Kuwait’s ICT industry poised for growth

KuwaitICT

Economic News

21 Sep 2017
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Tech businesses are expected to be among the beneficiaries of several new initiatives being rolled out in Kuwait targeting start-ups and e-government expansion.

The raft of projects will be introduced under the Kuwait National Development Plan (New Kuwait), which aims to transform the country into a regional financial and cultural leader by 2035.

Unveiled in January, the wide-ranging roadmap is supported by seven pillars: global position, infrastructure, human capital, public administration, health care, economy and living environment. Given its growing role across sectors, ICT looks set to become a major driver of non-oil growth in the coming years as Kuwait moves to further diversify its economy.

Drive to boost entrepreneurial activity

Initiatives planned under New Kuwait include the launch of a KD5.3m ($17.6m) incubator for small and medium-sized enterprises, which is expected to finance 100-150 businesses and create 200-300 permanent job opportunities each year.

The government expects the incubator to support its goals of increasing the non-oil sector’s contribution to GDP from an average of 45.3% between 2010 and 2014 to 83.9% in FY 2017/18, as mapped out in New Kuwait. Other targets include reducing commodity and service imports by 7.8% in 2017/18 from the 2010-14 average.

Stakeholders in the ICT industry will also be looking to benefit from a KD12.9m ($42.8m) plan to expand e-government and civil information system applications in the public administration pillar of the plan. The e-government expansion initiative will include the setting up of an integrated electronic portal linking family care, charity, medical and social welfare services alongside the implementation of a security system to safeguard individual data. It will be delivered by the Ministry of Social Affairs and Labour, and supports social pillar targets including reducing and simplifying the documentary cycle, streamlining service provision, and improving ICT adoption and usage up to 2035.

Start-ups building momentum

The number of tech-based start-ups is already expanding, in line with efforts under way to boost entrepreneurial activity.

Ventures making the news in 2017 include Kuwaiti food delivery start-up Carriage, which was acquired by Germany’s Delivery Hero in May. Media reports put the sale price at $100m-200m. Launched initially with $1.3m in seed funding and operating across the Gulf, Carriage allows users to order food via its app from more than 200 outlets.

Commenting at the time of the acquisition, Niklas Östberg, CEO of Delivery Hero, said the deal would provide the Berlin-based firm with a foothold in a region that offered “significant growth potential”.

The sale follows the well-documented success of fellow Kuwait-based food delivery site Talabat, which was acquired by German e-commerce group Rocket Internet for $170m in February 2015.

Other local start-ups gaining ground include Waterworks, a car-washing and valeting service launched in October 2016 that can be accessed via WhatsApp, and Baims, an online marketplace for Arabic educational content, which began operating one month earlier and has since built up a user base of 15,000.

Masbagti, a laundry app initiative launched in April 2016, is also establishing its place in the market. The venture provides pick-up and drop-off services for customers, with orders made via the app and payments accepted through electronic banking service K-Net, or as cash on delivery.

Private sector interest in Kuwait’s ICT sector is also on the rise. In October 2016 Huawei Kuwait announced the launch of an ICT training centre and Seeds for the Future, a programme which will work with Kuwaiti entrepreneurs and the government on initiatives including the internet of things and smart city development. The centre will train Kuwaitis in ICT skills in a bid to increase their participation in the sector, while also supporting localisation initiatives.

Licensing issue risks curbing growth

Though the long-term prospects for the ICT sector look bright, recent legal decisions could weigh on near-term start-up growth. In June, Kuwait City’s municipal government said it had halted a move by the Ministry of Commerce and Industry to allow home business licences, which would have provided a critical support mechanism for seed and early-stage start-ups.

Explaining its decision, the municipality said the ministry’s plans were in violation of rules banning commercial businesses within residential areas. While the move is set to weigh primarily on retail and service businesses, such as tailors, barbers, laundrettes and grocery shops, it will also impact start-up development. Addressing the issue of home licensing will thus be critical to supporting start-up growth.   

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