Globally, thriving economies often have a strong layer of digitalisation underneath the hood. The Middle East, which has always had a strong emphasis on infrastructure is no different.
The Middle East economy has traditionally been dependent on oil and gas resources, driving economic and national prosperity. However, this is changing.
In the recent years this massive reliance on oil is reducing and the effort is on creating a knowledge-based economy. The Middle East has always put a strong emphasis on infrastructure.
In the digital economy, the emphasis on infrastructure continues. Businesses across the Middle East are adopting new technologies, such as AI, 5G, and machine learning as part of their digital transformation strategy. Adoption of these technologies is driving an increase in data volume and network bandwidth requirements.
W.Media’s first Middle East Cloud & Data Center Convention 2022 was an effort to bring the top data center, cloud and cyber security thought leaders under a single platform and brain storm the way forward.
Acceleration & Transformation
“The next generation of digital transformation and the digital economy has arrived in the (Middle East) region. Further, the pandemic has also accelerated that transformation at a very fast pace. So, if a business has not moved into digital to become digital, it will be left behind,” stated Kamel Tawil, Managing Director for the Middle East and North Africa, Equinix.
They will most likely have reduced business because that acceleration has occurred at all levels and in all sectors of the off industries, and additionally, in countries such as the UAE, Bahrain, Oman, and Saudi Arabia, the government has taken a strong stance with initiatives around diversification and moving into the digital economy.
On the other side, if we look at the contribution of the digital economy and the overall GDP of the MENA region, some countries have higher rates than others, but the average is between 2 and 3%, with a maximum rate of 5%, stated Tawil.
Now, there is a strong push from within the (Middle East) governments to to bring in cloud service providers, data center operators and to bring more global IT players to contribute to the country, but we still believe there is room for improvement -in terms of really opening up the competitive edge, especially when it relates to regulated services.
The digital economy is growing and we still have a very good prospect of growth- from 2-3% to an average of 8%. This means tripling the current status of digital business contributions into the economy, which is very huge.
To achieve this kind of growth, strong connectivity assumes significance. Connectivity- whether undersea or subsea is growing at a fast pace, in the Middle East. This has resulted in many of the hyperscalers such as Amazon, Google, Alibaba, Tencent and others to set up base in the Middle East.
“The heart of the digital economy is what we call “neutral connectivity hubs” or “neutral digital hubs,” states Tawil. These are the hubs that will be the foundation for bringing bringing leading tech businesses to come and invest in the region by opening up subsea capacity. “By easing entry barriers and developing an interconnected ecosystem, I think the region can be a very strong contender in the global digital arena,” opines Tawil.
More Subsea Infrastructure?
When it comes to telecoms infrastructure, over the last decade or so, GCC countries figure in the top 20 countries list. However, there is a need to go beyond focusing only on core infrastructure.
“If we have to keep growing there is a need to look at augment the skilled manpower requirements especially in the data center and connectivity indsutry. Lot of professionals are retiring and we are looking around to see who is going take their place,” points out Musab Abdullah Executive Director, Bahrain Economic Development Board.
Then there is also the data residency and privacy issue in the region. “Everybody realises that data is valuable but in order for a connected spciety to work in a connected world, data needs to flow. This has to be cracked,” says Abdullah.
Agrees Eng. Maqbool Al Wahaibi, CEO, Oman Data Park. “We lack competencies, skill sets, all of which needs to be redeveloped again. On the data side we need to basically see how we can monetize data residency so that we can make use of them in one way or another.” Unlike most othe geographies, the Middle East does not have a sizeable enough SME market. Industry watchers point out that mandates should be given to hyperscalers clearly to develop the SME market.
“We can create companies to provide professional services for the hyperscalers. A lot of applications need to be developed and they need to give a chance to SME’s to develop those applications in areas such as artificial intelligence, blockchain etc., noted Maqbool Al Wahaibi.
In the Middle East region, the future is basically hyperscalers there will be big, medium and small clouds. Now those three layers of the cloud will be integrated in order to exchange data and with the artificial intelligence mandates, there is a need to ensure that companies have all this together.
This is due to the fact that artificial intelligence will not work without data. Today in the GCC region, it is Capex versus opex and there is a lot of pressure on what needs to be automated, along with the multi-cloud integration.
Looking at the macro picture, countries such as the UAE, Qatar, and Bahrain initiated diversification efforts to develop their financial sectors and establish knowledge-based economies. These diversification efforts have intensified and became widespread throughout the Middle East in the last decade, especially across Gulf Cooperation Council (GCC) countries.
For example, Saudi Arabia — the biggest economy in the Gulf region and the world’s largest oil exporter — is aiming to increase its share of non-oil Gross Domestic Product (GDP) from 16% in 2016 to 50% by 2030. Almost every GCC country has a similar vision that focuses on developing non-oil sectors for economic growth, local value and employment creation, and social development.
The Middle East has a young, tech-savvy population. Approximately 75% of the region’s population is under the age of 40. This demographic of young people, combined with large-scale infrastructure developments has made the Middle East one of the fastest global adopters of digital technologies.
For example, mobile infrastructure investments in the broader Middle East and North Africa (MENA) region are estimated to total US$70 billion over the 2019–25 period. Mobile broadband penetration in GCC countries has already reached 100% and more than 50% of consumers in the region shop online. In the UAE, 80% of digital payments are already contactless.
GCC countries are among the world’s leaders in 5G development. Additionally, the UAE, Saudi Arabia, Qatar, and Kuwait all feature in the global top 10 in terms of national mobile broadband speeds. In Saudi Arabia, 83% of 5G-capable devices are actively connected to 5G networks, a clear sign of Saudi Arabia’s 5G maturity. With its high speeds and low latencies, 5G is a key catalyst of the digital economy.12 Saudi Arabia therefore intends to continue investing in 5G technology, with plans to allocate or improve spectrum to boost speeds and coverage across the Kingdom.