The regional real estate, construction and hospitality sectors have been turned upside down over the last two years, with Covid-19 bringing these sectors to a halt. The impact of the pandemic remains, however, the resurrection of these vital sectors across the region is a welcome relief because they support the development of modern cities, which in turn have attracted commerce and tourism to the Middle East and North Africa.
This latest edition of Law Update, provides vital insights, updates and commentary on the latest trends taking shape across the real estate, construction, hotels and leisure sectors. The articles within this edition cover a broad range of topics, from what’s next for real estate in Dubai, to commentary on Saudi real estate, a market that is set to become the main bedrock of the region for years ahead. You will find articles on reforming real estate laws in Qatar, foreign investment and ownership in Oman, and mitigating risks on hotel construction projects and the lessons learnt from Covid.Read the full report
Haroun Khwaja - Senior Counsel - Digital & Data
June – July 2017
The ‘thriving economy’ aspect of the plan is largely reliant on the Kingdom’s ability to diversify its economy and reduce its reliance on oil. The transformation of the economy will have wide ranging implications for the Image result for the information and communication technology sector, including the recalibration of the regulatory framework, increased demand for talent and new opportunities for technology-focused businesses.
In this article, we provide an overview of some of the interesting information and communication technology related programs under Vision 2030.
Developing Digital Infrastructure
Vision 2030 notes that sophisticated digital infrastructure is integral to today’s advanced industrial activities. Digital infrastructure attracts investors and enhances the competitiveness of the economy. For this reason, the government will partner with the private sector (including telecommunications operators) and support local investments in order to help develop the telecommunications and information technology sectors and ultimately lead the digital economy. A particular area of focus is improving the quality and expanding the coverage of high speed broadband to 90 percent of housing in densely populated cities and 66 percent in other urban zones.
The governance of digital transformation will be strengthened through a national council and improved regulations.
Leader in E-government
The Kingdom aims to become a global leader in e-government by expanding online services and improving its governance standards. It is hoped that this, in turn will boost transparency and reduce delays. To date, a good deal of progress has been made in e-government with the scope of online services having been expanded over the last decade to include employment programs, online job searches, e-learning services, traffic, passports and civil affairs, online payment services and online issuance of commercial registers.
The scope of current online services will be expanded further to include areas such as geographic information, health care and education. Quality is slated to improve by streamlining processes, and diversifying communication channels. The government will also support the wider use of online applications in government agencies, such as cloud applications, data sharing platforms and HR management systems.
Although not specifically referred to in Vision 2030, the development of ‘Smart Cities’ also appears to be an area of focus. Recently, the first annual Saudi Smart Cities conference took place in Riyadh with over 700 participants from ministries and governmental bodies from across the Kingdom attending. The Ministry of Municipal and Rural Affairs (MoMRA) used the conference as a platform to bring together key stakeholders and initiate discussion about best-practices and leading technologies and services that could feature in the proposed Smart Cities. It has been reported that the Kingdom will invest over US$500 billion into modernising its infrastructure across the 285 municipalities in line with global standards in order to provide the best quality of life for its citizens.
Investing in Emerging Technologies
The ongoing privatisation of state-owned assets, including leading companies, property and other assets, will bring in new and more diverse revenues for the Saudi government. This will further enhance financial resources to allow it to maximise its ability to invest in large international companies and emerging technologies from around the world.
Localising Defence Industries
The Kingdom is the world’s third biggest military spender, having just recently signed a deal in Riyadh with the United States for arms to the value of US$350 billion over 10 years, with US$110 billion that to take effect immediately. Lockheed Martin, one of the world’s largest defence contractors and whose technology was part of the deal, said in a statement that the deal “will directly contribute to [Saudi Arabia’s] Vision 2030 by opening the door for thousands of highly skilled jobs in new economic sectors.”
The Saudi government plans to manufacture half of its military needs within the Kingdom to create more job opportunities for citizens. Currently only two percent of its military spending occurs within the country, with the national defence industrial sector being limited to only seven companies and two research centres. Localisation is slated to be achieved through direct investments and strategic partnerships with leading companies in these sectors. It is hoped that this will result in the transfer of knowledge and technology, and the development of national expertise in the fields of manufacturing, maintenance, repair, research and development.
The proposed increase in local defence expenditure is expected to also stimulate other sectors such as industrial equipment, communications and information technology, which in turn will help create further job opportunities.
Supporting Small and Medium-sized Enterprises
It has been identified that small and medium-sized enterprises contribute only 20 percent towards Saudi Arabia’s GDP whereas, in certain advanced economies, the figure is around 70 percent. It has been identified that SMEs endure unnecessarily slow and complex legal and administrative procedures. They also struggle to attract the required skills and funding as financial institutions currently provide, at almost five percent of total funding costs – again, a far lower percentage than the global average. To address this, the recently established SME Authority plans to review and revise laws and regulations, remove obstacles, facilitate access to funding, and enable youth and entrepreneurs to market their ideas and products. Additionally, the government will facilitate access to funding for SMEs and it will encourage financial institutions in the Kingdom to allocate up to 20 percent of overall funding to SMEs by 2030.
Lastly, the government will establish new business incubators, specialised training institutions and venture capital funds to help entrepreneurs in developing their skills and networks. SMEs will also be supported in marketing and exporting their products and services, by leveraging e-commerce and collaborating with international stakeholders.
E-commerce in retail sector
The Vision has identified that traditional retail dominates about 50 percent of the market in the Kingdom compared to 20 percent in a number of countries in the Gulf Cooperation Council (GCC), with the retail market suffering from limited penetration of modern trade and e-commerce. The government aims to increase the contribution of modern trade and e-commerce to 80 percent in the retail sector by 2030. This is planned to be achieved by attracting both regional and international retail investors, increasing financing of small retail enterprises to stimulate their growth and development and by easing restrictions on ownership and foreign investment.
Vision 2030 offers a great opportunity for the development of the Kingdom’s information and communication technology sector and technology focussed businesses operating in the region are well-placed to benefit from this game changing initiative over the coming years. The potential for Vision 2030 to achieve its stated aims will largely depend on the ability of government entities to work with private sector stakeholders to improve the business environment, including by changing the regulatory framework, facilitating the flow of private investment, developing and nurturing local talent and expediting licensing procedures.
Al Tamimi & Company’s Technology, Media & Telecommunications team regularly supports clients on information and communication technology matters in the Saudi market. For further information please contact Haroun Khwaja (email@example.com) or Nick O’Connell (firstname.lastname@example.org).