INSEAD, the leading international business school, and the World Economic Forum (WEF), today released the 12th annual Global Information Technology Report (GITR) with the support of Booz '&' Company and CISCO. The new study focuses on "Growth and Jobs in a hyper connected World".
The report assesses the digital ecosystems of 144 developed and developing countries accounting for more than 98 per cent of the world's GDP. By ranking each nation using the Networked Readiness Index (NRI), the study examines how these markets leverage advances in information and communication technologies (ICT) to drive economic productivity and social development.
The report ranks three GCC countries in the top 30 list globally for the second consecutive year, and another two in the top 40: Qatar (23), the United Arab Emirates (25), Bahrain (29), Kingdom of Saudi Arabia (31) and Oman (40), demonstrating that they continue to embrace ICT to boost their country's competitiveness. In contrast, countries in the Levant and North Africa still lag behind and face challenges to fully leverage ICT. Jordan ranked (47), Egypt (80), Morocco (89), Lebanon (94) and Algeria (131).
"Overall, the MENA region shows stability, both in rankings and scores. However, the dynamics within the region seem to confirm that regional leaders keep moving ahead: Qatar and the UAE both moved up five ranks, reaching 23rd and 25th rank overall respectively, and Saudi Arabia continued its own move upward (also gaining three ranks, to reach 31st place)", said Bruno Lanvin, GITR co-editor and Executive Director of INSEAD European Competitiveness Initiative (IECI). "On the other hand however Bahrain (29th) lost two places and Egypt one (80th).
Oman, Jordan and Kuwait remained at the same ranks as last year (40th, 47th and 62nd respectively)." The United Arab Emirates has advanced five positions in overall ranking to largely compensate a fall in 2012 rankings and regain its competitive position in the Middle East. Currently, UAE ranks second in the Middle East, with Qatar leading by two spots. Most notably, the UAE ranks in the top ten on two sub-pillars - rising thirty spots in Government Usage to currently stand second to Singapore, and climbing 26 spots in Social Impact to place seventh.
Fixed and mobile affordability represents UAE's most significant weakness with a 89th place ranking, as a by-product of high fixed broadband internet tariffs and relatively low competition. The affordability sub-pillar, which assess the cost of accessing ICT and the level of competition in the Internet and telephony sectors, represents UAE's most significant weakness with a 89th place ranking. Overall, UAE has achieved improved footing in eight of the ten pillars contributing to NRI rankings, in particular with respect to the overall network readiness and usage.
"As part of the UAE's long-term strategy to diversify its economy, the government has continued to drive the development of the ICT industry decisively and to expand the use of ICTs to all segments of the economy and society (1st). Available government online services (9th), the online participation of citizens (11th) and the important rise in mobile broadband subscriptions (49th), have driven this rise in the rankings. However, the UAE needs to continue on this positive trajectory and expedite digitization efforts to climb the ranks and remain a competitive global ICT player", said Miguel Lobo, Associate Professor of Decision Sciences, Director of the Abu Dhabi campus.
Overall despite the high fixed broadband Internet tariffs (99th), which may be affecting the number of broadband Internet subscriptions (52nd) the UAE's investments in increasing its ICT infrastructure, especially in terms of international Internet bandwidth (49th) and skills upgrading (25th), have provided the right conditions for a higher ICT uptake in the past year (23rd).
Although the UAE continues to boast a very favourable business environment (17th) despite its excessive and cumbersome, complex process for enforcing contracts (137th), increasing the economic impacts of ICTs (28th) in terms of more innovation and higher-value-added activities will require higher levels of tertiary education (84th) and a consolidation of efforts to strengthen the national innovation system.
The focus of this year's GITR report is on how digitization can profoundly accelerate the rate of job creation by positively impacting enterprises at multiple functional layers. "As the spread and depth of digitization increases globally, so does its role as a key driver of growth and source of national competitive advantage. Policymakers have focused until now on improving the reach and affordability of ICT services most recently facilitating, and even investing in, large-scale broadband deployment.
Though important, this is just one part of the story." explains Bahjat El- Darwiche, Partner at Booz '&' Company. "Policymakers in the future need to become digital market makers creators of a digital economy that provides its citizens, enterprises, and economic sectors with the competitive advantage essential to thrive in an increasingly global market." "
Despite the unfavourable economic climate in 2011, digitization (or the mass adoption of digital applications through connected services and devices) added $193 billion boost to world economic output and created 6 million jobs globally", added Milind Singh, Principal at Booz '&' Company. "At a regional level, digitization had $16.5 billion impact on the MENA GDP and estimated to have led to the creation of more than 377,000 jobs in the same region in 2011 alone. However, the impact of digitization by country and by sector is uneven.
For example, as digitization rises, financial services gain the most in terms of output and productivity. Increased digitization, however, cut jobs in financial services and manufacturing because productivity gains surpassed output gains. Conversely, digitization created jobs in services sub-sectors, with particularly notable gains in the hospitality and retail subsectors."
Becoming a digital market maker requires three undertakings: proactively charting sectoral digitization plans, building enabling capabilities, and jump-starting and monitoring the wider digitization ecosystem. In charting sectoral digitization plans, policymakers should seek to develop competitive advantage and generate jobs in sectors that are already critical to the national economy.
Policymakers should then foster the development of capabilities and enablers necessary to achieve these digitization plans. Finally, policymakers should work in concert with industry, consumers, and government agencies to jump-start and continuously monitor an inclusive digitization ecosystem that will encourage the uptake of digital applications in these sectors and that will keep them competitive.
Booz '&' Company added that developed economies enjoy higher economic growth benefits by a factor of almost 25 per cent, although they tend to lag behind emerging economies in job creation by a similar margin. The main reason for the differing effects of digitization is the economic structures of developed and emerging economies.
Developed countries rely chiefly on domestic consumption, which makes non-tradable sectors important. Across developed economies, digitization improves productivity and has a measurable effect on growth. However, the result can be job losses because lower-skill, lower-value-added work is sent abroad to emerging markets where labour is cheaper. By contrast, emerging markets are more export-oriented and driven by tradable sectors. They tend to gain more from digitization's effect on employment than from the influence on growth.
Researchers found that policies in some developing economies are failing to capitalise on ICT investment. "Our 2013 study reveals significant disparities and persistence in the �digital divide' separating top performers and those still struggling to close the ICT and skills gaps," added Bruno Lanvin. "Our analysis shows how matching investments in ICT with investment in skills and innovation can help economies cross a threshold, beyond which return on investment increases significantly".
The report's key findings include: Most developing economies are failing to create the conditions needed to close the ICT-related competiveness gap against advanced economies; In the Middle East and North Africa, ICT investment and use is sharply divided, with several Gulf Cooperation Council states dramatically increasing ICT investment and performance, while other regional nations have faltered; "Big Data" is a new asset class with potential to revitalise the global economy and strengthen social cohesion. Broadband (especially mobile broadband) is the foundation to unlock this potential; Three GCC countries rank in top five on government usage of ICT: UAE (2), Bahrain (4), Qatar(5), with Saudi Arabia following in sixth place; GCC countries also fare well on ICT-driven improvements in well-being covering environment, energy consumption, health progress and more-active civil participation; four countries are in the top twenty: UAE (7), Qatar (8), Bahrain (16), Saudi Arabia (18), while Oman and Kuwait fall behind at 34 and 85 respectively; GCC countries are leading the world on availability of mobile infrastructure, with UAE, Qatar, Bahrain and Kuwait joint first in coverage of mobile telephony.
The top 10 best-performing nations are: Finland (1), Singapore (2), Sweden (3), Netherlands (4), Norway (5), Switzerland (6), United Kingdom (7), Denmark (8), United States (9), and Taiwan, China (10). Researchers found significant gaps among countries in Europe, notably disparities between better-prepared nations in the north and their less-prepared counterparts in the south.
The Global Information Technology Report is the result of a long-standing partnership between the World Economic Forum and INSEAD, and, since this edition, with the Samuel Curtis Johnson Graduate School of Management at Cornell University. Booz '&' Company is a long-standing partner of the World Economic Forum and INSEAD and partner of this year's Global Information Technology Report, where it contributed a chapter titled "Digitization for Economic Growth and Job Creation". This chapter proposes a new digital market making framework for policymakers to drive the growth and improve their national competitive advantage. The chapter also reveals that an increase of 10 percent in a country's digitization score fuels a 0.75 percent growth in its GDP per capita.
The NRI uses a combination of data from publicly available sources and the results of the Executive Opinion Survey, a comprehensive annual survey conducted by the Forum in collaboration with Partner institutes, a network of 167 leading research institutes and business organisations. This survey of more than 15,000 executives provides insight into areas critical for networked readiness.