Middle East Eye, 4 April 2023
Riyadh needs more data centres and infrastructure if it is to become the multi-billion dollar web giant of the Gulf
Saudi Arabia is spending billions of dollars, and hopes to attract billions more, to become the digital hub of the Middle East, investing in data centres, metaverses and fibre optic cables.
Global players Microsoft, Google, Oracle, Meta and Apple are all piling into the kingdom, attracted by its deep pockets, high internet usage and plans for the future.
Riyadh is keen, under its Vision 2030 economic plan, to diversify away from hydrocarbons - and that includes investing in information and communications technology (ICT) infrastructure and services.
The aim, Fahad Alhajeri, CEO of Center3, a subsidiary of the Saudi Telecom Company (STC), told the media in October 2022, is to become “the main digital hub connecting the three continents Asia, Europe and Africa, as well as leading the largest share of internet exchange and data traffic in the region".
But to achieve this, the kingdom needs more data centres and infrastructure to handle vast amounts of data traffic, including fibre-optic cables running directly to the Arabian peninsula from Asia, Europe and beyond.
Riyadh also faces several other challenges, including the ongoing tech war between Washington and Beijing, questions over the kingdom’s approach to human rights and digital privacy; and the economic viability of its strategy.
Can Saudi Arabia build Silicon Valley on the Arabian Peninsula?
Saudi Arabia is already a digital giant in the Middle East. It is home to more than 55 percent of the region’s largest telecoms market and 51 percent of the region’s IT industries, according to Goldstein Research. Internet penetration stands at 98 percent.
But consumer spending on IT is only 0.7 percent of GDP, compared to 1.3 percent in developed markets. That means there’s room for growth.
And that growth is coming. Cloud services in Saudi Arabia are forecast to reach $10bn by 2030. Google has entered into a joint-venture with state-owned oil giant Aramco. Oracle announced in February 2003 that it will invest $1.5bn to open cloud centres. Microsoft is to invest $2.5bn in a new cloud data centre. China’s tech giant Huawei is to invest $400m in a cloud region. Meta, the parent company of Facebook, is to open the region’s first metaverse academy, to train people how to build the new digital environments, in Riyadh in May. Apple is to locate its first distribution hub in the Middle East near Riyadh.
James Shires, senior research fellow at Chatham House and author of The Politics of Cybersecurity in the Middle East, says: “The big technology companies recognise the future is non-western, so they need to engage with these regions, especially with countries like Saudi Arabia that are going to be important markets for them.”
The Saudi government is backing major plans to digitalise the kingdom - necessary to enable projects such as Neom, the multi-billion dollar megalopolis it is building in the north of the kingdom, to become a smart city.
In 2022, Riyadh earmarked $6.4bn for future technologies and entrepreneurship. It includes $1bn for the Neom Tech & Digital Company to develop XVRS, the world’s first cognitive metaverse, which integrates the virtual and real worlds.
On top of that, the Ministry of Communications and Information Technology plans to attract $18bn to build a network of large-scale data centres. MIS, a Saudi-based information systems company, has established a $320m fund to develop six data centres. State-backed STC is investing $400m to build the “largest cloud-enabled data centre in the region”. And Aramco is to invest $1bn in a venture capital fund to focus on new technology.
Yet to realise its data hub ambitions, the kingdom needs to significantly bolster capacity from its current data capacity of 60 megawatts (MW) to 1,300 MW by the end of the decade, according to a report by Al Rajhi Capital.
“But what drives a hub is content,” says Paul Brodsky, senior analyst at telecommunications research firm TeleGeography in Washington, “what people are looking at on computers and smart phones. In the Gulf people are no different.
“For the most part, what people consume is served up from local content caches. So someone in Saudi Arabia is most likely streaming a cricket match from within a server located within the country. The caches themselves get filled from European or - to a lesser degree - Asian hubs.
“To be a hub, you want that data stored locally and pushed closer to the end user. You need a critical mass of people that demand and want content.”
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