The Middle East and North Africa Economies – Transforming with Digital

A 2022 World Bank Group report discusses how digital technology can accelerate economic growth and job creation in the Middle East and North Africa (MENA) region. This report argues that this region is “suffering from a ‘digital paradox.”

On the positive side, there is a tremendous socioeconomic advantage of digitalizing the economy of MENA countries. A Kenneth Research report projects the digital transformation market in MENA countries to grow from $1.12 billion in 2015 to $2.79 billion by 2025.

In Middle East countries like UAE, Bahrain, and Qatar, the growing usage of smartphones and social media platforms is driving this digital wave. A McKinsey report titled “Digital Middle East” documents that these three countries have achieved 100% smartphone penetration and over 70% social media adoption — higher than the U.S.

Ferid Belhaj, World Bank VP for MENA, points out that “digital transformation would provide jobs in a region where unemployment is unacceptably high, particularly among the youth and women.” 

All that considered, here is a detailed look at how digital technologies can transform these economies and boost job growth.

How Digital Can Transform the MENA Economy

The McKinsey Digitization report shows a strong correlation between this region’s GDP growth and the adoption of digital technologies. With projections hinting at over 160 million digital users by 2025, digital technologies in the Middle East countries can potentially contribute 3.8% of the GDP annually (amounting to $95 billion).

Notably, digital transformation in the MENA region is primarily driven by industry verticals like the BFSI, Healthcare, Energy & Utilities, and Manufacturing.

The World Bank quantifies the positive impact of this modernization:

• 40% growth in GDP per capita
• 37% growth in manufacturing revenues
• 7% increase in manufacturing jobs
• 70% increase in Middle East tourism
• 20% increase in female labour participation over 30 years from 40 million to 80 million female workers

How Will Digital Impact Job Growth in the Region?

According to the World Bank, employment in the manufacturing sector will increase by at least 5% (over the next 30 years). This is equivalent to 1.5 million jobs (or 50,000 new jobs annually). Digital hiring technologies like AI and online recruitment platforms can reduce the time and cost of finding and hiring job seekers.

Favourably, the overall industry outlook for IT technologies looks positive in the MENA countries. John Lovelock of Gartner says that recent “projects such as remote work visas, Smart Dubai 2021 are expected to boost technology investments in the region.”

For a successful transition into a digital future, the MENA region will also require the participation of all stakeholders. This includes the local government, civil society, and public & private companies. Besides transforming the MENA economy and boosting jobs, digital can potentially reduce poverty, improve healthcare, and even reduce carbon emissions. 

Next, let us discuss why the MENA countries need to adopt digital technologies.

It’s the Right Time for MENA to Go Digital

Going back to the World Bank report, 66% of MENA-based consumers use the Internet compared to 61% in Latin America and 54% in the APAC region. Despite that, digital payments in the MENA region are relatively less used.

Industry regulations and lack of trust could be significant factors restricting the pace of digital transformation in this region. For instance, the telecommunication industry should be more competitive and unregulated, thus increasing digital payments and mobile money.

That said, the Gulf Cooperation Council (GCC) expects to be a global driver of the Internet-of-Things (IoT) by 2025. The UAE has successfully created the optimal conditions for developing smart cities in the Middle East. Among the success stories, the city of Dubai features an advanced connected airport, technology infrastructure, smart government initiatives, and a high-speed mobile network.

To boost mobile payments, UAE has forged a strong collaboration between Fintech and telecommunications companies. Sarah Al Amiri, the state minister for Advanced Technology, believes the launch of the fourth industrial revolution can “add 25 billion dirhams to the national economy by 2031.” Further, the UAE National Program for Coders can focus on reducing the technical skills gap in the region.

Besides the UAE, Saudi Arabia also launched its “Saudi Vision 2030” program to reduce the country’s oil dependence and encourage other economic activities to not be too dependent on oil. 

Digital technology also impacts key sectors in North African countries like Morocco and Tunisia. Encouraged by their young and tech-savvy population, a robust technology infrastructure can transform industry sectors like tourism, education, and consumer electronics. Among the technology projects being developed in Morocco, the Mazagan city centre (spread across 1,300 hectares) includes a business incubator, a cultural centre, and an academic centre.

As for the corporates, Zain KSA and Nokia are among the notable collaborations in recent years. They are set to work on “advanced networking technologies in the IoT and the Cloud to connect and manage a wide array of devices, vehicles, homes and applications.”

With all these tech- and operational-specific changes taking place, it’s becoming self-evident that a foundation is being laid in MENA for countries to leverage and advance their digital-first endeavours.

Conclusion

To accelerate digital transformation across the MENA region, enterprises need to balance adhering to business, governance, talent, and funding. On that note, a good practice for fast-growing companies in the region is to leverage talent analytics to speed up their hiring process. They can further benefit from AI-powered smart hiring, which offers an objective and bias-free approach to recruiting the best talent.

At X0PA, we believe that digital technology can automate and streamline the hiring process in fast-growing economies in MENA. Through objectivity in hiring, we can help you achieve workplace happiness.  
Want to know how? Contact us with your business details, and we will get back to you.