Tech boom: MENA emerges as global digital economy hub

The information and communications technology sector in the Middle East and North Africa region has experienced significant growth in recent years. And this is due to the increasing trend of digital transformation. The region acknowledges the close connection between digital transformation and economic growth. Consequently, technological advancements like the Internet of Things, big data, machine learning and cloud computing have prompted enterprises to adapt their software. 

The United Nations Economic and Social Commission for Western Asia defines the digital economy as an economy centered on digital technologies. These encompass infrastructure, software, networks and devices, along with digital mechanisms for conducting economic transactions online. Meanwhile, Harvard Business Review characterizes the digital economy as an economy reliant on communication between individuals and various parties occurring daily. This communication generates substantial amounts of data and information utilized in diverse economic activities.  

Digital growth forecasts

According to the TechGPT Compendium report by Switzerland’s UBS Group AG, the digital economy in the MENA region could increase from $180 billion in 2022 to $780 billion in 2030. It reflects a 20 percent annual growth. Additionally, the digital economy’s contribution to the region’s gross domestic product could rise from 4.1 percent in 2022 to 13.4 percent in 2030. This is slightly below the United States’ projection of 15 percent. 

Meanwhile, Mordor Intelligence predicts the ICT market in the MENA region to reach $250.2 billion in 2029. It’s an increase from $183.4 billion in 2024, indicating a 36.41 percent jump. This establishes the MENA region as one of the fastest-growing digital economies globally. And it is driven by substantial investments during and after the COVID-19 pandemic.  

In this context, software spending in the MENA region could grow at a rate of 15 percent annually. This is followed by Internet-based industries with a compound annual growth rate of 23.5 percent. Furthermore, the third segment, data centers, could attract significant investments in generative artificial intelligence in the coming years. 

GCC countries

MarkNtel Advisors, a prominent data analytics and market research consulting firm, anticipates a compound annual growth rate of approximately 25.7 percent in the GCC digital transformation market from 2024 to 2030. This growth is fueled by factors including economic diversification, national visions, modernization strategies, e-government initiatives and financial technology. 

The GCC has formulated ambitious national visions and modernization strategies. Exemplifying these are the digital government strategies of Saudi Arabia and the UAE. Qatar, with its Qatar National Vision 2030, has prioritized digital transformation as a catalyst for economic diversification, sustainability, and improved quality of life. These strategic initiatives serve as a guide for the region’s comprehensive digital endeavors. This led to increased adoption of technologies like cloud computing, AI, IoT and others across sectors such as healthcare and finance in recent years. 

Moreover, countries in the region are embracing digital technologies to efficiently manage data, optimize supply chains and enhance global competitiveness through product and service modifications. This trend stimulates innovation and fosters collaboration in the digital transformation sector, contributing to overall market growth. 

Read: How has AI impacted Dubai

Digital transformation and tourism

The tourism sector in the UAE, Qatar and Oman is anticipated to experience growth in the upcoming years. It will be driven by government initiatives, campaigns, visa regulations, the presence of luxury hotels and resorts, and global events. For instance, in 2023, the UAE implemented new visa regulations known as the New UAE Visa Extension Rules. It allows travelers to extend their visit visas. Furthermore, Saudi Arabia introduced a new premium residency visa. 

These initiatives are expected to attract a significant influx of travelers to the region in the years ahead. Consequently, there will be an increased reliance on various digital technologies within the sector. The industry heavily depends on digital platforms for booking flights, accommodations, tours and activities. 

The digital economy and growth

A 2022 World Bank report titled “The Upside of Digital for the Middle East and North Africa: How Digital Technology Adoption Can Accelerate Growth and Create Jobs” states that embracing digital technology accelerates growth and enhances job opportunities. The transition to a fully digital economic system in the Middle East is projected to raise per capita GDP by approximately 46 percent over a 30-year period. The estimated gains are $1.6 trillion. According to the report, women’s participation in the labor force is expected to increase by 20 percent in the next 30 years, reaching 40 to 80 million women. 

Furthermore, the growth in transformative industries’ workforce is anticipated to contribute 5 percent to the GDP. It could create around 1.5 million job opportunities. Frictional unemployment rates could decrease by approximately 7 to 10 percent within the next six years. 

Data security

Despite the numerous advantages offered by digital transformation, there are significant associated risks and challenges. In particular, data privacy is a prominent concern in the face of escalating cybersecurity violations. As IBM Security and the Ponemon Institute have reported, the cost of data breaches in the MENA region surged to $8.07 million in 2023. It marks an 8.2 percent increase from $7.46 million in 2022. 

This underscores the commitment of many countries in the MENA region to invest in robust security measures. Moreover, there is a clear emphasis on implementing deterrent legislation and laws to safeguard data privacy. The purpose is to create a secure environment for digital operations through a well-established security system. 

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