The Kingdom of Saudi Arabia (KSA) ranks better than several of the world’s strong emerging economies in terms of easy access and use of internet, according to a new report by the Boston Consulting Group (BCG).
The report also showed that easy access and use of the internet can dramatically affect the growth of national economies and indicated that the difference between countries with low e-friction and those with high e-friction can amount to 2.5 percent of GDP.
The new report, Greasing the Wheels of the Internet Economy, introduces the BCG e-Friction Index, which measures the constraints on Internet use in 65 countries and ranks them according to four types of e-friction: infrastructure-related frictions that limit basic access; industry and individual frictions that affect the ability of companies and consumers to engage in online transactions; and information frictions that involve availability of, and access to, online content.
The e-Friction Index shows that KSA ranks 44 globally, outperforming several world’s emerging economies such as Brazil, China, India, South Africa and Turkey.
“Because the digital economy is growing quickly, often outpacing the offline economy, high e-friction countries are in danger of missing out on a high-impact propellant of growth and job creation,” said Joerg Hildebrandt, Partner and Managing Director at BCG Middle East.
“On the other hand, high-friction countries that address their sources of e-friction have the potential to add significant value to their economies.”
“GCC countries have so far achieved considerable success in removing obstacles to internet adoption by individuals and corporations, but clearly they need to take more measures across the four e-friction categories to ease internet usage and bridge the gap with the countries that have less e-friction,” added Hildebrandt.
The countries in the top quintile — those with the lowest e-friction — tend to score well across all four components: they have strong infrastructures and supportive business and regulatory environments.
At the other end of the scale, issues of basic access, price, and speed — common problems in developing economies — are widespread, as are shortcomings related to capital, labor, and consumers’ ability to conduct business online.
Among small and midsize enterprises (SMEs), Web users are 50 percent more likely to sell products and services outside of their immediate region and 63 percent more likely to source products and services from outside of their region.
SMEs encounter a range of frictions that slow or prevent them from fully exploiting the internet’s potential. Their biggest single concern is the protection of consumer data online — a prevalent issue for consumers as well.
The report argues that good policy in a few key areas can have a significant impact on e-friction and speed the development of internet use and individual countries’ internet economies. Policies that promote investment, especially in infrastructure, are essential. Policy responses that fail to take into account how quickly technologies and the innovations they enable are evolving can cause more, rather than less, friction.
“The internet has become a defining force in economic growth and job creation across the globe,” said Fadi Chehadé, president and CEO of the Internet Corporation for Assigned Names and Numbers (ICANN), which commissioned the report.
“It’s important that this amazing information and communication resource be allowed to grow as it always has, with the input of diverse stakeholders from around the globe who value a single network that is open and available to as many as possible.”SHOW MORE