The United Arab Emirates
(UAE) has retained its position as a leader in the Middle East's Internet
Economy, a new report by The Boston Consulting Group (BCG), a global management
consulting firm and the world's leading advisor on business strategy, revealed.
The research also found that, globally, the difference between countries with
large digital economies and those with low economic activity amounts to about
2.5 percent of GDP - a material figure for any nation.
The new study, titled
Which Wheels to Grease? Reducing Friction in the Internet Economy, serves as a
follow-up to BCG's previous report The Connected World:Greasing the Wheels of
the Internet Economy. The 2014 analysis identified 55 indicators of e-friction
that inhibit online activity by consumers, businesses, and governments. The BCG
e-Friction Index- introduced in last year's study - then used those indicators
to rank 65 economies according to four types of e-friction:
infrastructure-related frictions that limit basic access; industry and individual
frictions that affect the ability of companies and consumers to engage in
online transactions; and information frictions that involve availability of,
and access to, online content. The new research expands on that and outlines
how economies can move up the e-friction ladder.
"The Internet has
created an unprecedented environment for businesses to grow and flourish,
thanks to its permission-less innovation, which makes it possible for everyone
to explore the untapped opportunities of today's digital economy," said
Baher Esmat, Vice President Stakeholder Engagement, Middle East of the Internet
Corporation for Assigned Names and Numbers (ICANN), which commissioned the 2014
report and the update. "Countries in the Middle East have the potential to
grow their digital economy, and this report by BCG demonstrates how the UAE and
Qatar are tapping into this potential and leading the way for growth."
The 2015 BCG e-Friction
Index highlights that the UAE and Qatar are two leaders in the MENA region with
advanced and productive Internet economies. On a global level, the Index ranks
the two countries 24 and 23, respectively - ahead of a number of strong
emerging economies.
"In the UAE and in
Qatar, consumers and businesses face few restrictions or constraints on digital
activity - what we refer to as 'e-friction," said Hermann Riedl, Partner
and Managing Director at BCG Middle East. "The nations that are still
lagging behind, however, both in the GCC and in the rest of the world, need to
imminently address their sources of e-friction; after all, doing so could have
a strong impact on national competitiveness as well as on social and economic
development."
He also added,
"Based on our study, the broad causes of e-friction include wealth,
population density, the urban-rural population mix, literacy, and
English-language skills. And, while some of these can be influenced by policy
initiatives, others require more creative approaches."
GETTING TO THE ROOT OF
THE ISSUE The analysis of economies by their e-friction scores and their per
capita GDP points up some interesting - and potentially useful -groupings.
Eight clusters emerge, split into three groups by income levels. Among
high-income economies, "all-rounders" and "well-oiled
nations"- such as the UAE -have generally low e-friction scores, although
the well-oiled set performs less consistently across the 55 indicators than
all-rounders do.
"High-income
overachievers" excel, owing to successful and focused digital-economy
initiatives in areas such as infrastructure deployment, and e-government.
"High-income aspirants" - such as Saudi Arabia, Kuwait, and Qatar -
have a high per capita GDP despite, rather than because of, the level of
friction in their digital economies. Their performance across the e-friction metrics
is generally moderate.
Among
"middle-income achievers", economies outperform on e-friction, while
"middle-income rural" economies and "middle-income urban
aspirants" face equally big challenges, although of different types. For
the first group, the question is how to deploy infrastructure to large rural
populations given the economic realities of big capital expenditures, high
operating costs, and low average revenues per user. The question for the second
and third groups is whether to make the trade-offs between the large urban,
unconnected populations and those in rural areas.
Finally, the economies
with the lowest GDP per capita and with poor e-friction performance across the
board face multiple challenges owing to low income levels, rural populations,
and often low literacy rates. The economic and social potential of successfully
addressing these challenges is correspondingly large.
Analyzing and addressing
the 55 indicators can help any economy reduce e-friction, increase Internet
use, and further digital economic activity.
"Even economies in
the well-oiled categories, such as the UAE, should not rest on their
laurels," stated Riedl. "They also have sources of friction to
address, such as those related to outdated regulation, excessive bureaucracy,
and impediments to investment; these economies need to focus their
interventions with care." -end-
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