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									ICT Sector Baseline Industry Survey

AMIR II Achievement of Market-Friendly Initiatives and Results




January 2005
This document was produced for review by the United States Agency for International
Development. It was prepared by Chemonics International Inc.
JORDAN AMIR II
Achievement of Market-Friendly Initiatives and Results
Contract No. 278-C-00-02-00210-00




The author’s views expressed in this publication do not necessarily reflect the views of the United States
Agency for International Development or the United States Government.
Contract No.:                              278-C-00-02-00210-00

Contractor Name:                           Chemonics International, Inc.

USAID Cognizant Technical Office:          Office of Economic Opportunities
                                           USAID Jordan

Date of Report:                            January 2005

Document Title:                            ICT Sector Baseline Industry Survey
                                           FINAL

Author’s Name:                             Eyas Shuaibi and Jumana Husseini / Al-Jidara
                                           Investment Services

Activity Title and Number:                 Achievement of Market-Friendly Initiatives and
                                           Results Program (AMIR Program)

                                           ICT Sector Baseline Industry Survey
                                           Enhanced Competitiveness Initiative (ECI)
                                           7513.04.01




ICT Sector Baseline Industry Survey
Final Report
January 2005




The opinions expressed herein are those of the author(s) and do not necessarily reflect the
opinions of the United States Agency for International Development or the United States
Government or Chemonics International or any firms in the AMIR Program consortium or the
management of the AMIR Program.
ICT Sector Baseline Industry Survey

Data Page

Name of Component: Enhanced Competitiveness Initiative (ECI)

Author:                Eyas Shuaibi and Jumana Husseini / Al-Jidara
                       Investment Services

Practice Area:         Trade and Investment

Service Offering:      N/A

List of Key Words Contained in Report: N/A




AMIR Program                                                          1
ICT Sector Baseline Industry Survey

Abstract

This survey provides a clear and comprehensive understanding of the breadth and depth of the
local ICT sector on which the subsequent analysis and recommendations of a three-year national
export and investment promotion strategy for the sector can be firmly based.




AMIR Program                                                                                 1
ICT Sector Baseline Industry Survey


Table of Contents

Executive Summary                             1

Attachment 1 - ICT Baseline Industry Survey




AMIR Program                                      1
ICT Sector Baseline Industry Survey


Executive Summary
In the third annual review of the REACH Initiative (September 2002), the Chairman of int@j
admitted that this target is too ambitious. A number of factors may contribute to the shortfall.

First, a survey conducted by int@j in 2001 of domestic investors in Jordan’s ICT sector provided
a mixed picture of the investment climate. Issues identified included 1) excessive regulation, 2)
limited skilled manpower (due largely to the brain drain to the Gulf countries), 3) lack of
management and marketing skills, and 4) limited access to capital.

Second, Jordan’s geographic neighbors provide competitive challenges: Israel has access to
significant capital and advanced technology resources; Dubai, has vast capital resources, a more
favorable tax regime, and the ability to attract almost limitless numbers of skilled workers; and
Egypt has lower operating costs, a larger domestic market, and a larger pool of skilled workers.

Finally, Jordan ICT investment promote efforts have been uncoordinated and unfocused. While
JIB has the legal mandate as the lead national investment promotion agency, its resources are
limited and its performance has generally been poor. Entities, such as MOICT and int@j, have
pursued their own initiatives to compensate. Efforts by these entities have generally been pursued
on an ad hoc basis, in the absence of any strategy.

In the short term, Jordan’s ICT sector may not become a mass employer, major source of FDI, or
principal engine of economic advancement that Government envisions. It can however become an
important source of investment and skills development. Development of the ICT sector can be a
critical step in the country’s economic evolution from low-margin, labor-intensive manufacturing
toward knowledge-intensive and high value-added activities. As Jordan develops its ICT sector, it
must compete against well-funded and low-cost rivals. To realize its potential, it must identify
areas where it provides advantage and develop a highly-focused strategy to attract investment in
those areas. This strategy must be pursued in a coordinate manner.

The AMIR Program has accordingly initiated the development such a strategy, in collaboration
with the Jordan Investment Board, the Ministry of Information & Communications Technology,
int@j, and the Jordan National Competitiveness Team. The lead consultants of this task have
determined that a critical foundational element for the development of this strategy is a rigorous
survey of the Jordanian ICT sector. It is hoped that such a survey will complement initial field
work by providing a clear and comprehensive understanding of the breadth and depth of the local
sector on which the subsequent analysis and recommendations of the three-year national export
and investment promotion strategy for the ICT sector can be firmly based.




AMIR Program                                                                                    1
ICT Sector Baseline Industry
           Survey
           A Presentation to
        ICT Sector Stakeholders
            13 January 2005




      Prime Contract Number 278-C-00-02-00201-00)
      Activity: 513.04.01 Investor Targeting Strategy
                             2


Main Points


 Project background
 Objectives of the Project
 Process and Approach
 Review of Results
 SWOT
                                                                    3


Quick Background


 ICT importance and drive in Jordan is noticeable.
 The REACH initiative have gone through several iterations.
 Ambitious targets have been set:
  – 2004 targets included: $150 million in cumulative FDI,
    creation of 30,000 new jobs and $550 million in annual sector
    export.
 Have these targets been achieved?
The Need for an ICT Strategy
                                                                                      5


           Scope of Work in Relation to the ICT Strategy



                                                  Develop an appropriate three-year
ICT Investment Promotion Strategy     Objective
                                                   national export and investment
                                                         promotion strategy.




                                                  Provide a clear and comprehensive
ICT Sector Baseline Industry Survey   Objective      understanding of the breadth
                                                   and depth of the local ICT sector
                                                  6


Objectives of the Survey


 Understand markets pursued
 Assess specializations and focus
 Understand strengths and competitive advantage
 Understand challenges
                                        7


Process and Approach

          Create Survey Questions


             Create Sample List


         Schedule an Appointment


              Conduct Survey


       Collect and Tabulate Responses


              Analyze Results

              Present Findings
                   8


Survey Questions
                                                      9


Survey Sample List


 A Sample list of 50 companies
  –   Assuming 300 companies
  –   Max. allowable difference of a 0.25
  –   Confidence of 95%
  –   Variance estimate of 1.0
 Mainly from INT@J members
 A mix of large/small, old/new, general/specialized
 Local “major users” of ICT
                                                           10


Conducting Surveys


 Face to face interviews with the CEOs or their deputies
 Very positive response and participation
 Allowed freedom to express thoughts
Results
                                                         12


Companies Profiles


 Mostly new (3-5 Yrs), limited liability
 General software development and system integration
 Most companies in the $500K - $4M range
 Majority reporting high growth 25%+ per year (past and
 projected)
 Healthy net profit margins (half of companies 15%+)
 Projects mostly in the $100K’s. Few companies in the $M’s
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               Companies Revenues
                                          2003 Revenue


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              Less than   $100,000 -   $500,000 -         $1,000,000 -   $5,000,000 -     More than
              $100,000     $400,000     $900,000           $4,000,000     $9,000,000    $10,000,000
                                                    Revenue
                                                            15


Markets Pursued


 Jordan regarded as a main market and base
 Most attention given to the Gulf
 Only few (around 10) reported the US, and 2 reported
 Europe
 Emerging opportunities in countries like Libya and Sudan
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                                                       17


Competitive Selling Factors


 Three geographic areas: Jordan, MENA, and US/Europe
 Jordan – Niche, innovation, then price
 MENA – Niche, price, then relationships
 US/Europe – Price, innovation, then relationships
                                                                   0
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                                                                                 Jordan
                                                                                 USA/EU
                                                            19


Technical Skills and Competencies


 Mostly in “main stream” technologies such as Microsoft.
 JAVA, and Oracle
 Emerging in Open Source
 More on the development end
 Gaps in some technologies such as IBM, or fields such as
 CRM
 Gaps in leadership roles such as project managers or
 architects
 Process maturity is still developing
                                                                                        20


                   Technical Skills - Applications
                                Experienced   Capable     Starting

16


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Challenges


 People
  – High turn over
  – Scarce leadership roles
  – University grads
 Government
  – Regulations not translated to reality
  – Bureaucracy in procurement
  – Customs and taxes
 Financial Institutions
  – Smaller/newer companied reported difficulties in tapping into
    facilities
                                                      22


S W O T Analysis


          Strengths               Opportunities
 Leadership support        Emerging markets
 Entrepreneurship          Products development
 Positive image            Building specializations
 Location

        Weaknesses                   Threats
 Fragmented market         Regional volatility
 Local competition high    Competition (e.g. India)
 Seniority and expertise   Reliance on foreign aid
 Investment                Brain drain
Thank You!

								
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