Analysis, Interviews, Opinions

Internet ‘can boost Mideast growth by $380bn’

The Middle East can add $380 billion to regional economic output by bringing the whole region online according to a major new study by Strategy&, formerly Booz & Company and part of the PwC network.

In an environment of low commodity prices and regional instability, the Middle East is changing how it achieves sustainable economic growth, explained the study entitled “Connecting the world: Ten mechanisms for global inclusion”, conducted on behalf of Facebook.

Innovation and digitization will play as important a role in the future as government spending. This is because the Internet is a major driver of growth, and creator of new, high value jobs around the world, which makes digital inclusion a powerful tool for development and poverty reduction.

Extending the reach of the Internet to the unconnected is, however, looking increasingly difficult. There are 4.1 billion people around the world—56 per cent of the world’s population—who are not online, with more than 200 million unconnected in the Middle East. The pace of Internet growth has slowed in recent years in developing countries, leaving billions of people disconnected from the modern economy.

To achieve universal Internet access will require the removal of significant barriers in the markets serving the Internet, according to the study.

“The centrality of the Internet to the 21st century economy means that enabling universal access is a fundamental development challenge of our era. These global and regional solutions can help bring the whole of the Middle East online because of the interconnected nature of the Internet,” said Bahjat El-Darwiche, a co-author of the study and a partner with Strategy&.

“Internet access is a fundamental challenge of our time. The Internet’s truly revolutionary potential will only be unleashed when the remaining 56 per cent of the world’s population is also connected,” said Rawia Abdel Samad, director of the Ideation Center, the leading think tank for Strategy& in the Middle East.

Bringing the whole world online would create huge benefits for developing countries and for businesses across industries over the coming five years, including:

•    Additional global economic output of $6.7 trillion
•    Social and economic improvement for over 4 billion people
•    $400 billion growth opportunity for telecom operators
•    $200 billion opportunity for content providers

The study also describes how the Internet will change as more people from developing markets gain access to online resources. With global Internet inclusion, there could be five Internet users in developing markets for every user in developed markets, compared to the current ratio of two to one.

These new users will seek more content related to work, economic opportunity, and social needs. Data hungry content, such as entertainment will likely be downloaded from Wi-Fi hotspots or through other technologies and consumed offline.

“The reasons for going online will tilt towards productivity, micro enterprise, and education, and there will be growth in e-commerce that sources from and sells to the poorest consumers,” said Jad El Mir, a co-author of the Strategy& study and a manager with Strategy&.

One of the key findings of the study, which encompassed 120 countries over a 10-year period, is that Internet growth can be encouraged by solving structural challenges in the three key markets that enable the Internet:

1.    The market for connectivity needs to modernize the technology base by replacing 2G with 3G or 4G/LTE investment to extend higher capacity cellular coverage that can handle larger data volumes and provide users with a high quality experience. Retail Internet prices also need to fall nearly 70 per cent to make the Internet affordable to 80 per cent of the population.

2.    The market for content needs to foster local content systems in developing countries to create relevant and compelling material that will bring people online. In particular, content must provide people with economic opportunity, such as to enhance their income.

3.    The retail market must adopt new consultative sales approaches, brand subsidized access, and simpler value propositions to reach the poorest customers.

Finally, reaching the world’s remotest and poorest inhabitants will require using innovative and disruptive technologies.

“Energizing these three markets can remove the existing barriers to Internet adoption and reignite Internet growth in the developing world. “We need to find new approaches in the markets for connectivity, content, and retail if we are to harness the power of the Internet for development and poverty reduction,” said Andrew Bocking, product manager for Internet.org at Facebook.

The study analyzes the mechanisms that could energize the three markets, some of which are already succeeding in certain countries. Together, these mechanisms will have a transformative effect on the lives of millions of people across the Middle East, providing them with jobs and opportunities for social and economic advancement. – TradeArabia News Service