Kuwait Financial Centre ‘Markaz’ recently published the executive summary of its report on Kuwait Information and Communication Technology (ICT) Sector. In this research note, Markaz analyzes status of the Sector, and discusses challenges and investment opportunities in the GCC Education sector.
Markaz’s report points out that Kuwait is the third largest spender on ICT infrastructure in the GCC. ICT spending has grown at a CAGR of 12.6% between 2003-2011 and is expected to moderate to a 6.4% annualized growth over the next three years.
The report expects total ICT spending to reach $28bn between 2011-2015. The bulk of ICT spending, about 80% ($21.3bn), is towards Communications, followed distantly by Computer Hardware and Software.
The projection is in line with the bigger picture in the region as a whole, where the key driver in ICT spending remains to be in the telecommunication sector.
Computer hardware and computer software are growing at double digit rate however the size of spending lackluster in comparison. The next decade is more likely to see a quantum leap in computer hardware and software spending as governments and business transform from the “pen and paper” to the new digital world.
The report notes that ICT sector is in constant growth in tandem with economic and demographic trends of Kuwait. This induces a great need for capacity building and maintenance. In the early eighties, Kuwait adopted telecommunication technology before its GCC peers by establishing Mobile Telecommunications Company (now Zain), the first telecommunication company in the region.
Kuwait was one of the earliest internet adopters in the region as well. However, it lagged behind other countries in the recent years in terms of various key indicators. For example, in terms of network readiness index, it ranks 62 compared to 27 for Bahrain and 28 for Qatar. Similarly it has lower mobile and internet penetration compared to other GCC countries. One of the key limitations of Kuwait ICT sector is the lack of an independent regulatory body which is slowing further development in this evolving sector.
Based on segment analysis, ICT spending is concentrated on consumer segment with 47% of total 2011 spending, followed by energy and utilities with 9.3% while the government segment contributed to 7.2% of total ICT spending. Going forward, segments which were underinvested will have a better opportunity to shine such as Construction, educational service, transportation and retail trade which grew at a CAGR of 11.4% between 2007-2010 and is expected continue its robust growth between 2012-2015.
Consumers might be leading ICT adoption in Kuwait; however this is not the case in the government sector. This issue was addressed by the Government of Kuwait, through the establishment of the Central Agency for Information technology. The CAI is in charge of digitizing the government, the task is long and challenging but fruitful as we can see with several unified communication tools including Ministry of Health digital medical record initiative and TASDEED portal. CAI projects once implemented will require increased spending on ICT infrastructure.
Investment forecasts are usually a projection based on current trends. However, since the Information Technology is in constant growth and advancement mode, the report points out that if the CAI implements its educational mandate effectively, the ICT investment forecast will actually be in line with the telecommunication spending since the convergence of Information Technology with daily activities – be it work or personal – is evident; and once it is adopted by the general users in dealing with government entities, the critical mass alone will spur investments.
