Unknown to most American investors, a quiet tech revolution is building in the Middle East.
Ignited in late 2014, this “Beast of the (Middle) East” is gradually inching its way towards a seat at the big kids’ table – and closer to the current leader of the pack…
And thanks to some recent generous developments (read: monetary backing), it’s picking up the pace.
As Mike Butcher of Tech Crunch puts it, “Beirut is rapidly shaping up to be a powerhouse for startups in the Middle East. It has many of the key elements: a highly entrepreneurial culture; incubators and accelerators; venture capital; some gradually favorable government policy; and access to growth funding.”
Now, it’s not about to knock Silicon Valley off the throne anytime soon… but it’s certainly modeling itself on the essential elements of the renowned Californian tech hub.
Indeed, the pro-growth initiatives of Lebanon’s Central Bank, plus the United Kingdom, and major venture capitalist firms are positioning Beirut as the future “Silicon Valley of the Middle East.”
Here’s the proof…
Beirut’s Tech Pot Is Growing
Attention – and, more importantly, a glut of new funding – is flowing towards Beirut, in hopes of establishing it as a new tech hub for the region. For example…
- Middle East Venture Partners (MEVP), Berytech Fund, and LEAP Ventures have “each raised at least $50 million.”
- Beirut-based Leap Ventures recently announced a new $71-million venture capital fund focused on the Middle East and North Africa (MENA) region.
- Further pushing the agenda of the tech ecosystem, Lebanon’s Central Bank promised to invest up to $400 million into the startup economy via its “Circular 331” initiative.
- Even Britain is jumping in to boost the area’s tech presence. Tom Fletcher, the former Private Secretary for Foreign Affairs to the Prime Minister (also the current U.K. Ambassador to Lebanon), is championing a new initiative aimed at bridging startup communities between Lebanon and the U.K. The project is referred to as a U.K.-Lebanon “Tech Hub.”
So far, so good, right? Not quite…
One Man Standing in the Way
There’s just one problem. His name is Abdel Menhem Youssef – a man whose policies could really bottleneck Beirut’s growth.
He’s Chairman of the Board of Directors and General Manager of government-owned Ogero, the main operator “of the fixed telecommunications network in Lebanon for the benefit of the Lebanese Ministry of Telecommunications.” That includes telephone services, digital services, and the internet.
He’s also the Director of Investments and Maintenance at the Telecommunications Ministry.
Youssef has proven quite influential as a one-man army. But not in a good way.
His immense influence poses a threat to all the pro-tech hub folks.
For example, despite the thousands of people (politicians included) who attended Lebanon’s first international startup conference in late 2014, Banque du Liban Accelerate, he was not one of them.
You’d think a guy like this would be one of the first ones in the door. So what’s his deal?
A Conflict of Interest
In short, critics have deemed Youssef as either incompetent or an “idiot.” Take your pick.
Right now, for example, he’s overseeing an average internet speed of 3.11 megabits per second (Mpbs) in Lebanon. That’s comically slow. To put that into perspective, its Middle Eastern neighbor, the United Arab Emirates, boasts an average speed of 27.9 Mbps.
It makes no sense for Lebanon to sit on its hands, either. Studies show that Lebanon could improve its gross domestic product (GDP) by 0.6% if it doubled its bandwidth. A 0.6% GDP boost is decent for any country, but for Lebanon, it could really help an economy with a war on its doorstep, not to mention a refugee crisis.
But with Youssef calling the shots, that’s not happening.
In 2011, the country tried to improve the speed dilemma by connecting to the India-Middle East-Western Europe (IMEWE) maritime cable. But Youssef sabotaged that, too – managing to block the “utilization and distribution of the IMEWE and other cables that have been hooked up,” according to TechCrunch.
Right now, of all the currently available internet cables, a shocking less than 10% is made available to the market.
And the blame is going right to Youssef’s Ogero Empire. TechCrunch’s Mike Butcher says, “The company is responsible for distributing the boosted internet capacity enjoyed from the IMEWE to different internet service providers, as well as building the network. It also sells internet access directly to consumers… So the body charged with widening broadband internet is directly hindering the development of Lebanon’s internet economy, and ultimately the development of the country.”
What Lebanon really needs are more E1 lines. They’re technically what give us internet bandwidth. Purchased on a monthly basis, they provide two Mpbs to each line.
Now, you’d think that as the Director of Investments and Maintenance at the Telecommunications Ministry, Youssef should support the purchase of E1 lines to increase internet speed, while lowering costs for the citizens and internet providers (ISPs). But that’s not happening.
As GM of Ogero, he shuts it down. He refuses to sell the E1 lines to ISPs for $420 per line. This forces ISPs to pay between $800 and $1,000 through private sector sellers. Why would Youssef want to do this?
Well, Ogero is allegedly reselling them to Alpha, Touch, as well as illegal ISPs and digital service providers (DSPs). Per Khaldoun Farhat, CEO of ISP Terranet, “They [Ogero] claim that they have ‘X’ number of customers. Admin says this is the capacity you need. So when [they] need more capacity, [they] have to prove that they have more private customers.”
In other words, Youssef doesn’t want anyone dipping into his piggy bank.
But this translates into expensive bills for citizens and slow-as-molasses internet speed for the very place that wants to become an up-and-coming tech hub!
ISPs have lodged numerous complaints and implored Ogero to buy E1. Even the Ministry of Telecommunications has sent Youssef memorandums to that effect. But Ogero – or more specifically, Youssef – isn’t budging.
Former Caretaker Telecommunications Minister, Nicolas Sehnaoui, has even accused Youssef of forcing the state treasury into a $500,000 loss every month, due to his intransigence.
Who knew one man could enrage such a large group of people? And the people aren’t happy…
People Fight to #FreeTheBandwidth
A couple of years ago, Lebanese citizens stormed social media with a campaign against Youssef’s faulty internet policies, using hashtags like #FreeTheBandwidth. The goal was to bring awareness of the situation to politicians, and prompt influential donors and lawmakers to end this illegal and unfair structure.
But Youssef has still remained in control… and out of control.
And since Boutros Harb took office as the Minister of Telecommunications in early 2014, he’s certainly had his hands full with Youssef.
When Harb took office, he promised to slash internet and telephone rates. And while he’s successfully reduced local and international call rates by between 30% and 50%, the internet debacle remains… thanks to Youssef’s incompetence and stubborn policies.
As long as Youssef is in office and continuing his shenanigans, it hampers Beirut’s ability to grow its technology sector, as well as its standing as a Middle East tech hub. The next nationwide elections in Lebanon won’t take place until June 2017… at which point, Youssef will hopefully be removed from his position of power.
Meanwhile, banks, venture capitalists, and other influential figures continue to work towards making Beirut a new tech hub, and turning the region into the next Silicon Valley. It may not be tomorrow, but it’s coming!
Where innovation meets investing,