February 24, 2021

Lack of internet causes many Mideast businesses to fail amid coronavirus

Small businesses in poorer Middle Eastern nations have suffered from the economic downturn caused by the coronavirus pandemic more than counterparts in most parts of the world because they are less likely to have an internet presence, an International Monetary Fund (IMF) economist says.

Small- and medium-sized enterprises (SMEs) in the Middle East and North Africa use the internet less than companies of similar size in most of the world because they lack funds and information, according to Inutu Lukonga, a senior IMF economist who works in its Middle East and Central Asia department.

These businesses comprise 90% of the region’s enterprises, Lukonga says, but receive only 10% of its bank loans because financial institutions are concerned about their viability.

“A lot of the internet-services content [originally] wasn’t in Arabic,” she told The Media Line. “It’s only now that they’re creating Arabic content so that small businesses can also adopt some of the digital solutions.”

The region, excluding Israel, has the world’s second-largest technology usage gap – the discrepancy between the number of people who have access to the internet but choose not to use it.

“Many of the SMEs aren’t sure which technology to use,” adds Lukonga, who recently wrote a report on “Digital Solutions for Small Businesses in the Middle East and North Africa.” 

She states that this is due not only to a lack of information and knowledge, but also a lack of faith in internet security. She believes that authorities should establish country-wide plans for SMEs, providing internet education, boosting cybersecurity and creating guidelines to protect personal information.

Still, there is a large difference between countries in the region itself when it comes to internet use.

In Bahrain, usage is close to 100%, whereas in Afghanistan it is only about 20%. Yet even in countries where most people are highly connected, commercial ventures lag behind individual and even government use.

Businesses in some parts of the region face challenges such as conflict and political instability. 

The countries with the lowest connectivity rates include Yemen, at a little over 20%, with Afghanistan not far behind. While these countries are at war, not all nations in conflict have such low levels of utilization. For example, 40% of Iraqis use the internet.

“The digital divide has largely been along income lines, but government policies have also played an important role,” according to Lukonga.

“Higher-income countries have been able to invest in advanced technologies such as 4G, which businesses need. For consumers, there’s a higher penetration of smart phones, which facilitates higher consumption,” she explained.

“Governments that allow competition and have better policies on spectrum allocation have also been able to provide better services and reduce costs,” she said.

Yet the popularity of internet commerce is indeed growing. 

Badia Farms in the UAE emirate of Dubai has taken advantage of the internet.

“Having an online presence is important because that’s what consumers demand,” CEO Omar Al Jundi told The Media Line. 

“This was the case before the coronavirus, but [the pandemic] accelerated this trend,” he said. “Some say we are spoiled now because we have everything at our fingertips. Not only that, we want customizable items. We have four types of lettuce, for example, and 12 varieties of microgreens.”

Excluding Israel, the six countries of the Gulf Cooperation Council (GCC), which includes the UAE, have the highest levels of internet consumption in the region, with all but Oman at levels of 90-100%. Oman’s internet usage is about 80%. 

Despite the discrepancy, all the countries in the region have increased their connectivity levels since 2010. Yet even in countries with high internet use, business use lags behind that of individuals and even governments. 

In Kuwait and the UAE, the Gulf countries with the highest use of technology, businesses are only half as willing to use the internet as are individuals.   

“Individuals use the internet [for browsing] and social media. Businesses need websites, which requires a higher set of technological skills and faster internet [speeds] than for personal use,” Lukonga explained.

Still, even with improved accessibility, many people in the region are just not using it.

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