The global rise in crude oil prices coupled with an increase in the quantities produced has resulted in a major boost for the Saudi economy. The increased revenues allowed the Kingdom to announce a balanced budget for 2001, with both revenue and expenditure estimated at SR215 billion.
There were no large infrastructure projects put forth under the new budget. Instead, the pattern of expenditure displayed a marked priority for human resources development. This fit well with the government’s goal of Saudization of the work force. The budget projected an increase of SR30 billion in expenditure over the previous year. There was more of a focus on education with SR53.3 billion being set aside for education and manpower training. This was eight percent more than the allocation that was made for the sector in the previous budget, but it was greatly needed. With 40 percent of the population under 15 years of age, there is an urgent requirement for new schools, teachers and other services related to education.
The government is continuing its campaign to push the private sector to carry more of the load for the development of public services. There has been a strong move to increase the percentage of foreign investment in the Saudi economy. Prince Abdullah ibn Faisal ibn Turki, governor of Saudi Arabia’s General Investment Authority (GIA), is determined to do everything within his power to react quickly to those foreign individuals and entities wanting to do business in the Kingdom. GIA is responsible for implementing the new foreign investment law. Under the law, once a proposal is submitted with the required documents, the business license must be issued within 30 days or rejected for cause. Foreigners may now own property related to the business. Taxes have been reduced. At its most basic level the agency is a “one stop shop” for foreign investors.
“The new buoyancy in the economy, the direction of the government and the general business psychology have made a big impact to the extent that we have had a forty-fold increase in foreign investment in the last few months compared to the year before,” stated Prince Abdullah ibn Faisal. “That in itself as an absolute figure is not a big one and certainly not our target. It’s about SR5-6 billion total. But it is an important indication of the investment climate.”
It is refreshing to note that recently some decision-makers in the government have begun to speak out on the vital need to do more to support the development and implementation of information technology in the Kingdom. At the conclusion of the Conference on Computers and Education held in February, recommendations were put forward and it is hoped that these will win approval at the highest level. Some of the points are:
— Government agencies and ministries should formulate a policy to implement e-government.
— A national policy should be devised to create computer education programs for teachers.
— Developers of educational programs and e-book producers should be encouraged.
— Teachers should be sponsored in overseas computer courses.
— King Abdul Aziz City for Science and Technology and Saudi Telecom Company should provide free Internet services to all schools in the Kingdom.
— The private sector and government agencies should work harder to make the computer education project, “Al-Watani,” a success.
While these discussions went on within the Kingdom, overseas at the “Investing in Saudi Arabia” seminar held in Houston, Texas, GIA Governor Prince Abdullah ibn Faisal made several statements of interest to the IT community. First, he pointed out that “foreign direct investments have benefits not just purely from a financial point of view but also from the fact that they bring the latest expertise and know-how.”
Then he went on to answer a question about whether the government would continue to emphasize investment in industry: “Industry has been covered. I think it has enjoyed in the past a very special position and I think now the future is in services because the Saudi market is hungry for that. I think things like IT and others will be perfect for the Saudi market.”
With such positive statements it might seem that the climate for the expansion of IT in the Kingdom would be excellent, but unfortunately there are some impediments.
In the area of telecommunications, the Kingdom is doing better but improvement is still needed. According to figures supplied by STC, as of December 2000 there were a total of 2,965,000 working fixed lines and the network had a total capacity of 4,314,000 fixed lines. Slightly more than 250,000 fixed lines were activated in the year 2000. In addition there were a total of 1,376,000 cellular subscribers to the network. In December 2000, 550 modem ports were added bringing the total number available to 22,608. STC plans to start offering new services such as DSL and ISDN in spring 2001.
Despite the increase in lines, total capacity is still not nearly enough. For example, using a population estimate of 20 million and STC’s figures, cellular services are only being provided to around 6 per 100 population. In the UAE, the number is at least 22 per 100, the USA is over 31 per 100 and Finland has a whopping 57 per 100. Figures for total numbers of computers and Internet usage are also low.
Dr. Fahd Hoymany, head of the Internet Services Unit at KACST, believes that there are approximately one million Internet capable PCs in the Kingdom. This would give about five PCs per 100 population. In the UAE, that number is 11 per 100. The USA is much higher with 45 per 100. This shows that there is enormous room for growth.
The Kingdom has been leading the region in IT sales, accounting for over 40 percent of all the region’s sales. During 1999, those sales totaled $2.6 billion. That trend will continue. Such sales include not only computers, peripherals and software, but there is also a strong demand for information technology consultancy as well. As WTO negotiations come to a conclusion, major companies have begun to make moves to re-engineer their businesses in hopes of surviving in a global marketplace. IT is an integral part of such strategies. Some recent surveys have shown that the market is becoming more aware of the importance of after sales service and ideal implementations, but on the whole, price remains of primary importance to both individuals and corporate consumers. In addition, protection of intellectual property remains a problem for software companies. The Business Software Alliance places software piracy estimates for the Kingdom at about 64 percent.
Although PC penetration remains low, right now there still could be more Internet subscribers to the Saudi network than are currently being connected. Hoymany said that there were about 250,000 subscribers to the Saudi Internet and about 700,000 total users on dial-up, including universities and corporations. Some ISPs feel that this estimate is not high enough. They point out that there are about six individuals per Saudi household and that in the Kingdom it is extremely common for subscribers to share subscriptions — even corporate clients.
Currently, KACST is running two STM-1 fiber links and one STM-1 for back-up from Riyadh. Each STM is 155 Mbps and utilization is only about 40 percent of main capacity. KACST has reduced Internet rates in the past year but users are still unhappy about charges especially because service remains poor. KACST claims that it is not the Kingdom’s proxy that slows down service, but whatever the problem the fact is that connections of 34 Kbps are the best most users can manage and worse connection times are the norm in some telephone exchanges. Hardly a week passes without an alert from the ISPs to subscribers that browsing has been reduced to a crawl. Slow browsing conditions frequently last for days. Such alerts are so common that they are no longer news.
All businesses that can afford to have switched to V-SAT arrangements. These bypass the Saudi network and are against the Kingdom’s laws. Recently there have been threats from the government that such connections will be forcibly disabled, but no business has been worried enough to change its method of operation. The Kingdom’s ISPs are furious about the situation because they are bleeding red ink and are being forced to sit by helplessly and watch their most lucrative corporate subscribers slip away.
In January at the Jeddah Economic Forum, Deputy Minister of Commerce Fawwaz Al-Alami suggested a collective approach to meeting the challenges of the Internet Age. He proposed that the government set up a high-level committee headed by the commerce minister and including the finance minister, the PTT minister, and the directors of Saudi Arabian Monetary Agency (SAMA) and KACST. He also advocated the revamping of technical education standards in the Kingdom. He backed the development of an IT industry, the introduction of telecom competition and the creation of an IT park in Jeddah.
If any of these suggestions were brought to fruition they could have a major impact on the IT environment in the Kingdom. Right now there is plenty of talk but action is lacking. There is an urgent need for a major decision-maker in the government to step forward and put concrete proposals on the table for the nation to follow that will result in the implementation of IT solutions at all levels and in all sectors of the economy. The numbers show that the Kingdom is behind both regionally and globally in prioritizing investment in IT. As Deputy Minister Al-Alami said at the Jeddah Economic Forum, “The road ahead for the Kingdom lies in defining the vision in our mission.”
