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Light

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... and shadow

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Big difference in Internet penetration across the region

Source: www.internetworldstats.com

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

MENA Average:

51.6%

Global Average:

49.6%

Online population by country (%)

In some countries strong performance on several other metrics too, such as smart phone penetration and use of social media

Raise penetration

Increase impact

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Need to convert access (and usage) into economic and social impact

0

500

1,000

1,500

2,000

2,500

0 20 40 60 80 100 120

Internet Penetration 2016 (%)

Per capita e-commerce

spend (USD)

Note: e-commerce spend is for 2016 or latest available year Source: statista, internetworldstats

Relationship between e-commerce spend and Internet penetration

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Transform to an economy that is digital

… to social …

… to commerce and entertainment …

… to ubiquity The Internet moves from academia …

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The G20 Internet economy: $4.2T in 2016

+10.8%

Developing

Developed

2016

4.2

1.4

2.8

2010

2.3

0.5

1.7 1

2

5

G20 Internet Economy ($T)

3

4

CAGR

8%

18%

Note: G20 countries only Source: EIU; Ovum; Gartner; Euromonitor; OECD; country-specific sources; BCG analysis

4.1% of GDP

5.3% of GDP

Multiple indirect benefits too

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SMEs using web extensively grow faster

Historical three-year sales growth

%

20

10

0

22

5 8 15

-5

17 13

19 12

20

9

25

High-web Low-web and No-web

10 10

-5

10

7 4

6 0

%

18

20

15

3

-5

14

11

China Brazil India Turkey

Germany USA France S. Korea

Source: BCG survey among approximately 6,200 SMEs

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“e-Friction” holds back the development of the Internet economy

Source: BCG e-Friction model

Infrastructure Weighted 3/6

Industry Weighted 1/6

Frictions holding back companies from adopting

the Internet

Frictions related to the availability

of content

Frictions deterring consumers from

online activity

Frictions reducing opportunities to

access the Internet

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Infrastructure Information Industry Individuals

Infra

stru

ctur

e

Number of Wikipedia pages in home language (Wikipedia)

Number of micro messages made in home language, messages/day

(Twitter)

Freedom of the press index, 0-100 (Reporters Without

Borders)

Freedom on the Net, score 0-100

(Freedom House)

ONI transparency rating, 1-15 (Open Net Initiative)

Commitment to open data, 0-1 (Open Knowledge Foundation)

Info

rmat

ion

Volu

me

Indu

stry

Infra

Te

ch

Labo

ur

Cap

ital

Eco

nom

y

Quality of transport infra for physical fulfilment, 0-7 (WEF)

Quality of electricity and telephony infra, 0-7 (WEF)

ICT skills, 1-10 (IMD)

Quality of math and science education, 0-7 (WEF)

Availability of qualified engineers, 0-7 (WEF)

Capacity for innovation, 0-7 (WEF)

Firm-level technology absorption, 0-7 (WEF)

Business fixed broadband penetration, % (Pyramid

Research)

Venture capital availability, 0-7 (WEF)

Financial market sophistication, 0-7 (WEF)

Financing through local equity market, 0-7 (WEF)

Ease of access to loans, 0-7 (WEF)

Foreign direct investment to GDP, ratio (WEF)

Strength of IP protection, 0-7 (WEF)

Burden of customs procedures, 0-7 (WEF)

Prevalence of trade barriers, 0-7 (WEF)

Number of days to set up a business (WEF)

Abi

lity

Ban

king

Quality of educational system, 0-7 (WEF)

Adult literacy rate, % (WEF)

ICT skills, 1-10 (IMD)

Consumer broadband penetration, % (Pyramid)

Availability of financial services, 0-7 (WEF)

Affordability of financial services, 0-7 (WEF)

Market penetration of bank accounts, % (WEF)

Acc

ess

Trus

t

Indi

vidu

als

Cyber security being adequately addressed, 1-10 (IMD)

Population using online personal finance, % (ComSc)

Debit card penetration, % (WEF)

Trust in privacy of credit card/financial data, survey score (BCG)

Trust in privacy of other personal data, survey score (BCG)

No. of domains registered to each ccTLD/cap (Google)

Obs

tacl

es

Atti

tude

s

Pay

men

ts

The components of e-Friction – 55 indicators S

peed

Peak fixed BB connection speed, Mbps (Akamai)

Peak mobile connection speed, Mbps (Akamai)

Average fixed BB connection speed, Mbps (Akamai)

Pric

e Fixed BB pricing, $/month at PPP (WEF)

Mobile pricing, $/min local call off-net (peak) at PPP (IMD)

Arc

hite

ctur

e

Number of networks (ASNs)/cap (Potaroo)

Exchange points/capita (Euro-IX)

Existence of indep. regulator, 0-1 score (ITU)

Number of IPv4 registrations/capita (Potaroo)

Number of IPv6 registrations/capita (Potaroo)

Traf

fic

International Internet bandwidth/cap (Telegeography)

International traffic volumes /capita, Mbps (Telegeography)

Traffic volumes/capita, Mbps (Cisco)

Average mobile connection speed, Mbps (Akamai)

Content registered to ccTLD hosted onshore, % (Pingdom)

Internet users, % of pop (World Bank)

Mobile Internet subscription penetration, % (Ovum)

Acc

ess

Internet bandwidth/capita (ITU)

Fraction of population using social networks, % (Comscore)

Source: BCG e-Friction model

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Country e-Friction score

Infra-structure Industry Individual Infor-

mation

1. Sweden 14 15 15 10 16 2. Finland 17 21 16 8 14 3. Denmark 21 21 37 15 11 4. Switzerland

21 22 21 13 27

5. Hong Kong 21 18 9 22 43

6. United States 22 23 26 28 11

7. Iceland 22 17 34 36 14 8. Norway 23 25 26 14 20 9. Netherlands

25 28 21 13 30

10. Canada 25 32 28 13 15 11. Germany

26 28 35 17 18

12. United Kingdom 28 29 27 29 25

13. Austria 29 27 40 25 29 14. Australia

30 38 26 27 15

15. Singapore 31 30 9 25 66

16. Belgium 32 34 27 23 42

17. New Zealand 33 42 30 27 17

18. Ireland 34 34 41 36 24 19. France 34 38 33 26 32 20. Estonia 35 35 47 43 19 21. Japan 39 33 32 50 53 22. Israel 39 37 39 39 48 23. Qatar 40 51 19 23 44 24. UAE 41 45 25 33 49 25. Korea, Rep.

41 28 45 47 69

26. Slovenia 44 34 58 56 47

27. Bahrain 44 41 42 36 60 28. Malaysia

44 52 28 42 40

29. Poland 45 45 65 42 31 30. Portugal

45 43 43 49 51

31. Romania 46 29 81 70 35

32. Czech Republic 46 38 62 47 54

Country e-Friction score

Infra-structure Industry Individual Infor-

mation

33. Spain 47 46 52 43 51 34. Panama

48 42 39 57 65

35. Hungary 48 47 62 59 30

36. Italy 49 42 64 62 41 37. Bulgaria

53 39 71 76 55

38. Greece 53 49 65 65 43 39. Ukraine 54 45 77 74 33 40. Kuwait 56 55 73 53 47 41. Chile 57 60 44 55 61 42. Jordan 57 53 48 67 69 43. Russia 57 49 73 59 66 44. Saudi Arabia

58 54 36 54 92

45. Turkey 58 52 60 59 76 46. Kazakhstan

64 58 70 61 76

47. Philippines 64 71 61 65 43

48. Thailand 64 61 59 63 81

49. Argentina 67 61 91 76 53

50. South Africa 67 75 50 63 68

51. Mexico 68 66 69 79 59 52. Brazil 69 67 71 71 68 53. China 69 73 56 66 75 54. Morocco

70 72 58 76 73

55. Venezuela 71 66 88 80 58

56. Colombia 71 72 76 75 61

57. Kenya 71 80 71 68 51 58. India 73 79 52 71 77 59. Indonesia

74 78 56 75 78

60. Peru 75 79 71 84 55 61. Vietnam

75 69 73 82 87

62. Bangladesh 75 74 86 90 53

63. Egypt 76 78 77 92 55 64. Pakistan

82 79 72 89 92

65. Nigeria 82 89 77 86 59

Top Bottom - Quintiles Note: Best e-Friction available is 0, worst is 100

So how do MENA countries perform?

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Positive economic impact of lower e-Friction

Relationship between size of digital economy and e-Friction

0%

8%

6%

70

4%

2%

50 0 10 20 30 40 80 60

Turkey

Sweden

South Africa Saudi Arabia Russia

Poland

Netherlands

Mexico

Korea, Rep. Japan

Italy

Indonesia

India

Hong Kong

Greece Germany

France

e-Friction score, 2013

Denmark

Czech Republic

China

Canada

Brazil Egypt

Australia

Argentina

2013 digital economy1 as % of GDP (est.)

United States

United Kingdom

Belgium

R2=0.60

Equivalent to 2.5 pts of GDP of

the economy

Bottom quintile e-Friction

Top quintile e-Friction

1. 2013 estimates interpolated from 2010 and 2011 actuals and 2016 forecasts; 2. in the 65 countries covered. Source: BCG e-GDP model, BCG e-Friction model

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Richer countries tend to have lower e-Friction

10 100 1

e-Friction score

GDP per capita ('000 US$ - log scale)

0

100

20

40

60

80

GDP per capita vs. e-Friction score

Source: World Bank GDP per capita (current US$) year 2012; Bangladesh omitted on this chart as GDP per capita under $1,000

R2 = 0.63

But wealth is not necessarily destiny – widespread of e-Friction scores at each wealth level

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Wealth is important, but doesn’t alone explain e-Friction

e-Friction score vs. GDP per capita

Source: World Bank GDP per capita (current US$) year 2012; Bangladesh omitted on this chart as GDP per capita under $1,000

100 10 1

Jordan

Japan

Italy

Israel

Ireland

Indonesia

Iceland

Hungary

HK

Greece

Germany

France

Finland

Estonia

Egypt

Denmark

Czech Qatar

China

Chile

Canada

Bulgaria

Brazil

Belgium

Bahrain

Austria

Australia

Argentina

Russia

Colombia

Romania

Portugal Poland

Philippines

Peru

Panama

Pakistan

Norway

Nigeria

NZ NL

Morocco Mexico

Malaysia

Kuwait

e-Friction score

GDP per capita ('000 US$ - log scale)

Korea

Kenya Kazakhstan

Vietnam Venezuela

US

India

UAE

Ukraine

Turkey

Thailand

Switzerland

Sweden

Spain

SA

Slovenia Singapore

Saudi

UK

Well-oiled

Developing Rural Middle-Income Rural

Middle-Income Urban Aspirants

High-Income Aspirants

All-rounders 0

100

20

40

60

80

High-Income Overachievers Middle-Income

Overachievers

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Accelerate the digital economy: four main areas to address

1.  Infrastructure access is a prerequisite

2.  Affordability needs to be improved

3.  Digital literacy skills need to be developed

4.  Locally relevant digital content and services need encouraging

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Improving access and affordability

Infrastructure access is a prerequisite Affordability needs to be improved

1.  Define a long-term digital strategy

2.  Encourage the supply of international bandwidth

3.  Promote competition

4.  Incentivize collaboration between network providers

1.  Reduce taxes on devices and access

2.  Treat spectrum auctions as the chance to attract investment

3.  Allow experimentation with different pricing models

4.  Promote carrier-neutral IXPs

Priorities are country specific. Other factors important too.

Examples of actions that have worked elsewhere

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Developing digital skills is key

1.  Build an education system capable of addressing 21st century needs

2.  Drive for full school enrolment

3.  Address teacher shortages by deploying technology in the classroom

4.  Create digital literacy programs for those no longer in formal education

5.  Support the development of entrepreneurial skills

6.  Encourage the creation of jobs requiring digital skills

With half the population under 25 this represents great opportunity and risk

Examples of actions that have worked elsewhere

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Encourage locally relevant digital content and services

1.  Digitize government services and encourage open data

2.  Encourage investment in physical logistics, payment platforms and mobile money services

3.  Address cybercrime and fraudulent billing

4.  Promote content and registrations under local country code domains

5.  Encourage applications of the Internet of Things, and accelerate IPv6

6.  Coordinate regulations to reduce Internet fragmentation and promote free cross-border data flow

Examples of actions that have worked elsewhere

ca. 5% of world’s Internet users speak Arabic – but under 1% of websites are Arabic

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Reducing e-Friction across MENA can deliver enormous potential

An Internet economy of 5 per cent of GDP •  An additional $100B for the region’s economy

300 million people online and benefiting fully from the Internet

•  At least $500B in consumer surplus Trade

•  Increasingly, the Internet drives cross-border and international trade Social benefits

•  Access to health, education, financial services, etc. Specific priorities will differ by country, the

overall urgency should not

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Thank you!

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