Expanding in the Middle East is not easy

Expanding in the Middle East is not easy

When Fadi Ghandour co-founded Aramex in 1982 shortly after graduating from George Washington University, the courier and logistics company filled a gap in the market—serving the Middle East. Global leaders at the time—FedEx Corp. (then known as Federal Express) and Airborne Express—lacked expertise in the region, where local laws were thorny and addresses were inconsistent or hard to find. Aramex stepped in to deliver for several bigger companies, and has since become one of the leading couriers in the Arab world. With more than 10,000 employees in over 60 countries, Aramex now serves an increasingly Web-savvy, middle-class population and has aided the growth of local e-commerce firms such as Souq.com and MarkaVIP. The company is based in Jordan but listed on the Dubai Stock Exchange.

Fadi Ghandour recently talked with The Wall Street Journal about why it is still hard to start companies in the Middle East, and which firms are worth watching. Edited excerpts:

WSJ: After 30 years spent running a company in the Middle East, how have you seen entrepreneurship evolve in the region?

Mr. Ghandour: It has come very far since I started. Then, there was practically no private equity or venture capital, and banks were not receptive to entrepreneurs’ needs. A lot of people had to struggle, and went to the West. They started businesses wherever they studied and they became successful entrepreneurs there. Today, it’s totally different—there are venture-capital firms and a big network of angel investors.

WSJ: How important is it for new companies starting out to think regionally—or even globally?

Mr. Ghandour: You need to think of the neighborhood. How do I sell my product or services? The Levant (Lebanon, Syria and Jordan) and the GCC (the Gulf Cooperation Council, which comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) are a must [for companies in the region]. You can’t scale up unless these markets open. Eventually, going global is another story altogether. It takes more time and capital.

WSJ: You started Aramex before the expansion of e-commerce. How has it changed the way you work?

Mr. Ghandour: E-commerce can’t happen without logistics companies delivering packages. We’re helping build the industry in the region. The future of retail is going online, and we think of ourselves as partners. We’re benefiting, seeing a surge in online commerce in the Middle East and South Asia, especially India.

WSJ: What are some of the main obstacles you’ve faced in growing your business, and how did you overcome them?

Mr. Ghandour: The main obstacles are regulatory—mainly postal authorities and postal monopolies. It took a long time to get licenses for the region. Some countries imposed taxes on us. In Tunisia today, despite adherence to World Trade Organization standards, they still don’t allow foreign nonpostal companies to operate in the country. [In those countries, Aramex acts as a freight forwarder, and not an express courier. Local postal authorities handle actual delivery.]

Another issue was finding capital, which we eventually did by going public. The process was tough, and it was done over years of failure in not being able to raise private equity. We thought it would be better to go to the global market just when Nasdaq was seeing the dot.com boom (in 1997). It was a huge leap forward. Our Nasdaq offering is why we’re where we are today. It was a big statement and it changed people’s perceptions. As a public company, banks saw us differently.

After five years, we felt we weren’t getting value appreciation on the market. We were approached by [private-equity firm] Abraaj Capital to build up capital, then relist on the Dubai exchange. On the Dubai Stock Exchange, there’s a restriction of ownership, which creates an artificial ceiling on demand. We’d like to see different regulations, which we’ve been discussing with the authorities. But we’re in a market that recognizes our brand.

WSJ: What are some companies to watch in the region?

Mr. Ghandour: Looking at the whole Internet space, there’s the animation company Rubicon, which is based in Jordan. It does a lot of work in the region, and it also does work for Hollywood. We’ll hear more about them in the coming year. Akhtaboot is an online [regional] job recruiting site that competes with [Lebanese] Bayt.com. Qordoba [the Arabic translation website] is attracting a lot of talent. Kharabeesh has the largest content of Arabic cartoons on YouTube.

WSJ: To what extent is the Arab Spring an economic, as well as political, movement?

Mr. Ghandour: The Arab Spring is totally about economic empowerment. We’re in for huge disappointment if we think it’s just about political empowerment. Political without economic development is a hollow promise. The people who went down to the streets in Cairo didn’t just want political freedom. They wanted better schools, better health care, better jobs and better-paying jobs. The youth went out there to have a better future.

You can’t be a successful business without investing in the society where you live and building better services in places where you operate.

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