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.”
Startup of the Week: Saudi fintech joins battle for US retail investors
Quant Alpha platform offers artificial intelligence-powered software for investors
Updated 16 January 2022
George Charles Darley
RIYADH: Saudi entrepreneur Nezar Bakhsh has joined the battle for US retail investors after launching a financial technology startup that sells stock trading advice to traders.
His Quant Alpha platform offers artificial intelligence-powered software for investors, which he told Arab News: “Adds a layer of simplicity, reliability and academic rigor to investment strategies”.
The Jeddah-based firm, launched in March 2020, supplies research-based information that private investors can use to make long-term investments.
Quant Alpha, which employs five full-time staff and 30 freelancers, is aimed at investors in US stocks and is focused on small-cap investments — firms with a market capitalization between $300 million (SR1.1 billion) and $2 billion.
Bakhsh, 27, added: “We’re targeting high-net-worth clients in the US, UK, Germany and Switzerland, who tend to be tech-savvy investors who understand and appreciate our software.
“In the future, we have plans to build a system for the Tadawul as well as the Shanghai market and the London Stock Exchange.”
The fintech firm, which does not act as a fund manager or broker, has 500 current subscribers, and Bakhsh said he expects sales of over $1 million in the financial year to 2022. Quant Alpha aims for rapid growth, targeting over $13 million of income from 50,000 subscribers at the end of its third year.
The US retail investor market is seeing firms offer zero, or low, trading fees for small traders. California-based small investor platform Robinhood has grown rapidly since its 2013 launch to around 13 million users, while Virginia-based E-Trade has about 5.5 million retail and corporate accounts. These firms also offer some trading advice.
Bakhsh, 27, came to finance after an early start in science and engineering.
He gained a bachelor’s and a master’s degree in electrical engineering at Pennsylvania State University, before joining Saudi government-financed construction startup Istidama. That led to a three-month project in China, where he was part of a team that successfully converted farm waste into fertilizer and animal feed.
Soon after that Bakhsh found himself with time on his hands back in the Kingdom during the COVID-19 lockdown. Fascinated by the stock market, he began developing his own investment and trading strategies.
Bakhsh said: “My results started to show great promise. And a couple of friends also started seeing some profit using my strategies.
“One of them said: ‘All these online investment software platforms charge a hefty amount, they don’t work, and they’re not backed by any academic research. They are a complete rip-off. What if you started leasing your software?’ That got the ball rolling.”
Baksh said that his platform, which he funded himself, is backed by a great deal of data.
He said: “Our member base gets access to all our research, to some proprietary indicators and to our best performing portfolio, which is powered by our own AI algorithms.”
“We have what’s called a ‘multifactor portfolio’, based on four key factors — momentum, value, quality and size — all which are rigorously researched by the academic community.”
Baksh has published his trading strategies as an e-book, available exclusively to Quant Alpha subscribers.
He said: “Informed investors are the best clients to have because they understand the cyclic behavior of a portfolio. The difference between investors who actually make money, and ones who lose, are those who understand their portfolio and are willing to be patient during times of underperformance.”
Bakhsh noted that similar to his own experience, the pandemic lockdown triggered a huge interest in the stock markets from small investors in the US who could not go to work.
Around 15 percent of American retail investors began trading in 2020, according to a survey in April by US financial services giant Charles Schwab, which owns E-Trade.
However, many seasoned market observers say that a significant proportion of the trading by these new investors is led by anonymous tips on trading message boards, which can lead to wild stock price swings of companies that come across their radar.
Bakhsh said: “Unfortunately, I don’t see many private investors doing extensive research. They just keep trying things out and not sticking with them for the long-term.”
But this rush of new investors represents an opportunity for the Saudi platform.
Bakhsh added: “I’m definitely excited by this huge flood of new investors. I hope I get a chance to educate a lot of them. I’m doing my part and hopefully it will work out for us and our clients.”
Stocks stumble, yields jump on rates outlook; oil rallies
Investors worry about how imminent US interest rate hikes would affect economy
Updated 16 January 2022
Global stock markets stumbled again on Friday and US Treasury yields climbed as cautious investors worried about how imminent US interest rate hikes would affect the economy.
A warning from the largest US bank JPMorgan Chase & Co. that its profitability may fall below a medium-term target cast another pall on Wall Street.
MSCI’s gauge of stocks across the globe had shed 0.36 percent. The pan-European STOXX 600 index closed down 1.01 percent and had its worst week since Nov. 26, weighed in part by declines in technology stocks.
In the US, a spate of bargain hunting toward the end of the day helped stocks to narrow losses. The Dow Jones Industrial Average fell 0.56 percent, the S&P 500 ended flat, and the Nasdaq Composite flipped into the black, rising 0.59 percent.
“We are now entering a period where the Federal Reserve will engage in a never-before-seen experiment: Raising interest rates off zero and reducing the size of its balance sheet in the same year,” said Nicholas Colas, co-founder of DataTrek Research.
“The market is still left wondering what results will come from their decisions,” Colas said.
In line with expectations of rising rates, benchmark 10-year Treasury yields jumped to 1.7859 percent, rebounding toward a two-year high of 1.808 percent struck earlier this week. Two-year Treasury yields hit a high of 0.973 percent, a level last seen in February last 2020.
Benchmark 10- year Treasury yields jumped to 1.7859 percent, rebounding toward a two- year high of 1.808 percent struck earlier this week. Two- year Treasury yields hit a high of 0.973 percent, a level last seen in February last 2020.
European bond yields also rose in choppy trade as investors focused on monetary policy tightening by central banks, though sharp falls in Germany’s benchmark 10-year yield earlier this week led it to notch its biggest weekly fall in 10 weeks.
Meanwhile, in Asia, the five- year Japanese government bond yield jumped to its highest since January 2016 and the yen rose after a Reuters report that Bank of Japan policymakers are debating how soon they can start an eventual interest rate hike.
Such a move could come even before inflation hits the bank’s 2 percent target, sources said.
The dollar, which has been slugged by a three-day selling spree as investors bet that expec- tations of rate rises are already priced into the currency, finally steadied on Friday.
The dollar index, which measures the greenback against a basket of six currencies, bounced 0.34 percent to 95.167, pulling away further from a two-month low hit this week.
A bounce in the dollar dragged on the euro, which lost 0.34 percent to 1.14135.
Sterling also slipped 0.22 percent to 1.36780, taking a breather after this week’s rally that pushed it to a 2-1/2-month high.
GDP data on Friday showed that Britain’s economy grew faster than expected in November and its output finally surpassed its level before the country went into its first COVID-19 lockdown.