A new World Bank Report finds that Mashreq countries have a unique opportunity to catch up on strengthening the digital economy ecosystem and reposition themselves as strong economic competitors at the regional and interregional levels. Building the ecosystem of a regional digital economy would greatly benefit from two main comparative advantages these countries enjoy: competitive higher education levels and tech-savvy youth, and a strategic position that allows them to be at the center of advanced service trade and connectivity.
The new report, Mashreq 2.0: Digital Transformation for Inclusive Growth and Jobs, examines the inventory of digital infrastructure in Iraq, Jordan and Lebanon. The report reviews the legal, regulatory and institutional frameworks governing the sector and pins down the obstacles preventing the full development of digital economies. The report also analyzes cross-sectoral digital applications and platforms, namely in the sectors of energy, financial inclusion, e-government, regional trade and logistics, agriculture and skills development.
“Digital transformation can address some of the most imminent challenges the Mashreq region faces at this critical period, namely the need to foster inclusive growth and create the much-needed jobs for the region’s vibrant youth,” said Saroj Kumar Jha, World Bank Regional Director for the Mashreq. “Recognizing the importance of digital transformation, the World Bank committed back in October 2018 to the Moonshot approach which calls for doubling broadband access by 2021 and expanding access to digital payments.”
The transformative impact of the digital economy stems from the growth in the billions of data and online transactions that businesses, individuals and governments perform every day. This transformation can bring about efficiencies, allow faster inclusion of lagging economic and social groups and improve governance and transparency. Disruptive technologies are also increasingly changing the business model of core sectors of the economy, including agriculture, electricity, oil and gas, and industry production.
Drawing on the expanded World Bank MENA Strategy which prioritizes leveraging technologies for a new digital economy, the Mashreq region has the opportunity to create an infrastructure for the development of a more sophisticated digital economy and capitalize on its large base of digitally literate youth to position itself as the digital hub of the region.
“Increased contestability is essential to meet the Moonshot Approach targets,” said Carlo Maria Rossotto, World Bank Lead ICT Policy Specialist and lead author of the report. “Mashreq countries will need to reduce excessive profits by stimulating competition, strengthen regulatory institutions, create regulatory incentives and ensure universal access in broadband through proactive use of public sector subsidies.”
Broadband infrastructure enables economic growth as it provides easy access to information and increases efficiencies and productivity in the economy. In fact, boosting broadband penetration alone by 10% would lead to as high as 1.4% GDP growth and significantly boost economic growth and trade integration in the region. The report finds that overall, there remains a considerable gap in the adoption, speed, usage and affordability of fixed broadband services between the Region and emerging economies such as Turkey, Romania and Bulgaria, countries that compare positively in digital economy development.
On another hand, the development of physical access networks (“last mile” access) will be the area where most policy attention will need to be paid and the area which could attract the largest amount of investment. The level of investment needed to bring high speed broadband access to 30% of the population of the Mashreq through fiber access (about 13 million households) will be between 4.0bn and 5.2bn.
The report also finds that the Mashreq region has an extensive regional and backbone broadband infrastructure in place, that is however sub-optimally used, due to a mix of war and instability, complex political economy, and lack of reform at domestic level. The region has a strategic geographical position with respect to the global internet infrastructure. Mashreq countries could capitalize on the strategic access to major sea cable links through further liberalization of international gateways and internet exchange points.