On a recent trip to Lebanon to speak at the BDL Accelerate 2016 conference, I met many entrepreneurs from impressive startups and executives from large companies who are building businesses in the region.
I was struck by two observations. First, Lebanon has made great progress in establishing a foundation for businesses to flourish since the last time I visited in 1998, including new buildings and business districts. The Central Bank of Lebanon has also introduced new rules to allow financial institutions to both invest more of their capital in startups and to cover the costs of incubators to help give birth to new businesses. Second, I saw there is still much left to do before my ancestral homeland can once again claim to be a center of commerce with a technology-based economy.
Fortunately, with the election of Mr. Michel Aoun to the presidency and Mr. Saad Hariri as Prime Minister, the country has a golden opportunity and a real mandate to put forth a 21st century innovation plan for Lebanon. This plan must be both practical and comprehensive to address the challenges that entrepreneurs, startups, investors, and companies of all sizes face in creating and scaling successful tech-based businesses in the country. While the Lebanese people have a long history of resilience and being able to solve problems on their own, even during times of stress, I believe government action is required in this area will have the biggest impact in the shortest amount of time. In order for Lebanon to achieve significant economic growth and to be competitive on the digital map, this is absolutely essential.
Here are my suggestions for their innovation agenda:
Internet infrastructure. Let's face it – the Internet in Lebanon is abysmally bad! According to Worldwide Internet Speedtests, it's currently ranked 172 out of 198 countries with an average speed of 3.52 Mbps. Other tests show it as low as 1.6 Mbps. And, yet, connectivity is critical infrastructure for building any modern business today. Without easy, cheap and reliable connections to the Internet, teams cannot communicate among themselves and businesses cannot communicate with customers. The building blocks of electricity, cable, fiber and wireless technology are simple enough to identify, but a real and urgent government push is required to get the country fully up and running. Rest assured, this is not a technology issue! Fast internet can be rapidly deployed in just a few months via wireless, and the costs will be miniscule compared to the expansion in markets and revenues for private industry. Lebanon can also take advantage of its last mover status by adopting the absolute best practices and potentially creating the best connectivity in the world. Let's aim for an affordable 20 Mbps within 6 months across Lebanon and minimally 100 Mbps for every business. By contrast, many U.S. homes already receive 1000 Mbps. There is nothing more critically important than this issue today especially given the efforts by the Central Bank to build the digital economy.
Borders and e-commerce. A top concern I heard from entrepreneurs was that building and scaling e-commerce businesses and technology businesses involving hard goods can be especially difficult because of customs restrictions on shipping goods into or out of Lebanon. Is it any surprise that Amazon hasn't arrived?! At the same time, the country is prepared to take off in this respect with Beirut-Rafic Hariri International Airport and world-class resources like the Port of Beirut. The national and local government can do more by establishing free trade and e-commerce zones which would ideally provide tax and other financial incentives to help build an e-commerce ecosystem for goods-based businesses and modernizing customs processes to make any shipping much quicker and cheaper. Beirut was a central, global trading hub in the past; it can be again.
Education. Central to developing a thriving tech sector is ensuring that young people are being educated to succeed in a tech economy. Employability of the young people who graduate from universities is key. For example, the government can encourage the implementation of multi-disciplinary programs in public universities through funding incentives to help students get exposed to different aspects of tech businesses -- from engineering to design to coding and finance while they are still in school. In addition, the government could assist universities and students in obtaining access to distance learning programs for these course subjects if they are not currently offered.
Legal reforms. New businesses have to cut through too much costly red tape in Lebanon to get started. For example, entrepreneurs need to spend an average of US$25,000 just to start up a new business because of legal and registration fees (US$5,000) and meeting a minimum requirement of capital in the bank (US$20,000). In addition, the government needs to get laws on the books to help spur the creation of and to protect domestic and international venture capital investment funds and to incentivize founders and employees, including codifying concepts such as preferred shares for investors and stock options. Parliament should also pass the e-transaction and digital payment law to, among many other critical things the law covers, make electronic signatures legal (a basic requirement for e-commerce). All of this is imperative for attracting investment from around the world and workers for startups in Lebanon.
Foster government innovation. As Lebanon moves forward, it can learn a lot from countries that lead in e-government and are models for encouraging innovation in the public and private sectors. For example, Estonia offers e-residency IDs to entrepreneurs to attract founders and capital. It has also implemented a wide range of governmental e-services that have dramatically decreased the cost of doing business there. They can also take a page from the United States, which during President Obama's administration has created deep and mutually beneficial relationships with tech companies. Under Obama, the White House and many federal agencies had their first chief technology officers, and they succeeded in recruiting an army of tech experts from Silicon Valley to come to Washington, D.C. to lead the modernization of government systems, to make government data more open, transparent and efficient, and help to dramatically reduce the costs and time necessary to roll out overdue technology.
Think global. The tech economy is global, and Lebanon is just a starting point. Lebanese startups need to think global and fit well within the global economy. In part, this means spending funds invested through the Central Bank into expansion abroad. It also requires attracting global investors into current Lebanese startup funding rounds. However, international investors probably consider current legal protections as insufficient, which make legal reforms all the more important. A temporary solution could be to offer them investment in vehicles with international legal structures with a passthrough to Lebanon while the government works on improvements.
Engage with Lebanese citizens for continuous improvements. As a starting point, the Prime Minister's office could set up a website to encourage stakeholders in the tech and business communities to submit and rank problems they experience and suggest solutions. This will ensure that the government hears directly from creative citizens, entrepreneurs, venture capitalists and other investors, and small- to medium-sized enterprises, and will also give the government a start to take action to help them.
Lebanon has the essential building blocks to create world-beating companies, beginning with the talent and ingenuity of its people. With targeted reforms and initiatives by the new government, the country can become a hub for entrepreneurs while simultaneously increasing its GDP. When Lebanon accomplishes this, the cradle of civilization will at last become a new cradle of innovation.
Tony Fadell is one of the fathers of the iPod and the iPhone, and was the founder and CEO of Nest.
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