Economic Research Forum (ERF)

The threat of cybercrime in MENA economies

681
The MENA region’s increasing access to digital information and internet usage has led to an explosion in e-commerce and widespread interest in cryptocurrencies. At the same time, cybercrime, which includes hacking, malware, online fraud and harassment, has spread across digital networks. This column outlines the challenges.

In a nutshell

Most MENA countries consider crypto assets as a legal currency, but banks are often banned from dealing with crypto transactions; in Algeria, Egypt and Morocco, cryptocurrencies are illegal as of 2024.

Countries with higher internet usage, more advanced economies and bigger populations typically experience the most cyber-attacks; cryptocurrency is one of the current major global concerns of cybercrime and MENA countries often are on the top of the list for costly cyber-attacks.

It is important for MENA countries to develop transparent legal and economic environments in order to stay up to date with the fast-moving development of fintech and generative artificial intelligence.

Digital usage is altering the way we live and work. New technologies have established new markets, which in turn creates new opportunities, competitors and problems. Artificial intelligence, blockchain, cryptocurrencies and digital assets are fast-developing technologies. They have introduced many investors to the promise of a better currency and a better world of decentralised financial transactions, free of a potentially deceitful financial sector.

Financial technology (fintech) is the term for computer programs and other technologies used to support and enable business transactions to improve their operational and allocative efficiencies. Fintech is a public ledger capable of recording the origin, movements, and transfer of anything of value securely and with complete transparency via smart contract technology.

Fintech is changing how financial institutions and markets implement their business models through the elimination and decentralisation of old fashioned and traditional transaction methods.

Fintech technology is a dynamic improvement in automating the delivery and use of financial services started with the financial institutions like machines reading the check coding to the current stage of customer orientation services such as online banking, robo-advisors, peer-to-peer (P2P) lending apps, investment apps and cryptocurrencies. According to one report (ZDNET, 2018), there are currently 47 crypto apps, among the most popular of which are Coinbase, Robinhood, Gemini, Crypto.com, Karaken, eToro and Cash App.

Countries with higher internet usage, more advanced economies and bigger populations typically experience the most cyber-attacks.

Drivers of the rapid spread of crypto assets in the MENA region include consumer trust, earlier adoption and high inflation, which raises interest in dollar-denominated assets such as stablecoins.

MENA countries’ share of the world economy is roughly about 4.8% and in 2022, the MENA region accounted for 9.2% of global cryptocurrency transactions. The United Arab Emirates (UAE) is the regional hub for crypto assets. Egypt has the fastest growing crypto and digital currencies in the region, and it is used as a saving means in lieu of fiat currencies.

The MENA region’s increasing access to digital information and internet usage has led to an explosion in e-commerce. At the same time, cybercrime, which includes hacking, malware, online fraud and harassment, has spread across computers and digital networks.

Cyber-crime became the biggest concern of digital transactions users. MENA countries are spending enormous amounts of money on preventing cybercrimes. This has created the need for establishing a safer and more trusted digital environment in the region, which can bring empowerment, economic benefits and convenience.

MENA countries’ e-commerce transactions are highly exposed to cyber-crime. These attacks target the high wealth in certain countries such as Saudi Arabia and the UAE, which have the highest global email spam rate, with the highest cyber cost. In the first half of 2021, there was an increase of 17% of cyber-crimes in the region.

A study by Ponemon Institute and IBM stated that on average each cyber-attack occurrence costs $6.93 million, and $6.52 million for each data breach (IBM Security, 2020).

The most targeted industries that have a significant increase in industrial control system (ICS) risks include government institutions, financial services, healthcare, education and technology

Consumers International (2019) surveyed 3,000 online consumers in Oman, Tunisia, Saudi Arabia, and Egypt to help us understand MENA consumers’ experiences with e-commerce, privacy, and security online in a diverse range of markets. The survey findings were accompanied by interviews with the above MENA regional members of 9.2% global currencies transactions. Consumers International Insight Briefing – Dec 2019, ranked Saudi Arabia to have the highest global email spam rate followed by the UAE.

The major cost of cybercrimes comes from consumers, governments, and companies. It is estimated that globally the average cybercrime victims invest the equivalent of three full working days on fixing the cybercrime damages. Saudi Arabia and the UAE have experienced some of the costliest data breaches in the world – costing $5.97 million in lost business to organisations in 2017 alone.

UAE and Saudi Arabia were the highest targeted countries in the Gulf region in 2021-22 mostly with ransomware attacks originated mainly in Russia and Iran (Arab News, 2023).

Crypto crimes in the MENA account for 24% of total cryptocurrency transactions.

Cryptocurrencies are especially attractive to investors in MENA for being shariah-compliant. Some coins, protocol and crypto assets are part of Islamic finance by the ethical, inclusive, sustainable and charitable investments principles.

The chart shows the percentage of individuals using the internet in MENA. The higher the internet usage, the higher the usage of crypto assets, which will lead to a higher crypto crime.

One of the current major global concerns is cyber-crime and the MENA countries often are on the top of the list for costly cyber-attacks. Hence, MENA countries urgently need to increase regulations to curb cyber-crime.

The work has benefited from the comments of the Technical Experts Editorial Board (TEEB) of the Arab Development Portal (ADP) and from a financial grant provided by the AFESD and ADP partnership. The contents and recommendations do not necessarily reflect the views of the AFESD (on behalf of the Arab Coordination Group) nor the ERF.

Tags: , , ,

  • Mahmoud Haddad
    Mahmoud Haddad
    Professor, The University of Tennessee at Martin, Tennessee

Most read

Trust in Lebanon’s public institutions: a challenge for the new leadership

Lebanon’s new leadership confronts daunting economic challenges amid geopolitical tensions across the wider region. As this column explains, understanding what has happened over the past decade to citizens’ trust in key public institutions – parliament, the government and the armed forces – will be a crucial part of the policy response.

Climate change: a growing threat to sustainable development in Tunisia

Tunisia’s vulnerability to extreme weather events is intensifying, placing immense pressure on vital sectors such as agriculture, energy and water resources, exacerbating inequalities and hindering social progress. This column explores the economic impacts of climate change on the country, its implications for achieving the sustainable development goals, and the urgent need for adaptive strategies and policy interventions.

Small businesses in the Great Lockdown: lessons for crisis management

Understanding big economic shocks like Covid-19 and how firms respond to them is crucial for mitigating their negative effects and accelerating the post-crisis recovery. This column reports evidence on how small and medium-sized enterprises in Tunisia’s formal business sector adapted to the pandemic and the lockdown – and draws policy lessons for when the next crisis hits.

Assessing Jordan’s progress on the sustainable development goals

Global, regional and national assessments of countries’ progress towards reaching the sustainable development goals do not always tell the same story. This column examines the case of Jordan, which is among the world’s leaders in statistical performance on the SDGs.

Qatarisation: playing the long game on workforce nationalisation

As national populations across the Gulf have grown and hydrocarbon reserves declined, most Gulf countries have sought to move to a more sustainable economic model underpinned by raising the share of citizens in the productive private sector. But, as this column explains, Qatar differs from its neighbours in several important ways that could render aggressive workforce nationalization policies counterproductive. In terms of such policies, the country should chart its own path.

The threat of cybercrime in MENA economies

The MENA region’s increasing access to digital information and internet usage has led to an explosion in e-commerce and widespread interest in cryptocurrencies. At the same time, cybercrime, which includes hacking, malware, online fraud and harassment, has spread across digital networks. This column outlines the challenges.

Economic consequences of the 2003 Bam earthquake in Iran

Over the decades, Iran has faced numerous devastating natural disasters, including the deadly 2003 Bam earthquake. This column reports evidence on the unexpected economic boost in Bam County and its neighbours after the disaster – the result of a variety of factors, including national and international aid, political mobilisation and the region’s cultural significance. Using data on the intensity of night-time lights in a geographical area, the research reveals how disaster recovery may lead to a surprising economic rebound.

Macroeconomic policy-making for sustainable development in Egypt

In recent years, economic policy in Egypt has been focused primarily on macroeconomic stabilisation to curb inflation, to reduce the fiscal deficit and the current account deficit, and to increase GDP growth. As this column explains, this has come at the expense of the country’s progress on the Sustainable Development Goals, which is rather modest compared with other economies in the region or at the same income level. Sustainable development needs to be more integrated with the conception and implementation of fiscal and monetary policies.

The impact of climate change and resource scarcity on conflict in MENA

The interrelationships between climate change, food production, economic instability and violent conflict have become increasingly relevant in recent decades, with climate-induced economic shocks intensifying social and political tensions, particularly in resource-constrained regions like MENA. This column reports new evidence on the impact of climate change on economic and food production outcomes – and how economic stability, agricultural productivity and shared water resources affect conflict. While international aid, economic growth and food security reduce the likelihood of conflict, resource scarcity and shared water basins contribute to high risks of conflict.

Qatar’s pursuit of government excellence: promises and pitfalls

As Qatar seeks to make the transition from a hydrocarbon-based economy to a diversified, knowledge-based economy, ‘government excellence’ has been identified as a key strategic objective. This column reports what government effectiveness means in terms of delivery of public services, digitalisation of services, and control of corruption – and outlines the progress made to date on these development priorities and what the country needs to do to meet its targets.