IT could lead the way to broader recovery

Technology could be a key catalyst to an economic rebound in the region as report says the Middle East will spend $50bn on technology this year.

Technology could be a key catalyst to an economic rebound in the region. The Middle East will see an 11 per cent rise in IT spending to about US$50 billion (Dh183.65bn) this year, the largest increase of any region in the world, the technology consultancy IDC said in a report released yesterday. "IT industry grows at about two to three times the rate of GDP," said Jyoti Lalchandani, the vice president and regional managing director at IDC's Middle East office. "A vibrant IT sector reflects very positively on the overall economic environment."

An increase in growth in the technology sector is generally considered by economists and financial experts as a vital indicator that the broader economy will soon recover. GDP in the Gulf is expected to grow by between 3 and 4 per cent this year, with the exception of Qatar, the GDP of which is forecast to rise by more than 17 per cent. Mr Lalchandani said the attention being given to the technology sector had also led Gulf-based sovereign wealth funds to look at investing in global technology companies to diversify their portfolios.

"The valuations are much lower than what they used to be," he said. "Many of the regional governments here will play an active role in acquiring a stake in the many industry players for some time to come." Last March, the Advanced Technology Investment Company (ATIC), the investment firm fully owned by the Abu Dhabi Government, purchased a majority stake in Globalfoundries, the customised chip maker that was spun off from Advanced Micro Devices (AMD).

Abu Dhabi's strategic investment arm, Mubadala Development, has bought a 19.67 per cent stake in AMD. The investment in IT departments helps companies operate more efficiently, ultimately freeing financial and operational resources that firms can allocate in other core areas of its businesses, said Haidi Nossair, the marketing manager for the global IT infrastructure firm EMC. "It has become a tool for them to generate further revenue," Ms Nossair said.