While encouraging greater use of ICT to make the economy more competitive, the Saudi authorities are also eager to see jobs created in the sector. There is, however, some uncertainty regarding how the impact of new technologies on employment will play out. Broadly speaking, there are at least three key points that should be considered. The first is whether the country can educate and train its workforce well enough and quickly enough to allow it to compete effectively in the new digital world. The second is what impact that world – and, in particular, the upheavals caused by the Fourth Industrial Revolution (4IR) – will have on employment, as automation, robotics and other smart technologies are expected to replace humans in some capacity in a number of sectors. Third is whether Saudi Arabia can achieve net employment gains amid the ensuing disruption by adopting the new technologies.
The Kingdom’s labour force as a whole is characterised by relatively low participation and high unemployment rates. According to the General Authority for Statistics (GaStat), the unemployment rate was 6% in the third quarter of 2018, down slightly on the 6.1% registered in the first quarter. While this is not far off the average unemployment rate experienced in developed economies, the unemployment rate among Saudi nationals – as distinct from expatriate residents – is much higher. GaStat data shows that citizen unemployment stood at 12.8%, unchanged from the beginning of 2018. Unemployment was higher yet among Saudi women, at 30.9%, compared to 7.5% for Saudi men.
Initial estimates suggest that ICT development can generate significant new employment in the Kingdom. A white paper on Middle East markets by consultancy International Data Corporation (IDC) released in late 2018 suggested that Microsoft’s technology ecosystem and work to expand the use of cloud services could create more than 63,400 jobs in the country by the end of 2022, with 55,000 of those positions relating to cloud operations. This ties into the overall direction and goals of the Vision 2030 strategy, but also to specific efforts by the Communications and Information Technology Commission, the sector regulator, and additional initiatives to utilise the cloud in the banking, health care, transport and education sectors.
The remaining 8400 new positions will apply to companies and individuals who “sell, service, deploy or otherwise work with Microsoft products”. The Microsoft ecosystem already supported some 71,250 workers in 2017, according to the research.
IDC predicted that spending on cloud services across the board would rise from SR427.7m ($114.1m) in 2017 to SR1.57bn ($418.7m) in 2022, with total ICT spending in the Kingdom reaching SR43.97bn ($11.7bn) by that year. In 2022 the IT sector is expected to employ over 270,000 people.
A 2018 report by global consultancy firm Accenture titled “Pivoting with AI: How artificial intelligence can drive diversification in the Middle East” also paints an encouraging picture about the economic impact of new technologies on Saudi Arabia. The firm’s research suggests that the adoption of artificial intelligence (AI) systems has the potential to boost the Kingdom’s gross value added (GVA) by $215bn by 2035. AI is set to have the greatest impact on public services, manufacturing and professional services, with GVA gains of $67bn, $37bn and $26bn, respectively, between 2018 and 2035.
In September 2018 Zafir Junaid, regional manager for Saudi Arabia, Bahrain and Pakistan of US-based analytics company SAS, told local media that there are attractive opportunities for tech investment in Saudi Arabia. However, he noted, “In the current environment, it is imperative that Saudi Arabia invests heavily in national IT skills and capabilities to help the market innovate and develop more valuable and impactful products and services”, adding, “the education sector is crucial as a future investment area to build an ICT skills base and ensure a sizeable pool of expertise that will help take the nation and its strategies forward”.
This sentiment is echoed by Yasser Alobaidan, CEO of digital services firm Jawraa, who believes the right instruction can help build up a domestic talent pool for the sector. “Education has the power to make future generations much more digitally enabled. Enhancing science, technology and mathematics curricula will directly contribute to the local development of AI, blockchain and internet-of-things solutions,” he told OBG.
One of Saudi Arabia’s sector-related goals is to create its own high-tech hub similar to Silicon Valley in the US. While this is an ambitious aim, the country has been adopting policies that will support the development of such a hub, which is planned to compete at a regional level with Dubai. The Kingdom benefits from a youthful, tech-savvy consumer base, has already attracted a significant number of global tech firms and has made a commitment to further developing digital technologies.
To ensure the regional centre is sustainable, Saudi Arabia will need to attract an inflow of both local and foreign IT workers and entrepreneurs. Achieving that will require a number of initiatives – and balance. On the one hand, officials must work to step up the education and training of Saudi nationals in the tech sector, and on the other hand continue to attract professionals from abroad. Complete reliance on either is not recommended, as interaction and knowledge transfer between the two groups is considered optimal from an expertise and cultural standpoint. Speaking to local media in May 2018 John-David Lovelock, chief forecaster at US research firm Gartner, said it will take Saudi Arabia four years to nurture local junior tech talent, but much longer to develop a cohort of what he calls IT “visionaries”. The government will also need to continue to improve the ease of doing business and increase the quality of infrastructure.
Areas of Opportunity
While the timeline it takes to grow a large pool of local talent may be subject to debate, the evidence nonetheless points to a net growth of jobs in the ICT sector in Saudi Arabia. However, the wider outlook for jobs depends on what happens in the rest of the economy. At the global level there is consensus among economists that the 4IR will both create and destroy jobs; the net outcome between the two forces and the type of jobs that will be available remain hard to predict.
One perspective voiced by Bob Willen, Middle East partner and managing director at AT Kearney, is that Saudi Arabia’s relative lack of a strong industrial tradition might be a positive thing for the country rather than a negative, and provide it with a short-cut to the future. “You could say that Saudi Arabia has missed some of the earlier industrial revolutions, but I would rather say they have the opportunity to leapfrog those processes,” Willen said at a tech forum in Riyadh in late 2017. “It presents them with a lot of potential – rather than go through the whole painful process, they can be flexible in what approaches they adopt.”
One example of such an approach is the high-tech mega-city called NEOM, a greenfield undertaking in the north-west that will emphasise AI, robotics and smart city technologies. The Kingdom can also pick out new dynamic areas of comparative advantage. Saudi Arabia may be able to lead in 3D printing, for example, because it can combine this emerging technology with the materials it requires – abundant supplies of plastics and petrochemical derivatives. There may also be an overlapping need between Saudi Arabia’s desire to build up its own defence industries and its growing capabilities in 3D printing.
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