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Kuwait outperforms several emerging economies

Kuwait ranks better than several strong emerging economies in terms of easy access and use of Internet, according to a new report by The Boston Consulting Group, which also showed that easy access and use of the Internet can dramatically affect the growth of national economies and indicated that the difference between countries with low e-friction and those with high e-friction can amount to 2.5 percent of GDP. Reducing or eliminating sources of “e-friction” can grease the wheels of the internet economy worldwide.  No economy is entirely frictionless; the sources of friction evolve over time. With an e-friction score of 14, Sweden’s internet economy has less e-friction than any other country, followed by Finland, Denmark and Switzerland.

BCG e-Friction Index
The BCG e-Friction Index measures the four types of friction that prevent consumers, companies and countries from realizing the internet’s full benefits. Infrastructure-related friction — the most significant — limits basic access to online activity. Industry-related sources of friction, such as shortages of capital and skilled labor, hold back successful online business operations and the development of digital businesses. Individual friction — payment systems and data security are two examples — affects the degree to which citizens and consumers engage in online activities. Information-related friction includes the volume of content available in a local language, a country’s commitment to internet openness, and obstacles to assessing certain types of content.

Findings for the region:
The GCC economies fall in the middle of the Index with respect to levels of e-friction, all the countries scoring higher than Turkey, Brazil, China, India and South Africa. In the MENA region, Qatar, the United Arab Emirates, Bahrain, KSA and Kuwait, respectively have the lowest levels of e-friction The digital economy accounts for a larger share of the overall economy in low-friction countries than it does in high-friction countries. The internet economy — as a percentage of GDP — in a country in the top quintile of the BCG e-Friction Index is more than twice as large, on average, as that of a country in the bottom quintile. Because the digital economy is growing quickly (often outpacing the offline economy), high e-friction countries are in danger of missing out on a high-impact propellant of growth and job creation.
High- friction countries that address their sources of e-friction have the potential to add significant value to their economies The countries with the lowest e-friction tend to score well in all four components.

Their infrastructures are strong, and their supportive businesses and regulatory environments have created vibrant internet economies. At the other end of the scale, problems related to basic access, price, and speed are widespread, as are shortcomings related to capital, labor, and consumers’ ability to conduct business online. If e-friction is reduced, small and midsize enterprises (SMEs) will perform better in the digital economy. SMEs that are heavy Web users are almost 50 percent more likely to sell products and services outside of their immediate region and 63 percent more likely to source products and services from farther afield than are medium or light Web users. SMEs encounter friction from a range of sources that slow or prevent them from fully exploiting the internet’s potential. The biggest single concern for SMEs is the protection of consumer data online — a prevalent issue for consumers as well.

Good policy in a few key areas can have a significant impact on e-friction and can speed the development of internet use and individual countries’ internet economies. Policies that promote investment, especially in infrastructure, are essential. Policy responses that fail to take into account how quickly technologies and the innovations they enable are evolving can be the source of more, rather than less, friction. A significant issue of trust with respect to the use of personal data inhibits online interaction in many markets. Since the internet is a global phenomenon, this is a global issue, and it cries out for a comprehensive, global solution. The continued growth of the digital economy depends on limiting internet friction and fragmentation. Most current sources of friction originate at the national or local level. Policymakers in some countries are debating the extent to which certain elements of digital infrastructure, commerce, discourse, and interaction should be brought under greater government control. Precisely because the internet is a global network of networks, the potential is significant for uncoordinated policy to add major new sources of friction.

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