Saudi Arabia’s Vision 2030 – the Kingdom’s longterm economic development and diversification programme – is seeking a digital transformation across society, government and the economy. The ICT sector is at the forefront of this change, and is poised to be a key element of diversifying the economy towards non-oil growth. In the last few years ICT has become much more prominent, and it has also become increasingly dynamic as the country ramps up investment in technology to become an international leader in the digital economy.
These changes are coming at a time when ICT globally is giving individuals unprecedented access to knowledge and the ability to connect to others virtually. This became particularly important after the outbreak of Covid-19 caused much of the world to use technology to work from home and connect to friends and family via video chat. Businesses are embracing social media and digital platforms for marketing, while Saudi citizens have become engaged digital users, with one of the highest rates of Twitter use in the world. Recent developments in the Kingdom include the implementation of a new ICT strategy; an expanded rollout of fixed broadband, fibre and 5G; and advances in technology, e-government and e-commerce.
A range of government entities are involved in ICT. Overseeing the sector is the Ministry of Communications and Information Technology (MCIT). The ministry is responsible for developing policies and supervising all ICT-related activities, including coordinating with government departments and agencies. It drafts laws and establishes development plans and programmes.
The Communications and Information Technology Commission (CITC) is the regulator for the sector. Its board includes the head of the MCIT, the governor of the CITC, and representatives of the Ministry of Finance, the Ministry of Trade and Investment, the King Abdulaziz City for Science and Technology, the Presidency of State Security and the private sector.
Yesser is the body responsible for digitising government operations and services. It was established in 2005 and its first action plan became effective in 2007. It aims to raise the public sector’s productivity and efficiency, provide better services and increase return on investment. Meanwhile, the National Cybersecurity Authority, launched in October 2017, is the cybersecurity regulatory body. It has a mandate to develop policies, governance mechanisms, frameworks, standards and guidelines related to cybersecurity to protect networks, systems and electronic data. It includes representatives from state security, intelligence, the Ministry of Interior and the Ministry of Defence (see analysis).
The National Committee for Digital Transformation was established in July 2017 under Vision 2030. The 11-member ministerial committee’s tasks include developing policies, strategies and implementation programmes related to digitalisation, as well as overseeing Yesser. Previously a steering committee, it was reformed and renamed in 2017 with new responsibilities added to its mandate. The committee is lead by the head of the MCIT and coordinates with multiple ministries that deal with digitisation, digitalisation and digital transformation.
Under the committee is the National Digital Transformation Unit (NDU), a centre of excellence established in 2017 with the mandate to facilitate the country’s digital transformation. Its areas of focus include the digital economy, the alignment of the government’s digital strategies, and the private sector’s empowerment and participation in the digital economy. The unit reports directly to the head of the MCIT but is not part of the ministry. While not involved in policy execution, the NDU serves as a cross-cutting horizontal organisation, helping by consulting, governing and supporting the sector.
The establishment of new bodies is also helping to encourage the development of the sector and the adoption of technologies such as artificial intelligence (AI). In August 2019 the Saudi Data and AI Authority was created to enhance efficiency through AI and big data. It has responsibility for the National Centre for AI and the National Data Management Office, both of which were established by royal decree the same month.
In December 2019 it was announced that an e-commerce council will be launched, with a mandate to coordinate initiatives related to e-commerce. The council will be headed by the minister of commerce and investment, and include representatives from around 15 government entities. It also will have targeted subcommittees. The private sector will have a significant role in the council to ensure e-commerce development remains on track and is aligned with private sector objectives and goals.
Released in 2016, Vision 2030 set forth several strategic goals for ICT. These included expanding high-speed broadband coverage to 90% of households in densely populated cities and to 66% of households in other urban areas. It also targeted stronger partnerships with the private sector in order to develop new ICT infrastructure and the expansion of digital services to cut unnecessary bureaucracy. Vision 2030 emphasises that advanced industrial activities will require a sophisticated digital infrastructure and policies that will both enhance competitiveness and attract investors.
In the e-commerce space, Vision 2030 seeks to enhance the contribution of modern trade and e-commerce to 80% of the retail sector by 2020. This segment received an unexpected boost in the first half of 2020 as the spread of Covid-19 led to a surge of activity in online shopping and delivery services worldwide. Furthermore, the programme seeks to expand e-government services and strengthen the provision of online services within the government itself. This includes supporting the wider use of technologies in government, including cloud applications and data-sharing platforms. Vision 2030’s corresponding National Transformation Programme (NTP) aims to increase the contribution of the digital economy to non-oil GDP from 2% to 3% by 2020.
The MCIT aims to make the Kingdom one of the world’s leading countries in ICT by building a digital economy based on the Fourth Industrial Revolution and a digital government and society. In August 2019 the ministry launched a five-year digital development strategy for the sector. ICT Strategy 2019-23 is a roadmap for innovation in the digital economy, with targets including growing the IT sector by 50% and increasing the rate of Saudiisation in the sector to 50% by 2023, while creating opportunities for women and boosting foreign direct investment. The MCIT expects that ICT Strategy 2019-23 will increase the sector’s contribution to the economy by SR50bn ($13.3bn) over the course of the programme.
Efforts to develop ICT are beginning to pay off. Overall spending on the sector in Saudi Arabia is expected to reach $37bn in 2020, up 2.4% from 2019, according to market intelligence firm International Data Corporation. Drivers of spending include smart governance and projects worth in excess of $10bn, called giga-projects. Spending should see sustained expansion in the coming years. In March 2020 data and analytics firm GlobalData forecast ICT spending in the country would grow at a compound annual growth rate (CAGR) of 9.2% between 2019 and 2024, reaching $46.6bn, primarily driven by increased business spending on client computing and cloud computing services.
Cybersecurity represents one of the fastest-growing segments. By 2022 it is expected that cybersecurity’s market value will reach $5.1bn owing to a CAGR of 15.3%. This comes as Global Market Insights reported in 2019 that the international cybersecurity market had an estimated value of over $120bn in 2019 and is projected to reach $300bn by 2024.
ICT is witnessing notable change and expansion in the Kingdom, having achieved a number of metrics in 2019. The sector had a market size of SR107bn ($28.5bn) in 2019 and the 13th-highest average internet speed in the world in 2019, at speeds of 50.8 Mbps for mobile internet and 50.7 Mbps for fixed internet, according to the NDU’s 2019 annual report. The NDU also found that Saudi Arabia had the third-largest 5G network in the world, a service maturity rate of 81% – compared to 71% in 2018 – and the second-most spectrum allocation among G20 countries. In terms of technology governance, Saudi Arabia ranked third among G20 nations, while Riyadh was ranked 30th by the UN in the most sustainable smart cities.
In the International Telecommunication Union’s 2018 Global Cybersecurity Index, the country ranked 13th out of 175 countries and came in first among Arab states, with strong performance in the capacity building and cooperation pillars. “In an increasingly digitalised world, cybersecurity concerns have grown in the private and public sectors,” Ali Al Asiri, director-general of Yesser, told OBG. “However, the Kingdom is well equipped to offset cyberthreats.”
Mobile & Internet Subscriptions
Saudi Arabia’s mobile phone penetration rate is high. The latest available figures from the CITC indicate that at the end of 2018 Saudi Arabia had 41.3m mobile phone subscriptions, representing a penetration rate of 126.9%. These figures reflect ownership of multiple phones or SIM cards, as is common in the Gulf. The overall number of subscriptions decreased from 52.7m in 2014, with a 171.4% penetration. Most mobile phone contracts are pre-paid, representing 68.8% of subscriptions in late 2018. However, the number of post-paid subscriptions has been gradually rising, from 12.9% in 2014 to 31.2% in 2018.
The country had 3.1m fixed-line subscriptions at the end of 2018, of which 1.7m were residential, representing a household penetration rate of 31.8%. The remaining 1.4m were business lines. Fixed-line subscriptions have seen a steep drop in recent years as mobile phones became more popular; household penetration was 45% in 2014, with 2.5m residential and 1.1m business subscriptions.
Internet penetration for those 10-74 years of age measured 93.3% at the end of 2018. That year there were 29.2m mobile broadband subscriptions, declining slightly from 29.7m a year earlier. The mobile broadband penetration rate stood at 89.5%. There were 1.9m fixed broadband subscriptions, of which 819,000 were DSL connections, 780,000 were fibre to the x and 301,000 fixed wireless. This was a decline from the previous year, when broadband subscriptions totalled 2.5m.
Expanding broadband coverage is a key part of efforts to boost the nonoil economy. Broadband connections lay the foundations for greater digital activity and enable new areas of technological innovation. The country’s broadband expansion targets both fixed broadband and mobile broadband. In the case of the former, there has been particular emphasis on the rollout of high-speed, fibre-optic cables that are better able to deliver data quickly across greater distances. Standard broadband – known as ADSL – uses existing copper phone lines to transfer data.
In 2017 the MCIT signed an agreement to expand broadband connections for homes through fibre optics. Two state firms were tasked with leading the rollout, with state-owned Saudi Telecom Company (STC) responsible for 2m locations, or 73% of the network, and Dawiyat Integrated Telecommunications & Information Technology Company, a subsidiary of Saudi Electricity Company, responsible for 744,500 locations, or 27% of the total. All connections are expected to be installed by the end of 2020. In late 2017 Dawiyat launched the first phase of its fibre-to-the-home (FTTH) broadband deployment in major cities. As of December 2019 the MCIT reported 3m homes had been provided fibre-optic connections. “The FTTH network enables the expansion of digital infrastructure and helps provide high-speed, fibre-optic broadband services,” Ahmed Sindi, CEO of Dawiyat Integrated Telecommunications & Information Technology Company, told OBG. “Indeed, according to the NTP, FTTH coverage in densely populated urban areas should reach 80% by 2020, and we are on track to meet this objective.” The firm is also working to develop fibre-optic network connections to neighbouring countries, with the aim of making Saudi Arabia an international connectivity link between the East and West.
The government’s strategy for rural areas focuses on wireless mobile broadband, which offers fast connection speeds when compared to traditional dial-up connections. There has been a phased initiative for the deployment of services in remote villages and hamlets. Before the initiative, high-speed internet was available in less than 1% of remote areas. The first two phases were completed in July 2018, with 16% of households in such areas – or 700 villages and hamlets – receiving coverage. The MCIT signed an agreement with STC in November 2018 to implement the third phase of the initiative, which aims to cover 70% of rural homes in 3000 villages and hamlets by the end of 2020. As of the end of 2019 over 300,000 homes across the Kingdom had access to wireless broadband.
Open Access Agreement
In February 2020 the CITC launched an open-access agreement between the country’s major telecoms providers, establishing a non-discriminatory network, thereby empowering carriers and service providers. The agreement guarantees the provision of broadband services through any subscriber-selected service provider independent of infrastructure ownership. It was signed by the country’s six major telecommunications companies: STC, Mobily, Zain Saudi Arabia, Integrated Telecom Company, Dawiyat and GO Telecom. It aims to diversify users’ options in choosing their service provider and raise service quality, while increasing competitiveness among providers. The agreement stands to help increase the overall number of broadband subscriptions. “This agreement will help to increase the pick-up rate of fibre broadband services,” Amjad Osama Arab, executive vice-president of Dawiyat’s Commercial Business Unit, told OBG. “It will also result in positive competition between the operators in terms of quality of services and prices for the end user, as infrastructure is now open to all operators regardless of who built it. The agreement was initially seen as a commercial challenge; however, under the CITC’s leadership, we were able to successfully bring together all major players.”
Sharing agreements also have benefits for providers. “Tower sharing through thorough site-sharing agreements can help maximise assets and resources, especially in times of increased market competition with pressure on costs and pricing,” Sultan Al Deghaither, CEO of Zain Saudi Arabia, told OBG.
The CITC commercially launched a 5G mobile network in 2019, making Saudi Arabia one of the first countries in the world to introduce the technology. In October 2019 Zain launched commercial 5G services in the Kingdom and as of November 2019 coverage had expanded to 27 cities. The CITC reported in January 2020 that 5G had reached more than 5200 base towers in 30 cities. With one of the largest 5G networks in the world, the technology is set to become a core component of the drive to advance technological goals.
There are also efforts to integrate the GCC. In November 2019 Zain launched international 5G roaming between its mobile networks in Kuwait and Saudi Arabia, marking a first for the region. Under the service, users can tap download speeds as high as 500 Mbps for outbound and inbound roaming.
Tapping the Grid
In addition to introducing 5G technology, in January 2020 the CITC indicated it was opening the market to new mobile virtual network operators (MVNOs). It is expected that the move will bring more innovative and diverse bundles for customers, while likely enhancing employment opportunities and encouraging investment. MVNOs involve smaller companies buying access to existing networks at a wholesale price instead of building their own infrastructure. In 2019 there were two MVNO licensees in the country, and the CITC is set to issue two more licences by the third quarter of 2020. “There is a lot of competition in the telecoms sector, and lower consumer prices are being offered by utilising the economy of scale of MVNO services,” Waleed Al Harkan, CEO of Lebara KSA, told OBG.
In addition to developing traditional telecoms infrastructure, the country is witnessing significant growth in e-commerce. According to the NDU, as of early 2020 the e-retail market was worth approximately SR20.4bn ($5.4bn), a figure that includes physical goods but not tickets or digital services such as Netflix.
Saudi customers are increasingly interested in purchasing goods online. Indeed, in 2019 the Kingdom ranked among the top-10 developing countries in the UN Conference on Trade and Development’s business-to-consumer e-commerce index. It also rose in the index overall, ranking 49th in 2019 compared to 52th in 2018 out of 152 countries.
Saudi Arabia was one of the first countries to establish an e-commerce law. Introduced in October 2019, the E-Commerce Law aims to protect consumers and provide the government with the necessary tools to ensure companies provide quality service for consumers. This, in turn, should help to improve customer trust in online transactions. “One of the biggest challenges for e-commerce has been building consumer trust,” Mutaz Ghuni, Vision 2030 realisation director at the NDU, told OBG. “While online tickets and streaming services are popular, nearly half of Saudis have had an online retail transaction.” There are several factors that may contribute to this; Ghuni suggests that due to the country’s youthfulness – 70% of Saudis are under the age of 30 – many young citizens rely on parents. Furthermore, around two out of three Saudis prefer to use cash for delivery when cash and card are options, and this preference for cash can have a stifling effect on e-commerce. However, Ghuni noted these aspects are slowly changing as customers increasingly trust online transactions.
Along with the E-Commerce Law, a number of measures have been taken to expand the segment and encourage a shift towards digital payments. Recent initiatives included giving more delivery drivers point-of-sale machines. Banks have also allotted machines to larger merchants at subsidised rates. “In 2020 all merchants – including retailers such as malls – will be equipped with and offer digital payment solutions,” Basem Alsallom, CEO of technical solutions provider SURE Global Tech, told OBG. “Digital maturity in Saudi Arabia is advanced compared to other fast-developing economies in the region, and the central bank is empowering this transformation from a cash-based society to a more digitally focused market.”
Saudi Arabia is also working to expand the sharing economy. Popular segments include ride hailing, food delivery and home maintenance. As the digital economy grows, the government is looking to give more people access to part-time gig-economy jobs that will provide citizens with additional forms of income. While growth in some segments such as ride hailing may be slowed due to Covid-19, others – such as food delivery – stand to become even more important to daily life.
Linked to the growth in e-commerce, the country is making strides towards becoming a cashless society. According to the NDU, 36% of transactions made in 2019 were non-cash payments. Mobile payment penetration rates have increased significantly over the past few years, with the payment method being used both offline and online. Available smartphone wallets including Apple Pay, Mada Pay, STC Pay and BayanPay. While credit and debit card penetration rates are comparatively low, the figures are improving. Card penetration grew by over 10% between mid-2018 and early 2020, according to the NDU. This was attributed to a decision in April 2018 to allow the use of debit cards, rather than just credit cards, in online transactions.
There has been a high rate of digitisation in the government in recent years, both in terms of internal operations and external services. To support these developments, Yesser has been introducing a number of initiatives for e-government and managed services. The government launched an internal e-correspondence system, Morasalat, to replace paper-based operations across multiple government departments and agencies. Paper-based operations were dominant until recently, but as of 2019, 33 government entities were linked through the platform, with 13m e-transactions carried out, saving an estimated 39m working hours.
A whole-of-government online services portal, my.gov.sa, is also gradually being rolled out and will serve as a one-stop shop for citizens and residents. While still in its early stages, the portal aims to incorporate all government services. Other prominent platforms include Etimad and Absher. Etimad is an electronic financial interlinking platform operated by the Ministry of Finance that facilitates contracting, payment, tendering, procurement and financial rights. Absher, meanwhile, is an online platform and app that centralises the provision of government services and reduces the time it takes to access important services, such as document delivery and passport renewal. In 2019 over 26m operations were carried out on Absher, with the platform executing 26.2m processes, saving an estimated SR15bn ($4bn) for its 14m subscribers.
The NDU’s annual report for 2019 reported a number of other areas of progress in e-government in 2019. At the Ministry of Justice, the push for a paperless court has accelerated, with 2019 seeing a 75% reduction in paper use and 179 courts using e-systems. In digital health, over 36m appointments at primary health care centres were made on the Mawid platform, and more than 11m people – or around 34.2% of the population – were registered in the Unified Electronic Medical Record system. The latter enabled a savings of SR752m ($200.5m) over the course of year. In education, over 36m certificates were stored on the Noor digital platform, which connects all educational institutions. In culture and tourism, over 250,000 e-visas were issued via the Tourist Visa Platform. Moreover, in December 2019 Majid bin Abdullah Al Qasabi, the minister of commerce, told local press that 85% of the ministry’s services were offered electronically, including investment licences for foreign investors.
The drive for digitisation initially began with the government encouraging citizens to use electronic channels to access government services. However, in recent years citizens have adapted and prefer to access government services online over visiting official offices in person.
E-government services were developed in stages. Following its launch, Yesser initially focused on raising awareness within the government and training civil servants in basic IT packages, including Microsoft Office and email. With a large number of older employees, efforts included changing mindsets and getting employees to embrace new process. In 2016 and 2017 Yesser targeted IT professionals in the government and provided professional certification training in information security, IT infrastructure library and change management. Since 2019 Yesser has helped train senior business leaders and government officials in digital government by sending participants to prestigious international institutions to take short executive training courses that consist of classes split across a year-long period. Yesser is also focused on designing and improving user experiences and products, including my.gov.sa.
Yesser produces a comprehensive internal government report on the state of digital transformation each year, ranking government entities based on their progress. The scale by which it ranks entities is divided into green, blue, yellow and red, with green being the most developed and red being the least. Yesser benchmarks against the UN’s e-government development index. The index, which started in 2001, is released every two years and focuses on developments in infrastructure, human capital and online services. In the most recent index, Saudi Arabia ranked 52th out of 193 countries in 2018. This represented notable progress from its 2002 position of 105th, but down from its 2014 position of 36th. The drop has been attributed to a combination of factors, including the fact that Saudi Arabia’s ICT strategies were under review in the period leading up to the release of Vision 2030. Other countries also advanced more aggressively during this time, and a new methodology for the index was introduced that ranked online services with new benchmarks and more detailed criteria. Results of the next index are expected to be released in July 2020.
In order to advance tech development and develop the skills of citizens, Saudi Arabia has held a series of hackathons. As a way of coming up with innovative technology solutions, hackathons invite programmers and developers to create e-solutions to challenges within a specific area. In 2018 and 2019 hackathons were held targeting challenges related to health, agriculture, cybersecurity and the Hajj pilgrimage.
The Hajj Hackathon was held in Jeddah in 2018 and targeted issues including crowd management, public health, transport, traffic control, travel and accommodation, waste management and communication solutions. The event was organised by the Saudi Federation for Cybersecurity, Programming and Drones, and attracted major companies such as Google, Apple and Wikipedia. With 2950 participants from over 100 countries, the event broke the Guinness World Record for the most participants in a hackathon. The winners were an all-female team that developed a mobile app that translated Arabic-language signs for international pilgrims without requiring an internet connection.
Hajj & Umrah
Following the Hajj Hackathon, the Kingdom has been testing greater use of technology during the Hajj and Umrah to make the experience faster, safer and more efficient. In 2019 the Ministry of Hajj and Umrah conducted trials using AI and the internet of things to give pilgrims access to medical care, as well as monitor the crowd through personal trackers and mobile phones. The pilot scheme saw the issuance of wearable smart cards to 25,000 pilgrims that stored their identity, medical and contact information. The cards track locations and are scanned as people move between sites. A corresponding app enables pilgrims to see which are the most crowded areas and transportation schedules, while allowing the authorities to model location data. The ability to track locations in real time also helps service providers assist pilgrims as soon as they receive a request.
In 2019 the Ministry of Health conducted another trial during the Hajj whereby a robot took a patient’s temperature and checked their pulse. It is able to interact with a doctor off-site who can give a remote diagnosis. The Kingdom had plans to expand the annual pilgrimage from 8m to 30m visitations per year by 2030, though this goal may be delayed in the short term due to Covid-19. Even so, ensuring the well-being of pilgrims through greater investment in and use of emerging technologies such as AI and IoT will be essential to ensuring success.
While the ICT sector is growing, further expansion will be needed going forwards to meet demand for digital services. To that end, citizens, businesses and the government are actively pursuing greater adoption and capacity development, and this trend is anticipated to continue in light of the youthful population and expanding non-oil economy.
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