Saudi Arabia - financing the future

The very fact that Saudi Arabia needs to consider the financing of its future growth and development is an indication of how much has changed in the Kingdom in the past few years. It's not that the oil is running out. But other issues such as demographic change and regional instability are leading to a re-evaluation of future plans.

Saudi Arabia currently produces 10% of the world's oil and accounts for around 20% of known oil reserves. The recent sharp rise in world oil prices has no doubt provided a welcome boost to the country's finances. But this is unlikely to lead to a renewed round of big infrastructure projects such as were seen in the 1980s.

Instead, issues such as the rapid population growth and the localised impact of wider regional instability are changing the way the Kingdom is looking at its future. Saudi Arabia is experiencing population growth of around 2.1%. This could mean a total population of nearly 36 million by 2020, compared to the present 27 million. Almost a half of all Saudis are under the age of 19, leading to a major demographic imbalance.

The growth in population must be balanced and supported by economic growth of approximately 6% so that these young people can enjoy employment. Last year, the figure achieved was 6.5%, so there is optimism that foreign direct investment, privatisation and stimulating home-grown exports of goods and services can start paying dividends.Clearly there are opportunities for the telecoms sector, and not only in the existing domestic and commercial circles. Saudi Arabia intends to build new economic cities, new oil refineries, a railway from the Red Sea to the Arabian Gulf, and a number of schemes in tourism, energy, petrochemicals, water, health and education. These will all create new ICT opportunities. 

Overall, investment in the Kingdom is ranked 38th by the World Bank and IMF, the highest of any Arab nation, and higher than France, Portugal and Italy.

New licenses for fixed and mobile networks

Saudi Arabia can boast one of the fastest growing telecoms sectors in the Middle East, whether in terms of subscribers or the revenues that the subscribers generate. The young population, high overall economic growth, and new technologies are all playing their part. Mobile phone users are likely to increase by 5 million to 22 million by 2009.

The process of liberalisation commenced five years ago. At present there are only two licensed network operators. However, the Kingdom's Communications and Information Technology Commission intends to widen the competitive environment by issuing one or more new fixed-line and mobile licences before the end of this year (2006). Saudi Telecom Company (STC) and Ettihad Etisalat can expect competition. This is to be welcomed, as landline penetration is a mere 17%, and mobile 60%, comparing unfavourably with say Bahrain or the UAE. 

"Pioneers in adapting new technologies" - STC President

 In recent interviews, Saud Al-Daweesh, President of STC, has praised STCs attitude towards adopting new technologies. He regards his company as true pioneers in the region. For example, the launch of 3G mobiles is believed to be the region's largest technology project. Set to cover every city in Saudi Arabia, the project is valued at around US$266 million. Much depends once again on the involvement of Saudi Arabia's young population.

STC has ambitions to become both a regional and international player, building on its success in Saudi. External investment is prized as a strategy, as is operating in other markets at varying stages of their business cycles. The latter in turn assists in diversification as the original market in Saudi Arabia matures. 

In internet access, an area where Saudi Arabia has been criticised in the past, according to Al-Daweesh STC is aiming to bring 1 billion new broadband connections into homes during 2006 and 2007. The plan is to connect traditional landlines into a communications box to provide high-quality content, video games, shopping etc. Upgrades to services will be achieved using a range of new technologies including 3G, NGN and WiMAX.

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