Google and Boston Consulting Group Partner for a Study of a Potential New Internet Economy

egypt380If I were to describe a country where the Internet contributes as much as a percentage of GDP as its health services, education and oil industries, and is growing at nearly twice the rate as in Europe — driven in large part by growth in private and corporate-backed entrepreneurship — where would you guess?

Looking forward, if such a country has the largest population of Internet and mobile users in its region with one of the largest youth populations in the world; is a large consumer market in the early days of e-commerce; is a global tourist destination where roughly only five percent of all travel revenue is booked online — might this be an intriguing investment opportunity?

Am I describing Germany? China? Brazil?

Try Egypt.

Two years after the Arab uprisings and in the midst of wrestling significant economic and political change, the Internet is quietly and increasingly growing as a central platform of economic development around the country as it is around the globe. And according to a new Google-commissioned study by The Boston Consulting Group — Egypt at a Crossroads: How the Internet is Transforming Egypt’s Economy — policy makers, executives and investors alike are poised at a central moment of opportunity to embrace this platform for economic growth, job creation and returns.

David Dean, Senior Partner and Managing Director at the Boston Consulting Group — and one of the authors of the study — told me that this is the latest of fifteen country-wide studies his company has done, and he was impressed by what he found. “I think the biggest positive surprise was that there are many entrepreneurial companies using the Internet to grow their businesses.” The report highlights a handful of among hundreds of recent Egyptian startups as diverse as the content portal Masrawy, which now reaches over eight million unique users per month; e-commerce destination Nefsak, which offers over 25,000 products; and Alexandria’s Vimov, whose paid weather app WeatherHD was the fourth-best seller in Apple’s App store after its recent release. It notes that Vodafone, among other global investors, is making serious commitments both to the infrastructure and to funding startups in the region. “The report makes clear that there is much uptapped potential for Egypt’s nascent Internet ecosystem,” Samir El Bahaie, Google’s Head of Policy in the Middle East and North Africa, said — adding that “there is also a great opportunity for investment, economic growth and job creation waiting to be seized.”

The study underscores that the opportunity is now. Egypt’s population of 31 million Internet users is the largest in the Middle East, and while mobile penetration exceeds 100 percent in many parts of the country, the big news is that smartphones — with real computing capabilities — are expected by some to reach 50 percent penetration in the next three to five years. Unmeasured in penetration and GDP figures are what the report calls “ripple effects” on the Egyptian economy and society: The ability to reach new markets, to have better informed consumers, to have greater work efficiencies in the knowledge economy, to have simplified access to government and social services for people to take more control of their lives. Egypt, with its mobile penetration, is especially poised to capture opportunities in mobile banking (as significant success has been seen in Africa) and to fully embrace all the opportunities offered for tourism. Dean notes, in fact, that travel and tourism is “possibly the largest short-term lever that the Internet can have in the country.”

If the opportunity is now, however, so is the potential for missed opportunities. While access to the Internet is growing, there is still a lack of Internet skills in the workforce, even as compared to other emerging markets. While business adoption of the Internet as an economic platform in Egypt is competitive among larger enterprises, small- and medium-sized businesses still rank lowest among emerging growth markets. More fundamentally, there remains significant question of the most appropriate, entrepreneurship-driving policies — areas such as rule of law, copyright protection, lessening bureaucracy in starting businesses. “Of course, these are clearly not just questions for Egypt,” Dean explained to me. “What would really be encouraging would be a commitment by the Government to the Internet as an economic factor — which would mean simplifying the process for opening businesses, encouraging investment, demonstrating the benefits of the Internet in the way the government operates, and using the Internet to address some of Egypt’s most pressing problems, such as youth unemployment.”

Google hopes to play a continued role in working with governments like Egypt’s. Studies like these are extremely useful as they provide factual economic data points around the value of the Internet, El Bahaie noted. “We hope to work with the government of Egypt to leverage these data points to unlock the potential of eCommerce and mCommerce and well-informedly create a more enabling business environment for Egyptian small- and medium-sized business, and to help the country reach its full economic potential.”

Christopher M. Schroeder is a leading U.S. Internet entrepreneur and venture investor, a member of the advisory boards of the American University of Cairo School of Business, the regional entrepreneurship portal Wamda.com and incubator Oasis500. He is the author of “Startup Rising: The Entrepreneurial Revolution That’s Remaking the Middle East,” to be published September 2013 by Palgrave/MacMillan. He can be followed on Twitter @cmschroed.


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