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UAE continues reign as leading Internet economy in Middle East

Study says the difference between countries with large digital economies and those with low economic activity amounts to about 2.5 per cent of GDP.

Dubai - The UAE has retained its position as a leader in the Middle East’s Internet economy, a new report by the Boston Consulting Group, or BCG, has revealed.

The research also found that, globally, the difference between countries with large digital economies and those with low economic activity amounts to about 2.5 per cent of GDP — a material figure for any nation.

The new study, entitled “Which Wheels to Grease? Reducing Friction in the Internet Economy”, serves as a follow-up to BCG’s previous report “The Connected World: Greasing the Wheels of the Internet Economy”. The 2014 analysis identified 55 indicators of e-friction that inhibit online activity by consumers, businesses, and governments. The BCG e-Friction Index — introduced in last year’s study — then used those indicators to rank 65 economies according to four types of e-friction: infrastructure-related frictions that limit basic access; industry and individual frictions that affect the ability of companies and consumers to engage in online transactions; and information frictions that involve availability of, and access to, online content. The new research expands on that and outlines how economies can move up the e-friction ladder.

“The Internet has created an unprecedented environment for businesses to grow and flourish, thanks to its permission-less innovation, which makes it possible for everyone to explore the untapped opportunities of today’s digital economy,” said Baher Esmat, vice-president of stakeholder engagement for the Middle East at the Internet Corporation for Assigned Names and Numbers, which commissioned the 2014 report and the update. “Countries in the Middle East have the potential to grow their digital economy, and this report by BCG demonstrates how the UAE and Qatar are tapping into this potential and leading the way for growth.”

The 2015 BCG e-Friction Index highlights that the UAE and Qatar are two leaders in the Mena region with advanced and productive Internet economies. On a global level, the Index ranks the two countries 24 and 23, respectively — ahead of a number of strong emerging economies.

“In the UAE and in Qatar, consumers and businesses face few restrictions or constraints on digital activity — what we refer to as ‘e-friction’,” said Hermann Riedl, partner and managing director at BCG Middle East. “The nations that are still lagging behind, however, both in the GCC and in the rest of the world, need to imminently address their sources of e-friction; after all, doing so could have a strong impact on national competitiveness as well as on social and economic development.”

He added: “Based on our study, the broad causes of e-friction include wealth, population density, the urban-rural population mix, literacy and English-language skills. And, while some of these can be influenced by policy initiatives, others require more creative approaches.”

The analysis of economies by their e-friction scores and their per capita GDP points up some interesting — and potentially useful — groupings. Eight clusters emerge, split into three groups by income levels. Among high-income economies, “all-rounders” and “well-oiled nations” — such as the UAE — have generally low e-friction scores, although the well-oiled set performs less consistently across the 55 indicators than all-rounders do. —rohma@khaleejtimes.com