A Digital Economy: MENA’s Next Big Venture

By Nadeen Al-Awadh

Over the last decade, the countries of the Arab world have made promising strides to diversify their economic portfolios to tackle hurdles such as the youth unemployment crisis. By fostering the digital economy and kickstarting the region’s technology sector, MENA countries can further diversification efforts by simultaneously creating new employment prospects, global investments, and civic participation. 

The promise of a blossoming MENA technology sector and the successes of apps such as Careem and Souq – which Uber and Amazon recently acquired for $3.1billion and $580 million, respectively; has already made global investors take note of the up and coming Middle Eastern technology industry. Current digitisation efforts gave way to a record number of startup investments across the MENA region, totalling $704M in funding in 2019. While the UAE has long planned on being the central hub of the digital economy in the region, Egypt and Saudi Arabia are becoming fast contenders with rapidly developing digital ecosystems. 

Support from both the private citizens and the government enabled Egypt to capture 25 per cent of all digital startup deals in the region, the most of any other country in the area. Notable prospects include Thndr, an invest-tech startup, and Ordera, a food and drink delivery startup. Saudi Arabia was not far behind, acquiring the third the most significant number of deals and funding in 2019. Jordan and Lebanon have been trailblazers and were relatively early to promote digital entrepreneurship in the region; however, both experienced declines in the yearly number of startup deals in 2019. 

To encourage ground-breaking thinking within the Arab tech sector, the World Bank had launched the Mashreq 2.0 initiative in 2019, which aims to jumpstart the digital transformation in the region and moulds it to conquer the region’s most looming challenges. The initiative targets explicitly Jordan, Lebanon, and Iraq, supporting their plans by offering loans, consultations in areas such as infrastructure and innovation, and setting up the Skilling Up Mashreq Initiative that aims to provide half a million young men and women with digital skills by next year. More recently, Ahmed Marafie and Hashem Bihbahani, co-founders of CODED, the first coding academy in the Middle East, met with Kuwait’s I.T. minister Dr Rana Al-Fares to discuss the nation’s impending digital transformation initiative

Technology giants Microsoft and Amazon Web Services have also made moves to increase their support in the MENA region by opening data and cloud storage centres. Their presence in the region and the improvement of the local digital infrastructure that comes with it will be critical to regional digital transformation efforts. 

The crisis of youth unemployment is one that the region continues to try to solve. Estimates by the World Bank suggest that the MENA region would need to create 300 million jobs by 2050 to meet the younger working-age population’s employment needs. Current digitisation strategies in place will require infrastructural improvements and the removal of barriers to entry into regional markets to take full advantage of the employment influx the digital economy stands to bring. A recent study found that a boosted and reformed MENA digital economy can create up to 1.3 million additional jobs in the GCC by 2025 and would allow for the estimated 3.9 million unemployed youth in the GCC to benefit from digital self-employment. 

It is important to note that while digitisation can bring the MENA region a range of benefits such as chances for improved transparency and accountability, they also run the risk of arming fascistic regimes with enhanced means to monitor citizens and suppress dissent. Digitisation and technological supremacy are emerging as a profoundly geopolitical battleground both regionally and internationally. These issues continue to be a battle within the MENA region when tackling technological advancement. 

The Arab Gulf has immense potential in securing a new, stronger economic foundation in the digital technology space. A transformation of this magnitude could empower generations through new career opportunities and increased civic engagement. While there is a danger of authoritarian governments taking advantage of the progress, it should not deter from the plethora of economic possibilities that digitisation could bring to the region and its people. 

The views expressed in this article are the author’s own and may not reflect the opinions of the St Andrews Economist.

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