Saudi Arabia’s AI adoption ignites technological advancement and economic growth

Special Saudi Arabia’s AI adoption ignites technological advancement and economic growth
Abdullah Al-Swaha, Saudi minister of communications and IT. (Supplied)
Short Url
Updated 02 May 2024
Follow

Saudi Arabia’s AI adoption ignites technological advancement and economic growth

Saudi Arabia’s AI adoption ignites technological advancement and economic growth
  • Adoption of AI will help foster a knowledge-based economy and equip Saudi youth with skills for the digital age
  • Key initiatives, include the National Strategy for Data and AI, aim to establish Saudi Arabia as a global AI leader by 2030

RIYADH: As artificial intelligence gains global attention and becomes a buzzword, Saudi Arabia is positioned for accelerated adoption to enhance efficiency across its industries.

Over the years, AI has evolved into a transformative technology revolutionizing numerous industries and domains. Its development and adoption across sectors have spurred significant advancements, already reshaping how people live and work globally.

According to a recent report by the professional services firm PwC, the projected economic impact of AI in the Middle East by 2030 is $320 billion, with an estimated $135.2 billion attributed to Saudi Arabia.

The report also highlights an annual growth rate in AI contribution ranging between 20 percent and 34 percent across the region, with the UAE experiencing the fastest growth, followed by Saudi Arabia.

“Such growth and demand for AI demonstrated that the impact on industries can be substantial and wide-ranging both in Saudi Arabia and the wider region,” said Slava Bogdan, CEO & co-founder at Flowwow, to Arab News.

Flowwow, a global gifting marketplace, simplifies gift-giving and connects local brands with customers. It hosts over 14,000 local brands from 1,000 cities and operates in over 30 countries, including the UAE, Spain, the UK, and Brazil.

“Whether it’s hospitality, manufacturing, telecommunication, or business technologies, where Flowwow sits, I could say that AI solutions, firstly, could automate repetitive tasks, allowing employees to focus on more strategic and creative work, especially in data analysis, customer service, and marketing,” Bogdan said.

The CEO further explained how the firm’s marketers frequently utilize AI to target audiences, enhance creatives, or conduct competitive analysis, particularly in global markets like the Middle East and North Africa. This reduces decision-making time and allows for more strategic tasks that necessitate a tailored approach.

“Moreover, AI algorithms can analyze large amounts of data to identify patterns and trends, helping businesses make more informed decisions,” Bogdan explained.

“This attribute can lead to better forecasting, resource allocation, and risk management, especially in the financial sector, having had 25 percent of all regional AI investments,” he added.

Speaking to Arab News, Brahim Laaidi, partner at Bain & Co., emphasized that AI adoption in sectors like energy and healthcare aids “the Kingdom’s economic diversification and fosters a knowledge-based economy, enhancing efficiency and driving growth.”

Moreover, AI is recognized for enhancing customer experience and reducing costs for firms in various ways.

DID YOU KNOW?

• Saudi Arabia was one of the first nations to utilize data and artificial intelligence technologies to achieve its Vision 2030 goals.

• There are five prominent types of AI: machine learning, natural language processing, computer vision, speech recognition and robots.

• The Saudi Data and AI Authority has created AI ethics principles in accordance with the Kingdom’s commitment to human rights.

• SDAIA estimates SR412.5 billion ($109.96 billion) in global spending on AI by 2024 end.

“AI chatbots and virtual assistants provide 24/7 customer support, reducing costs. Multiple Saudi firms and banks use chatbots for customer service,” highlighted Laaidi.

He also illustrated how AI analyzes customer behavior to create personalized experiences, citing examples like Netflix and Spotify, which utilize AI to tailor content based on user preferences and listening habits.

Laaidi also highlighted how “AI facilitates segmentation based on behavior and profitability for targeted marketing. Coca-Cola utilizes AI for consumer segmentation.”

“In a nutshell, for most enterprises, the focus remains on leveraging narrow or vertical AI solutions to enhance specific business processes, improve customer experiences, or optimize operations,” he added.

According to Jad Haddad, head of Digital IMEA at management consulting firm Oliver Wyman, AI essentially democratizes access to intelligence, making it cheaper and more widely available.

This can generate significant efficiencies by augmenting employee capabilities, enabling them to complete tasks faster, and automating certain processes without human intervention.

Oliver Wyman estimates that up to 35 percent of tasks globally may be augmented or automated by AI in the next three years.

“In Saudi Arabia, considering the current economic structure, Oliver Wyman estimates that up to 17 percent of tasks may be affected within that time frame,” Haddad told Arab News.

AI projects and employment

It is evident that the Kingdom has been significantly investing in AI in recent years.

Key initiatives, according to Laaidi, include the National Strategy for Data and AI, aiming to establish Saudi Arabia as a global AI leader by 2030. Additionally, Neom, a planned smart city, is poised to leverage AI in urban planning and environmental management.

“The Saudi Data and Artificial Intelligence Authority was established in 2020 to regulate AI development, and Tonomous collaborates with global tech leaders to enhance the city’s projects,” he added.

Laaidi continued by stating that AI and Robotics Centers, formed through partnerships with universities and international entities, are advancing AI in the Kingdom. From a technology industry perspective, it offers diverse applications and significant benefits.

According to Cristina Carranza, global head of business development at GGTech Entertainment, AI stands as a powerful tool with vast potential to enhance operational efficiency across various domains.

“We use AI selectively, focusing on specific areas where it can augment human skills and improve processes,” Carranza told Arab News.

She gives examples of how AI algorithms are utilized to analyze player data and preferences, enabling them to tailor game experiences and enhance player engagement. “In addition, AI-driven predictive analytics help us anticipate market trends and make informed decisions.”

However, Carranza emphasized the importance of acknowledging that while AI is embraced as a tool for progress, there is a recognition of the necessity of human oversight and control.

“We believe in a symbiotic relationship between humans and AI, where the technology enhances our capabilities but is always subject to human direction and control,” she added,

New dimensions

From GGTech Entertainment’s perspective, AI opens up exciting new dimensions in gaming and entertainment.

Carranza revealed that one significant area involves the optimization of game design processes, where AI algorithms analyze player feedback and behavior data to inform the creation of more engaging and immersive gaming experiences.

“Additionally, AI-powered tools enhance player interaction through personalized recommendations and real-time assistance, fostering deeper engagement and loyalty,” she explained.

The global head further addressed how AI-driven analytics offer valuable insights into player behavior and market trends, empowering GGTech to make data-driven decisions and maintain a competitive edge in the industry.

Bridging skill gaps

The Kingdom’s journey to become an AI leader involves challenges encompassing ethical and legal aspects, data availability and quality, as well as skill gaps, infrastructure requirements, public trust, and the need for international collaborations.

“To navigate these dilemmas, the SDAIA and the National Data Management Office have been established to construct ethical guidelines and improve data governance,” Laaidi explained.

Similarly, the National Cybersecurity Authority continues to safeguard Saudi Arabia's digital infrastructure, including AI systems.

Laaidi emphasized Saudi Arabia’s prioritization of STEM education and training to bridge skill gaps, citing initiatives like the Prince Mohammed bin Salman College of Cyber Security aimed at fostering local talent in AI-related fields.

He highlighted the importance of focusing on STEM disciplines for developing a workforce equipped with the necessary skills for an AI-driven future.

Opinion

This section contains relevant reference points, placed in (Opinion field)

“Substantial investments are being made in infrastructure, with emphasis on high-performance computing and cloud computing capabilities to support AI development and deployment. Building public trust is also a key venture for the Kingdom,” the partner stressed.

In addition, the Kingdom seeks international collaborations with leading AI research entities worldwide to expedite AI capabilities. “By addressing these challenges strategically, Saudi Arabia aims to create a conducive environment for AI development and adoption,” he emphasized.

From a technological perspective, the adoption of AI can present challenges in navigating ethical considerations and ensuring human control.

“At GGTech, we recognize the importance of maintaining human oversight and ethical standards while leveraging AI technologies. To address this challenge, we prioritize transparency and accountability in our AI algorithms and processes, ensuring they are aligned with our values and ethical guidelines,” Carranza described.

She further added that they invest in ongoing training and education for team members to enhance their understanding of AI and its implications, enabling them to make informed decisions and mitigate potential risks.

Reskilling Saudi workforce    

Undoubtedly, marketers and creative leaders should prepare for the changes in their professional field resulting from AI adoption.

Bogdan explained that one of the crucial skills is the ability to ask AI the right questions and write clear prompts. He emphasized that it is necessary to understand, at least at a basic level, how AI algorithms work.

“At Flowwow, we acquaint employees with the different instruments to make AI a helpful assistant that allows us to analyze competitors’ websites, fact-check and edit texts, test tasks, and answers,” he continued.

The CEO highlighted that as the Kingdom invests resources to integrate AI into every sector, it creates more opportunities for entrepreneurs to establish their businesses and startups equipped with AI tools.

“Hence, apps and services developed with AI solutions will be on the edge. In this case, product managers and programmers should gain a thorough understanding of machine learning to create up-to-date apps,” Bogdan highlighted.

The CEO stressed that it will mostly be up to companies to invest in continuous learning and upskilling through educational short courses for their workers. “This investment is crucial to ensure that the workforce remains competitive and competent in leveraging advancements in AI effectively.”

Saudi Vision 2030  

AI is a driving force behind Saudi Arabia’s Vision 2030, fueling economic diversification, smart cities, and public service transformation.

According to Laaidi, “AI boosts innovation across non-oil sectors, enables intelligent urban planning in projects like NEOM, and promotes Industry 4.0 through automation and predictive maintenance.”

“AI also improves government services via chatbots, automation, and analytics. In healthcare, AI enhances medical imaging, drug discovery, and personalized medicine,” he highlighted.

On top of that, Laaidi emphasized how AI educational tools prepare the workforce and optimize resource allocation, while support for clean energy promotes sustainability.

“Vision 2030 powered by AI seamlessly connects economic domains, accelerating progress and innovation across the Kingdom,” he affirmed.

On another note, GGTech Entertainment's use of AI aligns with the goals of Saudi Vision 2030 by driving innovation, promoting economic diversification, and empowering Saudi youth with advanced skills and capabilities, according to the firm's global head.

“One way AI contributes to this vision is by enhancing gaming experiences and promoting the Kingdom as a global hub for entertainment and technology,” said Carranza.

By utilizing AI-powered tools for game design, player interaction, and analytics, GGTech Entertainment is delivering cutting-edge gaming experiences that showcase Saudi Arabia’s technological prowess and creativity to a global audience, she emphasized.

“In addition, the use of AI creates opportunities for job creation and economic growth in the Kingdom. As GGTech expands its AI capabilities, it is investing in the development of a skilled workforce with expertise in AI technologies and data analytics,” the company’s global head said.

She concluded by highlighting how this not only aligns with the goals of Saudi Vision 2030 to foster a knowledge-based economy but also equips Saudi youth with the skills they need to thrive in the digital age.


Saudi Arabia’s localization plan is reshaping consultancy sector - and more beyond

Saudi Arabia’s localization plan is reshaping consultancy sector - and more beyond
Updated 17 May 2024
Follow

Saudi Arabia’s localization plan is reshaping consultancy sector - and more beyond

Saudi Arabia’s localization plan is reshaping consultancy sector - and more beyond
  • Plan a huge opportunity for Saudi Arabia to boost local jobs and reduce its reliance on foreign workers

RIYADH: As Saudi Arabia embarks on a journey aimed at boosting job opportunities for citizens, the localization plan for consultancy professions and businesses plays a crucial role.

In October 2022, the Kingdom’s Ministry of Human Resources and Social Development issued a decision mandating that from the end of March 2024, 40 percent of workers in firms in this sector must be Saudi nationals.

The decision targeted all professions in the sector, most notably financial advisory specialists, business advisers, and cybersecurity advisory specialists, as well as project management managers, engineers, and specialists.

This targeted localization, or Saudization, is part of the cooperation between the Ministry of Human Resources and Social Development and supervising bodies, represented by the Ministry of Finance, the Local Content and Government Procurement Authority, the Expenditure and Project Efficiency Authority, and the Human Resources Development Fund.   

The collaboration aims to elevate the presence of cadres in the sector and boost the percentage of Saudis, contributing to the development of local content in this strategic sector. It also seeks to organize the labor market.

The ministry is meant to support private sector establishments in several ways, including helping them in hiring Saudis by supporting the training and qualification of employees, as well as supporting employment procedures and other initiatives.  

On a similar note, the Local Content and Government Procurement Authority is required to follow up on the commitment to include Saudization requirements in consulting contracts.

It has also issued a guide that clarifies the details of localizing the consultancy sector and professions, and the mechanism of implementing it.  

Reshaping the consultancy sector     

Azeem Zainulbhai, co-founder and chief product officer at talent-on-demand platform Outsized, believes the Saudization rules in the sector will help keep more money in the Kingdom, even though training costs could increase.

“This move means less reliance on experts from abroad in key fields like finance, project management and cybersecurity. Essentially, it’s about creating more jobs for Saudis in important, well-paying sectors and making sure they're trained for these roles,” he told Arab News.

“The end objective is to get better at handling projects and business dealings that are specific to Saudi culture and regulations, stimulate private sector growth, and foster a knowledge-based economy ultimately making companies more efficient and competitive globally,” the co-founder emphasized.

Bashar El-Jawharim, consulting partner at PwC Middle East, also stated that the localization plan initiated by Saudi Arabia marks a significant milestone in reshaping the consulting sector within the Kingdom.  

Azeem Zainulbha, Co-founder and chief product officer at Outsized

“With the launch of the second phase, we anticipate several key transformations that will contribute to the development and empowerment of local talent,” El-Jawhari told Arab News.

“Firstly, as young Saudi professionals enter the workforce, we expect a notable increase in demand for consulting services related to project and transformation management, financial and legal advisory, as well as procurement and supply chain management,” he added.

By having more Saudis in consulting, businesses can better navigate local market dynamics and regulations.

Azeem Zainulbha, Co-founder and chief product officer at Outsized

The consulting partner went on to note that the influx of senior Saudi talent into the consulting industry presents an opportunity for firms to leverage their experience and insights to drive business growth.

Sectors to be affected  

The localization push of course expands beyond the consultancy sector, Zainulbhai noted.

“Tourism and hospitality can really use local insights to attract more visitors and celebrate Saudi culture. Major construction and engineering projects, like the NEOM and the Red Sea Project, will also benefit from having local experts who understand the specific requirements and standards needed,” he said.

The Outsized executive also shed light on the fact that the healthcare, IT, cybersecurity, and renewable energy sectors are all set to improve with more local consultants who bring a deep understanding of regional needs and regulations.

“Local financial experts will be key in adapting to Saudi Arabia’s unique market, especially as it continues to grow and change,” Zainulbhai commented.

Overall, sectors essential to the diversification from oil will see substantial growth and development from this localization.  

“When looking at various sectors, certain areas are poised to benefit more prominently than others. For example, the government and public sectors are likely the first to benefit in light of the transformation journey towards Vision 2030,” El-Jawhari affirmed.

The consulting partner explained that as Saudi Arabia continues its journey toward achieving the ambitious goals outlined in Vision 2030, there is a growing emphasis on enhancing the efficiency and effectiveness of government operations.

“Consulting services play a vital role in supporting this transformation by providing strategic guidance and expertise in areas such as organizational restructuring, process optimization, and performance management,” El-Jawhari commented.

He added: “Furthermore, nationals equipped with experience in operational excellence are well-positioned to contribute to these efforts by implementing measures aimed at optimizing operational processes, reducing costs, and enhancing productivity.”

Potential opportunities

The plan is a huge opportunity for Saudi Arabia to boost local jobs and reduce its reliance on foreign workers, which aligns perfectly with the broader Vision 2030 goals.

“By having more Saudis in consulting, businesses can better navigate local market dynamics and regulations,” added Zainulbhai.

He continued to underscore that local consultants can offer insights that make companies more competitive, especially in sectors where understanding local consumer behavior is crucial.

He also clarified that businesses that follow these new hiring rules may find it easier to onboard government clients.

“The focus on local talent is also great for fostering innovation and could help companies set up successful programs to nurture new ideas in fields like digital tech and sustainability,” Zainulbhai explained.

From El-Jawhari’s point of view, the localization plan presents opportunities for Saudi nationals to enter the consulting profession, contributing to the development of a vibrant knowledge-based economy.

Potential challenges  

While there are many benefits, the plan also brings several challenges. According to Zainulbhai, those include filling talent gaps, adjusting to cultural shifts, and meeting new regulatory standards.

“To tackle these, businesses could set up mentorship programs where seasoned international consultants train up-and-coming Saudi professionals. Setting up special training centers to quickly upskill workers could also help,” the co-founder described.

Bashar El-Jawhari, Consulting partner at PwC Middle East

“There might be some resistance to these changes within companies, so promoting a culture that values diverse perspectives will be important,” he added.

Zainulbhai also believes that consulting with local legal experts will be crucial to stay on top of new regulations.

We anticipate several key transformations that will contribute to the development and empowerment of local talent.

Bashar El-Jawhari, Consulting partner at PwC Middle East

“Although initial costs might be high, businesses can look into government subsidies or focus on tech solutions to reduce long-term expenses and increase efficiency,” he said.

From PwC’s perspective, El-Jawhari said that the availability of fresh, well-educated Saudi graduates provides consulting firms access to junior talent.

“The challenge lies in retaining them beyond the first 4 to 5 years. Government and semi-government entities begin to recruit these nationals, who have gained experience in international consulting firms, to join their workforce,” he stressed.

The consulting partner went on to explain that another challenge is attracting mid-career Saudi consultants who are in high demand and short supply.

“The third challenge is distinct specialties. For example, with the strong drive toward diversifying the economy, there is a need for consulting experience across sectors such as industrial, defense, tourism and culture, sports, and entertainment, supported by international experience,” El-Jawhari revealed.

He further disclosed: “Overall, finding Saudi talent in relatively new sectors of the economy is quite challenging.”

“To expand the pool of mid-career Saudis, a program between government entities and consulting firms could be established. The program could include seconding talented mid-career Saudis into consulting firms for 1 to 2 years,” El-Jawhari clarified.

He wrapped up with this regard saying that this gives consulting firms access to mid-career Saudi talent and in return, government entities gain a mid-career professional equipped with consulting experience.

Vision 2030 implications  

Undoubtedly, this plan provides a key piece of the bigger Vision 2030 puzzle, which aims to diversify the economy beyond oil and boost public services like health and education.

“By increasing Saudi involvement in consulting, the plan helps keep more money in the country and creates high-value jobs that are crucial for modernizing the economy,” Zainulbhai said.

The co-founder also mentioned that it also focuses on upgrading the skills of the Saudi workforce, which is essential for innovation and sustained economic growth.

“More local consultants mean the private sector can grow stronger and more independent, making Saudi Arabia a more appealing place for investors and helping develop key sectors,” he concluded.

On the other side, El-Jawhari shed light on how two key outcomes of Vision 2030 are a thriving economy and a vibrant society.

“Pushing for a higher level of consulting localization will create higher-paid jobs for Saudi nationals, resulting in a more vibrant society that enjoys a higher quality of life,” the consulting partner reiterated.

“Additionally, local talent can provide the necessary expertise in specific consulting services to catalyze economic diversification,” he concluded.

 


Aramco seals deals with three US firms focused on low-carbon energy solutions

Aramco seals deals with three US firms focused on low-carbon energy solutions
Updated 17 May 2024
Follow

Aramco seals deals with three US firms focused on low-carbon energy solutions

Aramco seals deals with three US firms focused on low-carbon energy solutions

RIYADH: Energy giant Saudi Aramco has signed Memorandums of Understanding with three US firms to advance the development of potential lower-carbon solutions.

The deals with Aeroseal, Spiritus and Rondo were inked in the presence of the Kingdom’s Minister of Energy Prince Abdulaziz bin Salman, and his White House counterpart Jennifer Granholm. 

The agreements camed after the two officials agreed a roadmap for cooperation between the countries in the sector, amid discussions around carbon management, clean hydrogen, and nuclear energy, as well as electricity and renewables, innovation, and energy-sector supply chain resilience.

Ali Al-Meshari, senior vice president of technology, oversight and coordination at Aramco, said: “Aramco has stated its ambition to achieve net zero Scope 1 and Scope 2 greenhouse gas emissions across its wholly-owned operated assets by 2050, and sees opportunities to potentially build a lower-carbon new energy business. Innovative technologies deployed at scale can help reduce the costs of reducing carbon emissions, and we are investing in developing these through our R&D, venture capital, and technology deployment programs. We see the technologies of Aeroseal, Spiritus’, and Rondo to have the potential to scale globally, and specifically in the Middle East.”

Following a successful trial of Aeroseal’s technology in Saudi Arabia, Aramco and the company agreed to explore opportunities to accelerate the deployment of Aeroseal’s technology in the company’s building fleet and elsewhere; pursue joint testing of building ductwork and envelopes nationwide to uncover the most prominent opportunities; and commercialize the technology in novel applications such as gas pipelines.

The deal with Spiritus saw Aramco agree to explore opportunities in the field of direct air capture, with the US firm’s approach in this area potentially addressing major cost challenges.

Aramco and Rondo agreed to explore deployment of heat batteries in the Saudi firm’s global facilities to reduce operating costs and support emissions reduction initiatives.

The companies have started engineering studies for a first industrial scale deployment of Rondo Heat Batteries that could contribute to reduction of emissions from Aramco facilities, with subsequent scale up to 1 gigawatt per hour.

 


Saudi cement sector poised for global lead through digital maturity and circular economy practice

Saudi cement sector poised for global lead through digital maturity and circular economy practice
Updated 17 May 2024
Follow

Saudi cement sector poised for global lead through digital maturity and circular economy practice

Saudi cement sector poised for global lead through digital maturity and circular economy practice

RIYADH: Saudi Arabia’s cement industry is poised to maintain its position as a key player in the global market, by harnessing circular economy principles and navigating challenges using digital innovation, according to an industry expert.

Amr Nader, CEO and co-founder of cement consultancy A3&Co, told Arab News that most of the Kingdom’s plants in the sector boast state-of-the-art technologies, which will enable them to reach digital maturity for achieving operational excellence and de-carbonization goals.

While some plants are initiating proper strategic initiatives in this area, others are still in the early stages of trials. 

However, Nader believes that the transition to digital maturity is on the priority list of most plants and is expected to materialize within the next 2 to 5 years.

According to TechSCI Research, Saudi Arabia’s white cement market reached a value of $165.11 million in 2022, and is anticipated to grow at a compounded annual growth rate of 11.93 percent during the forecast period spanning from 2024 to 2028.

Key projects like NEOM and Qiddiya, along with the expansion of transportation networks and entertainment centers, have spurred a notable increase in the demand for high-quality cement in the Kingdom.

Nader believes this growth will come alongside major shifts in the sector, and said: “We anticipate a cost reduction and improved value addition, leveraging circular economy and even for net-zero transition if the right technologies at the efficient sizes are adopted.”

The CEO elaborated on the significance of adopting oxy-fuel technology at suitable scales, emphasizing its use of oxygen and recirculated flue gasses for burning fuels instead of air.

This approach, combined with increased reliance on renewable energy sources and the anticipated integration of low-carbon hydrogen as a fuel source, indicates the potential for Saudi Arabia’s cement industry to sustain its competitive advantage beyond 2030 according to Nader.

These initiatives form part of a comprehensive de-carbonization strategy aimed at lessening the sector’s ecological impact while preserving its market standing.

Nader further highlighted that the Saudi competitive pricing edge is driven by lower production costs even after factoring in carbon adjustment border taxes, potentially increasing exports to regions with stringent carbon regulations.

“In regard to the carbon boundary tax of Europe and other carbon boundary taxes in the world, we see that as an opportunity for further export from Middle East plants that will early adopt near-zero transitions in a time frame between 2024 and 2028,” he said.

Carbon boundary taxes, also known as carbon border adjustment mechanisms, are policies implemented by governments to address carbon leakage.

They ensure that industries subject to carbon pricing within their jurisdictions remain competitive with foreign industries that may not face similar levies..

These taxes aim to prevent the relocation of industries to countries with weaker climate policies while also encouraging other nations to adopt similar carbon pricing measures.

Projects like OXAGON at NEOM have been fueling the cement sector. File

Nader highlighted challenges affecting demand in the cement sector, such as heightened sea freight costs, reduced vessel availability due to geopolitical tensions, and increased pricing by Saudi plants to counter higher energy costs from Aramco.

“Despite the increase in fuel prices by average 100 percent for all fuels, the production cost in efficient Saudi plants is still lower than the global average by approximately 15 percent and there is still room to improve that by adopting operational excellence,” he added.

He explained that large companies in the Kingdom, with capacities exceeding 8,000 tonnes per day, have significant opportunities for improvement by implementing Operational Excellence Strategies and early adoption of near-zero science-based targets initiative verified strategies.

This will not only reduce costs further but also enables them to remain below the global cost average by the same 15 percent, even with the anticipated increase in energy prices next year, he added.

Reduced government investment has posed another challenge according to Nader, causing a slowdown in large-scale projects and consequently diminishing the demand for cement.

This trend translated into a 4 percent decline in domestic sales and a 30 percent drop in exports for Saudi Arabia’s 17 cement firms during the first quarter of 2024 compared to the same period last year, as reported by Al-Yamama Cement. 

Notably 97 percent of cement sales were domestic, with only 3 percent being exported.

Despite this drop in sales, the Kingdom stands as the largest cement producer in the region, housing several of the most significant cement-manufacturing firms in the area, according to Global Cement.

The most prominent firms in Saudi Arabia, based on market capitalization according to Bloomberg data, include Al Yamama Cement, with a market cap of SR6.95 billion, followed by Saudi Cement at SR6.82 billion, Southern Province Cement at SR5.5 billion, then Qassim Cement, and Yanbu Cement.

Nader linked the recent decline in domestic sales to certain giga-projects in the Kingdom that demand green cement, a product not commonly manufactured in most of Saudi Arabia’s plants.

“Nevertheless it must be noted that Saudi Arabia consumption per capita is still one of the highest in the world at approximately 1.3 tonnes per capita yet the utilization of the sector is less than 60 percent due to high installed capacity in the period between 2013 and 2017,” Nader added.

In its April report, Al-Jazira Capital also associated the decline with the increased influence of Ramadan on sales, noting that the holy month spanned 21 days in March 2024, compared to just 9 days in the previous year.

Nader had emphasized in a February interview with Aggregates Business that the Middle East’s cement plants, characterized by their large size, enjoy advantages in economies of scale and operational efficiency. With most plants equipped with modern technology and automated processes, they outperform their European counterparts, some of which date back to the 1950s.

Additionally, the region’s abundant solar, wind, and land resources present opportunities for the adoption of green energy, positioning the Middle East cement sector to lead in sustainability initiatives globally.

Looking ahead, Nader foresees a growing emphasis on sustainability and de-carbonization in the region, leading to increased production of green products.

Furthermore, he predicts a doubling of cement exports from the Middle East within the next two to three years, with Saudi Arabia, the UAE, and Algeria currently leading as the largest exporters.


Saudi Arabia’s pioneering healthcare reforms leading the way across the region, experts insist

Saudi Arabia’s pioneering healthcare reforms leading the way across the region, experts insist
Updated 17 May 2024
Follow

Saudi Arabia’s pioneering healthcare reforms leading the way across the region, experts insist

Saudi Arabia’s pioneering healthcare reforms leading the way across the region, experts insist

RIYADH: Saudi Arabia’s bold healthcare reforms promise valuable lessons for the region and beyond, according to a senior official.

In an interview with Arab News, Adeel Kheiri, partner in Oliver Wyman’s India, Middle East and Africa health and life sciences practice, highlighted the Kingdom’s endeavors in this sector.

Saudi Arabia has embarked on a journey to prioritize the health and well-being of its citizens, laying a robust foundation for progress. 

This commitment has been evident through a steady increase in healthcare spending, with a staggering SR147 billion ($39.2 billion) allocated in 2020 alone, signaling a resolute dedication to revolutionize the nation’s health infrastructure.

Reflecting on this shift, Kheiri said: “Saudi Arabia’s ambitious healthcare reforms stand out for their scale, complexity, and rapid timeframe. This unique approach will undoubtedly offer valuable lessons learned for the IMEA (India, Middle East, and Africa) region and beyond.”

Vikas Kharbanda, Arthur D. Little’s Middle East partner and healthcare practice lead, echoed that analysis, and told Arab News that very few health systems have managed to “achieve the degree of structural, policy and operations reforms as Saudi Arabia is witnessing at the moment, particularly at the scale and geographical scope.”

Kharbanda expressed that the Kingdom is on a path to achieving an “unprecedented change” at a pace “that has not been seen in most health systems that have gone through similar modernization journeys.”

Foundation of progress

An ambitious plan has been set in motion to expand healthcare facilities, with a particular emphasis on augmenting hospitals and primary healthcare centers. 

According to project management and advisory services firm Currie & Brown, Saudi Arabia has 78,000 beds in more than 500 hospitals.

This is up from 445 hospitals and 64,694 beds in 2014.

At a macro level, the evolution of Saudi Arabia’s modern health system unfolded across three distinct periods, according to Arthur D. Little.

The initial decade of the century witnessed the early acknowledgment of challenges, leading to substantial investments in establishing core fundamentals. 

This included significant investments in physical infrastructure, formulation of health insurance policies, and the expansion of the healthcare network. 

“The second phase of development was triggered around the early part of the second decade amidst a growing burden on the public health system, increasing demand for services, the emergence of epidemics, steady growth in the health insurance sector, and need for efficiency that saw increasing focus on digitalization, integration, capacity, and productivity enhancement,” said Kharbanda.

The onset of the third phase of development, initiated toward the conclusion of the second decade, with the introduction of Vision 2030 and the Healthcare Sector Transformation Program, heralds a truly transformative era.

The program is transforming the Kingdom’s healthcare system to be more comprehensive, effective, and integrated than ever before. 

This enhanced system prioritizes innovation, financial sustainability, and disease prevention while improving access to healthcare. 

It also focuses on expanding e-health services and digital solutions, improving the quality of care, and adhering to international standards.

Adeel Kheiri, partner in Oliver Wyman’s India, Middle East and Africa Health and Life Sciences practice. Supplied

Elevating quality of care

Quality stands as a cornerstone of Saudi Arabia’s healthcare ethos, evidenced by the implementation of accreditation programs like the National Accreditation Program for Healthcare Organizations and the Saudi Central Board for Accreditation of Healthcare Institutions. 

These programs uphold stringent standards of patient safety and care, catalyzing an elevation in healthcare services quality throughout the Kingdom.

“Saudi Arabia is likely to make significant strides in managing the human capital to meet the needs of a more future-facing health system,” Kharbanda said.

He added: “This involves identifying and setting up the training systems and accreditation for new roles in the care delivery system, including nurse practitioners, biostatisticians, etc.”

The focus, according to Kharbanda, has to be on developing the necessary capacity and capability in the workforce to meet the new models of care delivery centered around people instead of patients and ensuring new skills to adapt to the rapidly changing medical technologies.

Universal health coverage

Furthermore, Saudi Arabia’s commitment to quality care extends to its efforts toward achieving universal health coverage.

In a landmark move in 2019, the Kingdom embarked on a journey toward UHC, guaranteeing free healthcare services for all citizens irrespective of their socioeconomic status. 

This initiative not only ensures equitable access to medical services but also fosters a culture of inclusivity within the healthcare framework.

The ongoing plans go beyond just investing in the capacity of the health system, according to Kharbanda.

He noted that the approach is centered on ensuring a more remarkable shift toward primary care to “manage health rather than sickness.”

Saudi Arabia’s commitment to UHC is a core tenet in its commitment to provide an economically vibrant society and underpin that with an equally robust, resilient, and lively social infrastructure. 

“In my view, Saudi Arabia’s investment in world-class health infrastructure will be critical at three levels,” Kharbanda said.

He explained that establishing strong social infrastructure, including high-quality healthcare, not only attracts and fosters top human capital but also directly contributes to economic growth by boosting productivity and creating jobs.

Kharbanda added: “To ensure access to equitable, high-quality, and affordable healthcare, it is necessary to rapidly shift the healthcare delivery system toward care out of the hospitals, and increasing participation of the private sector.”

This is anticipated to positively impact the national economy, potentially saving SR30 billion to SR40 billion in projected public health spending by 2030 and catalyzing over SR30 billion in private sector investments within the same timeframe.

Harnessing technology’s power

The advancement of digital health services, including telemedicine and other e-health services, has made significant strides in recent years and has had a positive impact on the post-COVID-19 environment in the Kingdom, according to Arthur D. Little.

“While consumer-facing digital health solutions are gaining traction, the most impactful innovations for Saudi Arabia’s healthcare transformation will likely be non-clinical and support service applications,” Kheiri said.

He explained that tech enablement in these areas can significantly improve automation, transparency, and efficiency, especially as government health systems are corporatized and expected to adhere to private-sector-like operating principles.

Through a digital health revolution, the Kingdom has pioneered telemedicine and e-health services, transcending geographical barriers to enhance patient care. 

The inauguration of the SEHA Virtual Hospital in 2022 exemplifies Saudi Arabia’s commitment to leveraging technology for the greater good, enabling virtual consultations and remote surgeries to reach even the farthest communities.

“Cross-border collaboration in healthcare and life sciences holds immense potential for the IMEA region,” Kheiri said.

He continued: “Saudi Arabia’s advancements can act as a catalyst, particularly in areas like life sciences localization and medical tourism. By working together, countries can leverage each other’s strengths, minimize duplication of efforts, and achieve greater success on the global stage.”

The Arthur D. Little partner believes that localization has always been a topic of great importance in ensuring the long-term sustainability and self-reliability of the sector. 

“The real opportunity resides in the emerging areas for biotech and genetic based services where the playing field is less loaded in favor of established and traditional pharma and other technologies suppliers,” Kharbanda added.

Challenges and opportunities

Despite the strides it is making in the healthcare sector, Saudi Arabia faces challenges, including the deployment and operations of capacity in low-density population zones.

“No capacity in any health system will be sufficient to meet the demand unless people take better care of their wellness and participate in the system by bringing greater accountability for their health,” Arthur D. Little said.

Therefore, the challenge is to develop systems where awareness, education, and greater participation lead to a more efficient health system. 

The top official noted that outside of the urban centers, there is a greater need to engage people in health management through a more vibrant community-based engagement and health management. 

“We see significant advancements in medical technologies and new therapies, the challenge will be to adapt the system to these requirements to take into account novel funding approaches, technologies, and an ecosystem capable of fostering and adopting these innovations,” Kharbanda explained.

However, the Kingdom remains resolute in its pursuit, with plans to privatize segments of the healthcare sector and localize pharmaceutical production, heralding new opportunities for growth and innovation.

Vikas Kharbanda, Partner and Healthcare practice Lead at Arthur D. Little, Middle East. Supplied

Insurance industry integration

Alongside its healthcare advancements, Saudi Arabia’s insurance industry is experiencing rapid growth. 

Projected to reach $22 billion by 2028, with a compound annual growth rate of 5.2 percent, the sector is primarily driven by the health and motor segments, accounting for 86 percent of overall gross written premiums. 

Despite expectations of normalization in growth starting from 2024, the industry has witnessed substantial expansion. 

Moreover, the creation of almost 4,000 new healthcare jobs through the signing of eight memorandums of understanding valued at $1.07 billion in October with international and local companies further demonstrates Saudi Arabia’s commitment to enhancing its healthcare sector. 

These agreements aim to facilitate self-sufficiency in the healthcare sector by localizing the supply chain for advanced medical devices, thereby generating 3,800 job opportunities within the Kingdom. 

“With a strategy centered on the growth of private providers, there has, in parallel, been tremendous focus on the growth of the private insurance sector as well,” Kharbanda emphasized.

He added: “The GWP (gross written premium) for the health insurance market in the Kingdom has grown by almost 50 percent over the last six years, with nearly 25 percent growth being achieved in 2022. This clearly demonstrates the increasing penetration levels for health insurance in the Saudi market.”

GWP is the total amount of money an insurer collects from its customers in exchange for insurance policies. 

The mandatory health insurance program, along with economic growth driving workforce expansion, is expected to further boost the health insurance market, according to the top official.

“What would be very interesting is to explore models for supporting a greater collaboration in private and public health financing to allow more choices for patients to shift between public and private providers through an episode and enhance access to services while gradually re-aligning the whole health financing model with more outcome-based and value centric schemes,” Kharbanda suggested.

Looking to the future

As Saudi Arabia continues to develop healthcare financing, the future holds promising prospects for collaboration between public and private sectors.

Business can help accelerate healthcare innovation and accessibility, according to Oliver Wyman’s partner.

“Public-private partnerships and other forms of private sector engagement can help address existing ecosystem gaps and also support planned enhancement to the care continuum,” Kheiri said.

Establishing clear collaboration models, aligning incentives, and balanced risk-sharing will be essential for success, he noted.

The Kingdom has embarked on a journey of reforms within the health system that aims to achieve changes in a time that is unprecedented in many ways. 

“This presents a unique opportunity for Saudi Arabia to become a case study of how health reforms can be carried out in an inclusive, ambitious, and comprehensive fashion,” Kharbanda noted.

This transformation happens when the underlying medicinal science and technologies go through a very rapid evolution, he explained, adding “this also presents a unique opportunity for Saudi Arabia to demonstrate the ability to transform an existing health system and construct a future health system centered on wellness, digitalization, and people-centric health management rather than patient-centric care delivery.”


Oil Updates – crude set for weekly gain on signs of improving demand

Oil Updates – crude set for weekly gain on signs of improving demand
Updated 17 May 2024
Follow

Oil Updates – crude set for weekly gain on signs of improving demand

Oil Updates – crude set for weekly gain on signs of improving demand

NEW YORK : Oil prices gained on Friday, with global benchmark Brent set for its first weekly increase in three weeks on signs of improving global demand amid stronger economic indicators from key consumers China and the US, according to Reuters.

Brent crude oil prices climbed 21 cents, or 0.25 percent, to $83.48 a barrel by 6:14 a.m. Saudi time. US West Texas Intermediate crude futures rose 7 cents, or 0.09 percent, to $79.30 a barrel.

Brent futures are set to rise about 1 percent on a weekly basis, with WTI futures set to gain 1.4 percent.

“WTI crude oil prices seem to have found a near-term floor/support at around $78.40/barrel after a 9 percent+ decline from 26 April in the past week due to several encouraging factors such as two consecutive weeks of decline in US crude oil stockpile and more upcoming ‘piecemeal’ stimulus measures from China,” said OANDA senior market analyst Kelvin Wong, referring to the country’s potential program to buy up unsold homes directly from property developers.

Markets were also bolstered by China’s industrial output growth at 6.7 percent year-on-year in April as recovery in its manufacturing sector gathered pace, pointing to possibly stronger demand to come.

Declines in oil and refined products inventories at major global trading hubs have also created optimism over oil demand growth, reversing a trend of rising stockpiles that had weighed heavily on crude oil prices in prior weeks.

Recent economic indicators from the US have fed into the optimism over global demand. US consumer prices rose less than expected in April, data showed on Wednesday, boosting expectations of lower interest rates in the country.

Those expectations were further bolstered by data on Thursday that showed a stabilizing US job market.

Lower interest rates could help soften the US dollar, which would make oil cheaper for investors holding other currencies and drive demand.

On the supply side, investors were mostly looking for direction from an upcoming OPEC+ meeting on June 1, which will likely be held online.

An extension of OPEC+ cuts in oil output beyond June is likely to see firmer prices in the medium term, said OANDA’s Wong.

ANZ analysts said in a client note: “We see three possible scenarios for the outcome of the 1 June meeting: extend, unwind or complete removal of the voluntary cuts of 2.2mb/d. Our current model is based on a gradual unwinding of the cuts in H2 2024. Even with that, we see the market moving into a deficit, with the future call on OPEC production well above current output.”