Economy
Posted By Amal Aziz

Lebanon’s ICT Sector


The Information and communication technology (ICT) sector is considered one of the main drivers of economic development and social change, worldwide. In Lebanon, the ICT sector observed a significant growth over the period stretching from 2009-2014, growing by an average annual rate of 7.9% to reach a market size of USD 381 million in 2014.

One might wonder what contributed to this remarkable growth in the ICT sector. There are many drivers some of which are: the decline of hardware prices, infrastructure improvements, including enterprises and public sector modernization. Moreover, recent investments in infrastructure and networks, expanding broadband capacity, increasing internet speed, and the young and skilled labor force have also contributed to the ICT sector and brought to the ICT market various successful entrepreneurial initiatives. Furthermore, technological improvements have contributed to the ICT industry’s growth.

However, this growth is still limited due to several factors including political motivation, hindered privatization, and inadequate competition due to piracy.

Furthermore, the low quality and poor coverage of infrastructure coupled with high costs have created limitations for the exponential advancement of Lebanon’s ICT market.

In Lebanon, the ICT sector is ruled by SMEs, which are about 800 firms to be exact. These businesses are specialized in developing software, mobile and specialized applications, web solutions, software outsourcing, e-services, as well as supplying systems’ solutions and integration. Specifically, the sector encompasses more than 200 firms, of which 48% are engaged in software development, 38% are specialized in web-based application development, while the remaining 14% are engaged in mobile-based application development.

Lebanon’s ICT market can be divided into three main sub-sectors: computer hardware, software, and IT services. Lebanon’s ICT market is dominated by the computer hardware sub-sector, which reached an average annual rate of 7% over the period 2009-2014, to reach a value of USD 235 million in 2014. The young ICT consumer market in Lebanon is the main driver behind this growth, revealing a good appetite for high-tech products.

Moreover, the Central Bank of Lebanon has issued circular 331, stipulating that commercial banks, injecting cash into ICT startups, can benefit from interest-free BDL loans. In order to be qualified for this opportunity, banks should own shares in the funded company – not exceeding 80% – the whole period. This initiative has given banks more flexibility in financing the ICT sector. Additionally, loans granted to the technology sector are subsidized by the Central Bank of Lebanon, with the subsidy rate at 4.5%. Furthermore, these subsidized loans have no ceiling specified, which ensures further flexibility. Kafalat loans lead the market of lending to the ICT sector. Kafalat facilitates the access to bank funding for ICT entrepreneurs through providing loan guarantees. The company currently has two programs targeted towards the ICT sector. The first program is Kafalat Innovative which focuses on the high-tech sector. The program is the result of an agreement between the ministry of Economy and Trade and the European Union to provide financing to innovative projects. The program mainly finances software developers, mobile application developers, web developers, and hardware assemblers in need of financing not exceeding USD 200,000 up to five years. The second program is Kafalat Start-ups, which was also launched in partnership with the European Union. The program is targeted towards clients, who have already started their businesses through Kafalat Innovative and require further financing not exceeding USD 440,000 up to seven years.

In the last five years, ICT sector in Lebanon has witnessed a giant leap in terms of development and expansion. This growth is reflected in a booming tech community, placing Lebanon among evolving ICT markets in the region. Several factors have driven the expansion of the ICT market including: rising incomes, falling device prices, enhancements to infrastructure, as well as enterprises and public sector modernization. The Lebanese ICT sector holds a lot of economic potential given its fast-growing pace and its vast reach to the different aspects of consumers’ daily life, health, transport, etc. In fact, the sector’s added value amounted to $1.3 billion in 2013 and reached $1.7 billion in 2016, hence contributing to more than 3 percent of gross domestic product.

ICT still has a long way to go, as the poor infrastructure of the sector keeps on hindering the quality and speed of internet connections. Even though fiber optics is already installed in big cities but not yet operational, Lebanon actually relies on copper cables to have access to the internet. However, these cables have limited capacity in terms of data transfer and speed. Another major issue faced by the ICT sector in Lebanon is the lack of competitiveness due to the government’s tight control over the sector. Despite the sequential declines in communication prices since 2014, the fact that both telecom companies Alfa and touch are publicly owned entities, operated by private companies for the benefit of the government, creates a sort of duopoly agreement between the two companies.

In light of these deficiencies, the first step to improve the sector would be revamping its infrastructure, given its huge potential and capability of reshaping the Lebanese ICT market. Economically speaking, it is assumed that Lebanon’s GDP will increase by 0.3 percent every time the broadband doubles. Hence, the installation of fiber optics has gradually started in Lebanon and it is expected that 85 percent of the population will have access to the service by the end of 2017.

Lebanon has achieved major enhancements on several ICT indicators. However, the country still has a long way to go in order to develop its ICT sector to catch up with countries in the region. But Lebanon is definitely on the right track.

source: https://www.bankmed.com.lb/BOMedia/subservices/categories/News/20150515163840628.pdf

 


I have always struggled with such boxes, so I'll try to keep it short. I am a copywriter at a programming company. I am a content curator. I write. I edit. I re-write. I re-edit & sometimes I bang my head on the wall just to get that word that I've been searching for for a week. I read. A LOT. Basically, that's what got me into writing in the first place. I'm obsessed with cinema. Frankly, I'm obsessed with everything that tells stories and makes me overflow with emotions. Things that make me weep for a week or so are my absolute favorites. Hmmm.... that's exactly what my ex has done, he is not my favorite though. I'm passionate about food, fashion, traveling & dogs. I'm 25 but I've always felt that I'm way older. I believe that I was born in the wrong era, and possibly the wrong place, but that's life. You can't be strikingly beautiful, witty & intelligent, and be born at the right place, right? One just can't have it all. My life basically revolves around writing, reading, traveling, eating & my fiance. He is the joy of my life. To most people I’m the freak, the weirdo, the introvert, the crazy and the rebel, and you know what? I couldn't be more PROUD!

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