Saudi Arabia’s ICT sector has already achieved notable success. As of 2022 it is the largest and fastest-growing market in the MENA region, with a value of SR154bn ($41.1bn). The scale of the Kingdom’s ambition is drawing global attention, with multinational ICT providers congregating once a year in Riyadh for the LEAP tech conference, as well as the Global Cybersecurity Forum.
IT is set to play an increasingly important role as the Kingdom seeks to strengthen connectivity between the government, industry and academia – and ultimately achieve the long-term Vision 2030 goal of diversifying away from hydrocarbons and fostering a more sustainable economy (see Economy chapter).
Guiding Policies
Under an ongoing ICT sector development strategy launched in 2018, the government aims to boost the sector’s contribution to GDP by $13bn; increase female participation by 50%; expand the information and emerging technologies market by 50%; and create over 25,000 ICT-related jobs by 2023.
The Ministry of Communications and Information Technology (MCIT) is responsible for sector oversight and fostering an ecosystem that enables next-generation technologies to thrive. Under ICT Strategy 2023, the ministry sets out the framework for the Kingdom’s roadmap to digitisation and identifies 13 key priorities in three strategic themes: ICT transformation, supporting technology localisation and growing the IT and emerging technology market. It also outlines 24 initiatives under these strategic themes, which include improving the sector’s profitability and competitiveness, expanding 5G coverage and broadband rollout, improving local content and female participation, and nurturing start-ups and innovation.
The strategy serves as a blueprint for digitalising the entire Kingdom, and demands a sufficiently trained pool of skilled labour to staff the sector and develop infrastructure. The remit also covers guiding the development of competitive telecoms, IT and emerging technology markets, as well as implementing e-government and national data policies. These should provide the bedrock for a flourishing digital culture spanning e-commerce, education, health, Industry 4.0, smart cities and other sectors. The strategy also lists various targets designed to raise the contribution of local industry, particularly small and medium-sized enterprises (SMEs), to promote sector growth, while fostering a more dynamic and innovative ecosystem.
Structure & Oversight
Multiple government bodies will assist in achieving these goals, including the Communications, Space and Technology Commission (CST), which was rebranded from the Communications and Information Technologies Commission in November 2022. The CST links government and private industry, as well as the traditional telecoms and emerging technology segments. Its other priorities include safeguarding market competition, protecting consumers and promoting investment in new technologies.
Since 2020 the CST has facilitated the implementation of the Saudi Open Access agreement between the country’s six major network providers: stc, Mobily, Zain Saudi Arabia, Salam, Dawiyat and GO Telecom. The agreement aims to maximise ICT infrastructure efficiency through tower and network-sharing initiatives — in what is a relatively crowded market — to raise cooperation and competition between providers, and improve service quality and resource optimisation.
Another important organisation is the Digital Content Council, which was formed in 2021 in partnership with several government entities. The council aims to support the Kingdom’s digital content market by developing the necessary infrastructure, encouraging private sector involvement and nurturing local talent. It commands SR4.2bn ($1.1bn) in support funds for 36 initiatives and focuses on four main subsectors: video, audio, electronic games and digital advertising.
The Kingdom’s online retail market, for its part, is supported by the E-Commerce Council, which falls under the Ministry of Commerce. The council works to improve digital retail opportunities for Saudi companies; enhancing digital payments and e-commerce systems forms a key part of Vision 2030.
The National Cybersecurity Authority (NCA) protects Saudi national interests in cyberspace, including safeguarding citizens’ data and companies’ intellectual property. In May 2022 the NCA launched the National Portal for Cybersecurity Services (HASEEN) to develop and manage cyber services, support communication mechanisms for national entities, and raise the level of cybersecurity protection in the Kingdom. HASEEN includes a real-time information-sharing platform for entities to keep up-to-date with best practices, and a compliance-management service that allows the government to monitor their progress.
Lastly, the Saudi Data and Artificial Intelligence Authority (SDAIA) is responsible for the Kingdom’s national agenda on artificial intelligence (AI) and big data. It released its National Strategy for Data and Artificial Intelligence in 2020, which aims to grow the sector’s contribution to GDP to SR500bn ($133.3bn) by 2030. SDAIA oversees the National Centre for Artificial Intelligence, the National Data Management Office and the National Information Centre.
Regulatory Change
Governments around the world are taking steps to keep pace with digital innovation, particularly as technologies such as AI quickly evolve. Saudi Arabia is striving to stay ahead of the curve, and in June 2022 introduced a new ICT law covering both the telecommunications and IT segments, which includes digital infrastructure, emerging technologies, e-governance, and enabling applications and services. The Telecommunications and IT Act broadens the scope of the outgoing Telecommunications Law, while retaining provisions to encourage innovation and mandating that service providers offer services at fair prices or CST-determined costs.
One new provision requires service providers to comply with the Kingdom’s new data protection law, which was put forwards in 2021, but only came into force in March 2023 after an SDAIA-led public consultation led to a relaxation of the rules on international data transfers. The amended version widens the range of circumstances under which a data controller may transfer personal data overseas or disclose data to an entity outside Saudi Arabia, provided the transfer will not adversely affect national security or vital interests of the country. It also makes it easier for individuals to demand that their data be destroyed.
Another key regulatory advancement is the introduction of the CST’s sandbox, in place since May 2022, that allows emerging technology innovators to benefit from regulatory waivers and support from the CST’s partner network as they seek to scale their business.
Performance
According to the CST, Saudi Arabia’s ICT sector was valued at SR154bn ($41.1bn) as of May 2023, or 4.1% of GDP. Notably, 2022 was the first year that the size of the IT segment SR81bn ($21.6bn) exceeded that of the telecoms segment.
In 2022 Saudi-listed ICT firms accounted for 51% of GCC revenue across the sector, amounting to SR107.4bn ($28.6bn), up 9%. Their combined market capitalisation totalled SR293.9bn ($78.4bn). In terms of telecoms market share, stc accounted for 67.2% in the third quarter of 2022, according to financial services firm Al Rajhi Capital. Mobily had a 21% market share and Zain the remaining 11.8%. Looking ahead, financial news platform Argaam forecasts that the net earnings of the Kingdom’s listed ICT players will grow by 8.4% to SR15.4bn ($4.1bn) in 2023, followed by an 8% growth to SR16.7bn ($4.4bn) in 2024.
This positive market performance is reflected in the net earnings figures from the major telecoms players, all of which booked profits for the first time since 2009, buoyed by Vision 2030’s support for digital services. stc is the Kingdom’s largest mobile operator. The sovereign Public Investment Fund (PIF) holds a controlling stake in the company. In 2022 stc announced net profits of SR12.2bn ($3.3bn), up 8%, on record-high revenues of SR67bn ($17.9bn). stc attributed this to the diversification of its investment portfolio into areas such as cloud computing and internet of things (IoT), as well as digital infrastructure and transformations.
Zain reported revenue and profit in 2022 of SR9.1bn ($2.4bn) and SR550m ($146.6m), respectively, with net earnings up 157%. The company cited its growing 5G user base in the business community and the uptake of AI, augmented reality and virtual reality, and cloud computing, alongside investment in financial technology (fintech) and digital entertainment as key drivers.
Mobily, meanwhile, announced net profits of SR1.65bn ($439.9m) in 2022, up 54.6% on the previous year. It reported that revenue increased across all channels on the back of a broader subscription base.
Infrastructure Rollout
According to the CST’s 2022 Saudi Internet Report, investment in digital infrastructure in the six years to 2022 reached SR93bn ($24.8bn). This includes the rollout of high-speed internet to 21,000 rural villages, helping lift national internet penetration to 98.6% of the population.
Total internet traffic in the Kingdom rose to 35m TB, a 17% increase from 2021. In terms of broadband, 3.7m households have access to high-speed fibre-optic connection, while mobile subscription penetration stood at 172% of the population. According to the report, average mobile internet data consumption was 37 GB per person per month in 2022, and 28% of people subscribed to unlimited data packages.
The CST observed that service quality, including average mobile internet speeds of 181 Mbps – double the global average, has been improved by the allocation of frequency spectrum for communication services via auction. Through the Spectrum Outlook for Commercial and Innovative Use 2021-23, the commission is directing the facilitation of non-terrestrial networks for next-generation technologies, such as mobile satellite services, wireless connectivity on aircraft, IoT through satellites, and hybrid 5G connectivity.
The Kingdom’s overall 5G penetration rate has reached 53%, while coverage exceeds 94% in Riyadh.
Saudi Arabia has partnered with China’s Huawei and Sweden’s Ericsson to accelerate the 5G rollout. In March 2023 stc and Ericsson signed a memorandum of understanding (MoU) to explore future network architectures for 5G services, including cloud radio access network discussions. Ericsson is also collaborating with MCIT to host 5G hackathons and other activities designed to nurture local ICT talent and encourage innovation. Meanwhile, Huawei agreed to similar 5G-focused arrangements with both stc and Zain, covering outdoor and indoor solutions.
March 2022 marked a world-first for Saudi Arabia when UK company Stratospheric Platforms successfully trialled its first 5G transmission from the stratosphere, in collaboration with the Saudi Communications and Information Technology Commission. The trial aims to demonstrate the possibilities of establishing 5G capabilities even in remote areas.
In August 2022 stc launched the Saudi Vision Cable offshore. The 1071-km, high-capacity submarine cable will connect four landing stations in the Red Sea located in Jeddah, Yanbu, Duba and Haql and provide 18 Tbps of connectivity across 16 fibre pairs. The cable aims to raise the capacity of data centres to meet national and regional storage needs, including those of stc’s Center3 Company, which will consolidate the group’s regional digital infrastructure assets.
Mergers & Acquisitions
In recent years the PIF has played a key role in many of the key mergers and acquisitions that have taken place in the telecommunications infrastructure market. In September 2022 the sovereign fund led a consortium to buy 80% of Zain’s fixed tower network for $807m. This deal was then supplemented by the PIF’s non-binding offer for 51% of stc’s tower unit, TAWAL, valuing the company at almost $6bn. If the deal is approved, the PIF will acquire a tower business with burgeoning international ambitions. As of July 2023 there had been no further updates on whether the deal was confirmed.
In April 2023 TAWAL agreed to purchase three telecoms companies in Eastern Europe for $1.35bn, adding to its existing overseas tower operations in Pakistan. TAWAL plans to add more than 2000 new sites in Bulgaria, Croatia and Slovenia, on top of its network of more than 4000 units.
Saudi telecoms firms are actively seeking overseas acquisitions in the services market. For example, ICT company solutions by stc bought an 88.2% stake in Egypt’s Giza Systems for $158m in October 2022. In addition, in June 2023 the company signed a binding offer with Devoteam Group and ORTLL Investment to purchase 40% of IT consultancy Devoteam Middle East at an enterprise value of SR742m ($198m).
Innovation & Entrepreneurship
In February 2022 the minister for communication and information technology, Abdullah Alswaha, announced the Kingdom would be investing $6.4bn in future technologies. This includes a $2bn joint venture between PIF-backed eWTP Arabia Capital, China’s e-commerce giant Alibaba and Indonesia-headquartered delivery company J&T Express Group to build a regional smart delivery centre.
Saudi national energy company Aramco’s fund Prosperity7 Ventures is also investing $1bn in transformative start-ups, and stc will invest $1bn to develop data centres and submarine cables.
The government has allocated $1.4bn to fostering digital entrepreneurship, including an initiative known as The Garage — the name inspired by the fact many of the world’s leading technology companies first started in a garage. The Garage is an innovation hub in Riyadh that hosts events, training programmes, as well as business accelerators and incubators. It also offers technical support, marketing, financial aid, a co-working space and accommodation.
The future city of NEOM, located in the north-west, has also started investing in new technologies, with $1bn allocated to creating a metaverse for its citizens. This financing will complement the work of the city’s digital-focused subsidiary Tonomus, which has spent $1bn on integrating AI into the city’s development.
Foreign Investment
US-based computer technology firm Oracle announced in February 2023 that it plans to invest $1.5bn to expand cloud infrastructure in the Kingdom. The funds will go towards a new public cloud region in Riyadh and an expanded region in Jeddah. It plans to establish a third cloud region in the NEOM future city. The investment forms part of an MoU between Oracle and MCIT to help Saudi businesses benefit from cloud technology.
The same month, Microsoft announced plans to invest $2.1bn to build a global super-scaler cloud in the Kingdom. Google has also committed substantial investment in cloud development in Saudi Arabia, while Huawei has pledged $400m to expand its own network.
This investment has helped boost local companies’ cloud deployment. As indicated in a 2023 survey published by global consulting firm KPMG, 88% of businesses now consider themselves advanced in the adoption of cloud services.
In March 2023 Aramco signed a non-binding MoU with Samsung Electronics, which sets out a strategic collaboration to localise an industrial, 5G-tech ecosystem. The proposed agreement aims to further the digital transformation of the Kingdom’s industrial sectors, focusing on energy, petrochemicals and manufacturing. To this end, in January 2023 Aramco signed more than 100 agreements worth $7.2bn to accelerate digital transformation, and established the Aramco Digital Company to further these efforts.
Workforce & Upskilling
Saudi Arabia is aiming to create up to 250,000 ICT jobs by 2030, building on an existing employment base of about 300,000. However, that figure will require substantial investment to develop and enhance digital capabilities.
As a result, part of the Vision 2030 key performance indicators include objectives for training 40% of the workforce in fundamental data and AI skills, along with increasing technology spending to exceed 20% of the total national outlay by 2025.
Nevertheless, some analysts have forecast that the billions of dollars being invested in ICT in the Kingdom – amounting to a world-leading $24.7bn in technology by 2025 – will create unfilled vacancies for specialists in big data, AI and digital transformation.
Consequently, higher education institutions like King Abdullah University of Science and Technology (KAUST) are directing investment towards new technology programs and entrepreneurial training, offering the flexibility of enrolling in online remote courses.
KAUST also hosts its own start-up incubator, founded in 2010, which operates the TAQADAM programme, a six-month course that offers $40,000 to accepted new entrants and $1m if the company qualifies for follow-up investment. As of July 2023 TAQADAM has graduated more than 300 start-ups and allocated $60m in capital.
This complements the $1.2bn that the government has pledged to improve digital skills among 100,000 Saudi youth across cybersecurity, programming, AI and gaming. Technology centres such as Google for Startups and Cisco Networking Academy, as well as The Garage, also provide support for young entrepreneurs.
E-commerce giant Amazon also launched a new academy in the Kingdom in February 2023, which aims to train 30,000 Saudis by 2025 in cooperation with MCIT. Apple has opened its own developer academy in the capital, focusing on training 600 female participants per year at Princess Nourah University and Tuwaiq Academy. The latter is one of four major digital training institutions, alongside Saudi Digital Academy, Misk Academy and the National Information Technology Academy. For its part, US-based IBM has agreed to serve as the government’s lead partner in the training of government agencies and employees in digital skills.
In the UN Development Programme Global Knowledge Index 2022, Saudi Arabia secured the top position for both internet usage among its population and the percentage of individuals with standard ICT skills. The index also cited the country’s high levels of household internet access, the research share of research and development expenditure, and upper-secondary education enrolment rates as other key areas of strength.
Saudi Arabia ranked second in the G20 for digital preparedness in a 2023 report by the International Telecommunication Union, which named the strength of its regulatory framework as a significant success factor. The Kingdom also ranked second globally in terms of AI awareness in society, according to Stanford University’s “AI Index Report 2023”, surpassed only by China. Saudi Arabia and China jointly ranked first on a question about the positive impact of AI products and services through to 2026-28.
Tech Development
As of March 2023 Saudi Arabia hosts a total of 65 start-up accelerators and incubators, including various venture capital and angel funds like Riyadh Valley Company, which actively contribute to supporting early-stage companies.
Alongside KAUST’s TAQADAM programme, the PIFowned Saudi Technology Development and Investment Company’s BIAC is an umbrella accelerator, under which the most successful programme is Badir, which has incubated more than 500 start-ups.
The government has also introduced programmes designed to support start-ups. For example, in May 2023 the Ministry of Industry and Mineral Resources launched its Industrial Business Accelerator and Incubator initiative, which aims to support SMEs and industrial project owners by sharing resources and linking entrepreneurs with relevant government, academic and industrial organisations.
Fintech & E-commerce
The fintech industry plays a major role in Vision 2030’s Financial Sector Development Programme. The Kingdom aims to triple the number of fintech firms from around 150 to 525, create 18,000 jobs by 2025, as well as increase the proportion of transactions conducted digitally to 70%. As of 2022 approximately 71% of the population used online banking services, according to the CST.
Saudi Arabia’s e-commerce market is growing quickly. According to the Ministry of Commerce, it grew by 32% year-on-year in the first quarter of 2023. Total commercial registers issued during the quarter was 4093, up from 3499 in the first quarter of 2022.
A 2022 report by UK-headquartered, cloud-based payment platform Checkout.com also found that 91% of Saudi consumers shopped online, and 78% were expected to maintain or increase their e-commerce spending in 2023. According to the survey, consumers are increasingly shifting away from cash, with 26% of Saudis selecting digital wallets as their preferred payment method – double the amount in 2021.
The Kingdom’s e-commerce industry has also attracted international investment. For example, in February 2023 Indian fintech Zoho Corp has committed $30m of digital wallet credit and training funds to boost SMEs’ adoption of its more than 55 business applications. This announcement was made at 2023’s LEAP conference, which attracted funding worth more than $10bn for digital enterprises in the Kingdom. Riyad Bank and Banque Saudi Fransi led the way, contributing $1bn apiece for ICT companies.
Digital Government
In its 2022 report, the National Transformation Programme (NTP), which is among the primary Vision 2030 implementation vehicles, noted that Saudi Arabia provides 6000 digital government services, equivalent to 97% of the total.
This achievement helped Saudi Arabia place 31st in the UN e-Government Development Index for 2022, and first in the MENA region for digital government services in the Government Electronic and Mobile Services Maturity Index 2021.
As an example, the Ministry of Justice in June 2023 launched a virtual notary public system, allowing users to benefit from remote electronic notorisation services. The Kingdom is also cooperating with its regional neighbours to improve the provision of e-government capabilities, with Saudi officials in October 2022 travelling to Muscat to sign off on collaboration programmes with Oman focusing on digital transformation.
Outlook
Saudi Arabia is a driving force behind anticipated investment in digital transformation reaching $76bn across the Middle East, Turkey and Africa by 2026, according to a study released in 2022 by the International Data Corporation.
The government is taking clear steps to advance the digital transformation of every aspect of society, from government services to banking and manufacturing – the latter under a Future Factories Programme that aims to ensure the adoption of Industry 4.0 automated solutions in more than 4000 factories.
The Kingdom’s digital ambitions under Vision 2030 have also attracted some of the world’s major technology players and other foreign investors looking to invest in Saudi Arabia’s ICT infrastructure, software development and tech innovation ecosystem.
One potential impediment to the success of the Kingdom’s efforts is the availability of skilled workers in critical segments such as AI, data science and digital transformation management. The country’s commitment to providing the domestic workforce with the appropriate knowledge, skills and abilities for the future will be essential in assisting it to realise its goals.
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