A marathon, not a sprint

July’s Convergence 2002 showed that Jordan has made some progress in developing its IT sector, but there’s still plenty left to do

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By  David Ingham Published  August 28, 2002

|~||~||~|Jordan’s race to build a blooming indigenous IT and communications industry will clearly be a marathon, not a sprint. Preliminary figures released to Arabian Business by Int@j, Jordan’s public-private sector IT association, reveal that the country is making some progress in achieving job creation and investment goals for the sector outlined several years ago, but that there is still a long way to go.

Int@j’s arguably most ambitious target was to achieve a figure of $550M in annual IT exports by 2004. “I don’t think we’re close to that figure in all honesty,” Marwan Juma, chairman of Int@j, told Arabian Business. “We have a long way to go. I’ve got figures ranging from as low as $40 million, up to $100 million.”

In terms of attracting foreign direct investment, the Kingdom appears to be doing much better. Int@j targeted a total of $150 million worth of foreign direct investment in the sector between 2000 and 2004. Preliminary figures suggest that $65 million of the $150 million target has been achieved.

On the job creation front, Int@j envisaged the creation of 30,000 jobs (20,000 ‘direct’ and 10,000 ‘indirect’) in the sector. 8-10,000 are estimated to have been created so far.

Juma is refreshingly honest in his admission that Int@j’s original goals may have been a tad ambitious, but he seems genuinely optimistic that further progress can be made. “When the figures were set it was at the peak of the dot-com boom and a lot of hype had been created. Maybe we were a bit over ambitious,” he admits.
“However, we’re moving. We have gone in leaps and bounds in comparison to 1999’s figures. It’s important to raise the bar and try to achieve the figures.”

So how will further progress be made?
Int@j’s role is to make recommendations to policy makers on how best to advance what the government refers to as the ICT (information & communications technology) sector in the country. Intaj’s recommendations are encapsulated in policy documents that have come to be known as Reach. As Arabian Business writes, Int@j is in the process of compiling recommendations for Reach 3.0, which will be presented at the Jordan IT Forum, an investor conference, in late September.

Previously, the focus of Reach has been on removing impediments that hold back entrepreneurs and investors, and on creating new pro-business legislation where necessary. One of the most (in)famous examples of this was a law that stated companies had to be profitable for three years before they could apply for a stock market listing. Dot-com investors in the USA might like the sound of that, but it effectively left entrepreneurs and investors without an important exit mechanism.

Now, that law is gone and an e-commerce law is in place. Anti-piracy laws that were in place already but weren’t being vigorously enforced are now, apparently, being taken seriously.

According to the Business Software Alliance (BSA), piracy rates declined from 75% in 1999, to 71% in 2000, to 67% in 2001. “Today, the Kingdom is focused on preserving the copyrights of local and international software developers, as part of its efforts to strengthen and grow its IT sector,” says Jawad Al Redha, regional director, BSA Middle East. “As a result, software piracy has been dropping consistently over the past two years, which plays a key role in increasing Jordan’s credibility and trust in the fast growing international IT market.”

There also seems little doubt that Jordan’s telecommunications infrastructure has improved dramatically since France Telecom took a 32% stake in the company a few years ago. Pierre Mattei, CEO of Jordan Telecom, says that an immediate priority now is to “address the issue of the last mile,” a reference to the older, often inadequate, copper cables that deliver signals from relay boxes on street corners to a person’s home.
All of the above measures were aimed at creating a more business friendly environment and, in large part, reassuring foreigners that Jordan is a safe place to invest. One recent entrant into the market is Trinec, a Lebanese application service provider that wants to expands regionally.

Its path into the market was smoothed by the fact that it is working closely with Jordan Telecom and is using its data centre. When asked how he found dealing with government entities, Nadim Ghorayeb, the company’s COO, replies: “The same administrative work you need to do in Lebanon. It’s a bit tedious but it’s doable.”

Preliminary Reach 3.0 documents still mention the need to, “identify new hurdles and challenges” and, “review legislative reform.” However, what’s also clear from Juma’s comments is that Reach 3.0 will focus strongly on encouraging Jordan’s IT entrepreneurs to work together for mutual benefit, and to be less inwardly and more outwardly focused.

On the first point, working together, Juma is referring to the need for companies to merge and consolidate in order to be stronger collectively. He says, rather forthrightly, that, “In all honesty, people in the Arab world need to put their egos aside, and if you can put your egos aside a lot of things can happen. Instead of saying I want to keep this pie for myself and no-one can share it with me, have a much bigger pie and share it with people.”

He backs up his statements with some recent examples. Juma’s day job is as CEO of Batelco Jordan, a subsidiary of the Bahraini PTT, which was created after the merger of two Jordanian ISPs. “They said they weren’t [Batelco] going to look at companies in Jordan unless they consolidate,” argues Juma.

Another example he cites is the merger early this year of One World and Zeine, two of the country’s largest software developers, to form Estarta Solutions. Microsoft made a high profile investment, reportedly of $2 million, in the merged entity.

“If [companies] remain scattered and small with very little capital and duplicate [their] efforts, we will not attract foreign investment,” says Juma. “We’re hoping that our success and that of others will be a lesson to other companies.”

Juma’s comments on the need to work together tie in with his second point, about the need for Jordan’s IT companies to think outwardly. Instead of being small, under capitalised and focused only on Jordan, he urges businesspeople to look outwards, particularly towards the Gulf.

“In terms of what happened over the last two years, all the attention was westward,” admits Juma. “Now, there’s a lot of potential in working with the Gulf,” where, he believes, Jordanian workers have a good reputation. Such co-operation, according to Juma, might even help stem the renowned ‘Brain Drain’ that sees the educated and skilled of poorer Arab countries migrating to the Gulf.
This all makes sense, but do companies in Jordan have both the wherewithal and, even if they do, the funding to think outside of their home markets? In terms of wherewithal, it would be pretty difficult for a purely Jordanian company, on tight margins and most likely struggling to get paid by customers at home, to start thinking in terms of exports and overseas expansion. Int@j and Jordan’s authorities agree and intend to establish an office in Dubai Internet City, probably under the auspices of Int@j, to help facilitate communication between Jordanian IT companies and potential Gulf customers.

Beyond that, there will be a need for education about potential business opportunities and plenty of encouragement. Juma also reiterates his point about the need for companies to ‘bulk up’ to be better equipped for expansion.

Bulking up can certainly improve the financial prospects of companies, but accessing capital is still a challenge for regional startups, especially in the technology sector. Conservative banks tend to favour bricks & mortar investments. The presence of a strong capital market would help, but at the moment capital markets lack size.

One good idea, first talked about around 18 months ago, was to create a unified regional market for technology stocks that would encompass Bahrain, Jordan and the UAE. Things have gone unnervingly quiet and those involved in the idea always seem to be unreachable. Asked what happened, Juma replies: “As chairman of Int@j, a lot of my focus will be on looking at plans that did not materialise.”

Details are also vague on another potentially good idea, a government venture capital fund seeded with cash from privatisation proceeds. “I don’t know the amount and who’s going to manage it but the intention is there,” Juma says.
Alongside all of Int@j’s plans to encourage IT businesses, there is plenty of ongoing activity aimed at digitising government and imbibing Jordan’s youth with a greater understanding of IT. JTC’s Pierre Mattei says that the PTT is committed to putting fibre-optic cabling, which will facilitate high-speed internet access, into 3000 Jordanian schools.

Minister of ICT, Dr Fawaz Zu’bi, is more optimistic, saying that by 2005, Jordan will have a broadband network connecting schools, tele-centres, universities and colleges. “Rest assured, that by accomplishing this feat we will be well ahead of North America and most European countries in terms of broadband educational connectivity,” the minister enthuses.

People speak vaguely of public-private partnership to create the network and JTC’s Mattei says that the system will allow around 60,000 PCs to be installed with broadband internet access. What isn’t elaborated on is who pays for all this.

Plus, whilst having PCs in schools is one thing, what do you do with them once they’re there? A growing number of voices in the Arab world are saying that education is based too much on rote learning and needs to be overhauled, a point Juma accepts.

“We have to be honest. Today, it [education] doesn’t encourage innovation, it doesn’t encourage entrepreneurship; we’re still using the old methods of teaching, of learning everything by heart and then when you come out of the exam you forget everything.”

There is some movement, with IT now being taught at first grade level. However, reform of education will take time to yield results.
Even now, Jordan’s IT sector isn’t without its successes. The merger of One World and Zeine to create Estarta, the entry of Batelco and Maktoob’s emergence as a premier internet portal show that there is talent in the country.

What the country needs is more of the same please. It will clearly take plenty of time and no-one’s pretending the challenges aren’t great, but those involved certainly appear determined to make it happen.||**||

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