Saudi Arabia ICT Industry Outlook 2019-2035 : Growth Opportunities | Size-Sales | Trends | COVID-19 Impact Analysis

Saudi Arabia ICT Industry Overview, 2019-2035

The Saudi Arabia ICT sector is on the rise. The Kingdom of Saudi Arabia is one of the largest potential markets in the Middle East and Africa region for ICT Products and services. The ICT market in the region is still growing and happens to grow in the near future. In the today’s world, the growth sector happens to be the hardware infrastructure but the next round of development would be IT services, software and digital media. The KSA utmost priority s ICT development on the national budget agenda and the government also has ambitious plans for the ICT policies to drive its growth. In addition to it, there are number of small enterprises which will continue to grow which are driving the adoption of ICT services. With a growing population of global enterprises, Saudi Arabia happens to be the largest information and Communications Technology market as far as Middle East is concerned. Saudi telecommunications and information technology industries represent over 55 percent and 51 percent of the total Middle East market. As per the world’s advancements ICT markets are maturing, the Saudi Arabian market remains under developed by the global standards and remains on a rapid growth spree.

Saudi Arabia is relying on a significant ICT investment program that will make the Kingdom a regional technology powerhouse in the future. Saudi Arabia’s digital transformation continues to show that Kingdom ‘s ICT spending grew 6 percent in 2017 to over USD 36 billion and it is going to expand in the near future reaching a value of USD 40 billion. This growth is led by Government, Telecom, Finance and oil/Gas sectors. Like all other sectors of the economy, growth and development of the KSA’s ICT Industry is influenced by the Government‘s vision 2030 strategy and there comes the need of diversification and modernization. ICT is not the only sector but it acts as an important sector to transform through the adoption of digital technologies such as AI, robotics, cloud, IOT and e-commerce. In the region of KSA , the old ICT segments such as hardware, mobile phones, telecom will see a downfall and there will be an up fall of third party platform which will see a win situation. There will be rapid changes in the old segment with the rise in newer technologies. Modernization is the light of the day where aggressive IT projects are undertaken by the Saudi Arabian government to increase the competition, service levels usage. There are lot of industries which show significant signs of rapid growth which is driven by multinationals and local companies in the region. The size of the Saudi Arabian ICT market provides excellent operational facilities due to the presence of the technology hub which is catering to the Arabic speakers. The society is young and growing rapidly and more oriented towards technology.

Rising personal income, wealth and growing number of experts towards achieving leadership in information technology are the key drivers for the growth of ICT market in Saudi Arabia. Saudi Arabia has a plan of twenty year for ICT that will support technology and telecommunications adoption across households and enterprises. The government is trying to attract huge public investments across different sectors which can create investment opportunities in the private sector.

Market Dynamics in ICT Sector of Saudi Arabia Region

Growth Drivers

• This IT services market will experience growth of about 13 percent annually through 2010, and its share of the regional market will grow 42 percent during the same period. The main drivers include general economic growth, large infrastructure projects and economic-cities development projects. Increased competition in Saudi Arabia’s telecommunications and financial services sectors—the result of recent government deregulation—is also driving growth of the ICT market in Saudi Arabia.
• The growth of 5G services which the government is trying to increase faster speeds and higher efficiency. Thereby it could allow connection of a greater number of devices. The government is keen to establish Saudi Arabia as the world leader in 5G services and also made a financial commitment to support the roll out of 5G in the economy. The National 5G task Force was set up in early 2018 which was to bring together government, operators and vendors together.
• Giga and Mega projects are the recent projects which are working together in Kingdom of Saudi Arabia. The government has seen favorable regulations, nationwide access to reliable and low cost connectivity. For example we can say that the Ministry of Interior has a mandate to equip all the business premises with CCTV surveillance systems by the end of 2019 and the Ministry of Transportation has made compulsory that all commercial vehicles to implement a fleet management solution. With the rise in connectivity, IOT is facility data from data devices to enhance the productivity and increase profitability. This will in turn raise the standard of living for an average citizen.
• Developing of digital infrastructure which attracts private investors and enhances the competitiveness of the economy. For this reason the government will partner with private sector and support local investments in order to develop the telecommunications and information technology sectors which will lead to a digital economy. The government is focusing on a particular area for improving the quality and expanding the coverage of high speed broadband to 90 percent housing in populated areas and 67 percent in urban zones. Vision 2030 comes with the aim of digitalization and transforming the society to a digital economy.
• Investing in Emerging Technologies is the trend of the day. The privatization of assets including leading companies will bring in new and diverse revenues for the Saudi government. This will further increase the financial revenue to allow maximize its ability to invest in large multinationals companies and emerging technologies from around the world.
• The Kingdom of Saudi Arabia aims at becoming a global leader in e-government by expanding its online services in the present and near future. It will boost transparency and reduce delays. The scope of current services will be expanded to include areas as geographic information, healthcare and education. The vision of 2030 strategy entails the development of smart cities also is the area of focus. The first annual Saudi smart cities conference took place in Riyadh with over 700 participants. The conference used it as the platform to propose smart technologies in smart cities. Research after the analysis proves that the kingdom will invest US$ 600 billion into modernizing its infrastructure across the 286 municipalities to meet the best quality of life of its citizens.
• The Kingdom is the world’s third biggest military spender and spending money on military expenditure. The government is planning to increase its military expenditure thereby creating job opportunities for the citizens of the economy. The proposed increase in local defense expenditure is expected to stimulate other sectors as industrial equipment, communication and information technology which will help the economy in future.

Challenges

• Branding and Content : The Saudi market can be sensitive towards branding and content. The government is facing a challenge that the US companies should get attuned with the branding content of the Saudi companies. They are also expected to familiar themselves with the traditions and customs of the Saudi companies in general.
• The Saudi Arabia’s political environment is quite unpredictable on the application of such technology, considering the leadership fears of extremist uprising that has happened in the neighboring states. The following fact could lead to the blockage of applications such as those in the social medial, hence limiting information sharing capabilities that are necessary in the economic and technological development of the country (Huang, Wang, Wu, Lou, Miao, & Xu, 2012). Thirdly, there is mistrust amongst nations in the application of technology, especially in reference to the matters relating to economic and political intelligence collection. Therefore, with the countries Vision 2030 being to become a leader in the Arabic and Islamic worlds, the possibility of resistance from the neighboring countries is still high. In this regard, no nation will freely allow its communications to be interfered with (Alshuwaikhat & Mohammed, 2017). Besides, the increasing competition among the Gulf States in positioning themselves as regional leaders will derail the country’s vision of becoming a leader as the neighboring nations use similar technologies to protect their data. Lastly, Saudi Arabia has not reached a position to create and rely on its home made information technologies, and as such will have to depend on other countries (Saisana & Philippas, 2012). This fact exposes its program to getting accessed by the operatives from other nations.
• Technical Standards and Regulations : Saudi Arabia continues to move toward adherence to a single standard, which is often based on International Organization for Standardization (ISO) or International Electrotechnical Commission (IEC) standards, in technical regulations to the exclusion of other international standards, such as those developed by U.S.-domiciled standards development organizations (SDOs). Saudi Arabia’s exclusion of these other international standards, which are often used by U.S. manufacturers, can create significant market access restrictions for industrial and consumer products exported from the United States.
• Branding and Content : The Saudi market can be very sensitive to branding and materials content. U.S. companies are encouraged to familiarize themselves with Saudi traditions, customs, and strict observances of the Islamic faith to ensure that branding does not unintentionally offend local norms and practices.
• Performance and Localization Requirements : Government-controlled enterprises in Saudi Arabia are increasingly introducing local content requirements for foreign firms. Aramco’s “In-Kingdom Total Value Added” program, for example, strongly encourages the purchase of goods and services from a local supplier base and aims to double Aramco’s percentage of locally-manufactured energy-related goods and services to 70 percent by 2021. Saudi Arabia’s military is reforming its procurement processes and policies to incorporate new Saudi employment and localized production goals. The SAG’s Vision 2030 program calls for 50 percent of defense materials to be produced and procured locally by 2030, and simultaneously seeks comparable increases in the number of Saudis employed in this sector.
• Saudization : The SAG is adopting progressively stricter quotas for hiring Saudi nationals. U.S. companies report increasing difficulties obtaining visas for expatriate professional employees. Firms also may face challenges in finding sufficient numbers of qualified Saudi nationals to fill particular jobs.
• Intellectual Property Rights Protection : While the SAG has made significant progress in Intellectual Property Rights (IPR) enforcement in recent years, deterioration of the Intellectual Property (IP) situation occurred in certain sectors in 2017. Saudi Arabia was included on USTR’s Special 301 “Watch List” in April 2018, following an increase in the number of IP stakeholders’ complaints about the IPR situation in the Kingdom, particularly with respect to pharmaceuticals, software, digital and signal piracy, and counterfeit goods. (Saudi Arabia had previously been removed from USTR’s Special 301 report in 2010 following improvements in the Kingdom’s IPR enforcement regime.)
• Counterfeiting : The SAG has shown improvements in combatting the proliferation of counterfeit products in recent years, with increased resources devoted to marketplace enforcement and stricter penalties for copyright and trademark violators. However, enforcement often remains uneven: stakeholders cited a decrease in overall counterfeit goods seizures over the course of 2016 amid changes in SAG leadership, while copyright enforcement remains hampered by an insufficient number of inspectors. Moreover, manufacturers of consumer products and automobile spare parts are particularly concerned about the availability in Saudi Arabia of cheap counterfeit products, often produced in China.
• Delayed Payments : Companies which have significant experience with government procurement in Saudi Arabia report they have carried Saudi government receivables for years. The problem has become more visible since the sustained fall in oil prices commenced in 2014 and the SAG’s introduction of austerity measures. U.S. companies should contact the U.S. Commercial Service at the Embassy in Riyadh or Consulates in Dhahran or Jeddah if payment delays persist.
• Unsolicited Contracts (Scams) : The U.S. Commercial Service in Saudi Arabia has noticed an uptick in the number of U.S. firms receiving unsolicited but seemingly attractive business proposals from scam artists. Businesses should be particularly wary of unverified Saudi “companies” and/or government entities promising lucrative business deals and demanding staggered payments to progress through a non-existing procurement process. Perpetrators of sophisticated internet scams use Saudi Arabia’s wealth and admiration for American products and services to lure unsuspecting U.S. companies and citizens with “419” type scams (named for a Nigerian law aimed at combating financial crimes). U.S. businesses should verify the identity of any potential “partner” and the veracity of proposals before committing any resources. If they have doubts, they are encouraged to contact the Commercial Service office in the U.S. Embassy in Riyadh, or U.S. Consulates in Dhahran or Jeddah, for verification assistance.
• Commercial Disputes Settlements : In 2016, Saudi Arabia established the Saudi Center for Commercial Arbitration (SCCA), with arbitration rules that conform to internationally recognized standards and principles. The SCCA offers comprehensive and efficient dispute resolution services to both domestic and foreign firms. Some firms have already started incorporating the SCCA by reference in their contracts. SCCA arbitration awards can be enforced in local courts if they comply with Sharia law.
• The enforcement of foreign arbitration awards for private sector disputes has yet to be upheld in practice. SAG agencies are not allowed to agree to international arbitration without express approval from the Council of Ministers, which is rarely granted.
• Inflation : According to the IMF, Saudi Arabia’s inflation rate averaged 2.6 percent as of October 2018. Costs went up faster for food and non-alcoholic beverages; transport; furnishings and health. In addition, prices rebounded for miscellaneous goods and services, recreation and culture, and fell for clothing and footwear.

Opportunities

• Saudi Arabia is the region’s largest ICT market with strong growth in consumer and enterprise end markets, which are driven by the following:
• Deregulation, privatization and WTO accession promoting private-sector   opportunities—supported by significant investment incentives
• Public-private funding partnerships such as KACST’s (King Abdul Aziz City for Science and Technology) R&D co-funding initiatives such as Technia cluster of companies like Technia Defense, Technia Energy and Technia Aviation
• Public-private partnerships supporting venture capital funding such as recent collaboration between Saudi General Investment Authority (SAGIA) and Intel
• Strong commitment to e-commerce and e-governance initiatives (including IP protection)
• Significant unmet demands for web-based and mobile services; increased enterprise and government usage of web-based services provide large-scale opportunities for contractors and service providers
• Massive public investment in connectivity for Economic Cities provides unique opportunities for green-field projects covering millions of users
• Public investment in IT knowledge and Internet-based services literacy programs
• Saudi Arabia’s unique access to energy makes it an attractive location for a range of activities across the ICT value chain. ICT-enabled service providers with vast IT offerings will be able to leverage this access to low-cost power and state-of-the-art communications infrastructure to efficiently service global customers. Hence the recent activities with Amazon Web Services, Google and Alibaba.
• Several underlying prospects exist in the use of information technology to supporting the objectives of the nation’s vision 2030. Firstly, with IT, there is potential for a vibrant economic growth for Saudi Arabia. Technology is a key factor in the growth of modern industries due to its ability collect, analyze, and store information in a manner that it could easily get retrieved and applied at ease. Besides, it has also become necessary in data exchange among various business players, thus ensuring the sharing of skills, which is necessary in transfer of the abilities from one group to another. Secondly, the application of information technology presents an opportunity for the government and private sector to interact and corroborate more closely on development programs (Huang, Wang, Wu, Lou, Miao, & Xu, 2012). As such, government services become easily accessible, hence encouraging more investors to put their money in various sectors of the economy. 

Restraints

• Information technology application in the implementation of the Saudi’s Vision 2030 has also been faced with various threats that could derail the progress or successful execution of the program.
• Firstly, IT-related crimes are on the rise globally. As such, the implementation of the program should be done cautiously; otherwise it could be attacked by the country’s enemies to destroy its economy. Besides, the threat of information theft has become a reality, and thus most companies will not be willing to take such a threat by exposing themselves. This is one of the restraining factors which is restraining the growth of ICT Industry in Saudi Arabia.
• Secondly, with the competing interests on the government side, little resources are likely to be allocated for information technology. As such, it may become difficult to ensure its safety and maintenance for the country. Budget allocation can be a problem as it requires huge amount of money.
• Thirdly, people generally have vast expectations regarding the performance of information technology in delivering the expected results. As such, they fail to clearly recognize its weaknesses, which then lead to unforeseen failures, such as data loss and data breach etc.
• Fourthly, as technology can help enhance services grows, the risks posed by hackers and other cyber attackers continue to increase. Therefore, there is no single time that the application of information technology will be viewed as safe without the risks of being attacked. Cybercrime is on rise and it will 
• Fifthly, IT requires constant research and development, which can require raising the cost of its maintenance. As such, it becomes difficult to keep up with the threat with the intention of enhancing security, the governments and businesses should reduce funding, which in some ways will curtail the growth and development of the IT industry in Saudi Arabia and impact the implementation of the blueprint.
• Last but not least, the possibility of job losses grows with the rising use of technology. Although on the one hand, IT has in several ways led to the creation of new job opportunities, on the other hand, it has also threatened others, which may contribute to some resistance by employees. People hate losing their jobs and are unwilling to let go of their source of income without fighting back. As such, they are likely to sabotage the implementation process with the hope of retaining their positions and control. Such factors could then contribute to system failure, and hence the inability to achieve its objectives.
• Saudi Vision 2030 aims to transform Saudi Arabia into a globally competitive ICT hub, with modern technologies and an empowered information society.
• The ambition envisages many investment themes, including the development of the digital content and media, the expansion of the telecommunication system, the digitization of the country, and the creation of new high-tech and smart industries.
• The government is working alongside the private sector to modernize the ICT infrastructure, enhancing the regulatory framework to enable new innovative investments, and building the most suitable ecosystem to support entrepreneurs and digital talents.

COVID-19 impact on "Saudi Arabia ICT Industry"

The report analyses and includes complete detailed chapter of 50-70 pages about the short term & long terms impact of COVID-19 outbreak on each segment of "Saudi Arabia ICT Industry" along with government measures to support the sector. It also showcases the current market landscape during COVID, impact of the virus on leading companies, expected demand schedule and supply chain in the industry and other various major factors. This will help you identify those companies that may benefit from this pandemic as well as those that will lose out.

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Key questions answered in this research report

• What is the total market size by 2035 and what would be the expected growth rate of sales?
• What are the total sales in 2018-19 and what would be the expected demand over the forecast period?
• What are the recent developments and business strategy of companies?
• What are the market opportunities for the existing and entry level players?
• What are the key market trends?
• What are the factors which are driving this market?
• What are the major barriers to market growth?
• Who are the key vendors in this market space?

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