of Finance, Mohamed Maait, stressed that the government is working to stimulate emerging companies and entrepreneurship by imposing a simplified tax, as part of its keenness to encourage investment and open new horizons, to provide more job opportunities for young people, and to promote sustainable economic growth.

Investment generally varies to include the establishment of large companies, medium-sized, small and micro-enterprises, as well as emerging companies that are based on an innovative idea linked to technology and whose goal is to spread in the future.

The importance of startups

Economic analyst, Nadi Azzam, said that emerging companies are a bet horse for the growth of the economy in any country, provided that countries focus on a promising sector or one that is in dire need, and then begin to provide the necessary support to it, explaining that in Egypt, for example, it went to support Start-up companies that promote the advancement of the industrial sector.

He added that the importance of startup companies lies in that they are the engine of the economy, but this is achieved by making the most of them and harnessing them appropriately, calling for giving them more tax advantages and incentives in the country.

Gulf countries

The economic analyst explained that despite the tax incentives announced by Egypt to support emerging companies, their growth opportunities are greater in the Gulf region, especially in light of the foreign liquidity crisis in Egypt, unlike Gulf countries such as the Emirates, which allows greater freedom to obtain any raw materials or manufacturing needs. Or for technology support.

He pointed out that emerging companies are currently focusing on technology, or providing technological solutions in economic sectors, thus providing job opportunities for individuals while generating profits that countries can benefit from by imposing taxes at a later time, for countries that depend on taxes as a basic resource, such as Egypt.

Risks of investing in emerging companies

Azzam Club pointed out that emerging companies in the Arab region must take caution so as not to be exposed to faltering or bankruptcy, as happens in global markets, and therefore with the desire of these entities to expand and spread, it must be accompanied by studying the market well, and very carefully, so as not to be hampered. Midway.

Earlier this week, We Work, a startup owned by Japanese billionaire Masayoshi Son, filed for bankruptcy protection, marking the culmination of a years-long saga that revealed weaknesses in his investment style, damaging his professional reputation beyond recognition. The money he lost, which demonstrates the need for caution when financing and supporting startups in the Arab region.