Kuwait Internet Economy Outperforms EMs

(MENAFN- Arab Times) A new report by The Boston Consulting Group (BCG), a global management consulting firm and the world's leading advisor on business strategy, reveals that Kuwait boasts a globally competitive Internet economy. 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 percent of GDP- a material figure for any nation. The new study, titled Which Wheels to Grease? Reducing Friction in the Internet Economy, serves as a followup to BCG's previous report The Connected World: Greasing the Wheels of the Internet Economy.

The 2014 analysis identified 55 indicators of efriction 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 efriction: 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 Stakeholder Engagement, Middle East of the Internet Corporation for Assigned Names and Numbers (ICANN), 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, on a global level, Kuwait is ranked 40th - ahead of a number of strong emerging economies such as Brazil, China, India, South Africa, and Turkey. On a regional level, Kuwaitis ranked fourth after Qatar, the UAE, and Bahrain. "In advanced and productive Internet economies, consumers and businesses face few restrictions or constraints on digital activity - what we refer to as 'e-friction," said Joerg Hildebrandt, 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 also added, "Based on our study, the broad causes of e-friction include wealth, population density, the urbanrural 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 capital 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 "welloiled 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. "High-income overachievers", such as Bahrain, excel, owing to successful and focused digital-economy initiatives in areas such as infrastructure deployment, and e-government. "Highincome aspirants" - such as Kuwait, Saudi Arabia, and Qatar - have a high per capita GDP despite, rather than because of, the level of friction in their digital economies. Their performance across the e-friction metrics is generally moderate.

Among "middle-income achievers", economies outperform on e-friction, while "middle-income rural" economies and "middle-income urban aspirants" face equally big challenges, although of different types. For the first group, the question is how to deploy infrastructure to large rural populations given the economic realities of big capital expenditures, high operating costs, and low average revenues per user. The question for the second and third groups is whether to make the tradeoffs between the large urban, unconnected populations and those in rural areas. Finally, the economies with the lowest GDP per capita and with poor efriction performance across the board face multiple challenges owing to low income levels, rural populations, and often low literacy rates.

The economic and social potential of successfully addressing these challenges is correspondingly large. Analyzing and addressing the 55 indicators can help any economy reduce e-friction, increase Internet use, and further digital economic activity. "Even economies in the well-oiled categories, such as the UAE, should not rest on their laurels," added Hildebrandt. "They also have sources of friction to address, such as those related to outdated regulation, excessive bureaucracy, and impediments to investment; these economies need to focus their interventions with care."