From Crisis to Opportunity - Strengthening MENA's digital ecosystem in the wake of the COVID-19 pandemic - Economist Impact
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From Crisis to Opportunity Strengthening MENA’s digital ecosystem in the wake of the COVID-19 pandemic A report by The Economist Intelligence Unit April 2021 Sponsored by
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC FOREWORD From Crisis to Opportunity: Strengthening HE Abdulaziz Alrasheed, Assistant Minister MENA’s digital ecosystem in the wake of the for International Financial Affairs and Macro- COVID-19 pandemic is an Economist Intelligence Fiscal Policy, Ministry of Finance, The Kingdom Unit (EIU) report that has been commissioned of Saudi Arabia by Google. The findings are based on an HE Dr Saad Alshahrani, Deputy Minister extensive literature review of more than 100 of Financial Affairs and Macro-Fiscal Policy, studies, an internal expert panel and an Ministry of Finance, The Kingdom of Saudi interview programme conducted by the EIU Arabia between July and August 2020. A number of Barbara Ubaldi, Head of Digital Government findings were updated in January 2021. In total, and Data Unit, Directorate for Public more than 10 representatives from government Governance, OECD entities, the private sector and academia were Arthur Pataud, MENA Policy Analyst, OECD interviewed. Dr Tina Zintl, Senior Researcher, “Stability and The EIU bears sole responsibility for the content Development in the Middle East and North of this report. The findings and views expressed Africa”, German Development Institute do not necessarily reflect the views of the Dr Bernhard Trautner, Professor, German commissioner. The report was produced by a Development Institute team of researchers, writers, editors, and graphic Hazem Galal, Partner, Global Leader for Cities designers, including: & Local Government, PwC Middle East Chris Yiu, Executive Director, Technology and Adedayo Bolaji-Adio, Project Director Public Policy, Tony Blair Global Institute for Meriem Menani, Project Advisor Global Change Pooja Chaudhary, Project Manager Suhail Shersad, Digital Economy Specialist, Sumer Sharma, Lead Analyst World Bank Zeina Dowidar, Research Contributor Cem Dener, Lead Governance Specialist, Ben Parisi, Writer World Bank Jan Copeman, Editor Stephen Davenport, Global Lead, Anti Corruption, Openness and Transparency, World Bank Interviewees Our thanks are also due to the following people Kimberly Johns, Senior Public Sector for their time and insights: Specialist, World Bank Jens Kromann Kristensen, Practice Manager, Dr Ahmed Daher, Deputy Minister of Middle East and North Africa Region, World Education for Information Technology, Ministry Bank of Education, Egypt 2 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC CONTENTS EXECUTIVE SUMMARY 4 INTRODUCTION 6 SECTION I: THE IMPACT OF COVID-19 IN THE MENA REGION 8 SECTION II: EMPLOYING TECHNOLOGY TO BUILD RESILIENCE IN KEY 13 SECTORS SECTION III: GAPS AND OPPORTUNITIES FOR ENHANCING THE 28 TECHNOLOGY ECOSYSTEM IN MENA ECONOMIES TO BUILD RESILIENCE Gaps in MENA’s technology ecosystem 29 Policy solutions to strengthen MENA’s technology ecosystem and build long- 41 term economic resilience SECTION IV: CONCLUSION 53 ENDNOTES 54 3 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC EXECUTIVE SUMMARY COVID-19 has taken more than two million In response to the socio-economic fallout of lives1 and wreaked havoc on even the strongest COVID-19, some governments in the MENA economies. The pandemic has forced changes region have leveraged technology to ensure to virtually every aspect of economic and non- that critical social services remain available, economic life, from the critical to the mundane. and that businesses are able to operate despite Overburdened healthcare systems around the increasing uncertainty. The countries of the world have scrambled to build makeshift field Gulf Cooperation Council (GCC), for instance, hospitals to treat patients, whilst schools have have deployed advanced technology to launch struggled to provide online instruction and in- telehealth services, offer digitised government person business exchanges have all but ground services and transition school lessons online.5 to a halt.2 In North Africa, governments have expanded e-learning services to ensure that students continue to access education. However, not all Policymakers around the world have MENA countries were technologically equipped implemented various measures to tackle the to handle the crisis.6 Across the region, even in spread of the virus, including lockdowns and the richer GCC countries, a number of factors social distancing. However, these measures have still hold countries back from their full digital forced business closures and travel restrictions, potential. These factors include persistent exacerbating the economic consequences of technology skills gaps, complex regulatory the crisis. In the Middle East and North Africa requirements, lack of access to digital systems, (MENA) region, COVID-19 has led to a severe digital divides across age and gender, and contraction in GDP growth, putting at risk the weak data flow, classification and protection region’s economic growth strategies. For oil- frameworks.7 exporting MENA countries, the global fall in demand has resulted in a slump in oil prices, driving an increase in job losses. Widespread The pandemic presents a window of opportunity travel restrictions have also resulted in the loss for MENA governments to reassess their digital of significant tourism revenue; a particular readiness and drive changes that will better concern for MENA countries, such as Egypt and equip them to create economic and social the United Arab Emirates, where it contributes opportunities, mitigate risks, and minimise up to 20% of GDP. 3 Across the region, the socio-economic disruptions during future crises. current health and economic crisis has amplified long-standing structural challenges, including This report examines how technological tools high youth unemployment, limited economic have been successfully applied in MENA during diversification, low business productivity, the pandemic, as well as key obstacles to future overburdened public sectors, and uncompetitive technological adoption in the region. It assesses business environments.4 4 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC areas where new or revised policies based on These require a robust set of data security, international best practices could catalyse the transfer and privacy laws and regulations, which MENA region’s use of advanced technologies to must be enforceable, credible and trusted by the bolster economic resilience. public to be in its best interest; 3. The elevation of educational standards to The study finds that MENA countries can ensure that MENA’s current and future workforce speed up their economic recovery and is adequately equipped with the hard and soft better prepare for future shocks by building skills that will enable them to participate in a the digital infrastructure, data security high-tech economy; regulation and human capital development 4. The promotion of private participation, frameworks that will enable the greater regional startups and digital entrepreneurs integration of advanced technologies through the simplification of business licensing throughout their economies. These three procedures, and; frameworks account for the physical systems 5. Accessible and interoperable legal systems, (such as telecommunications infrastructure), designed through a participatory process, with policy environment (particularly cloud, data key elements consistent across the region, that flow and privacy laws), and educational protect user data as the region increasingly strategies that can equip MENA’s future iterates new uses for Artificial Intelligence (AI), workforce with the necessary digital skills. cloud computing and advanced data analytics. Together, progress in these areas will build MENA’s technology ecosystem capacity to Although countries in the MENA region fall on support the region’s long-term economic a wide spectrum of technological readiness, a resilience. commitment to inclusive and strong economic growth requires that each country prioritises In particular, an analysis of MENA’s current these objectives in its national growth and technology ecosystem highlights the need for economic recovery agenda. Many MENA leaders concerted policy changes, including: have already started implementing policy 1. Unfettered, equitable access to high-speed initiatives to build their technology ecosystem, internet, which is the basic building block and they must now continue to champion these of preparedness, enabling remote learning, advances in resilience to help safeguard the vast e-commerce, business continuity and more interconnected global population. sophisticated and safer healthcare services; 2. The adoption of critical life-saving technologies, such as contact tracing applications and electronic medical records. 5 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC 6 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC INTRODUCTION T he COVID-19 pandemic has forced changes to nearly every aspect of public life. By the time the World Health Organisation (WHO) pandemic with the help of technology. It highlights how the pandemic has led to accelerated technology adoption by individuals, businesses and declared COVID-19 a public health emergency governments in the region in an effort to mitigate of international concern on 11 March 2020, against COVID-19’simpact and prevent future many countries around the world had enforced disruptions. The report also identifies existing lockdowns and social distancing measures. These challenges to widespread technology adoption measures have restricted business operations, in the region and highlights opportunities for reduced international travel, limited global trade, developing an advanced technology ecosystem and strained social service delivery systems. that could help countries build long-term economic resilience. A country’s capacity to adapt in the face of these unexpected changes is an indication of its SECTION I of this report reviews how the resilience. Crisis management that incorporates COVID-19 pandemic has affected countries in the advanced technology ecosystems has proven to MENA region. SECTION II assesses how countries be critical to building economic resilience and in MENA have employed technology to respond mitigating the impact of COVID-19. For example, to the socio-economic consequences of the South Korea was able to use existing technologies pandemic in five sectors - healthcare, education, to aggressively trace the contacts of known retail, tourism and government services. SECTION infected individuals and was one of the countries III examines the major gaps in MENA’s technology with the most successful containment results, with ecosystem that have limited the region’s ability to 27 deaths per one million residents.8 Compared harness the full potential for technology to support with an estimated average real GDP contraction economic recovery and growth. The section also rate of 5.3% for the 37 OECD member countries looks at the key opportunities and international in 2020, South Korea’s real GDP contraction is best practices for addressing challenges in MENA’s estimated to be only 1.1%.9 The EIU also expects technology ecosystem. Recommended policy South Korea to be the first OECD country to see changes and their likely impacts and timeframes its economy recover to pre-pandemic levels, with are further detailed in a Policy Playbook that estimated 3% growth in 2021.10 accompanies this report. The report concludes by reviewing the importance of a strong technology In the MENA region, the EIU estimates that GDP ecosystem for MENA’s long-term growth and contracted by 5.9% in 2020, as a result of COVID- productivity and highlights key areas for further 19’s effects on the region’s economies.11 Disparities exploration. in the development of technology ecosystems in the region, particularly between GCC countries Ultimately, this report aims to guide MENA and those in North Africa and the Levant, leave policy makers and private sector stakeholders some MENA countries much less able to fully in designing data-driven and forward-looking leverage new technologies to support economic solutions that will help develop the region’s recovery and resilience. technology ecosystems and address socio- economic challenges. This report will examine how MENA countries have managed the challenges posed by the COVID-19 7 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC SECTION I: THE IMPACT OF COVID-19 IN THE MENA REGION COVID-19 has had a greater impact on the global economy than any pandemic before it because of the scale and speed at which it has spread. In the MENA region, the pandemic has increased the strain on healthcare and education systems, adversely impacted key economic sectors, such as tourism and retail, and reduced fiscal stability, particularly in oil-exporting nations. U nlike past pandemics such as SARS, H1N1, Ebola, and the Zika virus, which had relatively localised socio-economic effects, additional 8.3 million people into poverty amid deepening food insecurity crises,18,19 and high unemployment.20 In 2021, the EIU estimates COVID-19 has had a more global impact. The that economic recovery will be subdued, with loss in GDP from SARS, for instance, was regional GDP expected to grow at 2.2%.21 This largely concentrated in East Asian economies is because global hydrocarbons output and and estimated to be US$54 billion.12 Likewise, prices are expected to recover only partially during the Ebola outbreak in 2014, West Africa and the revival of tourist activity is expected to sustained a GDP loss of more than US$53 be slow, remaining below pre-pandemic levels. billion, while the rest of the world’s economies GCC countries are rolling out vaccinations and remained largely unaffected.13 In the case of have the capacity to vaccinate most of their COVID-19, however, the EIU estimates that populations within the year. However, COVID-19 the pandemic caused global GDP to contract cases remain high in countries like the UAE by 4.3% in 2020, which amounts to a total GDP that have opened their borders to tourists,22 loss of roughly US$4.4 trillion in 2020.14 In 2021, despite the country leading the world in terms the EIU estimates that the world economy will of vaccinations administered per capita (second recover gradually at a rate of 4.5% due to the only to Israel).23 This suggests that reopening pandemic’s effects.15 will have to be gradual and careful, indicating a longer and more tentative road to recovery. In the MENA region, the economic impact of COVID-19 has been particularly dire, with the EIU estimating a regional GDP contraction of 5.9%, which amounts to a loss of US$288 billion.16 GDP losses include an estimated 45% decrease in FDI inflows into the region in 2020, a decline of US$17.8 billion compared with 2019.17 MENA’s drop in GDP risks pushing an 8 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC COVID-19’s economic impact on the MENA region Real GDP in MENA Saudi Algeria Egypt Iran Iraq Israel Qatar UAE (2008-2024) Arabia 20 15 10 5 0 -5 -10 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 -15 Source: EIU analysis. At sector level, the COVID-19 pandemic has affected countries in the MENA region in five major ways: 1. HEALTHCARE: Increased strain on already weak and overcrowded healthcare systems due to high rates of COVID-19 infection. 2. EDUCATION: Reduced access to education for almost 100 million children aged 5-17 as well as many tertiary-level students, thus threatening the region’s human capital development plans. 3. TOURISM: Decreased global travel and demand for tourism, a sector that generates close to 20% of GDP in many MENA countries. 4. RETAIL: Weakened consumer spending due to job losses and reduced consumer confidence placing pressure on retail activity. 5. GOVERNMENT: Increased fiscal pressure due to lower private consumption and business activity as well as lower oil receipts in oil-exporting countries due to reduced global demand. 9 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC COVID-19’s impact on livelihoods in MENA Consumption Profits Employment FDI Poverty Decline in Proportion of firms that Proportion of firms Loss of FDI Increase in absolute monthly PMI expect at least 25% that expect to cut staff poverty headcount reduction in profit 11-17 pts 40% 40% 45% 8.3M Sources: UN Economic Commission for West Asia; Middle East Economy Watch, PwC 2020; EIU analysis. In the healthcare sector, the pandemic has In the education sector, full or partial revealed cracks in MENA’s medical systems, closures during the early days of the pandemic particularly in low-income and conflict-affected risked derailing the region’s human capital countries. In the region, nearly 5 million people development plans. The quality of education in have contracted COVID-1924, representing many parts of MENA was already weak before 5% of all global cases.25 While countries like the COVID-19 pandemic. The World Bank’s Saudi Arabia, Iraq, Morocco and the UAE Human Capital Index finds that “a child born have seen 1-2% of their populations infected, today in MENA will be only 57% as productive smaller states like Qatar and Bahrain have seen when she grows up as she would be if she infection rates of 5% and 7% respectively.26,27 benefitted from complete education and full Despite the variation in infection rates, in health.”31 This is largely due to relatively low many MENA countries, weak and overcrowded education rates in many MENA countries, healthcare systems are finding it hard to cope as well as the poor quality of education. The with COVID-19 patients and typical healthcare COVID-19 pandemic risks exacerbating these emergencies. In fragile states, such as Yemen, education challenges. According to the World Syria, Libya, Iraq and the Palestinian Territories, Bank, COVID-19 school closures might increase healthcare systems are grappling with a lack of the learning deprivation gap by approximately hospital beds and testing capacity. In Yemen, 2.5 percentage points in the region. As students only 51% of the country’s health centres remain in the region return to their respective places of functional and there are very few testing sites learning, it will be important for governments for COVID-19.28 Syrian hospitals are similarly to identify how policy options deployed during overburdened due to lost capacity over the years the crisis, such as remote learning solutions, and can only conduct 500 tests a day.29 Even in can contribute to building an educational richer GCC states, healthcare systems have had system that is more resilient to crisis, flexible in to put workarounds in place to cope with the identifying and responding to each individual virus. In Dubai, for instance, the health authority student’s learning needs, and proactive in instructed hospitals to postpone all elective protecting the most vulnerable.32 and non-urgent surgeries in March 2020, to In the tourism sector, strict lockdowns and accommodate a potential surge in patients due social distancing measures in MENA nearly to COVID-19.30 10 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC ground economic activity to a halt in 2020. Prior due to economic uncertainty and job insecurity to the pandemic, tourism accounted for 5.3% has meant that consumers remain cautious of GDP growth and 6.7 million jobs across the about spending. According to PwC’s CFO Pulse MENA region. According to the World Travel Survey conducted in May 2020, 40% of firms in & Tourism Council (WTTC), as of November MENA are expected to experience at least a 25% 2020, 4.2 million jobs were lost or affected in dip in profits and plan to cut staff.42 Household the region because of the disruption to tourist expenditure on leisure and education in the activity. The tourism sector alone is responsible MENA region declined by US$3.5 billion in 2020.43 for a US$154 billion loss in GDP in MENA.33 In Non-food retail sales are estimated to have the first 10 months of 2020, international tourist fallen by US$7.6 billion in 2020 from US$235 arrivals fell by 73% compared to the previous billion in 2019.44 In 2021, retail sales are expected year.34 The tourism sector in MENA is expected to grow at a modest 2.7%, slower than the 2019 to begin to recover in 2021 with the removal of pre-pandemic growth rate (5.1%).45 travel restrictions. However, a UNWTO survey of Finally, for governments in the MENA region, experts shows that 83% of them expect tourism low economic activity coupled with external in the region to rebound only in the third and price shocks have increased fiscal pressures fourth quarters of the year.35 Surveyed experts on a number of economies. In oil-importing do not anticipate a return to pre-pandemic countries like Morocco, Lebanon and Egypt, 2019 levels in MENA before 2022, with a third the sharp decline in non-oil activity, like expecting that this will only happen in 2024 or tourism, and low levels of global trade, has later.36 limited government revenue. However, some The decline in tourism activity is expected to of this pressure has been alleviated by lower have a significant impact on Egypt, Jordan, oil import bills.46 In oil-exporting countries, Lebanon, Morocco, Tunisia and the UAE, such as Saudi Arabia and the UAE, where oil where tourism contributes between 10-20% forms an important component of government of total GDP. In Egypt, for example, the loss revenue, low levels of economic activity due of expenditure from international tourists to COVID-19 have reduced global demand for is estimated to represent two thirds of the oil thus reducing government oil receipts (see total loss in GDP caused by the pandemic.37 Exhibit below).47 The International Monetary In the GCC, where international visitor spend Fund (IMF) estimates a 7.7% contraction in oil contributes US$90.4 billion to the economy, GDP in the region, destructive for oil exporting international tourist arrivals fell by between economies.48 Moreover, while governments have 65-80% in 2020, with Bahrain (78%) and Saudi had to contend with lower revenue prospects, Arabia (74%) the worst hit.38,39 Up to September they have also had to provide significant levels 2020, Morocco’s tourism sector had suffered of economic support to key sectors. Saudi losses of US$2 billion due to the COVID-19 crisis. Arabia, for instance, has committed US$48 In addition, up to 400,000 tourism-related jobs in billion in economic stimulus to help its economy the GCC region were affected, compounding an manage the effects of COVID-19. Similarly, already serious unemployment crisis.41 in July 2020, Morocco announced a US$12.9 billion package to stimulate its economy and In the retail sector, a fall in domestic demand 11 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC Tunisia announced a US$864 million stimulus the economic recovery. Dubai started the package to help manage the effects of the crisis year by announcing a stimulus package worth in March 2020.49 In 2021 the region’s wealthier AED315 million on 6th January, its fifth since the economies, particularly in the GCC, will be able pandemic began.50 to continue to provide fiscal stimulus to support Breakeven oil prices and the decline in the oil prices in 2020 2019 Fiscal Breakeven Oil Price (US$ per barrel) 250 244.3 Oil Price 2020 Oil Price (US$ per barrel) (US$ 42.2) 200 150 100 106.3 92.8 82.6 55.7 52.6 67.1 48.5 44.9 Source: 50 IMF, EIU. 0 Bahrain Iran Iraq Kuwait Libya Oman Qatar Saudi UAE Arabia Though many countries in MENA have collaborating online using video conferencing. introduced economic stimulus packages The next section explores how businesses and to minimise the effects of COVID-19, these governments in the MENA region have used countries have also leveraged technology to technology across the five sectors discussed mitigate the crisis. For instance, with teams above to adapt to the changes brought about by working remotely, businesses in MENA the COVID-19 pandemic. have sustained day-to-day operations by 12 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC SECTION II: EMPLOYING TECHNOLOGY TO MINIMIZE COVID-RELATED DISRUPTIONS AND BUILD RESILIENCE IN KEY SECTORS IN MENA In response to the negative socio-economic impact of the COVID-19 pandemic, countries in the MENA region have sought to stimulate growth and provide essential social services by using technology to minimise disruptions in five key sectors: healthcare, education, retail, tourism, and government services. Across these sectors, actors in MENA have leveraged technology to: (1) scale up the use of existing digital apps and platforms in areas where there was previously minimal use, for example, expanding e-learning delivery during COVID-19 lockdowns; (2) provide new digital solutions in areas where alternative technologies proved inadequate, for example, setting up infrastructure to facilitate wholly touchless travel, and (3) introduce digital tools in areas where they were not previously employed, for example, deploying digital contact tracing and diagnosis applications for COVID-19 prevention. T echnology has played a vital role in many countries’ response to COVID-19, both in terms of employing digital tools to fight the important for the region given their contribution to national GDP (tourism and retail), their role in employing nationals (government services) virus itself and in using technology platforms to and their importance to the socio-economic cushion the impact on society as the pandemic wellbeing of citizens and residents (health and persists. This section focuses on how countries education). Accordingly, building resilience in MENA have used technology to improve in these five sectors, including through the resilience in five key sectors i.e. healthcare, use of technology, will be vital for the region’s education, retail, tourism and government economic recovery. services. These sectors are particularly 13 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC Technology as a tool to build resilience: MENA deployed technology across key sectors to minimize COVID-19 related interruptions Hospitals and clinics have scaled up telemedicine, using it Governments are using app-based platforms for contact with AI tools to enable contactless COVID-19 diagnosis tracing to control community transmission Some hospitals and healthcare facilities are using robots Healthcare for sanitisation Governments deployed existing or new online learning Governments provided online repositories of platforms to ensure continued schooling learning content and educational resources for Education teachers and students Shift to online shopping, as brick and mortar stores in the Use of robotics for contactless delivery region have started developing/ bolstering their online presence Retail Tourism and travel industry is innovating to resume travel Virtual reality experiences from popular tourist with minimal contact and risk of transmission by installing, destinations have been made available to substitute for example, self-cleaning escalator handrails, touchless physical tourism Tourism elevator buttons and contactless passenger screening Governments launched comprehensive platforms and used Governments have set up online information and support their existing platforms to enable citizens’ access to a wide platforms to provide vital business information Government range of government services Services Source: EIU analysis. Healthcare In the early weeks of the COVID-19 pandemic, which proved effective in limiting the spread it became clear that healthcare systems, even of the virus in the region, according to the in some of the most advanced economies in OECD report. Quarantine rules were enforced the world, were ill-prepared for the shock of a by incorporating severe penalties for non- highly communicable virus.52 An OECD report compliance, ranging from heavy fines to prison notes that GCC countries were more efficient sentences, in countries such as Jordan, Saudi than other countries in the MENA region in Arabia and the UAE, which helped in controlling controlling the spread of the virus. Despite the spread of the virus.53 varying levels of healthcare system preparedness GCC countries were more prepared to across MENA, the region’s early response to manage the COVID-19 virus, due to previous COVID-19 involved strict containment measures, 14 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC investments in healthcare infrastructure and assess the likelihood of their having contracted technologies, which, along with efforts to the COVID-19 virus. One example of this is increase medical staff, significantly improved the UAE government’s Virtual Doctor chatbot the quality of healthcare services in the region. service. 57 The chatbot asks people questions In an assessment of COVID-19 preparedness relating to their travel history, the possibility of published by the WHO in March 2020, where having come in contact with someone who has countries were ranked on a scale of 1 to 5 (with 1 travelled and is sick or with someone known meaning no capacity to respond and 5 meaning to have COVID-19. It also asks if the person is sustainable capacity), all GCC countries, except suffering from specific symptoms. Depending Qatar, scored either 4 or 5.54 Technology played a on the person’s answers, the chatbot will deduce key role in these efforts. if the person is at risk and connect him/her to a doctor through the same service. To scale up Contactless diagnosis using telemedicine telemedicine, the UAE has begun working with and AI tools: Due to the high communicability its national telecom provider Du to establish of the COVID-19 virus, many hospitals and clinics MENA’s first virtual hospital, which will include in the MENA region scaled up their telemedicine a telemedicine app and smart monitors that will services. Through virtual “visits”, a medical enable patients to receive remote care.58 practitioner could assess a patient for symptoms of COVID-19 and determine the need for further Increasingly, companies and governments in testing and treatment. Such services also served MENA have been deploying AI tools to improve to reduce crowding at healthcare facilities, thus diagnosis and help mitigate the spread of lowering the risk of patient exposure to people COVID-19. Countries like the UAE, Saudi Arabia infected with the virus. and Egypt have begun to adopt big data and AI in healthcare, where they are expected to play a In April, Dubai-based private healthcare major role, not just in diagnostics but also supply entities, Aster DM Healthcare and HealthHub management.59 For example, Nabta Health, an by Al-Futtaim, introduced their own video- emerging Emirati healthcare company, is using AI conference-style consultations . Both services, to provide COVID-19 risk assessments, identify currently free, are open to patients who require symptoms and diagnose underlying health non-emergency care.55 In Dhahran, Saudi Arabia, conditions.60,61 These advanced technologies Johns Hopkins Aramco Healthcare, launched have already played a role in distributing the primary care and mental health video sessions UAE’s health supplies during the pandemic. An through their platform MyChart Video Visit. example in this case is the use of a self-driving The platform offers patients an option to vehicle, which uses AI to distribute personal conduct virtual, face-to-face interactions with a protective equipment, including masks, gloves primary care physician from the comfort of their and sanitiser among residents.62 homes.56 Contact tracing using app-based platforms: In addition to online consultations with medical Contact tracing is the process of identifying all professionals, a number of healthcare providers the people in an infected person’s network who in MENA have introduced online chatbots, which may need to be tested or quarantined in order individuals can use to share symptoms and 15 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC to contain the virus and reduce community also rolled out a contact-tracing app, called transmission (see Exhibit 4). To perform EHTERAZ. Developed by the Ministry of Interior, contact tracing, a number of countries in the its use is compulsory for all citizens leaving MENA region have developed new technology their homes. The app uses GPS and Bluetooth platforms to help them track and prevent the technology to track COVID-19 cases.65 spread of the virus. Saudi Arabia, for instance, Use of robotics for sanitisation: Robots are has introduced a social distancing app, called being used by a number of countries in the Tabaud, which notifies people if they came region. For example, The Dubai Health Authority in contact with an individual infected with (DHA) has introduced eight “smart” robots to COVID-19.63 The government of Morocco has sterilise its government-run hospitals and clinics. launched its own contact-tracing app, Wiqaytna, These robots, created by Danish company UVD developed by the Ministry of Interior. The Robots, are able to complete the exhaustive app uses bluetooth technology and notifies sterilisation of a room in 10-15 minutes, making users if they come into prolonged contact the process of infection prevention and control with an individual who has tested positive for highly efficient.66 COVID-19.64 The government of Qatar has How contact tracing helps stop community transmission of COVID-19 Contact tracing begins once a positive case is identified. Public health authorities will then identify every person who has been in close contact with the patient recently. This can be done by either asking the patient or through apps that track interpersonal proximity. This allows health authorities to intervene and prevent further infection, asking contact to monitor symptoms and even self-isolate. It enables them to track high-risk individuals and identify their contacts. Without testing and tracing, community transmission would continue unabated. Source: EIU analysis. 16 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC Telemedicine requires people to have high- MENA is a mature market in this respect, with speed internet connections. Currently, internet smartphones comprising 62% of all mobile penetration in MENA averages 63%, ranging subscriptions.68 In the GCC, penetration is 79%, from 80% in some GCC countries and Lebanon, with North Africa at 54% and the rest of the to less than 50% in parts of North Africa and Middle East ranging between 45% and 61%.69 Iraq, with high rates of access concentrated Both telemedicine and contact tracing raise in urban areas.67 To scale real-time sharing of concerns over personal and data privacy, as health data, 4G, and eventually 5G, services these systems collect personal information and will need to be more widely available in MENA a number of these apps don’t include privacy- countries. For contact tracing, a large percentage preserving mechanisms, like anonymising data of the population must also have smartphones. or reporting the data in an aggregated format.70 Education According to UNICEF, 110 million school-aged Grade 10 students to help them access digital children in the MENA region stayed at home resources.74,75 The pandemic has renewed MENA because of school closures.71 To limit further governments’ commitment to online education disruptions to student learning, governments delivery. and academic institutions in MENA have Online learning platforms: Governments expanded the number of online educational across the MENA region have responded to applications, platforms and repositories the pandemic by upgrading existing e-learning available to help parents, teachers and school platforms or setting up new ones. The UAE, for administrators continue to educate students. instance, put its new online learning system “Due to the lockdown, The use of online learning tools during the “In This Together Dubai” into action in the first we had to stop pandemic builds on previous government weeks of the crisis.76 Their Ministry of Education schools in the investment in digital education. Governments also launched the Alef platform, which middle of the second in the region were supporting investments in specialises in providing lessons in mathematics, semester. Within four e-learning before the start of the pandemic.72 the Matvak platform, aimed at providing early days, we succeeded For example, investment raised by education childhood education, and the Nahla and Nahil in populating a new technology startups in MENA grew from just platforms, which specialise in raising Arabic platform called US$2 million in 2017 to more than US$23 million reading skills. These platforms will be available study.ekb.eg where in 2020.73 Before the lockdown, only 30% of to all students in both the government and students could access higher education students took online courses in private education systems. The UAE’s Ministry all the resources free the region. During the pandemic, this shot up to of Education has decided to complete the of charge” 100% of university students. The UAE Ministry of 2019/2020 academic school year online, through Ahmed Daher, Deputy Minister for Education. Education is expected to expand its investment its e-learning platforms.77 in e-learning initiatives by 60% to a value of Egypt continued the school year through a US$7.1 billion in 2023. As part of its Vision 2030, multitude of national online platforms adopted Egypt’s Ministry of Education connected 2,530 or launched by the Ministry of Education. secondary schools to fibre-optic internet in 2018, According to Ahmed Daher, Deputy Minister with wireless access points in every classroom, for Education, “Due to the lockdown, we had and distributed 700,000 tablets among 17 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC to stop schools in the middle of the second Online repositories of learning content: A semester. Within four days, we succeeded in number of governments in MENA have also populating a new platform called study.ekb.eg launched online knowledge repositories. The where students could access all the resources UAE Ministry of Education has launched an free of charge”. The platform was the new site of online library that allows teachers and students the Egyptian Knowledge Bank, first launched in to view and interact with the learning curriculum 2016, one of the largest online knowledge hubs. electronically and to download electronic copies It gives students, researchers and the public of books.81 access to “aggregated and curated content in Despite the noticeable expansion of online different sciences and humanities from 30 major learning platforms in MENA to ensure education publishers all over the world”. It is tailored to continuity during the COVID-19 pandemic, the provide learning objects and digital material for unplanned and rapid shift to e-learning has the curriculum, providing content by grade level revealed glaring gaps in the region’s education (kindergarten through secondary) and subject.78 system preparedness. Students who are unable “In another 10 days, we introduced a social to afford high-speed internet connections or learning platform called Edmodo’’, explained the devices necessary to participate in online the Deputy Minister. The edtech platform was classes have been excluded from e-learning selected to deliver remote instruction to the K-12 activities.82 Countries such as Lebanon and student body. Illustrating how public-private Egypt have sought to address this issue by collaboration can generate solutions, the Deputy providing students with free access to online Minister further explained, “We engineered the platforms, free internet bundles to compensate business implementation for this use-case for for increased internet usage, and SIM cards at no Edmodo, and we tailored it for the Egyptian cost. 83 As at June 2020, 13.5 million students and education engine”. “We registered 18 million 1.3 million teachers across Egypt had registered student accounts and have 11 million students on the Ministry of Education’s platform.84 The actively using the platform”.79 In Saudi Arabia, government is providing servers, screens the government has launched a new national and tablets to 25,000 public schools.85 An online platform targeting 6 million K-12 students agreement with cellular providers has allowed in public schools. Bahrain restructured its the government to provide free access to its EduNet portal and Jordan introduced an entirely Knowledge Bank educational resource through new platform, Darsak (“your course”), to deliver a form of zero-rating, whereby activities on courses online. Qatar announced the activation the site require zero data.86 The online system of an online platform using video lessons to has also placed immense pressure on working provide early childhood education (up to third parents, who have had to balance guiding their grade). In Morocco, the National Documentation children on new platforms alongside work Centre launched a platform, “ABHATOO”, to commitments.87 provide educational content by subject area, addressing different grade levels in accordance MENA governments and universities that were with the national curricula.80 previously reluctant to formally recognise 18 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC online education are now setting up online so there were only an average of 15 students in courses. While online education can’t replace a classroom, allowing them to practice social classroom learning, the accelerated use of distancing measures. According to Ahmed blended learning methods (which combine the Daher, Deputy Minister of Education, “Students advantages of in-person learning with online are expected to attend class at home, and technology tools), can help close literacy, digital teaching continues from there in the classroom: and learning gaps. As the pandemic eases and the teacher does not revise the material again”. countries in MENA begin to see students return This new level of trust and reliance on learning to the classroom, they can ensure long-term at home may be the lasting impact of the resilience in education by developing a holistic pandemic, even when all students return to the learning ecosystem that integrates classroom classroom. learning with remote learning solutions.88 Egypt reopened schools in October by adopting a blended learning approach, where students were divided into two groups and asked to come to class every alternate day. This reduced numbers 19 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC Case Study 1 How Saudi Arabia’s proactive ICT policies enabled rapid e-learning adoption Saudi Arabia’s successful response to the educational challenges brought about by COVID-19 was largely due to existing efforts towards widespread adoption of e-learning. Proactive ICT policies and the 2019-2023 ICT strategy had emphasised e-learning and facilitated its growing adoption.89 Impact of the pandemic technologies at all levels of education for years, in When the pandemic hit, Saudi Arabia’s schools were response to growing demand for education. To increase among the earliest to close, shutting on March 8th. The the quality of these virtual classrooms and ensure students majority of schools and universities developed e-learning stay connected, the Saudi Research and Innovation programmes so that students could continue their Network (Maeen) partnered with the Integrated Telecom education online. Company to “increase the data quota between some of the Kingdom’s universities and King Abdulaziz City for Science Innovative response and Technology free of charge”.94 Saudi Arabia launched a comprehensive online educational system in March, with 20 TV channels, a YouTube channel Future strategy and an iEN National Educational Portal.90 The use of The Kingdom has already allocated 19% television was to ensure that students who didn’t have nearly 19% of its 2020 federal budget sufficient digital access or skills were not excluded. The to education, building the required government had insight into this challenge from its efforts infrastructure necessary to increase nearly a decade ago to promote virtual education, where resilience. Saudi Arabia’s ICT Strategy nearly 50% of students and teachers were dissatisfied, 2019-2023 placed considerable focus on e-learning, and computer literacy was a key concern.91 The country highlighting the Kingdom’s plan to further develop its was better prepared due to this experience, and many digital ecosystem and attract Ed-tech start-ups. of the kingdom’s leading universities92 had the necessary infrastructure and training to roll out e-learning for all students.93 The Ministry of Higher Education had been advocating for the adoption of communication 20 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC Retail Movement restrictions due to COVID-19 forced and have been growing at a rate of 30% annually consumers to switch to online retail channels. since 2014, twice the rate of the rest of the Retailers in the MENA region had to quickly region. The UAE has developed several strategic establish or expand their online presence by projects with an eye to bolstering e-commerce developing websites and mobile applications to in the region. For instance, the 2.1-million square stay connected to consumers. foot Dubai CommerCity is the first free zone dedicated to e-commerce in the region. Its goal Within the MENA region, countries such as is to create an environment that encourages the UAE and Saudi Arabia were ripe for rapid innovation and attracts foreign investment in e-commerce expansion (see Exhibit below). e-commerce.96 GCC countries and Egypt, account for 80% of the e-commerce market in the MENA region, UAE leads the way in e-commerce penetration in MENA E-commerce penetration (as % of retail) 5 4 4.2 3.8 3 3 2 2.5 1.9 1 MENA GCC UAE Saudi Egypt Arabia 0 Source: Bain and Company, 2017; EIU analysis. 21 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC Shift to online shopping: During the pandemic, operates in 38 countries across the Middle East, the shift to e-commerce in the region has Africa and Asia, is set to use robots to pack been exponential.97 This is illustrated by PwC’s online grocery orders in Saudi Arabia and the Global Consumer Insights Survey, which found UAE. Carrefour’s customers will be able to place that 51% of consumers in MENA were buying orders via its online platform and Takeoff’s (a groceries “mainly” or “exclusively” online/ US-based technology company) automated by phone and that 92% are likely to continue technology, will ensure that robots within the shopping online.98 To meet this demand, brick Micro-Fulfilment Centres (MFCs) fulfil the order and mortar stores in the region have developed in less than 5 minutes for pick-up or delivery.103 or bolstered their online presence. Majid The MFCs will process Carrefour’s online Al-Futtaim Retail, the leading shopping mall, orders to replace the manual picking method communities, retail and leisure pioneer across currently used. Dubai has also seen the opening the Middle East, accelerated the launch of its of a cafe run by Robots. Robo cafe, located in online marketplace platform and expanded its Dubai’s festival city mall, runs with zero human last-mile delivery capacity with new transport intervention and uses robots to take orders, partnerships to meet increased online orders prepare and deliver food orders.104 in UAE.99 According to Hans Weiss, the CEO of Pandemic-related restrictions and concerns Majid Al-Futtaim Retail, the online platform had about safety have helped grow e-commerce in “witnessed 400% growth in the number of orders new markets, however, building on this growth placed (in the retail sector) and 300% growth in requires leaders in the region to facilitate brick online sales between March-May 2020 versus the and mortar retailers’ expansion online first by same period in 2019.”100 Another example of this strengthening electronic transactions systems, move to e-commerce by brick and mortar stores the keystone of e-commerce.105 Countries is Emaar Malls in the UAE, which partnered with like Saudi Arabia and Egypt have made some Noon, a Dubai- and Riyadh-based e-commerce progress by setting up regulatory frameworks company, to open The Dubai Mall virtual store. to enable electronic payments106, but in many To keep up with demand for online-shopping, MENA countries, few policies or programmes a number of e-commerce stores expanded exist to support electronic transactions and their offerings during the pandemic. Dubai- e-commerce expansion. The transition to headquartered Talabat launched a 30-minute e-commerce has been especially difficult for door-step grocery delivery service “Talabat Mart” small businesses – 67% of small and medium in some of its markets, including Kuwait and the enterprises in the GCC region do not have UAE101, and is expanding the same to Egypt by e-commerce platforms, according to a survey the end of this year. Food delivery platforms like by logistics firm UPS.107 Lack of awareness, high Deliveroo, Otlob in Egypt and Careem NOW tariffs and complex regulatory regimes make in Saudi Arabia are offering groceries on their it difficult for startups to get established, and platforms alongside the option to order meals existing small businesses to compete with online from restaurants.102 multinational e-commerce operators. Contactless-delivery: The region is also exploring the use of robotics for contactless delivery. Carrefour, a hypermarket chain that 22 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC Case Study 2 A developed fintech market enabling e-commerce in Bahrain Bahrain’s developed fintech market has acted as a key enabler in facilitating the expansion of e-commerce. Fintech solutions, such as digital wallets and payment gateways, are a key part of the ecommerce infrastructure, providing a digital alternative for making essential purchases when in-store shopping was restricted during the pandemic. Context and pandemic preparedness Bahrain is home to the oldest financial centre in the Gulf, and has been working to develop financial technology BenefitPay, Bahrain’s for years. In 2014, two licenses were introduced that national smartphone allowed entry of non-banking companies into banking payment app saw: services. In 2017, the Central Bank of Bahrain announced new regulations to create a regulatory sandbox that • Usage increase by 1000% would allow fintech firms to experiment with banking • 28% of the Bahraini population ideas and solutions. The Bahrain Economic Development registered on the app Board entered a partnership with Singapore Fintech Consortium and Dubai-based Trucial Investment Partners • Remittances sent increase by to develop the ecosystem and regulatory framework for 1257% in March 2020 alone the Kingdom.108 • Remittances total of US$275 million3 Pandemic response The Kingdom strived to emphasise fintech as the new norm once the COVID-19 pandemic hit, introducing policies such as reducing the minimum value needed to Future implications make a transaction on BenefitPay, the Kingdom’s national Across the region, there is immense potential for further smartphone payments app. As a result of these policies, development of fintech. Rapid growth of mobile phone BenefitPay saw usage surge by over 1000%, with more than penetration is creating a market for mobile payment 28% of the Bahraini population registered on the app.109 solutions and other fintech products. However, the The national electronic wallet reported a 1257% increase in pandemic has also shown that fintech is an ecosystem the number of remittances sent through its Fawri+ service enabler that can unlock further technological adoption and in March alone, amounting to almost US$275 million.110 The development in e-commerce. Ministry of Industry, Commerce and Tourism also launched a ‘virtual mall’ in April. The digital platform, with payment gateways to facilitate online purchases, was launched with more than 24 shopping categories for consumers, including baby needs, electronics, homewares, fashion, and books and stationery, and over 100 retailers registered in the mall.111 23 © The Economist Intelligence Unit Limited 2021
FROM CRISIS TO OPPORTUNITY: STRENGTHENING MENA’S DIGITAL ECOSYSTEM IN THE WAKE OF THE COVID-19 PANDEMIC Tourism Tourism is a major economic sector in many accurate contactless temperature measurement. MENA countries and has become a strategic The airport is also using an AI-powered face component of the diversification plans of oil-rich mask detection system, which can automatically economies in the region. With health and safety detect if someone is not wearing a mask within remaining a top concern for many travellers, the airport.113 the tourism industry in MENA has had to Airlines in the region are also using technology introduce innovations to manage tourist travel, driven interventions to ensure passenger safety. not only to minimise current risks, but also to As the UAE’s Etihad airlines resumed flights to 58 prepare for post-COVID-19 travel. This process destinations in July 2020, the airline introduced of adjustment and adaptation has required a COVID-19 risk-assessment tool powered by AI the deployment of an array of technologies to that was developed in partnership with Medius prevent transmission of the COVID-19 virus on AI, an Austrian health-technology company. The mass transit systems and to ensure that national 22-question assessment reportedly estimates travel protocols meet new international and the probability that a passenger may have country-specific requirements. contracted COVID-19, thus encouraging the Touchless travel: Touchless data-entry such passenger to make informed decisions about as gesture control and touchless document whether or not to travel.114 scanning are being tested at airports across Virtual travel: Virtual reality (VR) technology the region. Abu Dhabi International Airport has been used by airlines and tourism boards stands out in the region for installing self- for many years to market travel destinations to cleaning escalator handrails, replacing customers. Now, VR is being used to make arts, elevator buttons with touchless alternatives culture and new destinations more accessible and screening passengers upon arrival using to people who aren’t able to experience these contactless technology. The technology, due to movement restrictions. These tools designed by Australian technology firm Elenium are expected to complement real time travel Automation, helps identify passengers with experience once travel restrictions are lifted. medical conditions, potentially even those with For example, a popular online platform for arts early stages of COVID-19 by monitoring the and culture offers Artificial Reality (AR) and temperature, heart rate and respiratory rate VR views from popular tourist destinations in of any person using an airport touchpoint.112 UAE. It allows users to access content from Hamad International Airport in Doha has more than 2000 leading museums and archives also been digitally transformed. The airport around the world at just a click of a button.115 has introduced fully autonomous sanitisation Jordan is using the same platform to showcase robots, ultraviolet disinfection tunnels to a virtual photography tour of Petra. The free-to- disinfect passenger luggage, as well as baggage use platform allows people to have immersive trolleys and tubs. Furthermore, Doha airport experiences through high-resolution images, provides thermal screening cameras to measure videos and virtual reality, and to explore passengers for fever and smart screening artwork and cultural artefacts from top cultural helmets for staff, which use AI to provide 24 © The Economist Intelligence Unit Limited 2021
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