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Middle East’s digital economy is a massive opportunity

October 15, 2019

The telecom sector in the Middle East and North Africa (MENA) region has supported one million jobs and contributed US$165bn to the region’s GDP in 2017, according to a report by GSMA. And in only three years since, the sector’s contribution to GDP is expected to hit US$200bn. Additionally, between 2017 and 2025, the total number of unique mobile subscribers in MENA is projected to grow from 375m to 459m – at a rate of 22.4%.

At the back of this increasing digitization, e-commerce has been growing at a steady clip particularly in countries like the UAE. Cumulatively, the MENA region accounts for four million unique online shoppers – travel is the most popular e-commerce category followed by electronics and fashion. And the fastest growth has come in the form of mobile-driven commerce. Amazon’s acquisition of UAE’s largest multi-commerce website Souq.com for US$580m is testament to the potential.

The mobile payments platform in the region is also seeing tremendous interest with many companies beginning to offer diverse services. A few examples in the UAE include the Etisalat Wallet (a mobile wallet launched in 2016), NBD Pay (an NFC-based mobile contactless payment service also launched in 2016) and the Emirates Digital Wallet (launched in 2017 by a consortium of 16 UAE banks to provide mobile payment services). One Pay and Quickpay, meanwhile, provide bill payment services from mobile apps in Kuwait. Separately, Mastercard entered into a partnership with Kuwait Finance to launch a wallet in 2017. The continued rapid growth in the number of Chinese tourists has resulted in Network International, a payments solution provider in the UAE, partnering with China’s Alipay to allow the Chinese to make mobile payments when they visit the UAE.

However, a challenge – not unique to the Middle East – in sustaining this momentum is the absence of a single regulatory framework for the digital economy and cross-border payments. Encouragingly, steps are being taken to this end. In December 2018, an Arab digital economy strategy was launched in Abu Dhabi, with the objective of increasing the contribution of the digital economy to the Arab world’s GDP to 20 percent on average, in addition to doubling the region’s GDP to US$5trn in 10 years. If the Middle East were to establish a unified digital market by 2025 – potentially of 160m digital users – it could add 3.8% to the region’s annual GDP!

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