DHAHRAN, 3 September — A high-level trade and investment mission of international telecommunications and IT companies will be visiting Riyadh from Sept. 22-25. The mission will be led by Sir Bryan Carsberg, the former head of Oftel, the UK’s regulatory telecommunications body, who is also an adviser to the UK’s Joint Parliamentary Committee on the Draft Communications Bill. The mission has the active support of Prince Abdullah ibn Faisal ibn Turki, governor, Saudi Arabian General Investment Authority (GIA). Incorporated in the mission will be a special Saudi Telecom and IT Strategic Forum to be held in Riyadh on Sept. 24.
Saudi Arabia has caught the interest of multinational IT and telecommunications firms because major expansion in the Kingdom’s telecom and IT fields is creating great opportunities for international companies looking to increase their areas of operation and investment. The Saudi telecommunications sector is regarded as a huge growth industry in a country with a fast expanding population. It is also considered one the most financially viable.
The Saudi Telecommunications Company (STC) was set up in 1998 as the first step in the process of privatizing Saudi Arabia’s telecommunications sector. In 2001, its three million land lines, two million mobile phone users and 400,000 Internet users, generated profits for the company of $928 million.
Despite STC’s profitability, Saudi Arabia’s fixed line density is relatively low compared to other countries in the region. While Bahrain and the UAE have a density of 24.7 and 36.7 phone lines per 100 inhabitants respectively; the figure for Saudi Arabia is only 14. Similar ratios exist with mobile phone subscribers. Bahrain has 42.5 per 100 of population, the UAE 72, while in Saudi Arabia the figure is only 11.3 per 100.
Analysts say the Saudi telecom market has grown 30 percent in each of the past four years. The Saudi government has said it plans to offer STC shares to the public before the end of 2002. A flotation by STC would be a welcome addition to the local stock market. Although it is the largest in the Arab world in terms of total market value, the Saudi stock market has relatively few companies listed. It is estimated that the STC listing would add about $10,000 million to the capitalization of the Saudi market, which according to Middle East Economic Digest, in May 2002 had a total estimated value of $70,000 million. A sale of STC shares forms a key part of the Saudi government’s hopes to reinvigorate the economy through commercializing and privatizing state-owned enterprises. It is also regarded as critical in the creation of jobs for the estimated hundred thousand plus young Saudis who come on to the job market every year.
It is hoped that the fields of information technology and e-commerce will become major drivers in the Saudi economy but their growth is closely bound to the expansion of the telecom sector. An investment of $7 billion has been made to develop a modern telecommunications infrastructure capable of supporting e-commerce and the growing demands for Internet access.
In 2001, Saudi Arabia was responsible for generating approximately $1 billion of e-commerce activity in the GCC states. In 2000, the estimated size of the Kingdom’s IT product market was $3.8 billion with computer sales representing $500 million. Of the hardware purchased, 35 percent was assembled locally. Saudi Arabia now represents the Arab world’s largest market for IT products with over 33 percent of its PC sales in 2001. The overall value of e-commerce in the Arab world was estimated at $3 billion in 2000/2001 and is expected to reach $5 billion by 2005.
While improvements in the telecom infrastructure are essential to the growth of e-commerce in the Kingdom, there is also an urgent need for regulation. The Ministry of Commerce is examining the legal challenges brought about by e-commerce, and details of proposed legislation are expected soon. These new regulations will be based on guidelines set forth by the United Nations Commission on International Trade Law. The Ministry of Finance and the Saudi Arabian Monetary Authority (SAMA) are responsible for the development of the new regulatory framework. New laws and changes to legislation, presently moving through a consultation process, reflect similar issues currently under consideration by other countries.
A principal feature of the new regulations, as in the rest of the world, will involve the recognition of electronic signatures. Other provisions relate to the security of financial transactions, confidentiality of operations and systems security. A technical committee set up to formulate these regulations consists of five members, chaired by the deputy minister of commerce. The other members are the deputy minister of finance and national economy, the vice-chairman of King Abdul Aziz City for Science and Technology (KACST), the deputy governor of SAMA, and the adviser to the president of Saudi Telecom.
It is anticipated that during their visit to the Kingdom the IT and telecommunications mission will be meeting with representatives from all major groups involved in building, maintaining and regulating the Saudi telecom sector.
