Saudi Arabia's E-vision

The Kingdom of Saudi Arabia wants to become the Middle East’s e-business powerhouse, but what are its chances of succeeding?

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By  David Ingham Published  June 6, 2001

A tech hub of the future|~||~||~|Abdulrahman Al-Mazi has an ambitious vision for the Kingdom of Saudi Arabia. The enthusiastic managing director of National Information Systems says that what he calls, “ICT” (information and communications technology) could become Saudi Arabia’s largest industrial sector after oil & gas. “If you support ICT, it will be the third largest contributor to our GDP by 2010 and the second largest by 2020,” Al-Mazi told an audience of KSA’s most senior government and business figures last month.

The audience in question was gathered together on May 6-10 for the Saudi International Conference & Exhibition for E-Commerce. This impressive gathering featured an array of speakers, who were there to outline the moves that the Kingdom is making to encourage e-commerce practices and to become a hub for knowledge industries.

But could oil-dependent Saudi Arabia really become a hotbed of New Economy innovation? Look closely, and you’ll see that there is plenty of quiet, but steady, activity going on behind the scenes to make this happen.

It might not be obvious and progress may seem a little slow, but the Saudi International Conference & Exhibition for E-Commerce showed that things are definitely happening. Take KSA’s two major industrial groups, Saudi Basic Industries Corporation (SABIC) and Aramco. Both revealed to the conference how they have been boosting internal efficiency and driving down costs through the use of information technology.

King Abdulaziz City for Science and Technology told the audience that it’s giving itself ten months to put in place a public key infrastructure (PKI) system that will enable secure Kingdom-wide e-commerce. Saudi Arabian Monetary Agency is doing its bit, piloting an online payment system for business to business e-commerce based on the widely-used SWIFT technology. It’s also developing a new electronic securities trading system that will deliver straight through processing of payment and share transfers.

Even the lumbering giant of Saudi Telecommunications Company is beginning to stir and, on the surface at least, appears to be playing its part in Saudi Arabia’s planned e-transformation. STC president Abdulrahman Alyami says STC is working in four areas: telecommunications infrastructure, customer service, customer solutions and internal efficiency.

“We are building the national e-commerce infrastructure needed to access information and conduct transactions through the Internet,” says Alyami. “We are transforming STC to extend value to its suppliers and its workforce.”
||**||Commitment to the cause|~||~||~|
More on all of these developments later, however. What last month’s conference showed above all is that there’s a real desire in Saudi Arabia to make the Kingdom a part of the New Economy and to encourage the development of knowledge industries.

There’s the fact, for example, that last month’s conference was held under the auspices of His Highness Prince Abdullah, the Crown Prince, indicating support from the very top. There’s the involvement of the Kingdom’s top organisations, ranging from SABIC and the normally elusive Aramco, to KACST and SAMA, in the event. There’s also projects like Watani, an investment of potentially SR5 billion, that will bring the Internet and technology into all the Kingdom’s schools.

In an exclusive interview, Dr Fawaz Alami, Deputy Minster for Technical Affairs and Head of the Standing Committee on E-commerce, offered an insight into the government’s thinking. He says there is a commitment to the new direction from the “highest level,” but that action must be taken in a way that allows the country to retain what Dr Alami calls its, “unique position.”

“Saudi Arabia is the type of government, and the people are the same, that doesn’t like to publicise everything it is doing,” says Dr Alami. “We would like to do things and let the results speak for us. You can see these actions and deeds today.”

To set the ball rolling, the Standing Committee on E-Commerce was created a few years back to study what needed to be done to create knowledge industries in the Kingdom. After a number of low-key meetings, the status of the committee was raised to Deputy Minister level, headed by the Ministry of Commerce, and incorporating representatives from both the pubic and private sector.

After further deliberation, the committee came up with a list of recommendations that will form the basis for government policies on e-business. A number of government entities and ministries have now been asked for their feedback and to explain what they will contribute to the plan.

The result of that process was the announcements made by KACST, SAMA, STC and others at last month’s conference. The Ministry of Finance and National Economy has been told to come up with a co-ordinated strategy for Kingdom-wide e-government, although any firm plans are under wraps. Dr Alami’s Ministry of Commerce will come up with the rules and regulations to govern e-commerce in the Kingdom.

Dr Alami sums it all up by saying that he wants to see the Middle East close the current gap between the region’s IT imports and its IT consumption. “If we look at the top twenty exporters in the Arab world, we will not find a single one in the Arab countries,” he says. However, he argues that Malaysia, a predominantly Muslim country and a successful IT exporter, is a role model for Arab countries to follow.
||**||Challenges to overcome|~||~||~|
Needless to say, there are significant challenges to be overcome if KSA is to create knowledge industries and boost e-business inside its borders. A lack of speed at the decision making level could be one of the major issues. A number of delegates in the audience at last month’s conference were outspoken on this issue, pointing out that many previous good ideas had fallen prey to endless delays in committees.

Dr Alami answers that by saying the country’s top leadership is committed to the path that the standing committee is suggesting the country take. “There is a will and a conviction that comes from the highest level,” he says.

Saudi Arabia could do no worse than look at Dubai Internet City as an example of how to ‘make things happen.’ Whatever people may think about Dubai Internet City, the idea did go from concept to the near completion of phase one in approximately a year.

Ahmad Bin Byat, chief executive officer of Dubai Internet City (DIC), told the conference that streamlined reporting was key to this. “We had a reporting line direct to the Crown Prince [His Highness Sheikh Mohammed] and didn’t have to go through any Ministry or department,” he said. Another important factor that helped DIC happen so quickly, Bin Byat said, was a “can-do attitude.”

The question of haste doesn’t just hang over the decision making process, however. Saudi Telecommunications Company, perhaps the most fundamental link in the chain, is trying to improve the Kingdom’s communications systems, but many fear that it just isn’t moving quickly enough.

In the area of infrastructure and solutions, STC is at least saying all the right things. It’s been talking a lot about the rollout of WAP technology and aims to dramatically increase the number of Internet users that can be supported.

By the end of the year, STC president Abdulrahman Alyami says that KSA’s telecomms infrastructure will be capable of supporting potentially 1.3 million Internet users. In recent months, STC secured a $657 million loan from a consortium of KSA banks that will help finance the work.

STC says it also wants to use the Internet to improve customer service. Corporate customers can now check their bills online and a similar service is on its way for residential customers.

Internally, Alyami speaks of using technology to improve efficiency. An enterprise information portal is under construction to enable information sharing within the company. “We are re-engineering STC to better serve its customers,” says Alyami.

How far STC’s e-transformation efforts have progressed isn’t clear, however. Hopefully, the progress will be quicker than STC’s corporate Web site (, which is even now described by Alyami as, “under construction.”

Spare a thought too for Saudi Arabia’s Internet Service Providers (ISPs), which face huge challenges working with STC. The very companies that are there to sign people up to use the Internet face a myriad of problems.
||**||ISPs' problems|~||~||~|
One is money: at least two ISPs claimed that over 80% of an ISP’s turnover still has to be handed over to STC and King Abdulaziz City for Science and Technology. ISPs are left to scratch a profit out of what remains, something that few are managing if rumours are to be believed.

STC should surely be making it as easy as possible for KSA’s people to use the Internet, but instead prices remain high. It costs around SR230 ($62.67) to use the Internet for 40 hours per month, a price way above international pricing levels.

Of that SR230, SR120 goes straight to STC in call charges, which cost SR3 per hour. The remaining SR110 is paid to the ISP, which then has to hand over 80% of this amount to STC.

Mansour F Al-Obaid, general manager of AwalNet, a leading ISP, says there is a great opportunity to get a young audience online, but that the opportunity is being missed. “More than 70% of Saudi Arabia’s population is less than 30 years old,” says Obaid. “There is potential for all those people to use the Internet, and to encourage them to use the Internet you have to make it available as a commodity, not as a luxury service.”

As well as being affordable, the Internet also has to be stable. A purchasing department isn’t going to switch procurement to the Web if it isn’t certain it can log on at all times.

The same things goes for application service providers (ASPs), companies that allow users to access software over the Internet. ASP services rely on Internet connections constantly being available: go down, and the customer is left stranded.

Normally, an ASP would provide what’s called a service level agreement (SLA) to users, which is normally around 99% uptime. If that target isn’t met, the ASP pays penalties to the client.

AwalNet is one company that has ambitions to become an ASP, but has held back partly because it can’t provide SLAs to clients. “An ASP service without an SLA is not an ASP service,” says Mansour Al-Obaid. “To offer SLAs, we need STC to provide it to the ISPs.”

The authorities are certainly aware that change is required at STC. Dr Fawaz Alami explained that the government’s strategy towards STC has been to allow it to embark on a process of what he calls, ‘corporatisation’ moving eventually towards privatisation.

“I believe that one day in the future we will have the opening up of telecommunications services in Saudi Arabia,” says Dr Alami. “We do not know when this is going to take place, I believe STC will know [when the time is right.]”

The fact that Dr Alami, a senior government figure, even speaks about the privatisation of STC is significant. However, doubts will remain about whether a government-owned STC can think or move with the type of speed that’s needed in the New Economy.
||**||The skills question|~||~||~|
Whatever infrastructural challenges Saudi Arabia may face, they are ultimately fixable if there’s a will to invest money in fixing them. What’s much harder to tackle is a lack of personnel with the skills to create and manage high-tech industries.

Short term and long term solutions have been thought about. These aim to create more indigenous technology expertise, whilst making it easier for skilled overseas personnel to enter the Kingdom.
To encourage intellectual capital inflows, Dr Alami says that discriminatory nationality policies have been ended. “National treatment is non-discriminatory in terms of visas and in terms of benefits, which are now equal to what Saudis are entitled to,” he says.

A foreign investment law passed one year ago allows sponsorships for foreign workers to be obtained on projects rather than on Saudi nationals. A further step is a decision to allow foreigners to apply for soft loans.

There is also talk of a ‘one stop shop’ where all paperwork relating to visas and permits can be handed in to the authorities once and dealt with in a single go. “We do not have borders that will prevent knowledge going from one place to another,” says Dr Alami.

Measures like the ones taken can yield results almost immediately. What’s more difficult is to create an IT-savvy workforce at home.

In a modest building on the edge of Riyadh, a group of people is working on the country’s planned solution. This group, headed by Turki Al-Remali, project director, is charged with putting together what’s become known in the Kingdom as the Watani project.

Watani is no less than an effort to put PCs into every single one of KSA’s classrooms and have them linked into a Kingdom-wide network of information. The project will progress in stages over several years, but the aim is to finally have millions of students in virtually every school able to access the system.

“The project is about introducing information technology into the classroom, and thereby enhancing education and developing student’s skills in using technology,” says Abdullah Al-Dybaikhi, chief technology officer, Watani. “It is much more than just having IT in schools.”

A technical blueprint for the project is being finetuned and requests for tenders will be sent out to technology suppliers over coming months. A budget for the project has not been fixed, but spending over the next five years could be approximately SR5 billion, Al-Dybaikhi says.

The Kingdom’s existing fibre-optic infrastructure will be used to link cities together on the Watani network. New wireless systems will be built to link sites within the cities and satellites will beam content into the rural areas.

The really important part of the project, the content, will cover every subject on the KSA curriculum. The aim is not just to have students learning about technology, but also to have technology become an integral part of all a student’s studies, and thus an everyday part of their life.

“We will have electronic content for every subject on the curriculum,” explains Al-Dybaikhi. “From there, we can move on to include exercises, tests, special needs and so on.”
||**||E-enthusiasm is strong|~||~||~|
According to figures from the Saudi Arabian Ministry of Commerce, the private sector contributed 47% of the country’s GDP last year. If the country’s business and technology community has its way, that share will increase significantly in coming years, with knowledge industries leading the way.

Whether that happens or not depends very much on the type of initiatives outlined in this report coming to fruition. But even without what’s being talked about here, there are Saudi Arabian companies that are already learning to compete in the New Economy.

According to Saeed Al-Udaifi, senior vice president, Saudi Basic Industries Corp (SABIC), the company aims to utilise e-business techniques to cut operational costs by up to 20% annually. It has already embarked on a supply chain management strategy and is beginning to dabble with e-procurement. It began selling its products on ChemConnect, a global Web site dedicated to the chemicals industry, over a year ago.

“We are forcing change within SABIC,” says Al-Udaifi. “We are selling most of our products globally and we are competing globally, so we can’t relax and wait until things change by themselves.”

The level of Internet usage in the Kingdom points to huge enthusiasm for all things e-related. Just two years after the Internet was switched on, STC says there are 140,000 Internet subscribers and an estimated 600,000 regular users, infrastructure and cost not withstanding. STC says it’s expecting 3.3 million regular users by 2004.

Enthusiasm for the Internet and e-business is clearly growing in the Kingdom, both amongst the public and amongst businesses. It’s now up to the public institutions to deliver an environment in which that enthusiasm can be turned into serious, viable businesses.||**||

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