Close observers of policy trends in the Gulf Cooperation Council (GCC) will notice that digital transformation and data governance are becoming vital issues in the region. Over the last decade, Gulf countries have introduced ambitious plans to digitally transform their public and private sectors, with the goal of providing reliable, rapid, and efficient public and private services. In 2013, for example, the United Arab Emirates (UAE) launched its mGovernment initiative, which entailed creating One App, an application that offers more than 4,000 federal and local government services such as issuing or renewing visas, passports, licenses, or paying utility bills. Meanwhile, the Kingdom of Saudi Arabia (KSA) recently established the Unified National Platform (Gov.sa), which aims to provide high quality and efficient public services. Currently, the platform provides 3,300 services to around 890,000 users. At the same time, the private sector is showing a considerably increased interest in digitizing its business activities: According to the Microsoft Digital Transformation survey, conducted in 2018, 2 in 3 GCC businesses seek to invest at least 5% of their annual income in digital transformation. Another PwC survey showed that more than 60% of the region’s enterprises believe in the importance of big data and advanced analytics.
To an ever increasing extent, Gulf countries are being swept up in the global data revolution as they shift from oil-driven economies to data-driven economies. The large amounts of data that will be generated in the region will offer lucrative opportunities for companies and investors interested in the data utilization and storage industry. Therefore, the data centers industry is experiencing massive and rapid growth in the region to support the private sector’s need to store data and utilize it for profit.
It is important to understand the nature of “data centers” before trying to understand their role. Simply put, data centers are physical facilities equipped with computing and networking infrastructure to securely store, process, and provide access to large amounts of data. Just as you store your personal data on iCloud or Google Drive instead of on your phone or laptop’s internal storage, many organizations are now using public clouds to store their entire databases because it helps them save on expenses as they pay only for the space they use without any need to buy physical hardware or design complicated software. Cloud computing also enables employees to access the organizations’ databases from anywhere in the world at any time as long as they are connected to the internet. Moreover, one of the main added benefits of cloud computing is that it allows organizations to utilize their data at reduced costs through cooperating with third parties such as data analytics companies to get real-time data-driven insights. Last but not least, cloud computing can enhance coordination and supervision among public agencies as it enables governments to establish central databases for gathering public entities’ data in one place.
For all of these reasons, cloud computing has become one of the fastest expanding sectors in the Gulf with a compound annual growth rate (CAGR) of over 25%. According to International Data Company (IDC), the total cloud spending by public and private entities in the region will amount to $2.5 billion by 2025. Because of the coronavirus pandemic, the interest in cloud computing has surged dramatically, with 43% of chief information officers (CIOs) in the GCC saying that they are considering spending more on public cloud software (also known as “software as a service,” or SaaS) than before the pandemic. In the UAE, the data centers market is expected to create 31,650 new jobs between 2017 and 2022 in anticipation of a rise in cloud computing spending to reach Dh1.51 billion ($411 million) in 2022 compared with Dh439 million ($120 million) in 2017. In KSA, the cloud computing market size is expected to amount to $10 billion by 2030. By comparison, the cloud market size in Qatar is expected to increase from only $24 million in 2017 to $112 million in 2022. Meanwhile, the Kingdom of Bahrain has initiated its Cloud-First policy that aims to enhance the adoption of cloud computing by the public sector. Under this framework, public agencies will be obligated to integrate the adoption of cloud technology as part of their IT plans. To date, more than 40 public services have successfully moved to the cloud.
Despite the tremendous upturn in the cloud computing and data centers market in the GCC, there is still a huge room for legislative and regulatory improvements to foster the rising data market. Accordingly, this report aims to review the state of the data industry from the legislative, connectivity, security, and regulatory perspectives to provide effective policy recommendations that support the efforts of the region’s policy-makers to create a comprehensive framework that boosts the growth of the data centers market.
The GCC’s digital infrastructure
Having an efficient digital infrastructure is critical for creating a suitable cloud-computing environment. High-quality internet connectivity and high-speed broadband are essential for ensuring cloud market expansion. Therefore, governments should work on increasing the affordability and accessibility of telecom services in order to boost their readiness for the adoption of cloud computing.
Over the years, the GCC countries have invested heavily in improving their telecommunication infrastructure. In 2020, the overall ICT spending in KSA was expected to exceed $37 billion. Meanwhile, the UAE’s ICT spending is estimated to reach $23 billion by 2024, while Qatar’s spending will amount to $9 billion. However, most of the GCC countries did not rank highly on the UN E-government Development Index (EGDI), “which is a normalized composite index with three components: the Online Services Index (OSI), the Telecommunications Infrastructure Index (TII), and the Human Capacity Index (HCI).” According to the U.N. report, the UAE ranked first among the GCC countries (21st globally), followed by Bahrain (38th), KSA (43rd), Kuwait (46th), Oman (50th), and Qatar (66th). Yet, the GCC countries have launched serious initiatives to prepare the countries’ digital infrastructure to meet their ambitious digital transformation plans.
The Saudi government for example, has made noticeable efforts to increase internet connectivity across the country. As part of its Vision 2030 plan, the government launched a nationwide initiative to provide 70% of rural households in remote areas with wireless broadband networks. Currently, 3 million Saudi households are connected to fixed broadband, and 91% of the Saudi population are connected to 4G mobile broadband. To date, KSA has deployed around 6,500 5G towers, which makes it among the world leaders in this domain, ranking 7th globally in terms of internet speed and 5G technology. Furthermore, the Government of Bahrain has been a pioneer within the region in liberalizing the telecommunication industry, which has helped to give Bahrain a well-established ICT infrastructure. As a result, the island country “ranks 1st in the Arab region in the ICT Development Index (IDI) as per the International Telecommunication Union (ITU) report and ranks 4th globally in the Telecommunication Infrastructure Index (TII).”
Although Oman seems less interested in digital projects than other GCC countries, the Omani government launched the National Broadband Strategy to increase its relatively low fixed broadband penetration rate. The main objectives of the Omani strategy are to provide high-speed broadband access at affordable prices to allow Omani enterprises to compete globally, in addition to reducing the digital gap in broadband services in rural areas. Interestingly, Kuwait has a very low fixed broadband penetration rate of only 29%. However, the 4G and 5G mobile broadbands represent 85% of the internet market. In June 2019, 5G services were introduced to the Kuwaiti telecom market for the first time. By the beginning of 2020, two of the mobile network operators announced that their 5G services covered almost the whole country.
By observing the status of the telecommunication infrastructure in the GCC, it is safe to conclude that all six member states have at least the minimum telecom capacity to embrace the cloud computing industry. However, some countries are better digitally equipped and more capable than others.
The legislative environment for cloud computing in the region
Some people may think that the talk about developing digital industries revolves only around supporting them by expanding the number of cables, networks, complicated equipment, or even highly skilled individuals who can perform the required tasks. In fact, the sustainable success of most digital industries also relies on establishing efficient regulatory and legislative frameworks that can protect, supervise, and regulate daily business operations and the relations among the broader group of stakeholders.
When it comes to cloud computing, regulation and legislation must enhance the cloud markets’ ability to operate efficiently while protecting data sovereignty on the national and regional levels. However, the absence of clear regulatory frameworks that outline cloud-related issues in some of the Gulf countries is still a challenge. While some countries have successfully established comprehensive cloud computing frameworks that regulate the issues pertaining to data gathering, data utilization, and data sharing on the state and interstate levels, others still have no effective regulations to tackle these issues.