The Banking Executive Magazine - February 2022

Is the Arab World really benefiting from E-Commerce? tend to be less positively affected by the rise of digital markets. Arab coun- tries also produce very few interme- diate products for export, and thus are poorly integrated in global value chains. Such weaknesses reduce the opportunities for domestic busi- nesses to benefit from digital trade and e-commerce. No wonder some 80% of e-commerce in the region is concentrated in the six Gulf Cooper- ation Council (GCC) countries and Egypt. To be sure, Arab consumers do ben- efit from digital markets, and the Arab consumer base is digitalizing rapidly. Between 2012 and 2017, the share of digital media users in the re- gion increased from less than 10% to more than 30%, and this trend has since accelerated with the pandemic. But this rapid spike in digital adop- tion was mostly driven by smart- phones with faster internet speeds, predominantly in the United Arab Emirates and Saudi Arabia, which to- gether account for 60% of the re- gion’s e-commerce market. The situation is quite different in poorer countries outside the oil-rich Gulf states. According to a recent World Bank report, Tunisians in the bottom 40% of the income distribution would need to spend more than 40% of their income to purchase high- speed internet. And Tunisia is not alone. Over 60% of people in Alge- ria, Djibouti, Morocco, Syria, and Yemen cannot afford fixed or mobile broadband services. So far, the benefits of expanded e- commerce have been captured pri- marily by large GCC-based retailers, their foreign partners, and higher-in- come cohorts. And these retailers have been expanding their markets with new product selections, both or- ganically and through partnerships. For example, Souq, a UAE-based digital platform that was acquired by Amazon, and Noon, a digital market operated in partnership with eBay, have brought millions of new con- sumer goods to the MENA market with localized websites, product se- lections, and payment methods. The bulk of the wares sold on these platforms, however, comes from overseas sellers, mostly in China. Ac- cording to the Chinese Trade Min- istry, China’s exports to Egypt in 2020 totaled $13.6 billion, an 11.8% in- crease from the previous year, whereas imports from Egypt to China stood at $920 million, having fallen by 7.8%. In this respect, the overall impact of digital markets, particularly “aggregators” like Amazon and Al- ibaba, on Arab states appears to be the BANKING EXECUTIVE 22 ISSUE 158 FEBRUARY 2022