Stimulating Innovation: Building The Digital Advantage For MENA Countries
To strengthen their ICT sectors and foster innovation, governments in the MENA region must act on five core elements: identifying key focus areas, establishing innovation-friendly policies and regulations, making funding more widely avail¬able, improving ICT infrastructure, and developing the local talent pool. These elements are interconnected and will require a holistic approach, implemented in conjunction with private-sector ICT players. The end result will be a stronger innovation environment, not only for the ICT sector but for the national economy.
Around the world, the information and communications technology (ICT) sector has transformed societies and economies over the past decade, via a steady stream of innovative new products and technologies. Product cycles in the sector are now so short that ICT companies must innovate simply to compete, and the intense pace of this innovation has fuelled tremendous growth not only for the companies within the ICT sector but for many other industries as well.
However, according to Booz & Company, new information technologies have changed the way we interact, added intelligence to core infrastructures such as transportation and utilities, and spurred widespread innovation across national economies. As a result, governments now recognise that innovation in ICT products and services can have a multiplier effect, driving productivity growth and economic performance across the country as a whole.
This is why governments of both developed and emerging markets have made ICT innovation a priority on their national agendas. Recent initiatives include the European Union’s Digital Agenda, Malaysia’s Strategic ICT Roadmap, Germany’s ICT 2020 – Research for Innovation, and the U.S.’s Strategy for American Innovation. These programmes aim to establish national ecosystems capable of promoting ICT innovation at all levels, through a holistic and well-coordinated agenda of government policies.
To understand how best to foster ICT innovation in the Middle East and North Africa (MENA) region, it is important to understand the roots of such innovation. One primary source of innovation is the research and development function of scientific institutions and large corporations.
The second source of ICT innovation is entrepreneurs who develop new business models or products from the ground up, relying on the Internet, application stores, the telecom sector, or IT devices to reach markets.
“Innovation within the ICT sector can lead to innovation in other sectors of a national economy and thus make it more competitive. Countries of the MENA region have an opportunity to develop a strong innovation culture for their ICT sectors by fostering technology start-ups, creating business-friendly policies and regulations in such areas as patent filings, and devoting a larger percentage of their GDP to R&D,” said Bahjat El-Darwiche, Partner, Booz & Company.
The lack of overall innovation can have a significant negative impact on the region’s long-term economic competitiveness. Currently, the MENA region is a net importer of information and communica¬tions technology – companies in the region purchase ICT products and services that enhance efficiency, but the national economies do not enjoy the greater gains that come from a vibrant local ICT sector. To that end, national gov¬ernments in the MENA region must take a holistic approach to addressing five key issues, with the long-term goal of establishing an ICT innova¬tion ecosystem.
These five components are interconnected, and government is the enabler and supporter of all five. If implemented holistically, these elements can lead not only to a stronger and more innovative local ICT sector, but also to a more innovative regional economy across all sectors.
ICT Key Focus Areas
ICT is a broad and growing sector, and no country can excel in all the sector’s many clusters. Focus and selection are thus critical. To identify the most relevant focus areas, regional governments must understand both where demand exists and how they can use their strengths to fulfill it. First, factors such as demographics and the socioeconomic agenda can identify specific market demands within each country.
Policies and Regulations
Even though governments in the region have taken dramatic steps recently to establish business-friendly policies and reduce startup costs for companies, there is still more work to be done in developing efficient policies and regulations pertaining to intellectual property and copyright protection.
Funding
Without funding, neither innovators nor entrepreneurs would be able to develop new products or commercialise their ideas. This is why the E.U.’s Digital Agenda calls for doubling Europe’s R&D investment in ICT by 2020, from US$8 billion to $16 billion for public spending, while promoting an equiva¬lent increase in private spending, from $51 billion to $102 billion.
MENA governments must significantly increase their R&D spending and provide financing for entrepreneurs in key focus areas by setting up national funds for innovators and entrepreneurs. However, such government funds are not enough – they should be complemented by broader and more efficient funding on the part of the private sector.
Infrastructure
Governments should make sure that modern infrastructure is available to support innovation in the key focus areas. At a minimum, this includes the basic elements required to ensure competitiveness in any business sector: reliable and affordable energy and utilities; an extensive, high-quality transportation network; and affordable office space.
Talent Pool
Building the right talent pool is the most crucial step for any national ICT innovation programme, and the one that requires the longest time frame. In the short term, MENA countries – specifically those in the GCC – have little choice but to rely on imported talent. However, they can derive the greatest benefit from this temporary workforce by ensuring that some knowledge transfer takes place.
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