The Rise of eCommerce in the GCC

by Akin Gump Strauss Hauer & Feld LLP
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Electronic commerce, or eCommerce, is rapidly expanding in the member states of the Gulf Cooperation Council (GCC), spurred by the region’s near-universal online access, disposable income and technologically forward-thinking decision making bodies.  The term eCommerce refers to transactions completed over computer networks as opposed to within brick and mortar storefronts, and includes ancillary activities like Internet marketing and data collection and analysis.

The potential for online spending in the GCC is among the highest in the world. Nearly 90% of residents have access to the Internet.  Compare that figure with 35% access worldwide and 81% in the USA.  Additionally, GCC cities Abu Dhabi, Dubai and Riyadh occupy the top three spots on the list of highest per capita disposable incomes in the Middle East according to a recent survey by the Economist Intelligence Unit.

The GCC states have demonstrated a commitment to using government action to convert this online spending potential into reality.  The United Arab Emirates (UAE) has been particularly proactive, creating a legislative and regulatory framework designed to facilitate eCommerce growth.

This effort began with the enactment of Federal Law No. 1 of 2006: Electronic Commerce and Transactions (the UAE eCommerce Law).  While the UAE Telecommunications Regulatory Authority (TRA) was already charged with overseeing information technology industries, the UAE eCommerce Law created an eCommerce Department within the TRA and tasked it with a more targeted goal of promoting economic development and technological innovation within an eCommerce regulatory regime.  The TRA continues to lay out the framework for corporations to follow while growing their online business and backs several state-run initiatives to foster commercial innovation in the UAE.

The UAE eCommerce Law also seeks to allay specific concerns of both potential e-consumers and potential e-vendors which might otherwise present hurdles to growth.  Confidence should be buoyed by the law’s official validation of electronic signatures and online purchase agreements and its creation of harsh penalties, including fines, imprisonment and deportation, for anyone improperly acquiring or disclosing sensitive electronic records.

Similar frameworks are already in place in Saudi Arabia, Bahrain, Oman and Qatar and may soon be introduced in Kuwait.  With the establishment of these legislative and regulatory foundations, the rise of eCommerce in the GCC is underway.  Visa’s 2014 Middle East Report described a $5 billion dollar increase in Middle East online business-to-consumer spending in 2012, and predicted future growth of up to 20% annually.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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