Business & Money | Sunday 27 December, 2015 11:37 am |

Country-specific socio-economic conditions play a catalytic role in spurring a sustainable and robust local Internet economy. Similarly, the Internet serves as a powerful instrument and vehicle for national economic growth and development. An undeniable reciprocal relationship therefore exists between a country’s digital economy and overall economic activity. In line with this, it comes as no surprise that Saudi Arabia, which enjoys a high GDP per capita and one of the highest smartphone penetration rates in the world, has been featured in The Boston Consulting Group (BCG)’s 2015 e-Intensity Index.

 

In fact, Saudi Arabia’s score of 88 – and ranking of 45 – places it ahead of countries such as Bulgaria, Chile and Argentina. Another GCC state, the UAE, leads the Middle East when it comes to the maturity of its Internet economy, with a ranking of 30 and an e-Intensity score of 129.

 

BCG’s 2015 e-Intensity Index measures the maturity of 85 Internet economies – including all 28 members of the EU, most of Latin America and Asia, and 14 African countries. It basically provides a detailed overview of the depth and reach of digital activity across these nations as well as gauges each respective country’s supply of Internet infrastructure and demand for and use of Internet services.

 

The index consists of three major components (comprising a total of 28 metrics with different weightings):

 

• Enablement accounts for 50% of the total weighting; it measures various aspects of fixed and mobile infrastructure deployment.
• Engagement, which accounts for 25%, measures how actively businesses, governments, and consumers are embracing the Internet. 
• Expenditure, also accounting for 25%, measures the proportion of money spent on online retail and advertising.

 

Since the inaugural edition in 2011, BCG has published an e-Intensity Index every year except for 2014. 

 

SAUDI ARABIA IN FOCUS

Since 2011, Saudi Arabia has moved up an impressive five positions in the ranking. Today, the country ranks highest in terms of engagement – with a score of 94 and a ranking of 36 compared to 33, 36 and 57 in 2013, 2012, and 2011, respectively. When it comes to enablement, Saudi Arabia achieved a score of 107 in 2015 and a ranking of 41 – which means it has fallen just one spot since 2011. 

 

From an expenditure perspective, and with a score of 55, the country took the 57th place this year; it ranked 79th, 76th, and 74th in 2013, 2012, and 2011 – in that exact order.

 

These figures further indicate that Saudi Arabia has all the essential elements of a thriving Internet economy – one powered by a comprehensive e-infrastructure, an established digital marketplace, high levels of Internet engagement, and wide access to technological innovations.

 

“Saudi Arabia’s e-Intensity Index ranking demonstrates that the country has reached an inflection point for a  digital revolution,” explained Hermann Riedl, Partner and Managing Director at BCG Middle East. “Still, today, in Saudi Arabia, the Internet space is still rife with opportunity for growth. To maintain a solid e-Intensity Index ranking and a sustainable competitive advantage, the country will therefore have to boost its e-commerce prowess, fine-tune its innovation ecosystem, and keep delivering cutting-edge connectivity solutions. And this in turn will create positive ripple effects throughout Saudi Arabia’s entire economy.”

 

GLOBAL RESULTS

Since 2011, the scores of the BRICI (Brazil, Russia, India, China, and Indonesia), Latin American, and African countries have risen annually by 27%, 21%, and 21%, respectively. But given their relatively low starting positions, those economies will not catch up anytime soon to the EU15 or G7 countries, whose scores have been rising by 16% and 14%, respectively.

 

Thailand and China improved their rankings the most. Thailand moved up 12 spots, to sixty-second place, while China rose ten spots, to thirty-fifth.

 

Enablement and expenditure have powered the overall rise in index scores, while engagement has stagnated. E-commerce has become so prevalent and popular in China that it now has the fourth highest score on the expenditure component, after the UK, South Korea, and Denmark.

As one might expect, wealthy nations from northern Europe dominate the top of the index. Denmark emerged as the leading overall Internet economy, supplanting South Korea, which fell three spots. South Korea is now bracketed between Luxembourg and Sweden and the Netherlands, Norway, and the UK.

 

“More intriguing, however, are the economies that are performing better than their economic profiles would suggest,” concluded Riedl. “Many of the countries in Central and Eastern Europe – Latvia, Estonia, Poland, and Lithuania for example – fall into that category when e-Intensity is compared with per-capita GDP on the basis of purchasing-power parity. Many of the Latin American economies, on the other hand, are underperforming.”