Technology investors and entrepreneurs could help reduce the impact of the expected explosion in unemployment amongst youth in the Arab region, according to experts debating global and regional issues at Davos.

If the baby boom continues at its current rates, the Arab World could have a total population of 598 million citizens by 2050, with 149.5 million of its youth unemployed. The current 25.1 percent unemployment rate amongst this group has to be reduced and this can be done through more technology investments and entrepreneurial initiatives.

Creating a virtuous circle of investing in technology start-ups will have exponential positive impact on the future of the Arab region, both economically and socially, according to Arab business leaders who converged at Davos to debate global issues for a better tomorrow. “Technology” and “digital economy” hold the key to some of the solutions to the escalating problem of youth unemployment.

Dany Farha, chief executive officer of Beco Capital, a regional venture capital firm focused on technology investments in the Arab region, who is attending these intensive discussions said: “If we were to choose one provocative topic from this year’s debates at Davos, for me it would be youth unemployment.”

“This issue of unemployment causes greater disparity between those who have and those who have not, both at an individual and country levels, especially in the Arab region which, at 25 per cent unemployment rate amongst youth, stands to win the top position in the world.”

He said that more investments in technology and the digital economy, both at private sector and government levels will, over the mid to long term, help to alleviate the economic, social and political risks associated with youth unemployment.

Such investments will help create more jobs and create better jobs. At the moment, The Arab region has circa 10x less than India, 15x less than China, 35x less than Europe and 200x times less than the US, invested in venture capital per capita per annum.

“The region’s governments and big businesses have spent their job-creating currency,” said Farha.

“It’s time we close the gap with the rest of the world and increase investment in the technology sector by backing the firms who can invest, coach, support and unlock tremendous value, create valuable white-collar jobs and contribute to improving lives and humanity in our region.”

“Having technology entrenched in our socio-economic system produces multi-dimensional benefits, not least of which are efficiency, transparency and improved quality of life. To me, what is really imposing is the tremendous contribution of technology to employment and GDP growth at the national level,” Farha explained.

An example would be ten technology companies based in the Arab region and with which BECO Capital is intimately familiar, Farha said.

With a collective workforce of 2,600 and a combined enterprise value of over $2.5 billion, generating over $800 million in combined annualized revenues today, these companies either didn’t exist five years ago or, if they did, they were fledgling companies or start-ups employing very few people and generating very little revenues. The technology sector is one of the few sectors that can create this kind of impact this quickly and with modest amounts of capital.

“Compounding is a very powerful mathematical characteristic, when all these companies are growing at between 50-150 per cent annually, and more such companies are being built and succeeding today, you can see how US$800 million can get to several billion dollars in annual revenues in just a few years from now, growing their headcounts and enterprise values in similar fashion,” Farha said.

“These technology companies create jobs and are accretive to the economy, again, a unique characteristic of the technology sector. Whilst they can at times be disruptive, they are mostly creating new value and new demand where this demand was not previously being fulfilled by the old world,” Farha added.

“For the most part, these are white collar jobs which generate an average salary of 5x to 10x that of a blue collar job. This means that the 2,600 workers are the equivalent to 10,000 to 20,000 staff that would typically occupy jobs being created in the old economy of industry and construction. They have a higher purchasing power, buying cars, consumer goods and homes where possible, and support their extended families.”

Building a new breed of technology entrepreneurs and investors will be one of the elements that will close the gap of youth unemployment and economic and social inequality in the Arab region, Farha concluded. – TradeArabia News Service