The GCC can truly benefit from sharing economy platforms by tapping into underexploited human resources and assets, says a study by management consulting firm Strategy& (formerly Booz & Company), part of the PwC network.
Based on a survey conducted by Strategy&, GCC consumers spent $10.7 billion on sharing economy platforms in 2016, generating an estimated $1.7 billion in revenues for these platforms.
What is the sharing economy?
The sharing economy is defined as the exchange of goods and services directly between individuals through online platforms.
The Strategy& study identified five high-potential sectors which are transportation, financial services, business services, household services, and accommodation. These are also estimated to have the largest socio-economic implications. .
GCC start-ups, such as Careem, the region’s first ‘unicorn’, Washmen, and Beehive provide examples of the sharing economy models, and are increasingly popular throughout the region.
Sevag Papazian, principal with Strategy& in the Middle East, said: “The disruption that the sharing economy has had on economic sectors has been felt in the GCC in varying ways. First, sharing economy platforms has increased the use of underutilized assets through mobile-based applications, at a reduced cost. Second, the flexible work arrangements under the sharing economy are creating job opportunities, particularly for the region’s youth and untapped segments of the population – including women and people living in rural areas.”
Sharing economy growth
Several factors contribute to the growth of the sharing economy. GCC countries have a large pool of workers available, especially with a growing young population.
Their high levels of technology adoption and urbanization generate large volumes of data to drive the sharing economy — and this is expected to grow as national transformation plans are implemented and the entrepreneurial ecosystem develops.
Although ripe for growth in the region, sharing economy platforms also face some challenges:
– Inadequate or unclear regulatory frameworks: Sharing economy models often do not have a clearly defined regulating authority and operate in legal gray areas
– Regional consumers have limited trust in some of these platforms and are wary of data protection and quality assurance issues
– Incumbents oppose the intrusion of the sharing economy, as they have invested heavily in acquiring their operating licenses
– Strict labor policies sometimes do not cover part-time employment or prevent expatriates from working for different employers, thus limiting the potential of the sharing economy
– GCC nationals have a limited need for sharing economy services because they have easy access to low-cost labor when required and generally interact mostly within their close family circles.
“To exploit the sharing economy’s full potential while avoiding its potentially negative effects, GCC governments should adopt a differentiated approach that serves their specific socioeconomic needs and development goals. This will depend on the potential for job creation or risk of unemployment, the need to grow digital economy, cultural acceptance of the concept, quality standards, etc,” said Samer Bohsali, partner with Strategy& and leader of the firm’s digital business and technology practice and the digitization platform in the Middle East.