As the digital economy continues to burgeon, nations with access to advanced ICT are innovating new business models and prospering. Staying competitive is paramount. This is particularly relevant to oil-producing countries such as those in the Middle East, at a time of challenging economic growth.
While IMF projections put global economic growth at 3.5 per cent this year, forecast for the seven oil-exporting countries is nearer to 1.9 per cent.
That said, there are great opportunities ahead, as some of the leading economies look to ICT infrastructural investments as the most significant driver of GDP growth. The most digitally-developed economies are progressing the fastest … because of the level of their ICT investments.
In economic terms, a nation that increases its ICT infrastructure investment by 10 per cent annually from 2017 to 2025 can expect to benefit from a multiplier effect. Every additional $1 of ICT infrastructure investment brings a current return of $3 in GDP. By 2020, the return is forecast to increase to $3.70, rising further to $5 in 2025.
On a global scale, the same 10 per cent annual investment increase is expected to boost an estimated $17.6 trillion in GDP to the global economy as a whole by 2025. In real terms, this potential impact is equal to the size of the European Union’s GDP in 2016. This doesn’t even take into account the huge benefits to social development.
We forecast these figures based on a study Huawei has produced over the past four years titled the “Global Connectivity Index “(GCI). It shows how 50 different countries are progressing with digital transformation based on five technology enablers: broadband, data centers, the cloud, big data and the internet of Things (IoT). The 50 countries comprise around 90 per cent of global GDP and 78 per cent of its population.
The GCI 2017 shows that of the 50 countries analysed, 16 are considered “front-runners” (those with an average GDP per capita of $50,000). The next 21 are “adopters”, with an average GDP per capita of $15,000. The remaining 13 are “starters”, with an average GDP per capita of $3,000.
To bring these classifications into a practical perspective, front-runners are mostly developed economies. They continually boost the digital user experience, and use big data and IoT to develop smarter, more efficient societies.
Adopters are focused on increasing ICT demand to facilitate industry digitisation and high-quality economic growth. Starters are in the early stage of ICT infrastructure buildout, and focus on increasing ICT supply to give more people access to the digital world.
Returning now to the Middle East economic context, three countries in particular fell into the GCI 2017’s adopters cluster. All three of them have predominantly oil and gas based economies. Equally, each of them is proactively looking towards strengthening their ICT infrastructure.
Ranking second in the adopters cluster and 18th overall is the UAE, while Saudi Arabia came in 29th.
Each understands one very crucial principle — that in order to stay competitive, nations at an early stage of digital transformation need to prioritise ICT infrastructure development (especially broadband connectivity and cloud adoption) to reach sustainable growth.
An interesting point to note is that it is the adopters that experience the highest GDP growth from their ICT infrastructure. Much in the same way as the growth of the GCC countries has been so rapid and dynamic over past years.
The overall GCI score for the UAE and Saudi Arabia has increased in the past year due to the roll-out of various national ICT initiatives. However, Qatar and Saudi Arabia have both dropped two places in the GCI ranking among the 50 countries.
It is essential that as adopters, the GCC countries must invest to enhance their broadband infrastructure. It is equally crucial that policymakers should not underestimate the benefits of embracing the cloud. It is through the cloud that they will effectively deliver big data and IoT capabilities and the resulting benefits.
By leveraging the multiplier effect of the cloud, companies and society as a whole can innovate and transform into the knowledge-based economy.
By reaching a threshold of 35 per cent fixed broadband subscriptions and 70 per cent 4G coverage, UAE and Saudi Arabia falling in the adopters category, will move forward to compete with the front-runners’ cloud adoption rate.
So, what are the imperatives for digital transformation planning moving forward? First, policymakers should be focusing on ICT policies as part of a nation’s economic development strategy to encourage and incentivise the digital transformation.
Broadband is not just for fast internet access. Ultimately, its role is to enable cloud services and the software that runs on the cloud — namely big data and IoT. This includes building a public-private partnership approach for long-term planning, and pairing ICT initiatives together with new civil works — for example deploying broadband connections over electricity networks.
From a business perspective, policymakers can consider more industry-friendly policies to help promote the digital transformation. Nations that have developed an advance ICT infrastructure have been able to transform their industry-base from low-value manufacturing to higher-value information services.
Drilling further down to a people perspective, policymakers can collaborate with educational institutions, ministries, labour departments and technology enablers. In this way, they can ensure that education for building digital access and skills is universally accessible, targeted and fully utilised.
This includes improving digital literacy in schools and universities, deploying labour upskilling initiatives, and job matching to secure inclusive employment.
Once countries create the balance to energise their industries, companies and people towards a digital transformation paradigm, they have the basis for driving GDP growth through a digital economy.
The writer is President of Huawei Middle East.
