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BUSINESS POTENTIAL FOR INDIAN ICT SECTOR IN SAUDI ARABIA
With 1/4th of the world's proven oil reserves,
Saudi Arabia is likely to remain the world's
largest oil producer for the foreseeable
future.
Saudi government’s consistent determination
for diversification and latest focus on
integration of ICT for economic and social
development (with fairly good IT
infrastructure already in place) has resulted
in a number of initiatives in IT field.
Telephone Subscribers
• Total Telephone Subscribers in 2003: Information Technology
10,740,000 • Total Internet hosts in 2003:
• Per 100 inhabitants in 2003: 47.65 15,830
• Internet users in 2003: 1,500,000
Main Telephone Lines • Internet users per 10,000
• Main telephone lines in 2003: inhabitants in 2003: 665.52
3,502,600 • Licensed Internet service providers
• International trunk circuits in 2002: (ISP’s) in 2003: 22
34,415 • Total PCs in 2003: 3,003,000
• Countries directly connected to the • Total PCs per 100 inhabitants in
Kingdom in 2002: 245 2003: 13.67
Cellular Subscribers Sources: International Telecommunication Union
• Total cellular mobile subscribers Saudi Telecommunications Company
2003: 7,238,200
• Cellular mobile subscribers per 100
inhabitants in 2003: 32.11
• % digital in 2003: 100
• As % of total telephone subscribers
in 2003: 67.4
Indian Joint Ventures in Saudi Arabia: Indian companies have established more than
30 joint ventures in the Kingdom in different sectors like management and technical
consultancy services, construction, telecommunications and software etc.
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(TCIL has rendered its technical expertise in many of the telecom projects of PTT and
has executed projects worth US $ 500 million).
A Technical Co-operation Agreement exists between SASO and CSIR. Companies like
Bharat Heavy Electricals and IRCON have provided services. TATA, Oberoi, Godrej,
Voltas, Videocon, Raymonds etc have established trading relations with their Saudi
counterparts for marketing and distributing Indian products.
Some of the Indian ICT players have been working in the areas like multimedia, property
management software, simulation, web infrastructure & e-commerce solution, biometric
solution, software support for logistic and warehouse management, retail management, e-
banking & retail banking solutions, wireless solution, ERP etc for big companies like
Aramco and Government departments.
There are also 25 foreign collaborations (23 are financial and 2 are technical) between
Indian and Saudi companies. These are in the areas like designing, computer software,
telecom, financial, electrical equipment, industrial machinery and oil refining.
Indian professionals in Saudi Arabia: The contribution of Indian professionals to the
Saudi economy is enormous and they have potential to play an important role in
facilitating business relationship between Indian ICT sector and Saudi businessmen.
Many Indian professions like doctors in different fields, medical consultants, scientists,
professors, paramedics, engineers, economists, agriculture experts, etc. are invited on
deputation by the Saudi Government.
Nationality-wise break up of some of the larger expatriate groups are Indians 1.228
million (19.6%), Egyptians 1.19 million (19.1%), Pakistanis 0.78 million (12.4%),
Fillipinos 0.45 million (7.2%) Bangladeshis 0.44 million (7.1%), Indonesians 0.24
million (04%) etc.
ICT INITIATIVES IN SAUDI ARABIA
Saudi Arabia has the largest and fastest growing market for telecommunications products
and services in the Middle East. The expansion of telephone services and their
subsequent privatization have been important objectives in Saudi Arabia’s five-year
development plans, with particular emphasis placed on the telecommunications sector
during the Seventh Development Plan (2000-2005).
Indian IT companies have large experience of working with one of the American
companies, which have been closely involved in this rapid expansion, and opportunities
should continue to open up in the future. In 1994, the expansion of telecommunications
services began in earnest with the Telephone Expansion Project-6 (TEP-6), awarded to
Lucent Technologies. In 2003, Saudi Arabia completed the latest expansion of the
Kingdom’s GSM network, which doubled the capacity of the network to 5.8 million
lines.
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The same is true for companies in the information technology sector. Microsoft
Corporation and Intel, for instance, have participated in a joint venture with a Saudi
company to open a factory that produces computers in the Kingdom. In October 2002,
Microsoft was awarded a contract by the Ministry of Interior to provide its .NET software
to the ministry. The potential for U.S. firms to take part in the expansion of this sector is
heightened with the enactment of a new foreign investment law, which allows foreign
companies 100 percent ownership of their investment, as well as the same incentives
given to Saudi companies.
RESTRUCTURING
PTT was renamed the Ministry of Telecommunications and Information Technology in
April 2003. Saudi Telecommunications and Information Technology Commission
(STITC) is responsible for granting licenses to private investors, and for regulating
telephone and Internet services as well as other media.
In July 2002, the STITC issued new by-laws that will provide for the deregulation of the
Saudi telecommunications sector. The ambitious plan hopes to place a mobile phone in
the hands of one in three Saudis by 2006. The STITC has initiated the process of
introducing competition into the Saudi market by tendering new GSM, data and VSAT
licenses.
FIXED NETWORK
In 1970, the Kingdom’s total exchange line capacity was only 76,600 lines, which
increased to more than 1.6 million lines by 1990, representing an average annual growth
of 21.8 percent. The total number of telephones operating in the Kingdom also increased
from 29,400 telephones in 1970 to 1.3 million telephones in 1990, an average annual
growth rate of 19.4 percent. In 2003, the Kingdom operated more than 3.5 million
telephone lines, representing a 62 percent increase from 1998. During that same time, the
International Telecommunications Union reports that the number of telephone lines per
100 inhabitants increased from 10.95 to 15.54. By the end of 2004, Saudi Telecom plans
to provide 12 million fixed and mobile phone connections. The increased capacity has
been spurred by the advancement in telecommunications technology as well as the
pressures of a rapidly expanding Saudi population.
STC serves subscribers through a network that is 60 percent analog and 40 percent
digital. Saudi Arabia has an import market for switches and related equipment of about
$400 million, more than half of which is imported from the U.S. Saudi Arabia began
updating its telephone lines from analog to state-of-the-art digital lines in the mid-1990s.
Lucent Technologies, under the $4 billion TEP-6 project, installed digital telephone lines
in the Kingdom, effectively doubling the number of existing phone lines.
The existing backbone of the Saudi Arabia cable network consists of 76,700 km of
cabling,
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including 16,700 km of fiber optic cable. In addition, Saudi Arabia is a member of SEA-
ME-WE submarine coaxial cable, complementing the country’s international
communications
capabilities. Two other fiber cables link the country with Bahrain and Djibouti. In April
1998, Saudi Arabia reached a formal agreement with FLAG (Fiber-optic Link Around the
Globe) Telecom to provide Saudi Arabia with a high-speed, high-quality digital
communication link to Europe and Asia. In March 2004, Alcatel announced that along
with sixteen global telecommunications carriers, it will construct a $500 million
submarine cable network to boost high-tech communications between Southeast Asia, the
Middle East and Europe. Known as the SEA-NE-WE 4 submarine cable network, the
massive project will span nearly 20,000 km, linking 14 countries with 16 landing points
from France to Singapore via Italy, Algeria, Tunisia, Egypt, Saudi Arabia, United Arab
Emirates, Pakistan, India, Sri Lanka, Bangladesh, Thailand and Malaysia.
MOBILE MARKET
Mobile phones have dramatically altered the telecommunications market in Saudi Arabia.
In an effort to keep pace with further advances in telecommunications, Saudi Arabia has
vigorously pursued a modern mobile network over the past decade. Beginning in 1994
when the Kingdom launched the Global System for Mobiles (GSM), known locally as
“Al-Jawal,” Ericsson, Nokia and Lucent have worked closely within the Kingdom to
transform its mobile infrastructure. By April 2003, STC’s President and CEO Khaled Al-
Molhem announced that mobile telephone subscribers had risen from 16,000 in 1995 to
5.8 million, in 2001. Between 1999 and 2001, the number of international calls via
mobile phones grew 305 percent, while the amount from landlines grew only 26 percent.
Despite this dramatic rise in subscribers, Saudi Arabia still maintains the lowest number
of fixed and mobile lines in the GCC, while market penetration registers only 22 percent.
However, a recent report released by the Jordanbased Arab Advisors Group forecasted
that revenues in the GSM market in Saudi Arabia will rise to $7.9 billion by 2007, up
from $3.4 billion at the end of 2002. This is due in part to the recent privatization of the
Saudi Telecommunications Company (STC) and to increased competition set to begin
next year. The report also forecasts that by 2007 GSM market penetration will reach 77
percent.
The Kingdom has dedicated its efforts over the past two years to meeting increased
demand in the underpenetrated mobile market by rolling out a new cellular GSM license.
STITC will permit the new operators to use STCs current network in the short-term but
will expect them to rollout their own networks in the long-run. The STITC also requested
that potential bidders submit a second proposal for an associated third-generation (3G)
license, which required a two-week extension to the bid deadline. According to Middle
East Economic Digest, potential foreign operators must:
• Have a market capitalization in excess of $1 billion;
• Commit to enter into a five-year management agreement;
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• Control and operate one or more mobile networks with at least 1.5 million
subscribers in total;
• Have built and operated a greenfield business for at least two years;
• Commit to taking a minimum 15 per cent equity position in the local company if
and when the law permits during the licensing process;
• Form a public joint stock company with their local partners and float it on the
local stock market within a tight timeframe.
A total of 29 local and international companies responded to STITC’s public notice by
the
December 31 deadline and eleven were announced as finalists in April.
INTERNET AND DATA SERVICES
Internet service has been available in Saudi Arabia through domestic servers since
January 1999. King Abdul Aziz City for Science and Technology (KACST) was
responsible for the
coordination and management of initial Internet services between 1997 and 2003. In
January
2003, the STITC took over all regulatory control of Internet services in the Kingdom.
Approximately 1.5 million people use the Internet in Saudi Arabia, up from 350,000
users in
2001. The Internet’s penetration rate in the Kingdom stands at 2.64 percent, according to
a report released by the Arab Advisors Group. Individuals, companies, organizations and
government agencies other than universities are required to subscribe through one of the
22 licensed ISPs in the Kingdom. The Saudi Network Information Center (SaudiNIC) is
responsible for the administration of the domain name space for the country code of
Saudi Arabia. This includes the operation of the DNS root servers for domains as well as
the registration and maintenance of all third-level domain names. Additionally, SaudiNIC
is a local Internet Registry, which is responsible for allocating blocks of IP addresses to
universities and local ISPs in Saudi Arabia only. Subscribers currently pay between $0.80
and $1.20 an hour to access the internet.
SATELLITE COMMUNICATION
Saudi Arabia has also made remarkable strides over the past twelve months in satellite
services. In October 2003, the government announced that it will grant four local
companies – Saudi International Telecommunications & Electric Company, High
Capabilities Company, Nasser al- Harbi for Trading and Detecon Al-Saudia – licenses to
provide very small aperture terminal (VSAT) services. STC will retain its authority over
other datacomm services, including X.25, frame relay and ATM services, in addition to
being the only provider of PSTN, GSM and international connectivity in the Kingdom.
According to a report by the Arab Advisors Group, VSAT opportunities in Saudi Arabia
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are being fueled by the slow growth of ADSL. This is largely due to technical limitations
and a widely dispersed population. Many Saudis who apply for ADSL service are simply
not located within five cable kilometers of STC’s exchanges. The slow growth of ADSL
coupled with the liberalization of satellite services could generate a major market for
VSAT service in broadband Internet connectivity.
COMPUTER HARDWARE
Saudi per capita expenditure on computers and related accessories continues to be one of
the highest in the Middle East. There were over 3 million PCs in the Kingdom in 2003
with total PCs per 100 inhabitants standing at 13.67. Growth is being driven by the
increased use of the Internet and e-commerce as well as the growing use of Voice Over
Internet Protocol for long distance calls and the need for new services or hardware.
In 2003, Dell installed its largest high performance computing cluster in Europe, Middle
East and Africa (EMEA) region to date, at Saudi Aramco in order to accelerate its oil and
gas exploration program. In June 2004, Computer Associates Middle East (CA-ME)
signed an IT infrastructure management agreement with the Saudi Arabian Ministry of
Health.
Boasting the largest computer market in the in the Gulf region, Saudi Arabia is currently
enjoying a computer boom. With an annual turnover of approximately $1.2 billion, Saudi
Arabia accounts for 40% of computer sales in the Gulf region. Recent price wars between
the world's largest PC producers are expected to fuel the Kingdom's ever growing
computer market. Saudi Arabia offers a growing home market and a burgeoning small
business market to computer manufacturers. Approximately 15% to 20% of PCs end up
in the home market, while the rest of production is allotted to corporate accounts.
Almost every companies in Kingdom has personal computers, 82% of Saudi companies
had servers and 94% of these companies used LANs; but most of them (64%) had no
independent computer department. In addition, the percentage of Saudi nationals working
in the IT field in these companies was only 12.5%.
COMPUTER SOFTWARE
The first goal of the software industry in the country was aimed at satisfying the local
demand, once this has been achieved the focus shifted towards the regional demands.
Many of the nationals of the regions countries lack English language skills, and because
most applications are developed in English there was a great demand for an Arabic
version.
Today an increasing number of Saudi firms provide a variety of services to the local and
regional markets. The first products introduced to the local markets were simple word
processing applications that supported Arabic language. As the demand grew, so did
competition and innovation, all sorts of applications were being developed in order to
meet demand. The major advancement came with the introduction of the Arabic version
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of Windows, such product set the stage for a standard platform on which developers can
build. Most of the large players in the market are joint ventures with global firms, such as
IBM, Comet Group and AT&T. These large firms are the ones that usually provide total
solution services, meanwhile smaller firms gained ground in the area of software
development. Some of the major firms in Saudi Arabia include:
DowLog Technology Co., iVIiew GRAfix, Saudi Business Machines Ltd., ADawliah
Universal Electronics APL., Al-Khaire Computer Systems, Arabia Electric Limited,
Arabian Control Systems, Jeraisy Tech, International Systems Engineering, Mansour-
General Dynamics Limited, Suleiman Information Systems, Binladen
Telecommunications Company Ltd. etc
Some of the important ICT Projects by the Saudi Arabian Government where Indian IT
industry can play an important role are mentioned below:
Seventh five-year development plan: The seventh development plan includes a
clear vision of the role of information technology in the economy. The plan
envisages a national plan for the use of information technology (IT) for scientific
and economic development. The IT plan would include programs aimed at
facilitating the availability of and easy access to the most recent information,
determining the roles of data producing and data collection entities, information
integration, establishing information systems within the national information
network and making information technology and information services accessible
to all segments of the society.
National policy for science and technology: The Council of Ministers on 8 July
2002 approved the national policy for science and technology paper prepared
jointly by the Ministry of Planning and the King Abdul Aziz City for Science and
technology (KACST). The paper contains ten strategic principles, each
encompassing a number of mechanisms and programs for the implementation of
the country’s science and technology policy.
Saudi Communications and Information Technology Commission: It has
adopted a privatization strategy aimed at improving the efficiency and
competitiveness of the national economy. It encourages private investment and
participation. It provides incentives for private participation in capital investment
and production, both domestic and foreign.
Integration of ICT in education: A comprehensive plan has been launched to
integrate ICT in education. Projects under way in this area include:
1. Prince Abdulla ibn Abdul Aziz computer project for students called Watany.
It is a project that reflects the importance the country attaches to ICT and its role
in building an information society. The country has adopted ITC as its vehicle for
achieving its development objectives and for preparing the new generations for
the challenges of our age. The project is supported by King Fahd and is sponsored
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by Prince Abdulla. The project envisages provision of a computer per ten students
connecting all schools with the national network and providing LAN service in
each school.
2. Developing school libraries into learning resources centers (LRC). The project
aims at developing all school libraries in government and private education
institutes and teacher’s training colleges into LRCs where access is provided to all
printed and non-printed sources of information and integrating them in the
education and learning process. The aim is to make those LRCs a rich
environment that applies modern educational methods, which emphasize the role
of the learner.
3. Computer-based labs have been introduced to give students first hand
experience through experimenting and hands-on activities. They represent a
positive change from traditional education methods based on memorizing.
Students are given the opportunity to learn through experimenting observation
and induction using interactive software applications on computer sensors. In this
technology the components of scientific experiments are integrated with the
computer doing the gauging and this manner becomes a lab component.
4. Project for training high school students in the field of informatics called
Ta’heel. This project has been initiated to better align computer curricula with the
rapid changes in computer hardware and software. The project aims at preparing
high school graduates in the field of informatics in cooperation with the Saudi
Computer Association and a number of private sector firms. The project is 2 year
training course in five areas of informatics i.e. desktop techniques, system
development, internet, computer networks, and computer maintenance.
5. Digital technique centers have been established in the various governorates and
educational regions with a view to meeting their educational needs in the areas of
digital contents and educational applications. The centers are equipped with a unit
for the production of digital interactive educational aids to support school
curricula and other enrichment programs.
e-Commerce: A royal directive was issued on 14 February 1999, for the
establishment of a Standing Committee on e-Commerce. The committee has
mandate of identifying requirements and needs for harnessing e-Commerce
technology and applications for the benefit of the national economy, and establish
coordination among concerned agencies in taking practical steps for promoting e-
Commerce.
The Plan of Action of the committee covers the following fields:
1) Establishing the necessary Public Key Infrastructure (PKI) in order to provide
safe and secure transactions, identity verification of dealers as well as the safety
of interchanged messages establishing a mechanism for issuing digital certificates
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and securing the requirements of the certifying agencies as to the safety of
document and the technical specifications of the electronic signatures.
2) Developing payment systems necessary for undertaking all banking
transactions for executing electronic transactions swiftly and safely through
electronic means.
3) Developing communications infrastructure for supporting e-Commerce
technologies and securing data transfer services with the required rates and
bandwidths effectively and reliably all over the country.
4) Establishing the legal and legislative framework necessary for applying
electronic transactions and related contracts securing honouring commitments,
safeguarding dealer’s rights and certifying electronic signatures.
5) Identifying data safety requirements as well as the privacy of personal data.
6) Proving public services electronically through the so-called “e-Government”.
7) Establishing an electronic system for government procurement including
calling for bids and related procedures.
8) Establishing a marketing website for national companies and factories to
enable them market and sell their products in and outside the country through the
Internet.
9) Promoting the propagation of e-Commerce concepts and applications and
encouraging related investments.
10) Providing related support services for e-Commerce applications such as
improving the delivery of postal parcels and identifying the addresses of
government agencies, trading companies and individuals.
11) Promoting awareness of e-Commerce with all its benefits and possible
positive results and promoting confidence in the efficiency and safety of
electronic transactions.
12) Training national human resources for meeting the demand which is expected
to increase with the spread of e-Commerce.
13) Undertaking studies and research on ways and means of benefiting from e-
Commerce technologies.
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Role of the Private Sector:
An e-Commerce advisory team of businessmen has been established for initiating
its application in both the public and private sectors and providing incentives for
investing in e-Commerce technologies. The advisory team undertakes field visits
and holds meetings with concerned government agencies for reviewing progress
in meeting the requirements for e-Commerce. Regular meetings are also held with
the Permanent Committee on e-Commerce for discussing ideas and proposals for
securing the required environment and e-Commerce technologies and
applications.
e-Government Program: Under a royal directive dated 20 March 2003 the
Public Investments Fund of the Ministry of Finance laid down a program for
establishing e-Government it includes policies for establishing e-Government
projects, securing the interrelationship between the different systems, providing
government services for citizens, expatriates and the private sector through
electronic means as well as
interchanging information and data between government agencies electronically.
The program is to undertake several related activities such as the establishment of
a Single Portal for government services, securing an automated software that
would cover all applications related to government procurement, stock control,
financial procedures and similar other applications common among government
agencies.
Saudi Project for Electronic Data Interchange (SaudiEDI): The Public
Investments Fund of the Ministry of Finance is implementing the Saudi Project
for Electronic Data Interchange (SaudiEDI) with the aim of securing speed and
transparency in business. It would include the electronic interchange of the
consignment manifest information, delivery papers and the various items of
import-export information among the different concerned agencies.
Electronic Financial and Banking Services: The Saudi Monetary Authority has
established a system for speedy money transfer known as “SARIE”. This is an
integrated system for the immediate settlement of transfers among Saudi banks,
through their accounts with the Saudi Monetary Authority. Saudi Monetary
Authority and the Ministry of Finance pays the salaries of all government civil
servants and transfers them directly to their local bank accounts through the
speedy money transfer system (SARIE) as a first stage with the aim of paying all
other emoluments directly to the beneficiaries bank accounts at a later stage.
All national banks are going to execute a number of banking services
electronically through fixed line telephones, the Internet or mobile phones
provided with the WAP function.
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The Omrah Project: The Omrah project aims at issuing entry visas for those
wishing to go to the holy places in Saudi Arabia. Such persons would be able to
send their applications for visas electronically through their travel agencies
abroad. Applications would then be processed electronically by the Ministries of
Haj, Foreign Affairs and the Interior within 24 hours.
Other Important Projects: There are lots of other projects planed by the
Government of Saudi Arabia and its ministries with the help of foreign players
like smart card, bar code, etc.
IT LABOR MARKET
When examining the Saudi IT labor market, no significant shortages can be pointed out at
this time. Nevertheless, with an IT boom in the country, one would predict that such an
issue will come forth very soon. The Saudi IT labor market is supplied through two major
sources: 1) locally 2) globally. Locally, college graduates with degrees in information
technology related majors form the bulk of the local supply. Three major universities
offer programs in this field. The first of these is King Saud University (KSU) in Riyadh,
it offers degrees in Computer Engineering, Computer Science, Information systems and
Electrical Engineering. The second is King Abdulaziz University (KAU) in Jeddah,
which offers similar program with specialization in Computer Science, Structural
Programming, Program Languages, Database Systems, System Analysts, Operating
Systems, Electronic and Communication Engineering and Computer Engineering. The
third and probably the most recognized both on the national and international academic
community, is King Fahad University of Petroleum and Minerals (KFUPM), which is
located in Khobar. KFUPM offers similar programs to those offered in KSU and KAU, in
addition to those programs such as Software and Hardware Engineering are also
available.
Private institutions and organizations provide the remainder of the local supply, these
institutions provide programs that aid individuals to be more computer literate. Such
programs provide the basic framework for further advancements in this field for these
individuals.
The second source of labor is the global market, which has been historically the major
source of labor for the country. On the other hand this portion of the supply chain has
been shrinking, mainly due to stricter immigration laws. The Saudi government has also
been implementing a saudi-ization program, which has been largely effective in
increasing the level of Saudis in the work force. Nevertheless, this portion of the labor
market will still be there for the near future, because of economic and technology transfer
issues.
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CONCLUSION
The Saudi Arabian market offers excellent business potential for Indian ICT sector in the
field of IT education, public and private industry’s ICT initiatives, Saudi Government e-
governance projects, consultancy and management services in IT. Being the closest ally
of USA among Arab countries; Saudi offers good base for Indian ICT sector especially
after the Kuwait liberation and Saudi government’s determination of integrating ICT for
economic and social development in the Middle East region.
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