Shift to digital disruptors ‘could boost regional GDP’

If GCC countries shift from being digital adopters to being digital disruptors, they could add between $138 billion and $255 billion to regional GDP depending upon how far they advanced, said Strategy&, a global consulting business in a new report.

The new report from Strategy& Middle East indicates that according to its Digital Economy Index (DEI), the maturity of GCC digital economies could match that of the Organization of Economic Cooperation and Development (OECD) countries within five years, assuming both OECD and GCC countries continue to grow at their current pace.

The Strategy& Middle East DEI is an evidence-based tool that provides a comprehensive view of the digital maturity of 109 countries between 2010 and 2020. The index is based on 86 indicators grouped into five pillars: foundations, talent, innovation, adoption, and local production.

“Our digital economy index shows that considerable progress has been made in the evolution of the digital economy in the GCC over the last decade,” said Tarek El Zein, Partner with Strategy& Middle East, part of the PwC network.

“Specifically, progress has been made in investing in digital infrastructure, adopting e-government platforms, and launching technology parks and business incubators. However, governments now need to take vigorous policy actions if they are to move from being mostly adopters of digital technologies to becoming disruptors hosting powerful local companies, institutions, and talent.”

Despite continuous growth globally in the last year, there is a continuing divide between advanced economies and the economies of the developing world. The DEI groups countries into three categories: digital learners, digital adopters and digital disruptors. The GCC currently ranks, overall, as a digital adopter.

Countries ranked as digital adopters are defined as having met connectivity requirements, which in turn promote higher demand for digital outputs. Adopters are often seen to be seeking to develop talent, enable digital innovation, and localize digital services. They are also recognized as actively enabling the sector through putting in place policies and regulations, establishing capability development programs, and formalizing partnerships with the private sector.

“The Digital Economy Index (DEI) shows a clear correlation between the growth of the digital economy and overall GDP performance,” said Dima Sayess, Partner with Strategy& and the lead of the firm's Ideation Center in the Middle East. “It demonstrates that a 10-percent point increase in any country’s DEI score would lead to a 2.6% increase in GDP per capita growth and 1.1% growth in employment.”

In the case of Saudi Arabia, a 10% increase in the DEI score would increase its current score from 44.47 to 54.72 (equivalent to Germany’s level), which would then translate in a rise in GDP per capita from $19,587 to $20,779. In the event of it matching the level of Singapore, the country with the highest DEI score, then GDP per capita would rise to $23,005. For the GCC as a whole, attaining Singapore’s DEI score would increase the region’s aggregate GDP by 18.4 percent, equivalent to $255 billion.

“To leap the digital gap and keep pace with advanced economies, GCC countries need to focus their efforts in three main areas: reforming the regulatory framework, deepening the talent pool, and strengthening innovation and localization,” said Bahjat El-Darwiche, Partner with Strategy& and the Technology, Media, and Telecommunications leader for Europe, Middle East, and Africa.

•    They should reform the regulatory frameworks to adapt to the new market realities of the digital era. Regulations need to be adaptive and anticipatory to keep pace with technological and business model changes, supporting outcome based and experimental approaches.
•    The public and private sectors must work together to nurture talent, attract overlooked segments of the population such as women and youth, facilitate digital skills development, offer access to advanced skills training for science, technology, engineering and mathematics graduates.
•    Policymakers need to further strengthen and promote innovation and localization. Local production and digital innovation are vital because they contribute significantly to the growth of national GDP and jobs, either directly through revenues and direct employment, or indirectly by nurturing an ecosystem of innovative startups and SMEs. As such, it is imperative to identify and support strategic sectors, set-up the right partnerships, facilitate data collection and exchange and bring together a network of technology centers.

“Growing the digital economy is no longer a choice for Gulf countries. It is an imperative for their economic future, ensuring economic growth, jobs’ creation, and economic resilience and sovereignty,” concluded Melissa Rizk, senior fellow with the Ideation Center at Strategy&. - TradeArabia News Service




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