Egypt current-account deficit surges as tourism revenue collapses
Current account deficit rises 82 percent to $13.3 billion
Updated 30 June 2021
RIYADH: Egypt’s current-account deficit almost doubled in the first nine months of fiscal 2020-21 as tourism revenues slumped due to COVID-19 travel restrictions.
The deficit increased 82 percent to $13.3 billion in the 9 months through the end of March, Asharq reported, citing Central Bank of Egypt data. The total balance of payments surplus in the period was $1.8 billion.
The bank attributed the increase in the deficit to a drop in tourism revenues to $3.1 billion, compared to $9.6 billion in the same fiscal period, according to a statement issued today.
Net foreign direct investment (FDI) flows to Egypt during that period dropped by 19.3 percent to $4.8 billion, while transport proceeds, including the Suez Canal, fell by 12 percent to $5.5 billion.
Remittances from workers abroad rose to $23.4 billion from $21.5 billion.
Microsoft buys game maker Activision Blizzard for about $70 billion
Deal will turn Microsoft, maker of the Xbox gaming system, into one of the world’s largest video game companies
Microsoft CEO Satya Nadella vows to address issues of misconduct and unequal pay against Activision
Updated 19 January 2022
Arab News AP
RIYADH: Saudi Arabia’s sovereign wealth fund is set to see a $1.1 billion boost to its investment in Activision Blizzard after Microsoft agreed to buy the video game maker, Bloomberg reported.
The Public Investment Fund, which first started building a position at the end of 2020, owned about 37.9 million shares in Activision at the end of September, according to public filings.
The fund built its stake over the last three months of 2020 and the first half of 2021.
Microsoft will pay $95 a share in cash valuing the stake at $3.6 billion, up from $2.5 billion at Friday’s close.
If the deal is completed, it will help rescue PIF’s bet on the gaming publisher, whose shares had fallen more than a third from the time its investment was first reported to last week.
While filings don’t show the purchase price, if the fund paid the average price in each of those three quarters, its stake would’ve been acquired at an average of about $89 per share.
Microsoft is paying nearly $70 billion for Activision Blizzard, the maker of Candy Crush and Call of Duty, to boost its competitiveness in mobile gaming and virtual-reality technology.
The all-cash $68.7 billion deal will turn Microsoft, maker of the Xbox gaming system, into one of the world’s largest video game companies. It will also help it compete with tech rivals such as Meta, formerly Facebook, in creating immersive virtual worlds for both work and play.
If the deal survives scrutiny from US and European regulators in the coming months, it could be one of the biggest tech acquisitions in history. Dell bought data-storage company EMC in 2016 for around $60 billion.
Activision has been buffeted for months by allegations of misconduct and unequal pay. Microsoft CEO Satya Nadella addressed the issue Tuesday in a conference call with investors.
“The culture of our organization is my No. 1 priority,” Nadella said, adding that ”it’s critical for Activision Blizzard to drive forward” on its commitments to improve its workplace culture.
Activision disclosed last year it was being investigated by the Securities and Exchange Commission over complaints of workplace discrimination and in September settled claims brought by US workforce discrimination regulators. California’s civil rights agency sued the Santa Monica-based company in July, citing a “frat boy” culture that had become a “breeding ground for harassment and discrimination against women.”
Wall Street saw the acquisition as a big win for Activision Blizzard Inc. and its shares soared 25 percent in trading Tuesday, making up for losses over the past six months since California’s discrimination lawsuit was filed. Shares of Microsoft slipped about 2 percent.
Acquisition to push Microsoft past Nintendo as the third-largest video game company by global revenue, behind Playstation-maker Sony and Chinese tech giant Tencent
Last year, Microsoft spent $7.5 billion to acquire ZeniMax Media, the parent company of video game publisher Bethesda Softworks, which is behind popular video games The Elder Scrolls, Doom and Fallout. Microsoft’s properties also include the hit game Minecraft after it bought Swedish game studio Mojang for $2.5 billion in 2014.
The Redmond, Washington, tech giant said the latest acquisitions will help beef up its Xbox Game Pass game subscription service while also accelerating its ambitions for the metaverse, a collection of virtual worlds envisioned as a next generation of the Internet. While Xbox already has its own game-making studio, the prospect of Microsoft controlling so much game content raised questions about whether the company could restrict Activision games from competing consoles, although Nadella promised the deal would help people play games “wherever, whenever and however they want.”
The acquisition would push Microsoft past Nintendo as the third-largest video game company by global revenue, behind Playstation-maker Sony and Chinese tech giant Tencent, according to Wedbush Securities analyst Daniel Ives.
“Microsoft needed to do an aggressive deal given their streaming ambitions and metaverse strategy,” Ives said. ”They’re the only game in town that can do a deal of this size with the other tech stalwarts under massive tech scrutiny.”
Meta, Google, Amazon and Apple have all attracted increasing attention from antitrust regulators in the US and Europe, but the Activision deal is so big that it will also likely put Microsoft into the regulatory spotlight, Ives said. Microsoft is already facing delays in its planned $16 billion acquisition of Massachusetts speech recognition company Nuance because of an investigation by British antitrust regulators.
Microsoft is able to make such a big all-cash purchase of Activision because of its success as a cloud computing provider. But after years of focusing on shoring up its business clients and products such as the Office suite of email and other work tools, Ives said Microsoft’s failed 2020 attempt to acquire social media platform TikTok may have “really whet the appetite for Nadella to do a big consumer acquisition.”
Pushback against the deal was immediate from consumer advocacy groups.
“No way should the Federal Trade Commission and the US Department of Justice permit this merger to proceed,” said a statement from Alex Harman, competition policy advocate for Public Citizen. “If Microsoft wants to bet on the ‘metaverse,’ it should invest in new technology, not swallow up a competitor.”
Activision was formed in 1979 by former employees of Atari Inc., a pioneer in arcade games and home video game consoles.
White House press secretary Jen Psaki had no comment on Microsoft’s announcement at her briefing Tuesday, but emphasized the Biden administration’s recent moves to strengthen enforcement against illegal and anticompetitive mergers.
Started in 1979 by former Atari Inc. employees, Activision has created or acquired many of the most popular video games, from Pitfall in the 1980s to Guitar Hero and the World of Warcraft franchise. Bobby Kotick, 59, has been CEO since 1991.
Microsoft said it expects the deal to close in its 2023 fiscal year, which starts in July. It said Kotick will continue to serve as CEO. After the deal closes, the Activision business unit would then report to Phil Spencer, who has led Microsoft’s Xbox division and will now serve as CEO of Microsoft Gaming.
Kotick survived a number of executive shakeups at Activision last year after a series of controversies stemming from allegations of a toxic workplace culture. A shareholder lawsuit in August said the company failed to disclose to investors that it was being investigated in California and that it had workplace culture issues that could result in legal problems.
Activision reached a deal in September with the US Equal Employment Opportunity Commission to settle claims that followed a nearly three-year investigation. The agency said Activision failed to take effective action after employees complained about sexual harassment, discriminated against pregnant employees and retaliated against employees who spoke out, including by firing them.
Microsoft has also been investigating its own practices toward sexual harassment and gender discrimination, opening an inquiry last week sought by investors at its annual shareholders meeting in November. The company committed to publishing a report later this year on how it handles harassment claims, including past allegations involving senior leaders such as co-founder Bill Gates.
Crude oil’s latest bull run puts spotlight on geopolitical events
Having spent the last year fretting over supply, markets and investors appear suddenly more spooked by the ‘what ifs’ of global politics and its impact on still tight supplies
Updated 19 January 2022
LONDON: Crude oil’s latest bull run, which saw Brent climb to its highest level since 2014 on Tuesday, has put geopolitics front and center of market concerns.
Having spent the last year fretting over supply, markets and investors appear suddenly more spooked by the what ifs of global politics and its impact on still tight supplies.
This week’s drone attack by Iranian-backed Houthi rebels on the UAE, along with fears that Russia’s aggression towards neighboring Ukraine will lead to war, are nudging crude prices higher. The spike comes despite a view in some circles that supply issues are abating when compared to last year. A consensus view from energy analysts suggests current geopolitical events, primarily increased Middle East tensions and Russia’s saber-rattling, have added almost 12 percent to the price of a barrel of crude oil.
Alan Gelder, vice president for refining, chemicals and oil markets with UK energy consultant Wood Mackenzie, said: “Broadly speaking, geopolitics currently accounts for around $10 of the oil price.” Following the UAE attack, Goldman Sachs upwardly revised its price forecast, warning on Tuesday that Brent could reach $90 per barrel in the next two months and hit $100 in the second half of this year. However, Gelder believes triple figure oil prices could prove wide of the mark.
He told Arab News: “We don’t believe the oil market will be as tight in 2022 as it was in 2021. We’re expecting US oil production to grow because the investment discipline of recent years will now enable companies to drill and increase investment supply while still achieving high returns for investors.”
He added: “One can never say never, but we think forecasts of $100 oil are slightly overrated. The rig count is increasing in the US, albeit modestly, so supply will increase this year. Geopolitical events are of course hard to predict and are capable of causing further price shocks, though it would take an extreme production outrage at a major supplier for the current fundamentals of supply and demand to be impacted.” That said, it is worth remembering geopolitical events were behind the first big jump in oil prices last year.
In March 2021, just after OPEC and its OPEC+ allies announced they would stick to their production cuts, the Houthi militia launched a failed attack on Saudi Arabia’s Ras Tanura oil-export terminals and refinery.
A consensus view from energy analysts suggests current geopolitical events, primarily increased Middle East tensions and Russia’s saber-rattling, have added almost 12 percent to the price of a barrel of crude oil.
There was no damage to Ras Tanura, but the attack sent Brent crude briefly above $70 a barrel.
The six-year war in Yemen, where Saudi Arabia is leading a coalition of countries fighting the Iran-backed Houthis, has seen a number of attacks on the Kingdom’s energy infrastructure and oil tankers in the Red Sea and the Persian Gulf.
Indeed, a report last month by a respected Washington-based think tank, the Center for Strategic and International Studies, said Houthi attacks on Saudi Arabia more than doubled during the first nine months of 2021 compared to the same period a year earlier. The report said Iran’s Islamic Revolutionary Guard Corps and Lebanese militia Hezbollah played a critical role in providing Houthis with weapons, technology and training.
Concerns about potential disruptions to Saudi output on prices should also be coupled with the unlikelihood of any easing of sanctions against Iran — a huge crude producer, but one whose meager exports are now reliant on smuggling.
Fast forward to today, and the bloody unrest in Kazakhstan — an OPEC+ member and second largest oil producer in the former Soviet Union with almost 2 million barrels a day — had already pushed Brent almost 5 percent higher in the early days of this month, to $83. Ironically, the initial protests against the government were sparked by an increase in the price of liquid petroleum gas, which many Kazakhs use to run their cars.
The UAE attack, which has nudged Brent a little closer towards Goldman Sachs’ $90, is the most significant strike by Houthis against the Emirates since its military withdrawal from the Yemen conflict in 2019, though it still supports forces fighting the Houthis.
Meanwhile, the buildup of Russian troops on Ukraine’s border and fears that Vladimir Putin will invade, unleashing a NATO response of economic sanctions, or in a worse case scenario, a wider conflict, are sending prices higher still.
Tensions linked to Gazprom’s Nord Stream 2 pipeline project have already played a large role in rocketing gas prices across Europe. Gas prices have fallen sharply so far this year, but Ukraine is a vital supply route for Russian oil and gas supplies to Europe, which is heavily dependent on Russia for its energy needs.
Giovanni Staunovo, energy strategist with UBS, said: “There is probably also a geopolitical risk premium related to tensions in Eastern Europe and the Middle East, which is however difficult to quantify. Historically, such risk premia only remained in the price if those tensions triggered some supply disruptions. That said, currently there are no disruptions.”
A more pertinent risk for oil prices perhaps lies in the fundamentals of the market, primarily concerns about OPEC’s ability to pump more crude if required by higher demand. Several OPEC members have struggled to raise output to required quota levels, and speaking this week, Saudi Arabia Energy Minister Prince Abdulaziz bin Salman said the Kingdom had no plans to make up for their production shortfalls.
Staunovo said: “Some oil demand concerns related to the omicron variant have not materialized, with oil demand holding up better than some feared back in December. But the oil market is tight, with petroleum inventories, and crude and oil products, standing at a multi-year low, and if oil demand keeps recovering back to 2019 levels, available spare capacity should also fall to low levels, which makes the oil market and prices very sensitive to any supply disruptions.”
South Korea seeks to boost clean energy efforts with UAE cooperation
Seoul and Abu Dhabi reach landmark $3.5 billion defense agreement — largest in South Korea’s arms history
President Moon Jae-in scheduled to travel to Saudi Arabia on Tuesday
Updated 17 January 2022
SEOUL: South Korea is seeking to increase hydrogen cooperation with the UAE in a bid for a sustainable future and carbon neutrality, President Moon Jae-in said on Monday in Abu Dhabi during his Middle East tour to explore business opportunities in the region.
Moon arrived in the UAE on Saturday for a three-day visit as part of his week-long Middle East trip. From Abu Dhabi he will fly for talks in Riyadh.
“Through hydrogen cooperation between the UAE and Korea, I hope that we can move forward in a sustainable future and carbon neutrality,” he said while addressing the Abu Dhabi Sustainability Week.
As South Korea wants to achieve carbon neutrality by 2050, Moon said Seoul wants to bolster cooperation with the UAE in the development of carbon-capture technologies to create what is known as blue hydrogen — a form of the fuel obtained from natural gas in a process that stops carbon emissions from being released into the atmosphere.
The UAE is one of the world’s foremost pioneers in the field.
Prof. Jung Sang-ryul of the Institute of Middle Eastern Affairs at Myungji University in Seoul told Arab News that with UAE-Korean hydrogen cooperation, the industry “can make a greater leap forward.
“The hydrogen industry is a field for future cooperation,” he said. “The UAE has strengths in the production of green and blue hydrogen, whereas South Korea (has) in utilization, storage and distribution, including hydrogen-powered vehicles, charging stations, fuel cells and liquid transportation.”
During Moon’s visit, Seoul and Abu Dhabi also reached a landmark $3.5 billion defense agreement on Sunday, under which the UAE will purchase KM-SAM surface-to-air-missiles, known as Cheongung II. It is the largest deal in the history of South Korea’s arm exports.
“The UAE is the first foreign nation to operate the Cheongung II,” Kang Eun-ho, commissioner of the Defense Acquisition Program Administration, Seoul’s arms procurement agency, said in a statement. “The deal is the result of the bilateral defense cooperation based on mutual trust and will serve as a watershed moment for the two nation’s strategic defense partnership.”
The KM-SAM was developed with technical support from Russia to replace the older Hawk surface-to-air missiles that had been in service in 1964. Equipped with a multi-function phased array 3D radar, the interceptor can “hit-to-kill” hostile missiles coming in at altitudes below 40 km.
On the sidelines of the missile acquisition contract, the two countries also signed a memorandum of understanding on collaboration in defense technologies, including the potential development of weapons systems.
The UAE is South Korea’s top export market and biggest partner in human resource exchanges in the Middle East.
South Korean firms have participated in the development of Emirati oil fields and the Barakah nuclear power plant — the first nuclear power station in the Arabian Peninsula, which started operations last year.
On Tuesday, the South Korean president will continue his trip to Saudi Arabia.
His office said in a statement that Moon is scheduled to meet Crown Prince Mohammed bin Salman.
“The leaders of the two nations are expected to discuss energy and infrastructure, as well as health care, science and technology, hydrogen, intellectual property and education,”the office said.
On Wednesday, Moon is scheduled to meet Gulf Cooperation Council secretary-general Nayef bin Falah Al-Hajraf to discuss the resumption of negotiations for a free trade agreement between Seoul and GCC.
South Korea and the GCC started talks on a free trade deal in 2007, but negotiations had stalled and were suspended in 2010.
Mixed fortunes for startups during the financial crisis in Lebanon
Some fledgling businesses were unable to weather the storm but others found a lifeline by shifting operations to other countries and are determined to survive
Updated 16 January 2022
BEIRUT: Lebanon’s financial woes began with the protests in October 2019, when a series of peaceful sit-ins escalated and became a national revolution against the ruling class.
Soon, there was a steep decline in the value of the Lebanese pound against the dollar. The official rate is still 1,500 pounds to the dollar but the currency has lost more than 90 percent of its value and now trades at about 30,000.
Meanwhile, Lebanese banks decided to withhold the savings of individuals and organizations, a decision that resulted in many residents losing their life savings and the closure of numerous organizations, family businesses and startups.
“I lost $350,000 of my money because of the crisis,” Rana Chmaitelly, the founder of The Little Engineer, an educational startup for children, told Arab News. “I lost the product of my sweat, blood and tears — they took it all away. But I didn’t give up.”
In a stroke of good fortune amid the despair, toward the end of 2019 Chmaitelly was expecting a large transfer of money from a business partner. Having been denied access to the cash in her own bank account in Lebanon, her only solution was to swiftly establish an offshore, and later a freezone, company in the UAE, to which the money her partner owed her could be safely transferred.
“That transfer to the UAE saved me and my team, or else we would now be owing a lot of money to our partners,” Chmaitelly said.
Her story is not unique among Lebanese startups. The founders of Cherpa, another educational startup, which offers technology training courses to teenagers, also relocated in part to the UAE at the onset of the financial crisis. They were able to open a freezone company there and obtain residency.
“Having our money withheld by banks was awful; there was a lot of frustration,” cofounder Bassel Jalaleddine, told Arab News. “I used to waste my time queuing up in banks all day just to get $300.”
Online platforms Mint Basel Market, Kamkalima and Ounousa are just some of the other startups that relocated operations, at least partly, to the UAE.
Tech giant Arabnet has studied the effects of the multiple crises in Lebanon on the startup ecosystem, surveying 60 startups and 15 stakeholders. Its report, which has yet to be published, reveals that about half of the startups have moved their headquarters or parts of their businesses outside of Lebanon, Omar Christidis, Arabnet’s founder and CEO, told Arab News.
As if having their capital withheld by banks was not bad enough, startups had to deal with another devastating blow at the end of 2019: the suspension of Circular 331 by Banque du Liban, the country’s central bank.
Announced by BDL in late 2013, Circular 331 was a mechanism that injected more than $400 million into the Lebanese enterprise and tech markets. The limit was raised in 2016 to $650 million to foster even more innovation and encourage banks to invest more in startups. It was hailed as a “holy grail” for businesses in the country.
The benefits were felt for six years, said Elias Boustani, the former chief operating officer with startup consultant Wamda, despite concerns that a bubble had formed that was leading to ridiculously high valuations of startups, and affecting salaries in the tech sector.
“The circular is a BDL issue and this allowed the banks to use their own equity and to be subsidized by BDL in order to invest in startups or in funds investing in startups,” said Walid Hanna, the founder and CEO of Middle East Venture Partners in Beirut.
Capital locked away in banks. Circular 331 put on hold. Brain drain and the August 4 blast. How have Lebanese startups survived?
Lebanese startups are feeling the pinch. Engulfed by multiple crises, they are facing a unique set of challenges they have never had to contend with before, and are desperately looking for solutions.
“The money they allocated to the funds and to the startups was 100 percent used and depleted; it was all spent or invested. And now BDL and the (commercial) banks have no intention to reinvest in startups according to Circular 331 because, obviously, they have other priorities.”
These other priorities include attempts to address a crippling economic crisis and adjust to the hyperinflation of the currency.
MEVP told Arab News that the number of Lebanese operational startups before the crisis began in 2019 was 25. This number has fallen to 15, with seven of those struggling to remain afloat.
“The financial and economic crisis in Lebanon has impacted the ability of startups to invest in markets outside Lebanon,” according to MEVP. “The Lebanese (pound) has lost more than 90 percent of its value, making it impossible for Lebanese startups to generate substantial revenues.
“Previous funds raised are frozen in banks; these ‘Lebanese dollars,’ dubbed ‘lollars,’ stand at 19 percent of their US dollar value, making it impossible for Lebanese companies to invest in their growth.”
Some sources of funding, such as regional accelerator Flat6Labs, have put financial support to their Lebanese branches on hold.
“I remember we were among the last batch to receive funding in 2019 before the (suspension of Circular 331),” Adnan Ammache, the founder and CEO of gifting platform Presentail, told Arab news. “We received funding that was worth a little bit over $100,000.”
Six other startups received funding that ranged from $30,000 to $100,000, according to Ammache. No representative of Flat6Lab was available for comment.
With no end in sight to the crises, Lebanon is experiencing its most severe brain drain in more than a century. The minimum wage still stands at 675,000 pounds a month, which is now worth a meager $24.This has led to a severe loss of talent in several sectors, including technology, leaving startups at a disadvantage.
Startups that want to try to retain their human resources must pay employees in dollars, which places additional strain on already tenuous finances, said MEVP’s Hanna.
Avo Manjerian, the cofounder and CEO of shift-scheduling startup Schedex, told Arab News: “Finding and retaining talent is hard and costly but the goal is not the money; it’s creating the incomparable, flexible and broad-minded culture in our small startup.”
Schedex soft-launched in October 2019, just as the economic crisis was beginning.
“We pay our employees in fresh dollars from our investment because we want to be fair and we don’t want to take advantage of the situation,” Manjerian said.
Other startups such as Cherpa and Mint Basil Market said they also pay in dollars, in an effort to be “fair,” and having a bank account in another country, such as the UAE, helps with this.
Boustani said that some startups concerned about losing employees are also offering staff the chance to relocate to the UAE, Turkey or other countries and work remotely. Murex, for example, helped workers in Lebanon move to the company’s offices in France.
The devastating explosion at Beirut’s port on Aug. 4, 2020, delivered yet another blow to Lebanese startups. Buildings in the Beirut Digital District, the hub for Lebanese entrepreneurs, were badly damaged, including the offices of several startups including Schedex, Sympaticus and Moodfit.
Businesses in other parts of the city were also affected by the explosion, including Buildlink, FabricAID, Compost Baladi SAL and Basma, according to the Sharjah Entrepreneurship Center. The center launched an aid initiative that distributed $100,000 equally among 10 high-impact Lebanese startups affected by the blast.
Looking to the future, to say that the Lebanese are resilient is an understatement. They are a stubborn, determined people, and this is reflected in the determination startup founders to succeed at all costs.
“We have been operational since May 18,” said Hussein Sleiman, the founder of Find a Nurse, an award-winning online platform that supplies trusted caregivers.
“We have stopped at nothing. And while we of course aspire to expand to be a global startup, we plan to make our headquarters in Lebanon — where we can employ people residing in Lebanon and benefit our country.”
Souq founder Ronaldo Mouchawar remains MENA’s online guru at Amazon
Souq now attracts more than 45 million customers per month and offers 9.5 million products on its platform
Updated 17 January 2022
George Charles Darley
RIYADH: MENA’s first man of the internet Ronaldo Mouchawar may have sold the firm he set up for $580 million, but has the same drive he had when he joined his first startup 20 years ago.
The Syrian entrepreneur built the largest online marketplace in the region, Souq.com, in 2005 and 12 years later sold it to US tech giant Amazon.
But rather than sunning himself on the most exclusive beaches around the world, he stayed on to become vice president of Amazon MENA.
Souq now attracts more than 45 million customers per month and offers 9.5 million products on its platform, ranging from consumer electronics, household goods, fashion brands to baby products. It employs 4,500 staff.
Mouchawar’s career is closely linked with the development of the web in the region.
Born in Aleppo, Syria, to a family of traders and engineers, Mouchawar was a basketball star at local team Jalaa SC Aleppo, before heading to the US’ Northeastern University in Boston in the late 1980s to study a bachelor’s and later master’s degree in computer science.
He remained in the US, working at information technology firm EDS, founded by billionaire Ross Perot, who unsuccessfully ran for the US presidency in 1992. Mouchawar was kept busy at the business dealing in the emerging field of image processing and video scanning for car manufacturers, healthcare organizations and publishing companies.
As the web grew rapidly in the US in the early 2000s, Mouchawar returned to the Middle East, where digital firms were an emerging venture.
He joined Jordan-based Maktoob.com, whose founders Samih Toukan and Hussam Khoury pioneered online services in the Middle East. At that time, little on the internet was in Arabic.
“Samih and Hussam built the first Arabic version of email,” Mouchawar told Arab News. “And many Arabic speakers across the world started using this tool because it enabled you to write in Arabic regardless of where you were and what operating system you were using. Maktoob also provided an Arabic language chat room and instant messaging.
“We immediately saw traction with young people. It was all about self-expression, because we did not produce our own content — it was entirely user-generated.
“We would get energizing emails from customers who were using our platform to communicate, post blogs and create forums.”
But while Maktoob was growing in popularity, its revenue was low. “We wanted to monetize our portals as the traffic grew,” Mouchawar said.
“And we thought that building an e-commerce section would make a lot of sense.”
Mouchawar led the effort to create Maktoob’s online shopping platform, offering an auction system modeled on eBay.
This prototype online market faced commercial challenges at the outset because, as Mouchawar, 52, said: “Our business model was driven by online advertising, and at that time almost all of a firm’s media spend was on traditional outlets — TV, outdoor, print, newspapers, flyers and so on. Digital was still a very small segment.
“But the fun part was that every month, we felt we were better than the month before. Even though not everything made a lot of sense to us. We were always wondering: ‘How can we get people to trade safely? How can we get people to trust us? How can we get merchants to sell and can we get customers to buy?’
“It was a bit of chaos theory at work, in terms of learning, trying many new things and building trust.”
But their work paid off and Maktoob was established as a key e-commerce site in the Gulf.
Mouchawar’s influence within the firm grew but he remained an employee, although he had ambitions to be his own boss.
With investment from Toukan, Mouchawar co-founded the Souq.com marketplace (souq means market in Arabic), which was founded in Dubai in 2005. Toukan became the other co-founder of the business.
“We were incubated in a way within the Maktoob ecosystem,” Mouchawar said.
He added: “With Maktoob, we were trying to cover the entire region. The mission of Souq was to use technology to break barriers and borders, and enable trade, but focused on only three countries — the UAE, Saudi Arabia and Egypt.”
Souq concentrated on business-to-customer and peer-to-peer selling, where ordinary users sell among themselves.
There was an influx of funds in 2009 when Maktoob was bought by Yahoo for $164 million. Toukan was a key shareholder but Mouchawar also benefited from stock options he held.
Mouchawar said: “At that point, we took a hard look at the customer journey. We decided to become an entirely business-to-customer site, and shut down some of the early community tools.
“And that was the pivot point, where we moved from a kind of community environment to more what looked like an Amazon offering.”
Souq achieved growth in three ways. Its sales numbers lifted, it bought rivals, and launched other related logistics and online payment startups. The entrepreneur said that the moves proved to be a virtuous circle, as these areas supported one another.
Mouchawar also brought in global talent, hiring senior staff from US multinationals such as Proctor & Gamble, Gillette and major international banks.
This led to Souq’s first venture capital investment round in 2012, with $40 million in equity funding led by US investment firm Tiger Global Management and South African fund Naspers.
“That investment took us to another level in terms of being able to focus on service and delivery,” said Mouchawar. “Over the next four years, we went from $60 million to $400 million turnover. It was insane growth. And we were bringing in new people — college graduates who within two or three years were managing teams of 40 people. That was life-changing for them.
“And we were serving our customers better, shortening delivery times and improving our payment proposition. We held our first White Friday (a regional version of US-inspired Black Friday sales held in late November) in 2014 for the first time, with big brands involved.”
Advisers tempted Mouchwar to expand into many different countries, but he was intent on growing the business within its existing territories.
“I say this to many entrepreneurs — sometimes by doing less, you do more. There are many bright people with good ideas, but you need to stand for something —and we wanted to stand for business-to-consumer e-commerce in this specific part of the world. We wanted to facilitate trade, gain trust and help entrepreneurs build businesses online.”
Another key funding round came in 2016, when Souq raised $270 million of investment led by Standard Chartered Bank and venture capital group International Finance Corporation.
“This was a large round. That’s when we surfaced on the global map,” said Mouchawar.
The company raised a total of $425 million across several rounds of funding by 2017, according to tech data website CrunchBase.
By now, Mouchawar added that Souq’s early investors were hungry for returns, and with interest from the world’s biggest tech firms, the chance of an acquisition grew.
Dubai real estate company Emaar had sought to buy the online business.
But a team from Amazon, lead by CEO Jeff Bezos, flew in to meet Souq’s top executives and toured the region, leaving impressed by what they saw.
A takeover of Souq by Amazon made sense for both sides, said Mouchawar. For Souq, the US giant would deliver a new level of infrastructure. For Amazon, Souq represented access to one of the world’s fastest-growing online marketplaces.
“I thought that with Amazon, we could build a large business with exciting innovations in a region with high mobile adoption, a young user base and a huge opportunity for commerce, cloud content and devices. Also, with more than 420 million Arabic-speaking people in the world, there are still many services that we could develop for them.”
The deal was signed in March 2017 when Amazon paid Souq for $580 million for the business.
However, Mouchawar felt compelled to stay on and accepted the position of vice president at Amazon MENA.
“Like some other colleagues at Souq, I didn’t feel the mission was done,” he said. “There was still a lot to do. I was excited to learn a lot more about Amazon and how things operate at that scale. We could employ more people, empower more people and build more talent.”
Sales at Amazon lifted 38 percent to $386 billion as net income jumped 84 percent to $21.3 billion last year, as consumers in lockdowns around the world ordered from the platform. The tech giant’s international sales, which includes Souq, surged by 40 percent over the same period.
Mouchawar said: “Since then, we’ve launched Amazon in Arabic in the UAE, Saudi Arabia and Egypt. And the December release of our virtual assistant Alexa in numerous regional dialects of Arabic was another key moment.”
Mouchawar seems comfortable working as the tech giant’s main man in the region.
He said: “For me, it’s always about working with smart, bright people, both locally and globally. As long as I’m learning how to bring new things to the region, I still feel excited about the role I play.”