The force of digitalization is driving the global economy, creating distinct groups of leaders and laggards. Through institutional reform that leverages the advantages of digitalization, the Mashreq can become a vital hub in international data networks.

Furthermore, digital transformation can assuage pressing challenges. It can deliver higher transparency, accelerate lackluster productivity and increase economic opportunities for all, especially the youth of this region. A new report, Mashreq 2.0, charts the roadmap for the region to capitalize on this rapidly emerging opportunity, and assesses the prospect of a digitally integrated regional market.

Outside the dominant paradigms that portray the region in popular media, the Mashreq is the epicenter of the world’s fastest growing data transit market. Data traffic growth within the region will increase at a precipitous 42% compounded annual growth rate from 2016 to 2021.

Influenced by historically intertwined geographic and cultural ties, MENA-Europe data exchange grows at over 50% per year.

The Mashreq’s potential in the digital economy is also evidenced by the many unicorns that have been incubated in the Arab region. Hallmark cases include Maktoub and Souk.com, born in Jordan’s capital, Amman. These digital platforms indicate an evolution in consumer behavior, embracing digital consumption. Another example is Magnitt, an Iraqi startup now hosted in Dubai, which is a marketplace for investors that links 5,500 startup firms with investors across the region.

These examples signal a bright future for the region, but crucially, broadband internet infrastructure is not yet equipped with the capacity to realize this potential. While mobile phones are ubiquitous in the Mashreq, broadband internet paints a different picture. Mashreq countries have a similarly stark disparity between mobile and broadband penetration: Iraq has 95% mobile penetration but only 28% for broadband; Lebanon is less glaring, with 75% mobile penetration and 71% for broadband. Mobile access is also rather uneven in the region: The gender gap in mobile ownership is 11% in Iraq and 21% in Jordan, but only 2% in Egypt or Turkey. Creating a significant bottleneck, all countries in the Mashreq also have a lower fixed download speed than the global average of 55Mbps: Jordan is at 29 Mbps, Iraq at 13 Mbps, and Lebanon at 7Mbps. Mobile download speed is relatively better off: the global average is 25Mbps, and Lebanon is at 40Mbps, Jordan at 15Mbps and Iraq at 6Mbps. Even so, they fall behind best in class examples such as Romania, that has successfully introduced competition and market contestability to achieve 131Mbps (fixed download speed) and 34Mbps (mobile download speed).

The ability to absorb new communications technology is another source of disparity: 4G connectivity is only available to 25% of Iraq’s population, though present in 95% of the population in Jordan and Lebanon. Internet Exchange Points (IXPs) also present a largely untapped opportunity.

To provide Internet connectivity that can augment the data economy, significant investments in key areas of the infrastructure value chain are necessary.

In Iraq, it is estimated that a total of IQD 660.5 billion (US$558.8 million) will be needed to build a robust fixed network in areas afflicted by conflict.

Investment in the ”last mile” broadband infrastructure is also lagging more generally.

Investments to bring high speed broadband access to 30% of the population of the Mashreq (about 13 million households) through fiber access is estimated to be between US$ 4 billion and US$ 5.2 billion. A large part of the investment needed for this fiber buildup can be provided by the private sector, through competitive entrants, or strategically using Private Private Partnerships (PPPs). A good example is Jordan’s planned PPP on the National Broadband Network (NBN), which may crowd in at least $100 million of additional private investment leveraging an existing government fiber network. Considering the significant potential in the region, unlocking such a high quantum of investment is not beyond possibility. In addition to “last mile” broadband infrastructure, improving IXPs in the region can strengthen regional data exchange networks, and unleash at least US $200 million in investment.

Digital ecosystems can leverage high level of education in the region, including digital literacy, and a strategic geographic position as a central node in advanced service trade. Boosting broadband penetration alone by 10% would have a significant impact on GDP growth, estimated to be as high as 1.4%. This could give a significant boost to economic growth and trade integration in the region. However, this is only one piece of the puzzle.

Where the Mashreq’s regional and backbone broadband infrastructure is extensive, it remains sub-optimally used, due to intricacies in the political economy context, and lack of credible rules and institutions. Institutional reform to increase contestability is essential. Compelling priorities include: a) deepening competition to eliminate rents; b) strengthening regulatory institutions; c) creating regulatory incentives, including a Fiber Regulatory Package (FRP), to facilitate fiber investment; and d) ensuring universal access to broadband through proactive use of the public sector, and fast-track a timetable towards frontier technologies such as 5G.

Implementing these reforms would position the Mashreq to become a digital hub for the region, leveraging the full potential of the new digital economy for MENA, fully embracing innovation and entrepreneurship, creating opportunities for its technology savvy youth.

source: .worldbank

The Global Economic Conditions Survey (GECS) shows that global economic confidence remained low in Q1 2019, despite rising for the first time in a year.

The Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA) said that they expect a 3.5 per cent economic growth in the Middle East in 2019.

Fazeela Gopalani, the Head of ACCA Middle East, said, “While confidence was especially weak in our region at the end of last year, we are seeing a really positive start to 2019 and in the first quarter confidence has rebounded abruptly.”

Economic growth in the region will be supported by the regulatory and fiscal landscape, especially in the UAE and Saudi Arabia markets, which continue to attract foreign direct investment (FDI) and have recently seen an increase in international acquisition such as the merger between UAE-based Careem and Uber.

“With the regional visions of Saudi Arabia and the UAE now in their implementation phases, the Middle East economy is set to grow at a positive rate after a general slowdown,” said Hanadi Khalife, Director, MEA and India operations at IMA.

GECS stated that the significant bounce in 2019 will be aided by the strong recovery in oil prices, however it remains to be seen how sustainable the rise in oil prices is given the slowing global economy, which is likely to exert downward pressure on prices.

Source: bankerme