What a year it has been in the Middle East! Let’s start with the good news…

• Qatar Airways completed the world’s first commercial passenger flight powered by natural gas.
• The fully automated Dubai Metro became the first urban train network in the Middle East.
• And in Saudi Arabia, the King Abdullah University of Science and Technology opened its doors. Called “an oasis of freedom,” the university aims to fund research that will spawn economic diversity for Saudi.

2009 has truly been a year of breakthrough achievements in the Middle East. It’s also been a year of disappointments. Who could imagine that the bottom would fall out of the real estate market in most of the Middle East? Or that unemployment would rise and workers without a stake in the Gulf countries would flee, leaving their debts unpaid? Or that Dubai World would need a $26 billion bailout?

Yet, as disastrous as these situations may seem, they provide an unprecedented opportunity for growth in the region…the growth of innovation and entrepreneurs. 2010 could finally be the year that start-ups and companies investing in innovative products, services, business models and management come into serious play in the Middle East. The conditions are ripe.

Cheaper Resources: The events of 2009 have made resources – office space, talented personnel, raw materials, supplies – that are often too expensive for new businesses more affordable. The Middle East will likely see an influx of entrepreneurs taking advantage of the cheaper cost of doing business. Such businesses will likely be cash-based and will be able to survive month-to-month while they develop a customer base. On the other hand, highly financially-leveraged organizations will continue to bleed money unless they have vast reserves of cash or liquid assets.

Innovation and Agility: Real innovation is not about “bigger, faster, taller, or fancier.” It’s about adding value for both the business and its customers. Established companies may lose sight of this as they get bogged down by misguided corporate agendas and shareholder expectations. Entrepreneurs, on the other hand, have less to prove, and less to lose. For new businesses, innovation, especially during tough times, becomes a daily occurrence as they look for unique ways to attract customers and add value. Some may even have the flexibility to adopt innovative new business models that take them in a completely different direction. Such agility is, and will continue to be, a real advantage in every industry.

Access to Affordable Technology: “Sloan Management Review” recently reported on how affordable technology is enabling businesses to test consumer reactions to new products more quickly, easily and cost-effectively than ever before. Thus, innovations can be tested and tweaked earlier in the development process, paving the way for a more successful market launch. While the article focused on the achievements of Google and other large, established companies, the underlying argument is sound for entrepreneurs and smaller businesses, as well. The cheaper technology becomes, the more the innovation playing field is leveled between organizations of all sizes. In addition, the Internet and social networking technology is enabling collaboration and open innovation as never before. This phenomenon will no doubt continue in 2010 as entrepreneurs around the world leverage this affordable technology.

Access to Information: Businesses today must deal with the most educated consumers the world has ever seen. Buyers know exactly what they want and have a higher level of expectations (green, socially responsible, clean energy, etc.). With such informed customers, companies cannot afford to limit their employees’ access to information and new knowledge. Yet this is exactly what many established organizations are doing as they slash R&D and training budgets. Newer businesses, which tend to place more value on individual contributions, know that information and knowledge is essential to growth. So, while traditional companies hunker down and wait for things to get better, innovators and entrepreneurs continue to make things better by continuously learning and adapting.

Process Innovation: During the past year, companies both large and small were forced to cut costs. As per usual, organizations that could afford to cut jobs let the heads roll and hoped it would be enough. The UAE alone saw 16 percent of workers lose their jobs in 2009, and a recent survey by Gulf Talent reports that 15 percent of employers surveyed plan to continue cutting jobs. On the flip side, smart companies – many of them led by entrepreneurs – reduced job losses by focusing on managing processes, making them more cost-effective, innovative and efficient, and on eliminating or downsizing unnecessary infrastructure. Who do you think will be better prepared to face the challenges of 2010? (Hint: it’s not the company with fewer employees trained to do one thing that may not even be value-added anymore.)

So here is a question for the Middle East. Where will you put your money and effort next year? Should we continue to follow the U.S. model of bailing out established corporations that are overextended with large-scale risky investments? Or should we increase support for entrepreneurs, start-ups and innovators that can make a real difference and also turn a profit?

Here’s also a challenge for private equity funds: I read that you have $11 billion to invest in the region next year. What will you do to make 2010 the year of innovation and entrepreneurs in the Middle East?