With economic development experts highlighting the positive impact that a vibrant Information and Communication Technology (ICT) sector can have on social, economic, and political development, Middle East governments can fast-track an environment conducive to ICT sector growth by fostering ICT parks, consulting firm Booz Allen Hamilton says.
Economic development experts continue to give increasing attention to the Information and Communication Technology (ICT) sector because of its demonstrated impact on social, economic, and political advancement. Naturally, as these development themes gain prominence in the Middle East reform environment, ICT-related activities are taking centre stage in the public and private arenas. Conventional wisdom now associates ICT with a nation's level of advancement and its commitment to long-term economic development, equitable social development, and sustained political reform.
Governments in the region looking to create a development-friendly environment should adopt an approach that includes promoting ICT business parks as a fast-track way to begin benefiting from the vast opportunities associated with the ICT sector, according to consulting firm Booz Allen Hamilton. This potential is underscored by estimates that investment in the ICT sector, as a percentage of GDP, stands at 1% in the Middle East and could grow to exceed 8% over the next 10 years.
The road to a self-reinforcing ICT sector requires the formulation and execution of a comprehensive framework. In fact, the study of leading ICT-readied markets in recent years points to a four-pronged approach that involves environment, readiness, usage, and impact.
Firstly, an ICT-conducive market exhibits the right environment: strong political leadership, an enabling regulatory and legal context, adequate educational infrastructure and maturity of IT skills, a favourable climate for innovation, and accessibility to an efficient and effective infrastructure.
Secondly, there must be adequate ICT-readiness at the level of individual citizens, businesses and government agencies. Thirdly, these stakeholders must be incentivized to embrace and use the ICT-ed environment; said differently, ICT tools and applications should become widely available. Fourthly, and most importantly, the impact of these factors should be continuously monitored in order to gauge the extent to which benefits have been realized and introduce enhanced initiatives as required.
Karim Sabbagh, Partner and Vice President with the communications, media, and technology practice at Booz Allen, said, "The Middle East has had mixed success along these four dimensions. On one extreme we find markets such as Kuwait and the UAE where stakeholder readiness and usage have reached advanced levels, though the elements related to the environmental readiness and impact measurement are not explicitly defined and/or institutionalized as part of a broader economic, social, and political development agenda."
Sabbagh, who is based in Dubai and Riyadh, noted that on the other extreme, where the geographic, demographic, and social challenges are considerable, markets such as Egypt and Saudi Arabia are investing considerably in creating a balanced framework. Mid-range markets such as Bahrain, Jordan, and Qatar - amidst a more conducive context - are pursuing a phased approach across the entire ICT development framework.
The lessons learned from international markets have consistently pointed to a gradual build-up of a favourable ICT environment, whether at a national or cluster level. The cluster approach has proven to be quite relevant, particularly when governments recognized the difficulty of creating the right ICT framework at a national level, and elected to fast-track the process by creating smaller developments.
In such cases, governments allowed the build-up of self-sustaining zones, typically referred to as ICT parks, where the four dimensions of the ICT development framework (environment, readiness, usage, impact) were realizable more quickly and with less resistance. This route leveraged the learning from earlier experiments - many of which were successful - with technology parks as special economic zones where regulations, skills, infrastructure, and governance were all geared towards facilitating a targeted economic development.
Gabriel Chahine, Principal and Member of the Global Communications, Media and Technology group based in the UAE, said, "ICT Parks emerged in recent years building on the experience of Technology Parks, which are primarily defined as organizations whose main aim is to increase the wealth of their communities by promoting the culture of innovation and the competitiveness of their associated businesses and knowledge-based institutions."
Typically, technology parks stimulate and manage the flow of knowledge and technology among universities, R&D institutions, companies, and markets; they facilitate the creation and growth of innovation-based companies through incubation and spin-off processes; and they provide other value-added services together with high-quality space and facilities, a definition adapted from the International Association of Science Parks.
Chadi Moujaes, Senior Associate in Booz Allen's Beirut office, added, "In the context of technology parks, ICT-related activities have gained prominence. To illustrate, nearly 50% of employees working out of the Sophia Antipolis Science Park in France focus on IT. The other technology-intensive activities cover manufacturing, trade, health science, higher education and research, earth science, and environment. With the increased emphasis on the ICT sector as an economic and social advancement enabler, new developments have emerged around the concept of ICT parks, and these have integrated the broader definition of technology parks."
"At the core, ICT parks can be viewed as property-based initiatives with formal links to universities and research institutions, "said Walid Fayad, Senior Associate in Booz Allen's Beirut office, adding, "Their primary role is to encourage the formation and growth of knowledge-based businesses in the ICT sector. They actively support information and communication technology brokering and enhance the business skills in tenant firms. ICT parks can act as catalysts for local development and employment; they also can facilitate knowledge and technology transfer to the broader local economy. The Middle East region has witnessed in recent years the emergence of ICT Parks such as Dubai Internet City and Dubai Media City (UAE), CyberCity (Jordan), and Smart Villages (Egypt), to name a few."
Booz Allen has reviewed the learnings from global experiences and suggests six main levers for the successful development of ICT parks.
Purpose - This element must be articulated up front as it directly impacts the physical environment, regulatory and legal context, economic focus, level of integration to the national economy, etc. To illustrate, parks can focus on objectives dealing with ICT sector development, attraction of foreign investments and/or retention of domestic investments, and incubation of new business. Successful parks have generated growth rates exceeding 10% over the years in terms of tenancy and number of employees. Interestingly, close to 50% of this growth was fuelled by new companies while the balance was generated through the relocation of existing institutions.To illustrate, Dubai Internet City and Dubai Media City aim to attract regional and international institutions. Due to the demographic construct in the UAE, these companies are highly dependent on imported talents. The emphasis of these institutions is on the ICT sector, with the objective to serve the Middle East region using Dubai as a hub. Conversely, the Smart Villages in Egypt are more likely to attract domestic and foreign institutions within the ICT sector and other information intensive sectors. Their aim is more likely to serve the domestic market, being one of the largest in the region, and they would naturally leverage the vast pool of national talent.
Value Proposition - Central to the success of an ICT park is the definition and enactment of a legal and regulatory framework, provision of adequate infrastructure and facilities, availability of support services, overall quality of life, and location, to name a few. Importantly, the offering of communication-related services such as voice and data telecommunications, managed data services, and media broadcast all play a key role in shaping the value proposition. To illustrate, the Dubai Internet City and Dubai Media City value proposition focuses on the one-stop facilities combined with a world-class communication infrastructure, best-in-class business environment and support services, stimulating lifestyle and broad networking opportunities with like-minded professionals. CyberCity in Jordan aims to attract domestic and international companies by providing one-stop facilities, advanced communication services, attractive incentives including quota and duty free export to the USA, access to educated professionals via Jordan's University of Science and Technology, and efficient access to MENA markets.
Location - The efficiency, effectiveness, and resulting lifestyle in these parks are important attributes. As a result, ICT parks tend to be located in dedicated areas outside the main city and within a short driving distance. They also tend to be located within a short driving distance from the airport as well as prominent universities. Last but not least, the majority of parks dedicate 30%-50% of their space to green areas with the objective to create a distinctive and attractive environment. Partnership - ICT parks require close links to academic institutions, real estate developers, venture capitals and financial institutions, investment promotion agencies, and national government agencies involved in the ICT sector. To illustrate, and building on the learning of the broader experience of technology parks, nearly 50% of such developments are pursued within university-related premises. To illustrate, Dubai Internet City and Dubai Media City aim to leverage the nearby Knowledge Village development which includes training institutions as well as universities. CyberCity in Jordan draws on the talent pool formed at the Jordan University of Science and Technology. Berytech in Lebanon, which targets institutions within and outside the ICT sector, leverages the relationship with Universit Saint Joseph.
Funding - ICT parks can be funded primarily through the private sector (e.g., real estate developers, private investors/placement) and Government agencies if required. They are self-sustainable financially and can generate attractive returns. Greenfield developments in the Middle East can yield an Internal Rate of Return (IRR) ranging between 15%-25%. While services represent the largest operational expenditures (40+%), rent represents the largest contributor to revenues (70+%).
To illustrate, Dubai Internet City and Dubai Media City were funded initially by the Dubai Government with a statute of a private development; they now increasingly engage private sector funding. Conversely, the Smart Villages in Egypt are funded 51% by the private sector and 49% by the government. CyberCity in Jordan is viewed primarily through private-sector funding.
Competitive Positioning - ICT parks can define their competitive positioning along three dimensions. Firstly, they need a differentiated positioning vis--vis other comparable developments within the same region (e.g., within the Arabian Peninsula, Levant, or North Africa). Secondly, they need to offer distinctive benefits at a national level, in particular when considering that 50% of the tenants could represent already established institutions. Thirdly, ICT parks can be defined as part of a regional network of parks. Such a "constellation" of parks aims to create cross-border synergies and complementary products, services, and strengths. The concept of "constellation" is already into play at a national level with developments such as the Smart Villages in Egypt having planned presences in Giza (Cairo), Mansoura (Cairo), and Alexandria.
Going forward, Middle East countries continue to exhibit significant potential in advancing their ICT sectors at a national, as well as cluster, level. Such cluster developments can focus on domestic and/or regional markets - contingent on market conditions and the value propositions being offered. As discussed, Booz Allen recommends the ICT park approach as a fast-track way to seize the vast opportunities that ICT offers for economic, social, and political development.
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For more information,please Contact:
Booz Allen Hamilton
Karim Sabbagh
Tel: + 971 4 3900260
Fax: + 971 4 3908559
E-mail: sabbagh_karim@bah.com
Booz Allen Hamilton
Gabriel Chahine
Tel: + 971 4 3900260
Fax: + 971 4 3908559
E-mai: chahine_gabriel@bah.com
Walid Fayad
Tel: +9611-336433
Fax: +9611-336430
E-mail:fayad_walid@bah.com
Chadi N. Moujaes
Tel: +9611-336433
Fax: +9611-336430
E-mail: moujaes_chadi@bah.com
Smriti Singh
MS&L
Tel:+ 971 4 3676156
Fax: + 971 4 3672615
E-mail: smriti.singh@dubai.mslpr.com
© Press Release 2005
