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Saudi-con Valley? Kingdom’s bid for global tech leadership

Has Saudi Arabia got what it takes to build the latest Silicon Valley?

This article can also be found in the Premium Editorial Download: CW Middle East: CW Middle East: Can Saudi Arabia build the Silicon Valley of the Middle East?

In April this year, Saudi Arabia’s crown prince Mohammed Bin Salman visited Silicon Valley in the US to meet with tech giants such as Apple and Amazon as part of efforts to fast-forward the kingdom’s technology capabilities.

An understanding of what these companies want from a tech hub is vital if Saudi Arabia is to achieve its lofty tech ambitions.

As part of Saudi Arabia’s drive to modernise its economy by 2030, the kingdom’s push into technology has so far included a $3.5bn deal with Uber in 2016, the creation of a massive tech fund with Japan’s SoftBank Group and the announcement of a $500bn business and tech city, dubbed Neom.

“Saudi Arabia has made significant gains in modernising and adopting progressive technology policies that other Arab countries have been reluctant to consider,” according to Wes Schwalje, COO of Dubai-based research firm Tahseen Consulting.

“Through the Public Investment Fund, its open approach to regulating emerging technologies, and evolving entrepreneurship ecosystem, Saudi Arabia is emerging as a very serious contender to Dubai,” he said.

With a population of over 32 million, Saudi Arabia offers the largest ICT market in the Gulf and has long been attractive to outside players. Major US IT suppliers such Cisco and Microsoft have been operating in the kingdom for decades.

“Saudi Arabia has been and remains a priority focus for us,” said David Meads, vice-president, Middle East and Africa at Cisco. “The kingdom is marked by a large, young and tech-savvy consumer base and a growing number of local, regional and global enterprises. Saudi leadership truly understands the power of digitisation,” he added.

Leadership in connectivity and information technology

Meads said he is seeing “unprecedented” commitment on the part of the public sector to achieving leadership in connectivity and information technology.

“Key initiatives have been implemented across healthcare, education, smart cities, cyber security and skills development, and we see great potential for this promising market,” said Meads.

But learnings from the US’s Silicon Valley are vital, as more needs to be done to get to the next stage. John-David Lovelock, chief forecaster at Gartner, warned that the kingdom will have to “strongly focus” on attracting talent to the country if it is to achieve its ambition of becoming a global tech leader.

“Saudi Arabia will have to create access to skilled IT labour and also create the ability to support that skilled labour,” he said. “The Crown Prince needs to create the jobs and then make them accessible.”

He added the nation’s focus on attracting tech talent has to be “multi-pronged”, with a focus on both domestic training and importing international talent. “It’s not possible to train up the domestic workforce as quickly as you need them, but you cannot also build an entirely imported workforce,” he said. “You have to have some skin in the game.”

Lovelock refers to California’s Silicon Valley, which is home to a vibrant and cosmopolitan mix of local and global talent. “At a certain point, you have to cultivate indigenous talents who are not transient.”

He suggested it will take the kingdom four years to nurture indigenous junior tech talent, but developing local IT “visionaries” could take decades.

The Silicon Valley of the Middle East

Overall, Lovelock said the idea of Saudi Arabia becoming the Silicon Valley of the Middle East is possible. “There is growth in the technology industry globally and there aren’t yet enough local tech hubs,” he said.

“Saudi Arabia has the benefit of a lack of binding regulation and lack of legacy infrastructure, but it also means they don’t have a mature level of IT support and experience. Saudi Arabia still needs to provide the right infrastructure – but I wouldn’t bet against the country building it, just as Dubai has done.”

However, Andreas Krieg, assistant professor at King’s College London’s department of defence studies, warned Saudi Arabia’s ambitious goals appear to be out of sync with the “reality” of the job market in the kingdom.

“Saudi Arabia is currently lagging behind its neighbours in terms of ease-to-business, ease-to-invest as well as economic mobility,” he said

Bin Salman’s tough approach to revolutionising the country has spooked some foreign investors, which could make it more difficult for the kingdom to obtain the support it needs to grow its tech sector.

Read more about enterprise IT in Saudi Arabia

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“The market in Saudi Arabia is so far, despite the various announcements by the new leadership, quite closed and does not provide the incentives for foreign investors to help build an indigenous industry outside the hydrocarbon sector,” said Krieg.

“Looking at global push-and-pull factors in the tech sector, currently tech companies have no incentive to relocate to the Gulf – if they do, they would rather go the UAE or Qatar where the infrastructure for such companies is a lot better.”

He said the global tech sector thrives on “innovation, liberalism and freedom of thought” – all preconditions that are currently not met in Saudi Arabia.

“If Saudi Arabia is to become a truly global tech leader, the nation must become a liberal society that is not in fear to think outside the box, a business climate of openness and trust, where business is conducted according to the rule of law,” he said.

Krieg said Saudi Arabia could eventually create a more liberal environment but that it will take a long time. “The rest of world is already transforming at a faster pace. The competition for the kingdom is fierce, and Bin Salman has gigantic hurdles to overcome while other tech hubs are already flourishing.”

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