In this research note, Markaz analyzes and discusses challenges and investment opportunities in the GCC Education sector.
The Markaz report points out that Kuwait is the third largest spender on ICT infrastructure in the GCC. Information and Communication Technology (ICT) segment spending has grown at a CAGR of 12.6 percent between 2003-2011 and is expected to moderate to a 6.4 percent annualized growth over the next three years.
The report expects total ICT spending to reach USD 28 billion between 2011-2015. The bulk of Kuwait ICT spending, about 80 percent ($21.3bn), is for Communications, followed distantly by Computer Hardware and Software.
The projection is in line with the bigger picture in the region as a whole, where the key driver in ICT spending remains the telecommunication segment.
Computer hardware and computer software are growing at double digit rate however the size of spending lacklustre in comparison. The next decade is more likely to see a quantum leap in computer hardware and software spending as governments and business transform from ‘pen and paper’ to the new digital world.
The report notes that ICT segment is in constant growth, in tandem with other economic and demographic trends in Kuwait. This induces a great need for capacity-building and maintenance. In the early eighties, Kuwait adopted telecommunication technology before its GCC peers by establishing Kuwait’s Mobile Telecommunications Company (now Zain) — the first telecommunications company in the region.
Kuwait was also one of the earliest internet adopters in the region. However, it lagged in the recent years in terms of various key indicators. For example, in terms of network readiness index, it ranks 62 compared to 27 for Bahrain and 28 for Qatar. Similarly, it has lower mobile and internet penetration compared to other GCC countries. One of the key limitations of Kuwait ICT sector is the lack of an independent regulatory body which is slowing further development in this evolving sector.
Based on segment analysis, ICT spending is concentrated on the consumer segment with 47 percent of total 2011 spending, followed by energy and utilities with 9.3 percent while the government contributed 7.2 percent of total ICT spending.
Going forward, segments which were underinvested will have a better opportunity to shine such as Construction, educational service, transportation and retail trade which grew at a CAGR of 11.4 percent between 2007-2010 and is expected continue robust growth between 2012-2015.
Consumers might be leading ICT adoption in Kuwait, however this is not the case in the government sector. This issue was addressed by the Government of Kuwait, through the establishment of the Central Agency for Information technology. The CAI is in charge of digitizing the government, the task is long and challenging but fruitful as we can see with several unified communication tools including Ministry of Health digital medical record initiative and TASDEED portal. CAI projects once implemented will require increased spending on ICT infrastructure.
Investment forecasts are usually a projection based on current trends. However, since Information Technology is in constant growth and advancement mode, the report points out that if the CAI implements its educational mandate effectively, the ICT investment forecast will actually be in line with the telecommunication spending since the convergence of Information Technology with daily activities — be it work or personal — is evident, and once it is adopted by users dealing with government entities, the critical mass alone will spur further investments.