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Egypt in Turnaround: Entrepreneurs to the Rescue…if Only the U.S. Government Could Connect the Dots

Ahmed Alfi (C), Chairman of Sawari Ventures, Ramez Mohamed, CEO of Flat6Labs and Ahmed Essam (L), CEO of F16Apps, talk while posing for a picture during an open day in Flat6Labs headquarters in Cairo (REUTERS/AsmaaWaguih).

It has now been several weeks since the military coup that toppled the first democratically elected leader in Egypt’s 5000-year history, and the crisis is clearly deepening.  Few people, including me, found Mohamed Morsi to be a confidence-inspiring leader.  But then, there are other democratically elected officials – even in the United States and even as President – of whom the same can be said.  I think that what is most important, however, is the comment made by Council on Foreign Relations Senior Fellow and author of The Struggle for Egypt: From Nasser to Tahrir Square, Steven Cook in a recent New York Times op ed:

Coups d’état, no matter how popular, are by definition anti-democratic. Rarely, if ever, do they improve the environment for democracy. Perhaps Egypt will be different, but even so, full democracy there must someday challenge the military’s autonomy, economic interests and singular role as the source of legitimacy and authority — items the officers will not give up willingly.

In order for the pro-democratic environment to improve so that indeed, one day, the military will report to civilian government instead of the other way around, the “pro-democratic” environment needs to be strengthened. One of the best ways to do that is to bolster entrepreneurs.  It is exactly this that the US Government tried to do when President Obama, in his now infamous 2009 speech at Cairo University, promised to help support entrepreneurs in Egypt and throughout the Arab world.  It is what gave rise to the first-ever Presidential Summit on Entrepreneurship (in April, 2010) and the creation of the Global Entrepreneurship Program (GEP) at the Department of State.  I started and managed that program.  Egypt was the first country of our roll-out and we did some amazing things – with almost no money.  And therein lies the rub. 

Under the radar of the last couple of years of political turmoil in Egypt, a buzz of entrepreneurship is growing.  Chris Schroeder, who participated in the US State Department’s Global Entrepreneurship Program (GEP) Delegation to Egypt just before Tahrir Square in January 2010, has just published as book, “Startup Rising - the Entrepreneurial Revolution Remaking the Middle East” that documents exactly this phenomenon of blooming entrepreneurship concomitant with political turmoil in the Arab stratosphere.  Egypt is the poster child for this dichotomy.  Thanks to a miniscule funding by the US Government (about .1% of all the “aid” we give Egypt – almost all of which goes straight to the military), we actually have helped to spur entrepreneurship in Egypt in the GEP Egypt program (now, sadly, likely to grind to a halt for lake of funding).  At the same time, that program and a very few others, have provided the slightest bit of help to those doing the real heavy lifting around this subject – those starting private startup incubators and venture funds like Flat6 Labs, and Sawari Ventures.  The fact is that as the Arab world’s most populous country, and one of the youngest in the world, Egypt IS a great market and many in the startup world see today’s tumult as a “buying opportunity” for Egypt’s innovation economy.

If the US Government is going to change its image from only supporting military regimes (to the tune of an average of $1.5 billion per year in Egypt for over 35 years…) we will actually have to DO something on the civilian side of the support ledger as well.  Many of the young people most ardently “fighting the good fight” for a modern, progressive, democratic, market economy based Egypt were precisely these entrepreneurs who we SAID we were helping. What we actually have done is a bit of an embarrassment – about $2 million over 2+ years, now defunded.  We are unable to “connect the dots” in our foreign policy – bridging the rhetoric to deed.  In no small measure, this is a failure in our own governance systems.  USAID is so ham strung from actually funding real priorities of the Administration – both by lack of staff but far more, grossly antiquated procurement and contracting procedures, that we end up being seen as the emperor with no clothes.  Is it thus any wonder why America’s image is in tatters.

I often say there are “97 reasons why entrepreneurship is good for you.”  Well… maybe not 97, but certainly there are a whole bunch, and among them are reasons why entrepreneurship fosters a “pro-democratic environment.”  For example, entrepreneurs – who were, by the way, at the forefront of the Tahrir Square movement – are among the most astute watchdogs of evolution toward democracy.  They are inherently “anchors” for free market, democratic, stable, healthy economy regimes as all of those elements are essential to spurring a successful entrepreneurial ecosystem.  While the “startup class” includes people of all ages and political stripes, one thing that tends to unite them – indeed even across huge political divides – is their interest in functioning, “modern” states.

…[W]hile by no means are all entrepreneurs young (a common myth), the majority are, and Egypt is one of the youngest countries in the world; by most estimates, around 70% of Egypt’s population is under 30. More striking still, 80-90% of Egypt’s unemployed are under 30.

Egypt is an especially important example of this since it has one of the most inherently entrepreneurial populations.  At the same time, while by no means are all entrepreneurs young (a common myth), the majority are, and Egypt is one of the youngest countries in the world; by most estimates, around 70% of Egypt’s population is under 30. More striking still, 80-90% of Egypt’s unemployed are under 30.  There is thus a huge population of deeply frustrated young people, who are what the Global Entrepreneurship Monitor (GEM) report that covers trends in entrepreneurship in more than 60 countries, calls “necessity driven” entrepreneurs; one of the largest categories driving entrepreneurship.

Successful states require successful institutions that are demanded, watchdog-ed, and respected by concerned, activist citizens.  A robust entrepreneurial ecosystem is a key category of such citizens.  Egypt is lucky in that it has extraordinary people, young and old, at home and in its diaspora.  Let’s hope that these pillars of progress can turn around the Egyptian revolution, perhaps continuing to fly under the radar, bringing the power and optimism of the startup community to help shape the new Egypt.  Who knows, maybe the US Administration who thought of using the tool of spurring entrepreneurship in the service of foreign policy to begin with, might even find a penny or two to support them….

Editor's Note: Steven Koltai was the creator of the US Department of State’s Global Entrepreneurship Program (GEP) of which Egypt was the first major rollout country.  He is currently a Guest Scholar at the Brookings Institution, working on a book provisionally entitled “World Peace through Entrepreneurship.”  He is Managing Director of Koltai & Company, a global entrepreneurship development advisory firm.

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