Lebanon Information Technology Report 2012

BMI's Middle East and Africa (MEA) IT Business Environment Ratings compare the potential of the key regional markets over our forecast period, through to 2016. The ratings reflect our consideration of political and economic risks, as well as risks associated specifically with IT intellectual property (IP) rights protection and government projects.
In our updated Q112 ratings, country rankings are unchanged, reflecting stabilisation in most markets after the impact of the global economic downturn and political unrest. 2012 is expected to see IT market verticals retain momentum. To help maintain social stability, many regional governments have announced spending increases, including both capital investment and wage increases, which should boost spending on information technology. For example, to help maintain social stability, the Saudi government has announced US$93bn in handouts, including wage increases, which should boost consumer spending on durables such as PCs.
Vendors also reported a pick-up in IT services project flow, with new IT projects in verticals such as banking, government, real estate and education. Despite this, continued credit restrictions, global economic headwinds and political instability mean that cautious spending patterns are likely to persist across many Gulf Co-operation Council (GCC) markets.
The wealthy, high-tech GCC markets continue to occupy the higher rankings. Factors such as comparatively resilient consumer demand and ongoing infrastructure projects make this region relatively well positioned for growth in the post-credit crunch era. In most cases we do not see IT spending returning to its pre-crisis rate of growth over our five-year forecast period However, global trends such as cloud computing are relatively less established in the region but will grow in significance.
Despite continued financial concerns concerning Dubai, the UAE retains the top spot in our Q112 table. In second place is Israel, where household computer penetration of around 75% offers potential for continued growth and about 50% of IT spending is accounted for by government and military projects. Qatar takes third place, with its projected high rate of GDP growth keeping it ahead of the larger market of Saudi Arabia in fourth.
Kuwait, Bahrain and Oman occupy the next three places, and, as in Qatar, spending is expected to grow in 2012, consolidating a recovery from the impact of the economic slowdown. Economic reform and trade liberalisation will fuel spending on IT by both public sector organisations and enterprises.
Turkey, in eighth place in our table, is expected to be a regional IT market outperformer as the focus of demand shifts towards the Anatolian region and the rate of PC penetration rises. Meanwhile, South Africa's ninth spot reflects business environment risks rather than the considerable potential of the country's IT market.
Bringing up the field, Egypt's high growth potential is constrained by income and business environment considerations, while uncertainties continue to surround the Lebanese IT market, with a mixed picture with regards to economic policy.
One factor that will keep IT spending growing in this region is the wave of e-government initiatives being implemented. Government accounts for up to 40% of the IT market in some states, and governments in the region have allocated significant budgets for e-services development. First-placed UAE's Strategic Plan calls for a strengthening of e-government programmes. In Saudi Arabia, too, government bodies have pressed ahead with ambitious e-government and IT projects.
A number of factors have contributed to a recovery in the UAE and other GCC markets such as Oman, including economic recovery and a reversal of population decline seen during 2009. Saudi Arabian population growth, for example, is expected to reach 10% by the end of our five-year forecast period, driving IT spending. However, in markets such as the UAE, a property price slump and tighter credit are likely to continue to influence business and consumer caution.
In many markets, liberalisation in sectors such as telecommunications and financial services is a factor driving demand for IT products and services. The share of the non-oil sector in IT spending is expected to fall slightly in the UAE but to rise in Saudi Arabia, which accounts for 40% of regional IT spending.
However, despite these developments, the hydrocarbon sector remains key to IT spending, with oil and gas companies investing in IT to enhance operational efficiency, optimise cost structures and boost overall business agility.
The UAE is forecast to remain the largest market in the region. The IT market reported overall growth in 2011 but structural weaknesses still stand in the way of a more pronounced recovery, including weak credit conditions and Dubai's onerous debt repayment schedule. In the wake of the Dubai financial crisis, new potential exists in the northern emirates where the government has launched a major infrastructure investment programme. Government investment should also help support the market, with cloud services central to the Emirates' e-Government strategy for the next three years.
There will be further UAE market opportunities in sectors such as education, healthcare, utilities, banking and telecoms. A pick-up in the number of tourists should provide a boost to the carry trade, although there are concerns about the impact of sanctions against Iran.
Qatar is expected to be one of the fastest-growing IT markets in the region over the next decade. In its attempts to diversify the economy, the Qatari government is undertaking modernisation projects, which will offer opportunities to IT vendors. The recent success of Qatar's bid to host the 2022 FIFA World Cup will boost the ongoing development of transport infrastructure as well as the construction of stadiums. The Qatari government has outlined plans to invest QAR6bn (US$1.6bn) in information technology and IT services as part of its ICT-2015 strategy.
Saudi Arabia, Bahrain and Oman rank slightly behind their equally fast-growing GCC peers on grounds of general business environment, but the IT market metrics remain attractive. Saudi Arabia appears better placed than some other markets in the region to recover strongly from the recent economic slowdown. The kingdom will continue to be a lucrative market for technology products and services, with the country's youthful population supporting a continued rapid rise in PC and notebook penetration. The relative political stability compared with some other markets in the region will also attract vendors. Government-driven investments in transportation, property constructions and water and power plants will drive opportunities for IT vendors.
In 2010/11 Kuwait's government spending was expected to increase by 10%, following a 38% decrease in the previous year, and some of this spending should carry through into 2011. A four-year government infrastructure spending plan, launched in February 2010, should mean more public sector IT opportunities. BMI also takes a positive view of market performance in Bahrain over the 2012-2016 forecast period. A particularly important factor is Bahrain's growing status as a financial hub. Global IT trends such as cloud computing, virtualisation and convergence will continue to gain ground in the Bahrain market. The same is true of Oman, which, although like Bahrain one of the smaller markets in the region, should benefit from infrastructure projects in sectors ranging from tourism to ports.
Of the non-GCC countries, Israel should have enough momentum from key sectors to expand over BMI's 2012-2016 forecast period. In 2011, vendors reported a continued pick-up in the flow of IT projects, with a new large tender from the Israeli MOD. Our ratings also take into account opportunities in verticals such as financial services and small and medium-sized enterprises (SMEs), as well as growing demand for major IT outsourcing solutions. Healthcare, the public sector and utilities are also generating new projects or significant contract extensions. Falling unemployment and low inflation and interest rates should support domestic spending.
South Africa is one of the Middle East and Africa's most significant IT markets in terms of size and growth potential. However, it loses points for Country Structure and Market Risk. The recent spate of wage bargaining, along with low interest rates and relatively low inflation, has increased spending on bigticket items such as computers. Projected improvement in South Africa's broadband infrastructure, and international bandwidth, will also be a growth driver.
The South African market will be supported by factors such as government projects and investment by sectors such as telecoms. The South African Department of Education has announced a target of rolling out laptops to all school children in the country by 2014.
Egypt is expected to be one of the fastest-growing IT markets in the region over the next few years, but has a number of constraints, including low disposable incomes and economic disparities. Prolonged political instability following the events of February 2011 could also impact on the market's development. The country's IT budget will benefit from youthful demographics, rising PC penetration and improving ICT infrastructure, despite a sub-optimal distribution network outside of Cairo.
Lebanon also has some intrinsic advantages, including a cosmopolitan and multi-lingual labour force, and a strategic position for the Levant markets. There is potential for IT vendors in sectors such as telecoms, banking, utilities, real estate and government, but much will depend on the political stabilisation necessary to implement reforms.

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Executive Summary 5
SWOT Analysis 8
Lebanon IT Industry SWOT 8
Lebanon Political SWOT 9
Lebanon Economic SWOT 10
Lebanon Business Environment SWOT 11
IT Business Environment Ratings 12
Table: Regional IT Business Environment Ratings 15
Markets Overview 16
Middle East & Africa 16
Market Overview 23
Government Authority 23
Hardware 24
Software 26
Services 29
Industry Developments 31
Industry Forecast Scenario 34
Table: Lebanon's IT Industry, Historical Data And Forecasts, 2008-2016 (US$mn, unless otherwise stated) 37
Macroeconomic Forecast 38
Table: Lebanon – GDP By Expenditure, Current Prices Breakdown 40
Competitive Landscape 41
Company Profiles 44
IBM 44
HP 45
Computer Business Machines 47
Oracle 48
Microsoft 49
Country Snapshot: Lebanon Demographic Data 51
Section 1: Population 51
Table: Demographic Indicators, 2005-2030 51
Section 2: Education And Healthcare 52
Table: Education, 2002-2005 52
Table: Vital Statistics, 2005-2030 52
BMI Methodology 53
How We Generate Our Industry Forecasts 53
Transport Industry 53
Sources 54
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