Brave new world

The Gulf's largest economy is changing - slowly. Saudi Arabia's shift away from relying purely on oil revenues and towards a diversified economy has been a long and challenging one, but the country's enterprises are now seeing the effects of this transformation.

The Saudi government has made great strides in modernising key aspects of the country's economy, with a view to encouraging competition - and also to protect its citizens from some of the new threats that come with the new economy.

Recently the call for bids for the third telecoms licence to operate in Saudi Arabia closed - as ACN went to press, Kuwait's MTC group was confirmed as the highest bidder, offering more than US$6 billion for the licence (although MTC's win is yet to be ratified by Saudi ministers).

"We are delighted to have made the highest bid and look forward to confirmation of being awarded the third mobile licence in the attractive Saudi mobile market," commented MTC Group CEO Saad Al Barrak in a statement after the licence announcement was released.

That a telecoms company is willing to invest so heavily in a market with two incumbent operators gives an indication of the potential which many investors - globally as well as in the Middle East - see in Saudi Arabia. And as the keen nature of the bidding around a third telecoms licence also indicates, future growth in Saudi Arabia is going to come from knowledge- and technology-based industries as much as it is from more traditional verticals. MTC is betting on continued and dramatic growth in demand for lucrative communications products and services to give a return on its $6 billion investment - on top of its infrastructure deployment costs.

This growth comes from both the growing affluent middle class, and the increasing numbers of knowledge workers which Saudi Arabia expects to attract in the coming years.

A key plank in this strategy is the country's Economic Cities programme - four cities have been announced so far, with more on the way before the end of 2007. With the cities targeting a number of different sectors - knowledge industries, petrochemicals and heavy industry - Saudi Arabia's government hopes to attract foreign investment to the country, as well as skilled workers.

The first project under development is Knowledge Economic City (KEC), which will be built on the outskirts of Medina. KEC is positioning itself as a hub for knowledge workers, including IT firms as well as scientific research organisations and universities, among other strands.

"Because it's a centre for knowledge-based industries in the region, we will have very demanding and high-profile users that will be in that working environment - the techies of the world," says Mohammed Shah, senior technology officer for KEC. "We naturally want to make sure they have as comfortable and as modern technology environment there as possible, to help them with their business and other activities. They can go around the city and have connectivity, have virtual presence in their office, they can have flexibility when operating out of their office - a truly flexible, mobile workplace."