- Houmal Technology Park (HTP) can be an example of tech manufacture and fruitful entrepreneurialism.
- Export orientation of tech companies can be realized independently from the Lebanese entrepreneurship ecosystem that relies on Circular 331.
- First-mover disadvantages of pioneering tech companies need to be compensated by state and municipal partners for creation of productive clusters.
- Risks pertaining to the structural deficiencies in the legal and administrative infrastructure and risks linked to the recent changes in the financial and economic environment urgently need to be overcome.
Digital infrastructure of data centers is an easily overlooked growth industry in tech when compared to the exotic spheres of blockchain-based banking and finance, the internet of everything, or development hotspots from health and virtual reality gaming to artificial intelligence. And the project of a first national data center realized in Lebanon as a public-private partnership (PPP) frankly looks today even more utopian than at the beginning of this year, partly for reasons of uncertainty added by the October protests and partly because of the irrational political miscalculations that the PPP project has evidently been facing for over a year (and that contributed to the atmosphere of despondency that set the stage for October 17). But despite no rational line of vision on a national data center to be built as a PPP in the coming years, a new industrial campus on a hilltop a few miles southeast of Beirut provides its visitors with a strong impression of this important information technology (IT) growth sector’s potential for Lebanon. This industrial site goes by the name of Houmal Technology Park (HTP).
Talking with Fadi Daou, HTP’s mastermind and owner, Executive corroborated the following: It is possible for a young enterprise from Lebanon to have innovative manufacturing with a complete focus on export markets, job creation through such a venture could alter and upgrade the economic and social fortunes of the communities in which it exists, and HTP’s biggest struggle has been finding the full institutional support that it needs.
Daou’s company, Multilane, produces equipment for data center infrastructure. The international market for which is currently worth $100 billion, he explained in an early October presentation on his project to students. The market, the presentation continued, has seen a 25 percent annual growth over the last five years, with this level of growth forecasted to continue. This is due to continuously rising data volumes and transmission speeds in the IT realm that still functions in line with Moore’s law (that processor speeds, or overall processing power for computers will double every two years).
Daou tells Executive that he just has passed the half-way mark in investing $15 million into the development of HTP, and that he aims to at least triple his workforce between 2020 and 2022. “The business we are in is the business of big data infrastructure, and as a company, we are young and growing,” he says. “We are now in the early days of [transmission] standards of 400 gigabits (Gbit) per second per node, from the top-of-the-rack down. As Multilane we are in a leadership position in the 400 Gbit market—we are first to market in that area and believe that this market is going to start growing in 2020 with a five-year growth cycle. [We believe that this market] will carry the growth of the company for the next few years. This is fundamental.
Optimistic outlook
“All our development is done in Lebanon—the conception, realization, testing, qualification and support are initially done in Lebanon, but eventually we are outsourcing go-to-market with our partners—subassembly is done with our contract manufacturers in China, Malaysia, and Taiwan, and the final assembly, programing, and calibration is done here.”
Optimism over global market positions of Lebanese companies is not a message one hears every day. But what one hears even less is companies confident about their job creation potential in Lebanon. Daou is not merely confident of this in an abstract sense; he has a job creation agenda that is currently in the warm-up round, with an emerging tech academy and discussions or agreements for collaboration with several universities.
“We expect to train upwards of 100 students per year, perhaps one to two hundred. We expect the headcount of the company to grow by at least 50 percent annually for the next three years,” he explains. Transferring this to a numerical example, Daou confirms that this target growth implies moving from a headcount of 100 today to 150 in year one, 225 in year two, and about 340 or 350 in year three.
Daou concurs that the HTP vision not only had many mental barriers, bureaucratic obstacles, or even demands for “soft fees” to conquer over the past decade before it reached today’s status—near-readiness for full migration of the Multilane enterprise and its attached academy. Attesting to having encountered distinct first-mover disadvantages, he says, “The problem is not necessarily the money, but the delays that we encounter with bureaucracy under the existing system. Delays impact us in a very negative way. The world that we work in relies tremendously on time to market, and if we are delayed in any project, our customers are not going to wait for us next time. They are going to use our competitors. We need to remain competitive not only on price, value, [and] performance, but also on turn-around time.”
In his perspectives on what can work in improving the industrial tech sector in Lebanon, Daou sees the path of attracting dynamic multinational companies to Lebanon as preferable over efforts to foster local formations of tech companies and take them from startup to international exit.
“The problem is not necessarily the money, but the delays that we encounter with bureaucracy under the existing system.
In this sense, what sets HTP apart from other initiatives in the entrepreneurship ecosystem of Lebanon is that it is not a story of the monetary stimulus engendered by Banque du Liban’s (BDL), Lebanon’s central bank, Circular 331 and crystallized around the Beirut Digital District (BDD). Not being part of the entrepreneurship ecosystem of BDL-inseminated tech embryos nurtured in BDD breeding boxes on lifelines of banking-infused funds that are administered by VC nurses, the HTP campus feels more like the founding cell of its own ecosystem.
In the context of seeking to test the mutual influence and development potentials between Lebanon as location of an innovative manufacturing project and such an enterprise, Daou is now facing uncharted territory and risk scenarios. Talking after recent changes in the banking sector practices and before the protests, he notes new risk potentials that are rising in Lebanon’s economic framework. “If the cash flow barrier becomes prohibitive for us, we would reach a point where we would need to mitigate this risk by adopting a different operations model where we can function without operating out of Lebanon,” he says. “Another risk which we are afraid of facing is the fact that we have employees at subsidiaries and offices in Germany, the US, and Taiwan. If we get to a point where we can no longer transfer money, hard currency, to compensate them, we would not be able to keep these offices open or keep our customers satisfied. This is the risk that we face as an indirect or secondary monetary effect.”
