The Digitization of Middle East

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Middle East area becoming a digital economy examines the region's level of digitalization. The paper focuses on the Middle East's digital economy's future, what the region has accomplished in terms of digitization, and how likely it is that it will adopt cutting-edge technology. It also offers advice on how public and private sector digital leaders can fill in gaps and seize opportunities. Since all of them enable the digitization of back-end operations, the term "digital," as it is used in the article, represents the digital application perspective as well as the underlying capabilities and technology, such as storage, processing, and connection. New improved products and business models in the Middle East are also covered in the paper. Notably, the report analyses the degree of digitization across all the nine countries in the Middle East namely; Bahrain, Egypt, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

Key words: digital economy, private sector, Middle East, digitization

Introduction

The key parts of digitization in the Middle East include the level of digital implementation across customer, commercial, and public sectors as well as the strength of the information and communication technology supply and innovation. Middle East compares fairly in terms of digital adoption progress with some regions, such as Western Europe, the United States, and countries in the Asia-pacific. Countries like the United Kingdom, Sweden, South Korea, Singapore, and Norway are categorized as digital frontiers due to their high scores in the industry digitization index that was created by McKinsey Global Institute. The index indicated the level to which digital technologies have affected various countries.

Notably, in the present days, it is not sufficient to be a digital consumer. So, in order to gain the benefits of being a digital frontier, governments must adopt underlying technologies and associated human capital. Currently, the majority of Middle East citizens have embraced digital technology, and the challenge now lies with the respective governments to integrate digital into their system as well as empower businesses to do so. Remarkably, it is sufficient for the organic growth alone to transform the Middle East into a leading digital economy without the backup of the digitization. Therefore, to realize the full potential of digitization in the Middle East, a comprehensive, collaborative, and concrete action should begin immediately.

A paradigm shift of digital disruption in the Middle East is expected in the present days. In the last ten years or so, more than 150-fold cross-border data flow connecting the Middle East to the world has been witnessed. Notably, countries, such as the Qatar, Bahrain, and the United Arab Emirates have the best digital consumer charge regarding high social media use and smartphone adoption rates. However, digitization across the countries in the Middle East is different, and the respective governments and businesses across the board are putting the best foot forward to adopt relevant technologies. Notably, the regions have a higher chance to transform its financial situation through becoming a leading digital economy by bringing all the stakeholders together to focus on developing the governance of the area, talent, business, and funding. The Middle East citizens are the ones that have led the regions digitization charge, and according to the digital consumer adoption, Qatar, Bahrain, and the United Arab Emirates are among the countries in the world that have more than 70% social media adoption and more than 100 % smartphone penetration rates.

However, despite the fact that citizens have led to embrace digitization in their lives, governments and businesses are yet to adopt the digital opportunity entirely. Notably, only 6% of the Middle Eastern public lives are under a digitized smart government despite the much effort by various governments in the region to go digital. Consequently, many Middle Eastern countries lag behind the set benchmark for the level of business digitization. Importantly, most of the countries in the region such as the United Arab Emirates and Bahrain have rolled out core scanning programs, and it is notable that the United Arab Emirates is the leading nation in the region regarding digital adoption. Other countries in the area have followed suit and have made considerable progress. However, the poor governance structure is one of the challenges affecting the region’s implementation problems, to push the public sector adoption to the next level and promote innovation so as to achieve the desired transformation (Amineh, 2012). Remarkably, the future of digitization of the countries in the Middle East region is promising, and the increased rate of consumer enthusiasm is a positive sign for a potentially high growth in the coming days. The consumers are ready to embrace the new digital error, and it will be crucial for the region to increase the information and communication technology patent applications and boost their infrastructure in readiness to advance its innovation presentation and Information and Communication Technology Supply.

The associated cost of digital migration is huge as it will be associated with an increase in the country’s gross domestic product so as to allow the nations to spend more on digital adoption. The prize is significant since a higher level of digitization result to an increase in the growth of the economy and consequently leading to an increase in the gross domestic product. Outstandingly, digitization can have a positive consequence on poverty reduction and inclusion and thus improving the quality and access to health care, education, reduction of carbon dioxide emissions that mitigates global warming, among many other benefits. So as to expedite the level of digitization in the Middle East countries, ten practical recommendations range across four crucial areas of talent, funding, business, and government (Harders & Legrenzi, 2008). The proposals are designed to back up and fuel the already existing digitization initiatives put underway by the various governments in the regions. Also, the recommendations are mutually reinforcing, forward-looking, and comprehensive.

Therefore, digital future in the Middle East countries requires the full participation of all the stakeholders ranging from the civil society, private sector, individual agencies, and the government leaders. Considering the contribution of accelerating technology space and its ability to continually shaping governance, business practices, and lifestyles, this is the best time for the Middle East countries to act. Notably, there are a few facts concerning Middle East economies about the level of digitization (Jiang, Luo, & Kulemeka, 2016). Firstly, digital contribution to the Middle East is small as compared with benchmark countries such as the United States, Europe, and Britain. Secondly, venture capital funding has room for improvement in the region. Thirdly, the region lags behind regarding share of Information, and Communication Technology companies and number of Unicorns and finally, the Middle East covers only a fraction of its digital potential. Remarkably, the statistics have it that the digital market could add around $ 95 billion per annum to the Middle East’s annual gross domestic product by the year 2020.

Digital Revolution in Transforming the Middle East

Digital is not a thing of the past in the Middle East countries, but it is a revolution that is presently happening and changing the lives of the citizens at a fast rate. In the Middle East and everywhere in the world digital expertise is shaping the way of doing business, governance and unique ways of lives. The digitization story of the Middle East indicated that the countries have heavily invested in the digital age. Over 70% of the population in the countries possess supercomputers in their pockets and thus enabling the region to be the leading consumer of smartphones all over the globe. Basing on global smartphone penetration, United Arab Emirates, Qatar and Bahrain surpass the United States. The region is also rated high regarding social media usage as it is the second in the world regarding YouTube videos views. Notably, the Middle East and the United States region is the fastest growing consumer of Facebook videos. The young generation in the Middle East forms the biggest population of about 50%. Therefore, the demographics and the rate at which the young generation in the region are adopting digital is a clear indication that shortly, the region will be a leading digital world. Notably, the aspect of propagation of better feature phones, increased mobile access, the versatility of social media usage, and media consumption, translates into new ways to educate, inspire and reach a new generation for the 21st century.

In the Middle East region, adoption of digital technologies on the business side is lower as compared to other zones in the world like the United States. Online presence of many companies in the region is minimal. For example, according to a recent survey in the region, Egypt had an online presence of 7%, followed by Saudi Arabia with an online presence of about 15%. However, in the area, the businesses are putting the best foot forward to have more customer journeys. Internal processes and channels digitized. Notably, according to the projections done by the various analyst, by the year 2019, the Middle East and Africa will have over 41% of cloud traffic growth rate. The statistics are backed up by the several digitized businesses in the region that indicate that the promising momentum in this space is attainable and achievable. ENOC and EPPCO companies in the Middle East are a leading example of digital adoption in their daily business routines. The companies have adopted radio frequency identification enable chips that allow cashless fuel payment automated systems. Notably, most of the countries in the Gulf Cooperation Council are seeking ways to make the operations within the oilfields smarter by adopting systems that are smart by digitizing their operations using control systems, sensors, and big data and analytics. The online private car booking service Careem in the region is another example of a success story.

Unlike other dominating giants in the field like Uber of the United States and Didi in China, the service can compete regionally with the localized strategy focusing on the B2B integration and additional features such as bookings that are scheduled not only for their fleet of chauffeurs but also for the cabs. Notably, roads and transport authorities in Dubai together with Bank Audi in Lebanon, have launched Nobot, which is an artificial intelligence based on a humanoid robot. The mobile robot which is autonomous promotes the bank products and services in addition to welcoming visitors. Remarkably, Nobot has helped to lift customer experience to the next level and makes customer journeys at the bank intuitive and interactive. On the sector o e- commerce marketplace, Souq.com has achieved milestones as the region’s first unicorn with a market capitalization of over one million United States Dollars. The platform has enabled a connection to more than 75,000 Middle Eastern businesses. Notably, many more companies have continued to adopt digitization and exploring new digital adjacencies. Therefore, the above-discussed examples indicate clearly that the Middle East as a region is doing a lot to ensure that the area goes digital.

According to the exhibit provided by researchers in the region, though businesses in the Middle Eastern region have lagged behind in digitization, consumers are leading the charge. Therefore, there is a clear indication that digitization is already transforming the area. The high scores of the data flow from connecting the other parts of the world to the Middle East is also a clear indication of the trends in digitization in the area. A report my McKinsey Global Institute indicate that the region indicates the data flows in the Middle East have increased by more than a hundred and fifty times in the past decade. Notably, the increased data flow is only a part of the indication that the region is slowly accelerating its pace towards digitization. Since the years of the late 60’s each wave of digitization that has hit the region has been seen to be smarter, shorter and better than the previous one. Notably, it took ages for the area to move from using mainstreams to personal computers but in the recent years, innovation has significantly accelerated its frequency, and there had been witnessed groundbreaking technologies year after year in the region.

Nevertheless, the amazing technologies have made a positive impact in the business world that it did in the past years in the area. Massive opportunities have risen as a result of the current wave of innovative technologies including the robotics, virtual realities, and internet of things, big data, drones and artificial intelligence. Remarkably, technologies have shaped the way of doing business to many industries by reshaping their current industrial structures. Outstandingly, by the year 2020, projections have it that there will be more than two zeta bytes of data in the Middle East. The statistics indicate that the bytes will be more than the total sand covering the whole of Arabian Desert. Markedly, the massive digital world comes with a myriad of opportunities for the government, the local people and the businesses in the region. However, it is crucial to note that the Middle East is not advancing at the rate required so as to realize the full potential of digitization.

There is high penetration of smartphones in the region especially in Qatar, Bahrain, and the United Arab Emirates, regions such as in the Middle Eastern countries. However, there are still small penetrations of smartphones, making the whole area to have a low level of smartphone adoption. Notably, the bottom two-thirds of the population of the Middle East that have cheap smartphone adoption is estimated to be 20%. Comparing the statistics of the United States, one would quickly note that, in America, among the Citizens who earn less than 30,000 dollars per annum, over 50$ have a smartphone. However, there is every reason for optimism since research has shown that the region will reach a percentage of 60 by the year 2020 regarding the level of smartphone adoption, which will be agreement with the rest of the world. Furthermore, the number of fragmented information technology players in the Middle East is small. Consequently, the top publicly traded information technology players in the Middle East do not even rank in the top 600 by revenue globally. Notably, one of the biggest factors in the digital business in the region is scale. The startup corps excluding the small and medium enterprises in the Middle East is slim, especially looking at the next generation of information technology players (Monshipouri, 2015). The number of startups indicated in the Angelist illustrates that, in the Middle East, at least one business is started in the region as compared to more than 60 startups per day in the United States. Therefore, basing the argument on the statistics, there are some reasons behind the position of the Middle East in comparison to the other regions in the rest of the world concerning digital creation and adoption.

Digitally Savvy Consumers, Business, and Government Adoption in the Middle East

Through the Middle East digitization index, we can know the spread of digitization across the Middle East region (Rahimi, 2015). The index methodology provides some indicators that determine the accurate picture of digitization (especially among the consumers), information, communication technology, business, government, and innovation. The index clearly indicates that the Middle Eastern region has adopted digital variable across its countries (Nabli, 2007). The following countries have represented a population of about 58 million people and a gross domestic product of 1.7 trillion United States Dollars. These countries include: United Arab Emirates, Saudi Arabia, Qatar, Oman, Lebanon, Kuwait, Egypt, and Bahrain. Notably, the nine countries show different levels of digitization. The scores are also compared with those of Australia, Asia- Pacific, Western Europe, and the United States of America, as well as chosen countries that define the digital frontier, such as Sweden, Singapore, South Korea, Norway, and the United Kingdom. Remarkably, the averages of the regions are got from normalizing by weighting in the size of the population in each country. Therefore, the analysis proves that the spread of digitization in some countries in Europe is lower as compared to some countries in the Middle East. However, many countries in the Western side of Europe and the United States show significant consistency in digitization, while some nations in the Middle Eastern region such as Bahrain, Qatar, and the United Arab Emirates have also made progress. Nevertheless, countries, such as Lebanon, Kuwait, and Egypt, are still lagging behind while countries such as Saudi Arabia, Oman, and Jordan are somewhere in the Middle.

McKinsey digitization index reveals significant information about the state of digitization in the Middle East (Rahimi, 2015). First, consumers are the leading in digital adoption in the region. Bahrain, Qatar, and the United Arab Emirates are amidst the top countries in the world that are leading in smartphone penetration with a percentage of more than a hundred and more than a proportion of 70% in social media adoptions. The figures are even more than those of the Unites States of America, and some other nations in the Western Europe and Asia- Pacific countries. Therefore, the many of the Middle East users have little option to keep up with the ever-increasing pace of innovation, especially in the digital space. There are still low levels of penetration among the Middle Eastern countries thus making the region to have the overall penetration rate lower than that of the poorest areas in the United States. However, it is evident that consumer demand for digital is still high and as compared to the region’s government and businesses across the board.

Secondly, the level of digitization among the Middle Eastern companies varies notably among countries. The level is far much below the benchmark regions as there are still a lot of variations among its member countries. Notably, Lebanon, Egypt, and Jordan have low levels of digitization as compared to the Gulf Cooperation Council Countries. Therefore such countries have much more to gain from making further progress towards digitization (Rahimi, 2015). Remarkably, countries like the United Arab Emirates have reached the level of digital frontier countries. Also, regarding business level technology absorption and per capita on online overspending, the Middle East region scores low. The metrics affect the overall area performance in the levels of digital performance in the business sector.

Thirdly, digital has been embraced by some countries in the Middle East. Importantly, most of the countries in the Middle East have diverged in their progress in digital absorption. The United Arab Emirates and Bahrain are on the record as the highest in the line of implementing digital initiatives, and among the Middle Eastern nations the United Arab Emirates is the top in digital absorption, and its rating matches one of the digital frontier countries. Notably, among the many countries on the United Arab Emirates records the highest digital identification (Rahimi, 2015). The indicators that are put into consideration include the card features, digital signature, and access to services. Notably, unified smart city systems and expansion of broad coverage are some of the digitization initiatives are underway in the country. However, other countries such as Saudi Arabia, Oman, Qatar, Egypt, and Bahrain have also achieved considerable progress are still on the verge of making it to the digital world. Nevertheless, the countries are facing some implementation challenges in their efforts to promote creativity and push the public sector adoption of digital to the next level. Such problems include inadequate governance structure that can unify the change and achieve the vision. Notably, despite various efforts put by the government, only about 6% of the population lives under the umbrella of a digitized government.

The fourth key moment regarding the level of digitization in the Middle East is that information, communication technology supply, and innovation, especially in the zones of digital creation, are lagging behind. Remarkably, the region tracks down its global equivalents from in information and communication supplies and innovation, especially on the digital creation side. Notably, compared with the United States, the Middle East has one- the eighth patent per million population and when compared to other emerging market players such as China, India, Russia, and Brazil, the region has one-third fewer information and communication patents overall (Rahimi, 2015). The high 3G coverage and the low prices are the ones responsible for the high information and communication technology supplies and innovation in Bahrain and Qatar. Notably, the reason as to why Qatar tops the list regarding leading nations in the world is due to the high developed network infrastructure regarding speed and coverage. A note should be taken that both Bahrain and Qatar, due to their small area as compared to larger countries such as Egypt and Saudi Arabia, they stand a higher chance of creating a unified level of aces for the whole of their population. The difference in the levels of digitization and consumer adoption between the government and the business as well as information communication technology supply and innovation can result in string growth potential shortly, as consumers are inclined towards embracing the new technology. Given the population composition in the Middle East, it is notable that most of it are young people, and thus, the tech- native and the savvy youth in the region will only boost further the level of digital adoption rate shortly.

The Middle East Is Capturing Only a Small Portion of Its Digital Potential

Measured by a digital share in private consumption, imports, exports, government expenditure, and private investments, digital economy in the Middle East accounts for more than 4.1 % of the gross domestic product. Comparing the statistics with the United States, the digital contribution accounts for more than 50% of the gross domestic product. Notably, the Middle East shows a wide range of variations in its average value. The Gulf Cooperation Council countries have more digitized economies than their any of their neighbors. Consequently, the digital economies for Bahrain account for about 8 % and that of Kuwait accounts for more than 5.1 %. Notably, in both Qatar and Omar, who are adjacent neighbors of the nations’ their contribution to digital economy accounts for only 1%. The high participation of Bahrain is due to the high digital exports to regional neighbors.

Additionally, digital can have a significant contribution to growing the economy of a nation. Notably, it contributes to the creation of jobs, economic growth, and is a key contributor to enabling the increased productivity. Additionally, digital can have an impact in reducing the levels of poverty, improves access to and quality healthcare and education, and minimize the emission level of carbon dioxide thus mitigating global warming. Therefore, a digitized economy benefits a myriad of social and economic benefits. Notably, there exists a vicious cycle between a country’s gross domestic product and its digitization. More digital adoption forces a state to have a higher gross national product.

Notably, there are some digitization strategies that the Middle East is trying to implement so as to transform their economy to a digital one. Remarkably, leaders of the region have noted the benefits that accrue to a nation that has embraced digitization. Additionally, they have taken note of that the digitization journey has a substantial impact on the social inclusion, small and medium enterprise development, economic development, job creation, and government efficiency. Therefore, digital is the way to go for any country in the Middle Eastern region that need growth in their economies and societies. Notably, most of the governments in the region have adopted policies, strategies and visions and many digitization initiatives in the past decade.

Middle East has only scratched the surface of its digital potential. Research has shown that the region has only achieved 8% of its full digital potential. Comparing the statistics with the comparator economies, the United States has captured a digital potential of about 18% while Western Europe has captured a percentage of 15% (Rahimi, 2015). Also, it is important to note that the governments in the Middle East have developed ambitious plans in the coming years so as to harness the power of digital potential for the society and the economy. Therefore, so as to transform the Middle East into a leading digital economy, the region must be able to overcome the challenges and accelerate its digitization across the area. Also, leaders in both the public and private sectors must also contribute towards the agenda. The transforming initiatives put forward by the Middle East’s government leaders, are the best to steer the respective countries towards achieving a digital economy. Notably, so as to make the dream come to a reality, the respective societies and economies must evolve.

To sum it up, it is not enough to become the world’s best in consuming digital but to become the number one creators of digital. The motivation ensures that that is a continuous evolvement in the current technologies through innovating. Therefore, so as to maximize the many economic and social gains associated with the digital frontier, the Middle East countries must develop the necessary technologies and associated human capital. The government should move from e- government focused digital initiatives to full digital economy development. Additionally, businesses should step up the collaboration corporations and digital disrupters in the region. Finally, the government should rethink how to attract and retain digital talent and reconsider applicability nationalization to digital. Middle East region has the right potential to be the leading digital economy in the whole world since the areas has the required infrastructural potential to harness digitization. The only thing he governments of the countries in the region need to do is to give priority to investments that are geared towards adopting technology in their operations. Citizens of the Middle Eastern countries are already digitized following the high smart phone penetration rates in the region. Therefore, the only remaining aspect so as to digitize the whole economy is for businesses and government corporations to adopt digital systems in their operations

References

Amineh, M. (2012). The greater Middle East in global politics. Boston: Brill.

Harders, C. & Legrenzi, M. (2008). Beyond regionalism?. Aldershot, England: Ashgate.

Jiang, H., Luo, Y., & Kulemeka, O. (2016). Leading in the digital age: A study of how social media are transforming the work of communication professionals. Telematics And Informatics, 33(2), 493-499. http://dx.doi.org/10.1016/j.tele.2015.10.006

Monshipouri, M.(2015) Democratic uprisings in the new Middle East. Oxon: Routledge

Nabli, M. (2007). Breaking the barriers to higher economic growth. Washington, DC: World Bank.

Rahimi, B. (2015). Digital Middle East: Transforming the region into a leading digital economy. International Journal of Middle East Studies, 47(02), 1-57. http://dx.doi.org/10.1017/s0020743815000124

March 02, 2023
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