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 Sy st em in 0 2 4 6 8 10 12 14 of te fs gr ho at io re n W de ve eb lo /in pm te rn en et t de ve So lo ftw pm ar en e t de ve lo pm Br Te en an le t di co ng m /d /w es ir e ig le n ss & Main Activities di gi So ta ftw In lm te ed ar rn ia e et Fi ni M sh ed ed ia /p go or ta od l s (p E ac Le ka ar ge ni s) ng – pa E ck M ag ar es ke O tB ut 2B so ur (s ci al ng es -p ) ur e m ar ke tin g C al lC en tre s 13 14 Companies Revenues 2003 Revenue 12 10 8 Number 6 4 2 0 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 0 5 10 15 20 25 30 35 40 Jo rd Sa an ud i Ar ab ia U AE Q at ar Ku w ai t U SA Ba hr ai n Le Markets Pursued ba no n Li by a Pa le st in e O m an Ira q Sy ria Ye m en Eu ro pe 16 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 10 20 30 40 50 60 N ich Pr e ic sp e ec i al In is n ov ed at se io n r vic & e en tre pr en eu rs h ip Ti m e to M ar ke C t or p or Selling Factors at St e ro Br n g an M d ar ke R t in el g at io & ns Sa hi le ps s & C on ne c tio ns Bu si ne ss Cu l tu re N at io na lB ra nd 18 MENA 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 14 12 10 8 6 4 2 0 L T E et TM ++ P P B E 2E .N H A V .N C W P H /J S P D M va S L/ /A Ja TM P S H A 21 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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