Regulation sets back information technology growth

07 November 2012

One of Jordan’s booming economic sectors is under threat from a new media regulatory regime aimed at clamping down on dissent in the post-Arab uprising environment

Despite grappling with significant economic challenges, Jordan’s information, communication and technology (ICT) sector remains one of the country’s most promising growth markets.

The first country in the Arab world to fully liberalise its telecommunications market, Jordan has become one of the region’s leading hubs for technological innovators catering to the consumer, commercial and media sectors.

By the end of 2011, ICT was the fastest growing sector of Jordan’s economy, expanding at 25 per cent annually, according to the Information and Communications Association of Jordan (Intaj). The sector, which directly employs 16,000 people and supports another 70,000 jobs, currently accounts for about 14 per cent of Jordan’s gross domestic product (GDP).

The sector gained international recognition in 2009 when the locally developed web business Maktoob was acquired by US web giant Yahoo for $175m.

Despite the industry’s remarkable growth, there is concern within Jordan that its potential may be curbed as a result of persistent political instability and the government’s plans to add new rigour to its media regulatory regime.

Government priority

Since coming to the throne in 1999, Jordan’s King Abdullah II has focused on developing the country’s IT infrastructure to support its emergence as a regional ICT hub. Spearheading this strategy was the Reach initiative, which underpinned the growth of the sector between 1999 and 2005. The initiative focused on core necessities, including training, education and finance.

Reach was superseded by the National ICT Strategy 2007-2011, which aimed to capitalise on the reforms implemented under the initiative, while attracting increased domestic and foreign investment in research and development. The government’s success in opening up Jordan’s telecoms market laid the foundations for the ICT sector’s growth, with new competitors jostling for position in the country’s broadband internet market. By the end of 2011, there were 16 operators providing ADSL wired broadband services to about 200,000 customers.

The regional turmoil has affected the economy. That has affected telecoms sector revenues

Jawad Abassi, Arab Advisors Group

Jordan’s Ministry of Information and Communications Technology, meanwhile, is rolling out a national broadband network (NBN). It currently connects 600 schools and universities, as well as 58 government departments, and the ministry is assessing the potential to expand the network to support the country’s business sector.

“The liberalisation of the telecoms market, and efforts by entrepreneurs to establish businesses aimed at leveraging regional demand for ICT services has contributed to [overall growth],” says Jawad Abassi, founder and general manager of Arab Advisors Group, an Amman-based telecommunications and media research firm.

The combination of these factors has seen growth rocket over the past decade. Annual industry revenues rose from $560m in 2000 to $2bn in 2010, according to Intaj. The IT sector contributed 37 per cent, or $732m, of total revenues in 2010, with the telecommunications sector accounting for the remainder.

By 2011, only manufacturing (17.7 per cent) and tourism (14.3 per cent) contributed more to the Jordanian economy.

It is not just domestic demand that has contributed to the explosive growth. The country recorded a 96 per cent increase in IT export revenues between 2000 and 2010. Jordan’s ICT sector exports products and services to more than 45 countries, with the majority of its business concentrated in the GCC.

Jordan’s IT exports

Saudi Arabia ranks as Jordan’s biggest ICT customer, accounting for 34 per cent of ICT exports in 2010. Iraq and the UAE accounted for 13 per cent each, with the US and Oman the destination for 7 per cent and 5 per cent of Jordan’s ICT products respectively.

In Jordan, the industry is focused on six sectors: telecoms, IT infrastructure, software, online and mobile, IT outsourcing and games.

One of the main success stories of Jordan’s ICT drive was the creation of Maktoob in 2000. Maktoob was the world’s first free Arabic/English web-based email service, allowing subscribers to send and receive emails in either language. The company soon diversified, creating several integrated firms and websites, including

The success of Maktoob, and its subsequent multimillion-dollar sale to Yahoo, placed Jordan’s ICT sector under the international spotlight.

“Maktoob was a big milestone for the whole region, as it was the first successful Arabic/English portal. It took a lot of time to happen, but it showed people that this is a sector that can make money. It energised the market, not just in Jordan, but across the region,” says Abassi.

However, since the sale of Maktoob in 2009, Jordan’s ICT sector has faced a number of challenges. Growth has been curtailed in the past couple of years due to the global financial crisis and the effect of the Arab Uprisings. The slowdown can be illustrated by IT export revenue, which recorded year-on-year growth of 105 per cent from 2004 to 2005, but recorded a 3.5 per cent fall from 2009 to 2010.

The nature of Jordan’s open economy and its strong trading links with the GCC means that it is at the mercy of regional economic and political instability.

“The regional turmoil has affected the economy in Jordan. That has impacted telecoms sector revenues, even if only marginally so,” says Abassi.

Social unrest

Jordan has not escaped the political protests which engulfed the region in 2011. It has seen numerous protests against social conditions and demands for constitutional and electoral reforms, albeit on a smaller scale than in other states affected by the unrest. In response to the protests, King Abdullah has dissolved parliament four times in the past two years.

Unsurprisingly, the political instability has taken a toll on the ICT sector, with the Ministry of Information and Communications Technology yet to finalise the country’s next national ICT strategy. State efforts to control the media in response to the unrest are also threatening the future of Jordan’s communications sector.

In September, King Abdullah approved an amendment to the country’s Press and Communications Law, which broadens the government’s control over online content. The amendment will force electronic publishers to receive a licence from the government and the state will have increased power to block and censor websites.

The New York-based Human Rights Watch has claimed the government introduced the legislation to enable it to “go after opponents and critics”. Under the new law, owners, editors and directors of publications will be liable for prosecution for any infringements of the statute.

The proposed law stipulates that comments published online count as “press material”, which will result in online publishers taking responsibility for any content. The Associated Press estimates that about 400 Jordanian websites will be affected by the new law.

Law amend

There are reservations over the amendment and its possible infringement of human rights, but some industry experts also fear the wider message it sends to ICT companies.

“Several local and international IT companies are already thinking of leaving the Jordanian market and moving their offices abroad because of these amendments, to which they object,” Abed Shamlawi, chief executive officer of Intaj, was quoted as saying in the local Jordan Times in early September.

Some analysts have noted hesitation on the part of the government. According to Abassi, Jordan’s caretaker prime minister, Abdullah Ensour, who was appointed in early October, has moved to play down the impact of the legislative amendment.

“[Ensour] has said it [the government] will  be very lenient in implementing the law. People don’t expect it to be enforced too closely. The government has said don’t expect us to come down too hard on the ICT sector,” he says.

At a time when Jordanians are taking to the streets to call for reforms, tightening state control over the media represents a backward step. For the ICT sector to reach its potential, the king must ensure the state helps, rather than hinders, its progress.

In numbers

25 per cent: Annual growth rate of Jordan’s ICT sector

16,000: The number of people directly employed by Jordan’s ICT sector

ICT=Information, communication and technology. Source: Intaj

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