As the first country in the region to exploit its oil resources, Bahrain has long had a reputation as an early mover in the Gulf. Its information technology (IT) sector is no exception, with the first mainframe computer in the region installed by Bahrain Petroleum Company (Bapco) in 1962. Following this pioneering trend, Bahrain was the first GCC country to make internet services available nationwide, in April 1995.
Today, the tradition of innovation continues to make Bahrain one of the most vibrant IT centres in the region. Sustained investment from the public and private sectors has seen businesses and government services move online, bringing cost-saving gains in efficiency.
TODAY’S MARKET: Yet, in the fast-developing world of IT services and provision, there is always more to be done, particularly in times of economic uncertainty. The relatively high cost of cable broadband has seen businesses, especially small and medium-sized enterprises (SMEs), turn to cloud computing and mobile service delivery to take advantage of Bahrain’s relatively cheap and comprehensive mobile broadband.
Throughout 2011, which saw many Bahraini businesses challenged by decreased investor confidence and consumer spending, the IT sector has proved to be one of the most resilient, with the market growing some 8.1% year-on-year (y-o-y), according to Business Monitor International’s (BMI) 2012 Bahrain IT report.
The IT sector is estimated to be worth $373m, up from $345m in 2011. Much of this growth can be attributed to a fiscal stimulus package passed in the wake of protests in early- to mid-2011, but global trends, such as a move to cloud computing and virtualisation of business, have also driven demand for IT services. Bahrain’s robust regulatory oversight and public investment in infrastructure have also helped underpin investor confidence in the sector, making it an attractive base for international technology firms.
PUBLIC SPENDING: One of the main factors driving growth is public investment in the eGovernment programme, which aims to simplify access by moving public services online. The initiative is an important facet of the Kingdom’s Economic Vision 2030, the country’s long-term development plan.
Businesses can benefit from a range of services, such as office registration, provision of work permits and banking services. An online compendium of government regulations, from environmental compliance standards to the speed limit, is also available online. The Kingdom’s website also lists government contracts available for tender, and allows companies to submit bids for projects. A new initiative for 2012, the Business Licensing Information System, will shorten the length of time it takes to obtain and renew business licences.
Outside of the business sphere, e-government services aim to offer residents of Bahrain a convenient and centralised place to interact with their government. Users can access general information or use the National Authentication Framework to reach a portal with a record of personal transactions and other customised information through a personalised ID. Residents can pay water and electric bills, traffic fines, make appointments, register their cars, and renew their drivers’ licences online, among other services. Students can also register for school and receive a discount on courses if they use the eGovernment portal. For those without internet access at home, kiosks are provided in a number of public places, such as the post office and banks.
OVERSIGHT: The e-government push is made possible by the Central Informatics Organisation (CIO), Bahrain’s main IT body. The CIO was established in 2002 as a natural outgrowth of the Central Statistics Organisation, which had overseen the country’s data gathering and analysis since 1967. In 2011 the CIO announced its intention to centralise Bahrain’s IT services and data centres. With the assistance of US-based networking giant CISCO, the CIO is moving all government information from IBM mainframe servers to web-based databases. This push for centralisation extends to health care, with the government calling for a unified system of health records to simplify patient care.
Other IT services have also helped the government streamline services and reduce costs. The Enterprise Asset Management System (EAMS), maintained by the Ministry of Works (MoW), is intended to highlight value propositions within the government’s balance sheet through the use of an integrated asset registry system. By keeping data on all the MoW’s assets – roads, sanitation, infrastructure and buildings – it helps establish the most advantageous time to acquire and dispose of assets to optimise services and minimise costs. The EAMS service is supplied by United Technology Bahrain under a 28-month contract, and the government began using the system in November 2011.
ACCESSIBILITY: While these innovations are constructive, e-government services need to be accessible to all segments of the population. To that end, the eGovernment Authority has a mandate to bolster IT literacy and market its services. Facing difficulty in reaching certain segments, such as the unemployed and the elderly, a two-year recruitment campaign in 2010 was initiated using the most traditional of methods: door-to-door visits. Various incentives, such as prizes for registering at eServices centres and a discount on bills paid electronically, have also helped drive take-up of e-government services. As of February 2012, some 60% of utilities bills are paid through the electronic portal, according to the eGovernment Authority.
The eGovernment Authority also maintains a call centre managed by Silah, a joint venture between the authority and UK-based Merchants, a data management and customer service specialist. Silah hopes to become an exemplary outsourcing operation that could expand to the rest of the Gulf and, eventually, beyond.
GOING MOBILE: The eGovernment Authority has also announced a focus on developing mobile applications to cater to the growing number of people who use their mobile device as their main internet connection. Mobile penetration stood at 133% in 2011, according to the Telecommunications Regulatory Authority (TRA), while internet subscribers account for only 23% of the population. Even allowing for the fact that several people may use a single broadband internet connection, mobile internet is increasingly seen as the way forward. Over the past three years, subscription rates for ADSL connections have declined, while wireless subscriptions have skyrocketed. According to Sheikh Salman bin Mohammed Al Khalifa, the director-general of IT at the CIO, “The take-up of mobile devices has been remarkable, especially in hard-to-target demographics. Today, you find people of 70 years or older, who previously would not have touched a computer, happily using their iPad to surf the web, watch videos and check email.”
While Bahrain’s overall number of fixed internet subscribers is lower than The Organisation for Economic Cooperation and Development (OECD) norm of 27%, it represents the highest fixed broadband penetration in the GCC, according to the TRA. Additionally, the percentage of homes with fixed broadband access is above regional and worldwide norms, with 95% of Bahraini households covered, compared to the OECD average of 70%. The number of broadband subscribers increased 42% between 2010 and 2011, and dial-up internet has been completely phased out, as of 2010. Yet, at the end of 2010, the majority of these connections (55%) are at speeds below 1 Mbps, which is not ideal as bandwidth-heavy applications, such as video streaming and online gaming, become more popular.
Lowering the price of high-speed broadband, which is above that seen in the rest of the region and most developed economies, would serve to improve accessibility, which the government is in the midst of doing. The price of broadband fell 40% between 2010 and 2011, according to the 2011 “Retail Price Benchmarking Study of Telecommunications Services in Arab Countries”, a report published by the Arab Regulators Network. This should fall further in 2012, as a number of new access cables will increase broadband capacity, thus improving speed and affordability.
DIVERSIFICATION PUSH: Though the Kingdom’s early development was largely funded by oil revenues, the country has made significant progress in its efforts to diversify the economy. For example, its financial sector now accounts for 25% of GDP. For the 2003-08 period, manufacturing output rose by 80%, and while the sector contracted during the financial crisis, it remains strong. Moving forward, though, Bahrain will need to increase the quantity and quality of jobs on offer, as some estimate Bahrain’s population could more than double in the next 20 years, topping 2.6m by 2030.
The IT sector is seen as a natural choice to aid in this diversification push, both as a way to build human capital and for the contribution it makes to other sectors of the economy. According to Sheikh Mohamed bin Isa Al Khalifa, group CEO of Batelco, “Telecommunications and IT in general play a significant role in improving the productivity and competitiveness of Bahrain, regionally and globally. Without a doubt, an advanced IT sector is crucial for economic diversification, improving the socioeconomic welfare of all sectors.”
Development as an IT centre is also seen as an important way to drive foreign investment. According to the Bahrain Economic Development Board, a number of leading international technology companies have chosen to base their Middle East operations in Bahrain, such as Microsoft, Skype, WIPRO, Software AG and Netgear.
EDUCATION: Both private and publicly funded IT training programmes are available in the Kingdom. Tamkeen, a government entity formed in 2006 to support Bahraini employability and drive job creation, offers a number of programmes to improve IT literacy among the population and encourage the uptake of IT services. Under the Enterprise Development Scheme (EDS), private enterprises can apply for grants of up to BD15,000 ($39,603) for small enterprises or BD20,000 ($52,804) for medium and large enterprises. The funding is used to help develop professional competency.
Additional support can be attained through co-financing, with the private company putting up between 20% and 50% of the cost of proposed schemes, and Tamkeen covering the remainder. SMEs can also draw on Tamkeen support to computerise their services, with the government paying as much as 50% of the cost.
A resolution passed in June 2011 has made Tamkeen’s support more accessible by reducing the amount of administrative work necessary to take part in the EDS. Previously, enterprises needed to undergo an external audit, adhere to a Bahrainisation quota of 51%, and provide bank statements for the previous six months. Today the first condition has been dropped entirely, Bahrainisation quotas are now in line with those set by the Labour Market Regulatory Authority, and only the previous month’s bank statement is required.
Training courses are generally provided by private enterprises, which issue national and international certifications for IT competence. Several institutes offer training in IT competence. Those that offer external qualifications, such as CISCO or Microsoft certifications, undergo continual quality assurance reviews to ensure the prerequisites for diplomas issued are being met.
Tamkeen’s budget is covered through a combination of government grants and money raised from the private sector. Companies that employ foreign nationals must contribute money towards training programmes for Bahraini citizens – a unique way to address the skills gap between the local population and expatriates brought in to help develop the economy. However, funding for training is not limited to Bahraini citizens.
RANKINGS: With one of the highest internet penetration rates in the Middle East, Bahrain ranks high on e-readiness. The World Economic Forum’s 2011 “Global Information Technology Report” ranks Bahrain 30th out of 138 countries analysed in network readiness, which it defines as a country’s ability to exploit the opportunities offered by IT. Bahrain was also ranked first in the GCC and Middle East region in the 2010 UN “Global e-government Readiness Survey”. The Kingdom placed 13th out of 192 countries for its efforts to provide access to e-government services.
In a bid to increase IT capacity in the country and raise Bahrain’s profile as an IT destination, the eGovernment Authority, mobile provider Zain, and Microsoft are co-sponsoring a Bahraini division of the worldwide Microsoft Imagine Cup competition in 2012. The winner of Bahrain’s Software Design category will participate in the world finals in Australia. The move comes after a team from the University of Bahrain independently made it to the finals in both 2009 and 2010.
HARDWARE: Computer sales were estimated at $215m in 2011, according to BMI’s 2012 IT report. This is forecast to grow 7.4% to $231m in 2012, a rate expected to be sustained until 2016. As wireless connectivity becomes more prevalent, most users will likely move towards laptops and notebooks, with non-desktop sales projected to account for more than 60% of PC sales through 2016. Tablets are also becoming increasingly popular, both as a supplementary device and, in some cases, as a primary device – usually by the elderly who find the interface on tablets more user friendly.
As in most of the Middle East, PC manufacturer HP has a strong market share in Bahrain, though this could change in the wake of the company’s announcement that it plans to sell all or part of its PC division in 2012. Other international players, such as Acer, Dell, Lenovo and Toshiba, which currently share the bulk of market share with HP, stand to benefit from HP’s move away from hardware manufacturing. At present, no Apple store exists in the Kingdom, though authorised reseller Arab Business Machine distributes the full range of Apple’s products. iPads and iPhones are also available through mobile operators Batelco, Viva and Zain.
SOFTWARE: BMI forecasts that Bahrain’s software market will grow slightly faster than the hardware segment, at a compound annual growth rate of around 9% for the 2012-16 period. The addressable market is estimated to reach $47m in 2012. The boost in software spending is expected after years of delayed upgrades and spending as a result of the worldwide financial crisis and, to a lesser extent, the domestic situation in 2011.
Perhaps the greatest potential for growth in the software industry is in applications for mobile devices. As mobile internet becomes more accessible and affordable, the usage of smartphones and tablets and other popular mobile platforms, has become increasingly popular. At the end of 2010, mobile and wireless broadband, which is provided through satellite or WiMAX connections, accounted for two-thirds of internet subscriptions, and the TRA expects that the majority of future growth will occur in this rapidly growing sector.
One thing that will need to be addressed as regional IT services expand is Arabic language support. Currently, Microsoft products and Android have excellent Arabic-language compatibility, according to the CIO, but Apple products are comparably weaker. While Arabic-compatible Apple applications exist, they are not comprehensive, and text input can be complicated.
Information security and data protection are also primary concerns, particularly as data moves increasingly into the cloud, which is the storage of data off-site. To that end, the CIO is in the process of designing a new set of cybersecurity laws based on European standards. When complete, the CIO recommendations will be sent to parliament for approval.
TRADE AND ICT: In 2006 Bahrain became the first country in the GCC to negotiate and ratify a free trade agreement (FTA) with the US. The agreement, which stipulates that industrial and consumer goods may be imported and exported between the two countries without tariffs, has facilitated the exchange of technology expertise between Bahrain and the world’s largest single economy. To date, only one other GCC member country, Oman, has penned a similar FTA.
This liberalisation of trade has helped drive both the Bahraini government and the private sector to invest in IT services to ensure that they meet international standards. In addition, the US-Bahrain FTA is only one example of the government’s efforts to integrate with the world economy. The Kingdom has been a vocal advocate of a proposed FTA between the GCC and the EU. A preliminary agreement was signed between the GCC member states and the European Free Trade Association (EFTA) in June 2009, but the deal has yet to be implemented. Further negotiations between the two bodies could bring additional avenues for growth and development of the Bahraini IT sector.
OUTLOOK: As Bahrain’s economy continues to diversify, IT services will grow ever more important. Public spending on the sector will be bolstered by the Vision 2030 economic development plan, which calls for best-of-class IT platforms and universal e-government delivery. The Kingdom’s status as a major financial centre, in particular, relies on robust IT provision.
The virtualisation of the government’s various IT services, which first became available in 2011 and were implemented by the CIO, lays solid groundwork for the future integration of cloud services. Combined with high mobile penetration and IT literacy among the population, mobile e-government provision is seen as a significant growth area. IT vendors looking to enter this area may begin to consider partnering with the eGovernment Authority or the CIO.
The addition of two further broadband access cables in the first half of 2012 should double the country’s broadband capacity, thus improving speeds, reducing the price of internet in Bahrain and facilitating further IT development and opportunities to sector companies.