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Digital Disruption in The Middle East

The Middle East is on the verge of a massive digital disruption. In the past decade, the cross-border data flow, connecting the Middle East to the rest of the world, has increased more than 150-fold. Several countries—including Bahrain, Qatar, and the UAE are leading the digital consumer charge, with high smartphone-adoption rates and social-media use. However, digitization is uneven from country to country, and businesses and governments across the board have struggled to keep up. Building on a history of innovation, the region has the chance to transform itself into a leading digital economy—and to realise significant economic benefits—if it can bring stakeholders together to focus on developing the region’s governance, business, funding, and talent.

Citizens themselves are leading the Middle East Digital charge. As measured by digital consumer adoption, Bahrain, Qatar, and the United Arab Emirates are among the top countries in the world, with more than 100% smartphone penetration and more than 70% social-media adoption—even higher than in the United States.

However, while consumers are primed and ready to lead digitally enhanced lives, businesses and governments have not fully adapted to digital yet. The McKinsey Middle East Digitization report has assessed the level and impact of digitization across nine Middle Eastern countries: Bahrain, Egypt, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. However, despite ambitious government aspirations to go digital, only 6% of the Middle Eastern public lives under a digitized smart government. And Middle Eastern countries lag far behind benchmark countries (Norway, Singapore, South Korea, Sweden, and the United Kingdom) when it comes to business digitization. Indicators ranging from the amount of venture capital funding available to start-ups, to the share of the workforce working in digital careers and industries, show Middle Eastern countries to be falling behind their European counterparts.

Though some Middle Eastern governments, such as the United Arab Emirates and Bahrain, are taking steps to implement core digitisation initiatives. In fact, the UAE is currently leading the Middle East in terms of digital adoption. Whilst other countries in the region have big ambitions for pushing the public sector’s adoption of digital to the next level, some are facing implementation challenges due inadequate governance structure. Meanwhile there can be seen to be a healthy consumer appetite for new digital offerings in the region. Thus it will be critical for Middle Eastern countries to increase their digital applications so as to enhance the infrastructure and raise the potential for economic growth, and subsequently boost their country’s GDP.

According to analysis from the McKinsey Digitisation Index, a unified digital market across the Middle East (which would potentially achieve 160 million digital users by 2025) could contribute up to 3.8 percent annually in GDP – approximately USD 95 billion. Digital implementation could also have positive effects amongst a community in the form of poverty reduction, greater inclusion, an increase in access to and greater quality of healthcare and education, as well as a reduction in CO2 emissions.

The future of digital in the Middle East is dependent on the participation of stakeholders, from government leaders and individual agencies to the private sector and civil society. Given the accelerating pace of technology and its potential to continually shape lifestyles, business practices, and governing for many years to come, now is the time for the Middle East to embrace this opportunity.