Information and Communications Technology (ICT) stands undisputed as the sector with the greatest importance for any country seeking to position itself at the forefront of the “knowledge” economy. Banking and education are key, but manufacturing automation, health care, hospitality, logistics, media and all other advanced services industries depend on ICT. Modern government and public sector administration are increasingly being defined by ICT. The sector’s eminence in national economies has been thrust into the limelight through fabled cases such as Ireland’s 1990s record rise from European economic backwater to high-growth technology and services hub.
To Lebanon, Ireland’s rise was an oft-quoted example in discussions on the economic and social potential of ICT because the population and labor market in both countries were similar. Subsequent convergent phases of global new economy optimism and Lebanon’s own developmental hopes in the mid to late 90s, led the country and its business elite to revel in the anticipation of becoming a regional ICT hub. Today, while still aspiring to become a center of technology for the Middle East, Lebanon is in some respects even further away from realizing its dream. In other respects, the country has been defending its potential for leadership in Middle Eastern ICT but has yet to claim the ground of real growth.
Luckily, the ICT industry has an immense number of nuances and niches and thus being a center for ICT can mean many things. “Every country wants to be an ICT hub,” said Charbel Fakhoury, Eastern Mediterranean manager for international software manufacturer Microsoft. “Lebanon went through some steps and didn’t take others. I think a hub is an evolution. It doesn’t happen over night.”
From hardware to software to services, telecommunications, mobile data networks, computer training, web design, content provision, e-commerce and online banking, the ICT sector indeed has far too many facets to see a single country take the region’s leadership role in every respect, or even to allow for a wholesale review of the industry in one country.
To quote a case in point, several companies over the past two years have had to exit Lebanon’s computer assembly and retail business or severely reduce the number of outlets, while other local assemblers and their main chip supplier, Intel, confirmed an increase in assembly and sales of PCs. “The Lebanese assembly market has been growing steadily over the past few years,” said Maan Ahmadie, regional channel manager for Intel, the world’s leading chip manufacturer. “We have recorded around 20% to 30% growth in the past three years, and we expect to see this trend continue.”
However, data on the exact size of the local hardware market tends to be inconclusive. As an expert from the International Telecommunication Union (ITU) observed at a Beirut conference earlier this year, no Arab country has yet carried out a detailed ICT survey. “It is difficult to put a dollar value as such on the Lebanese assembly market,” Ahmadie conceded, “but, in terms of channel members, we have around 300 resellers, working in different market sectors, from PC assembly for homes and small offices to servers and mobile computers.”
Estimates on hardware penetration vary. One local company, Computer Echo, claims it assembles some 40,000 PCs annually, supplying about one third of the market. “Business has been growing very fast over the past four years,” said Computer Echo marketing manager Tony Abboud, reporting an annual sales growth of about 20%. Other local assemblers and resellers estimated the figure of personal computers entering the market each year to be slightly lower, at around 60,000. A matter of general agreement is that locally assembled computers hold an 80% share of the market, with units going mostly to home users and small businesses. Larger companies and institutions are said to rely more strongly on imported, brand name equipment that account for the remaining 20%.
Assembly of computers from foreign-made components is a viable business. However, neither profit margins nor local value-added are particularly high, and exports are not necessarily an outstanding perspective. Computer Echo distributes its assembled PCs through large and small local resellers, with only sporadic exports, mostly to West Africa. Regional exports are not on Abboud’s mind, because satisfying local demand is consuming all his time. And although Computer Echo benefits from Intel rebate and promotion programs, assemblers in Jordan and Egypt receive the same advantages, he said. “I don’t see what kind of a market I would have in Jordan.”
For Lebanese software companies, however, exports are a question of sustainable existence. “We will be a really strong industry only if we are exporting,” said Fares Kobeissy, president of the Association of the Lebanese Software Industry. “Our overall strategic objective is to open markets and create a highly exportable software industry,” agreed Ali Shamseddine, vice president of the organization. Like Kobeissy, he is founder and CEO of a Lebanese software company. According to figures from a joint 2003 research paper by Lebanon’s Office of the Minister of State for Administrative Reform (OMSAR) and the UNDP Lebanon office, Lebanon’s ICT industry consists of about 500 computer-related companies, of which “about 200 small and medium sized software companies employ more than 3,000 people, and can play a major role in the development of an information-based national economy.”
The size of the software industry also is a figure of some dispute, though. To Kobeissy and Shamseddine, the realm of viable software development companies extends to dozens rather than hundreds, with hundreds rather than thousands of employees. When their new-founded association approached potential members, they contacted somewhere over 50 companies and succeeded in convincing 15 to join their ranks. The software section of Lebanon’s largest ICT industry association, the Professional Computer Association (PCA), groups less than 10 companies out of roughly 70 PCA member firms. Notable as the size problem is in assessing ICT capabilities here, it is not to say that this industry doesn’t hold some extremely interesting potential. Firms based here have sold their software solutions to major banking and large retail enterprises in Europe, whereas other Lebanese development houses have a stable clientele among small and medium sized enterprises in the Middle East. “While Jordan and Egypt seem to have a higher percentage of projects where they write code under outsourcing contracts for clients abroad, Lebanon seems to have a higher share of own development,” Tony Prince, Intel’s regional business development manager, told Executive.
According to Prince, Intel has become increasingly interested in Lebanon. In July, the firm hired a developer relations manager to closer interact with software companies; Intel also this year participated in numerous public and private sector projects, ranging from installing a high-powered server at a software company to setting up or testing of wireless data technology (WiFi) in hotels, stores and the BCD. Later this year, the company hopes to finalize an agreement over establishing a developer facility at a Lebanese university. “We are in advanced stages of negotiations with AUB for setting up a banking competence center,” Prince said.
Lebanon is no exception to the global ICT evolution whereby services and solutions provision is gaining in economic importance over hardware manufacturing and equipment sales. ICT multinationals thus have come to attach great importance to finding, especially in promising locations, as many partners as possible who work with their technologies. The chipmaker apparently hopes that the banking competence center, with its emphasis on the area where Lebanese software is of highest regional repute, will attract developers to work with Intel tools. While investing into local capacity building and providing technology transfer, the multinational would profit by bringing Lebanese developers into its flock. “Our reward is that the applications are optimized for the Intel platform,” Prince said.
It is within the same logic that other multinational firms confirm their commitment to the Lebanese ICT industry, although the market here is rarely even worth a footnote in their annual reports. Networking equipment manufacturer Cisco Systems thus maintains an active office in Beirut, although business hasn’t been strong. “From a Cisco perspective, the market here has been flat since last year, and we expect another flat year,” said Hussam Kayyal, Cisco general manager Levant.
Waiting out the time until the public and private sector are ready for deploying new data infrastructure makes it all the more important to maintain a good rapport with the market. “We are optimistic,” Kayyal said. “We are looking at the coming couple of years as development years for Cisco in Lebanon, to spend time with partners and educate them, especially government agencies, to use IT in cost cutting.”
The company actively supports the training of ICT students and computer professionals as Cisco certified experts. Kayyal’s team works with agencies and professional associations such as IDAL and PCA but also with non-governmental organizations and educational institutions. The manager said Cisco intends to participate in three community projects before the end of the year. Working together with active NGOs, the multinational would invest $600,000 into these ICT community projects.
However, it is also worth mentioning that Lebanon’s ICT development initiatives not only originate from foreign firms. A project for a new tech zone, called the Beirut Emerging Technology Zone (BETZ), is high up on the list of initiatives managed by the Investment and Development Authority of Lebanon, IDAL. After several years of pondering over terms of reference and proper procedures, a feasibility study for the project was conducted last year (by an American company; the grant financing the study came from USAID). Many in the industry say that a tech zone would be of great importance to improve Lebanon’s chances in the march towards ICT leadership, and yet there seems to be some uncertainty over the BETZ concept. “Any tech park should drive the country to be a producer, moving companies to an environment where production is cheaper. But what is the target of BETZ?” asked Shamseddine and Kobeissy, in comments resonating those of several other industry members. “Our claim is that nobody knows. We have a vision but we know that none of the actors know.” Executive requested an interview with IDAL chairman, Dr. Samih Barbir, to find out about the zone’s concept and the agency’s latest activities in context of Investment Law 360, which rates ICT projects as particularly support-worthy. Unfortunately, Barbir is not currently available for interviews on this topic, the agency responded. Meanwhile, the Lebanese information technology community has been readying itself for the annual Termium exhibition, with statements of growth expectations and fine business tidings. “We are changing Termium to become more of an IT-experience trade show where companies can show products by stating IT success stories,” PCA president Jalal Fawaz told Executive. After two editions of partnership with the Dubai-based Gitex IT expo brand, Termium this September is back to its own devices for attracting exhibitors and visitors. “It will be the same companies and the same people as every year,” said the CEO of a Lebanese software-manufacturing firm between parmesan-laden salad and main dish at the press lunch announcing the conference. “But some companies cannot afford to stay away,” he moaned. Of course, nowhere in the recent past have ICT shows been able to emulate quite the same mix of geeky pleasures and relentless business optimism they were hallmarked for before 2001.