Jordan: ICT mergers on the cards


Economic News

12 Nov 2012
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The information and communication technology (ICT) sector is looking to further expand its reach across the region, with the giant Saudi market firmly in its sights -- though there have been suggestions that the congested domestic industry needs to consolidate to better equip it for overseas conquest.

The sector accounts for 14% of GDP and is growing at an annual rate of 25%, according to data from the industry’s representative body, the Information and Communications Technology Association of Jordan (int@j).

ICT provides direct employment for more than 16,000 people working in over 400 companies and key representatives, including Jordan’s minister of information and communications technology, Atef Tal, believe the sector would benefit from consolidation.

Jordan has an active domestic ICT market and a relatively high internet penetration rate, with 50% of the population, now having access to the web, according to int@j. The number, which sits well above the global figure of almost 33%, looks set to rise sharply as growing numbers of Jordanians upgrade their mobile phone subscription to include internet services. The Kingdom also contributes around 75% of all Arabic content on the web, according to a study published earlier this year by the International Telecommunication Union.

While many in the sector may not agree with the minister’s views on having fewer but bigger operators in the industry, Atef Tal is confident that mergers and partnerships among smaller firms would give them better economies of scale and improve their performance in the overseas markets, strengthening their hand in bidding for large-scale projects and cushioning them against fall-out from reduced government spending.

“The Jordanian IT market is small and the number of companies is large compared to the market’s needs,” Tal said in early October. “The majority of companies rely on government spending on IT projects and their businesses were affected as government spending on IT dropped due to the difficult financial conditions the country is going through. It is possible for IT companies to survive by just focusing on the Jordanian market, but we want them to grow. Therefore, they should concentrate on mergers and partnerships.”

But companies are also keen to tap regional markets, aware of the limitations of Jordan’s domestic market, as int@j’s CEO, Abed Shamlawi, acknowledged. “Development potential in the local market is possible through integrating ICT in other sectors such as education and health,” he told OBG. “We definitely see Jordan’s ICT sector also focusing more toward being based on exports.”

At present, the UAE, the US and Saudi Arabia combine to make up 60% of the ICT sector export business. According to int@j’s data, the Saudi market, which is the largest single ICT market in the Gulf region, is forecast to top $12bn by 2015. Jordan exported some $93.5m worth of information technology goods and services to Saudi Arabia in 2011, marking almost 40% of its total overseas sales. Though a notable addition to Jordan’s foreign trade figures, the exports represent a fraction of Saudi Arabia’s total spend on ICT.

int@j announced plans at the end of September to explore opening a representative office in Saudi Arabia, which Shamlawi said would increase the participation of Jordanian companies in IT project tenders. “We are exerting our utmost efforts to at least double our exports to Saudi Arabia over the next few years, building on the solid ties between the two countries and the capabilities of Jordanian IT companies,” he said.

The ICT sector is well placed to capitalise on the region’s information technology boom, thanks to its background as both a content provider and developer of software solutions for global markets. Demand is rising across a broad range of segments, including telecoms, financial products, government business, health and education solutions.

The Kingdom’s ICT companies may well eventually come up against increased competition from other regional players who decide to put more focus on developing research and development programmes of their own. However, in the short term, the most pressing challenge will be stimulating growth in the sector without a reliance on government stimulus.

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