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Corruption, high costs hinder IT sector growth

  • File - The Telecommunications ministry building is seen in Beirut, Lebanon, Thursday, May 26, 2011. (Mahmoud Kheir/The Daily Star)

BEIRUT: Corruption, high costs and poor infrastructure are prohibiting the growth of the information technology sector in Lebanon, telecom experts said Friday.

“The growth of the IT sector in Lebanon is very small compared to other countries in the region. In addition to corruption and high cost, the speed the Internet is extremely low because the investments in bandwidths and cables were not sufficient, to say the least,” Riyad Bahsoun, a telecoms expert, told The Daily Star.

The London-based Business Monitor International said in a recent report that the sector’s weaknesses included ongoing political instability, high telecommunications costs, low quality and coverage of telecoms services, and high rates of software piracy.

But BMI estimated the size of the Lebanese IT sector at $368.7 million in 2013, an increase of 5.1 percent from $350.7 million in 2012.

It projected the sector to grow by 7.8 percent to $397.6 million in 2014, despite the direct and indirect spillovers from the Syrian conflict.

It forecast the market to grow at a compound annual rate of 11 percent during the 2014-17 period and to reach $560 million by 2017.

Bahsoun argued that the successive telecommunication ministers had failed to improve the IT sector and Internet considerably, adding that some of the ministers were too busy fighting with officials from the state-run Ogero company instead of trying to find solutions to turn around the industry’s poor growth.

“Some of the ministers are keen on making personal achievements at the ministries instead of looking out for public interest,” Bahsoun said.

Fadi Daou, the CEO of MultiLane company, stressed that corruption was one of the reasons preventing software and IT companies from investing in Lebanon.

“Take the example of my company. Most of our work is based abroad because the charges put by the suppliers are outrageous,” he said.

MultiLane is among the Lebanese IT companies that are generating most of their revenues from other countries after opening offices abroad to cut expenses.

“Our global customers like Alcatel, Google and Intel buy our products. We have expanded our operations abroad, but we couldn’t do the same in Lebanon due to the challenges we are facing,” he added.

Daou said that MultiLane, like many Lebanese businesses, was forced to bribe customs officials just to let its supplies enter the country.

“When we try to bring in some supplies to Lebanon we are forced to bribe. Some of the couriers charge high fees for the delivery of items to our company. I am not sure where this money is going,” he added.

Daou believes that one way to combat corruption in Lebanon is by having a free-trade zone.

Amer Tabish, an IT consultant, said the sector would grow fivefold if proper measures are taken soon.

“Many of the IT companies are moving to Dubai and Jordan because they have better infrastructure. We didn’t make any effort to lure companies to the country. We still lag behind most countries in term of IT,” Tabish said.

The consultant said new rules and regulations were needed to attract more firms and improve the growth of the sector.

“Why would a startup company move to Lebanon if it were forced to pay exorbitant electricity, telephone and Internet fees, not to mention the poor infrastructure,” Daou said.

In its report, BMI also said it expected software piracy to continue to negatively impact the development of the domestic software market, despite the implementation of some public and private projects to limit piracy in Lebanon.

It also noted that the sale of personal computers in Lebanon in 2013 had dropped considerably because most people had shifted to tablets.

“This trend will sustain the growth in the number of tablets sold, but will negatively affect the growth of the computer hardware segment, given that the average selling price of tablets is declining,” BMI said.

BMI also said that cybersecurity issues had the potential to be a disruptive factor in the development of the IT market in Lebanon.

It cautioned that a successful cyberattack, mainly on critical infrastructure, would have the potential to undermine confidence in IT systems and solutions, which would affect the sector’s growth.

 
A version of this article appeared in the print edition of The Daily Star on January 18, 2014, on page 4.
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Summary

Corruption, high costs and poor infrastructure are prohibiting the growth of the information technology sector in Lebanon, telecom experts said Friday.

BMI estimated the size of the Lebanese IT sector at $368.7 million in 2013, an increase of 5.1 percent from $350.7 million in 2012 .

Bahsoun argued that the successive telecommunication ministers had failed to improve the IT sector and Internet considerably, adding that some of the ministers were too busy fighting with officials from the state-run Ogero company instead of trying to find solutions to turn around the industry's poor growth.

Fadi Daou, the CEO of MultiLane company, stressed that corruption was one of the reasons preventing software and IT companies from investing in Lebanon.

Daou believes that one way to combat corruption in Lebanon is by having a free-trade zone.

It also noted that the sale of personal computers in Lebanon in 2013 had dropped considerably because most people had shifted to tablets.


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