As Saudi Arabia diversifies its economy and undergoes massive social reforms the opportunities for AV technology suppliers are growing. Anna Mitchell explores where the prospects lie and how they can be grasped.
On April 25, 2016 Crown Prince Mohammad bin Salman announced the first details of Saudi Vision 2030 thereby marking the start of hefty investment across targeted areas in the Kingdom of Saudi Arabia that are largely aimed at reducing the country’s reliance on oil revenue.
Many of the areas earmarked for growth spell good news for the AV industry; whether that’s new cities, increased tourism, wider leisure and entertainment options and a fresh focus on heritage projects. At the same time the country is trying to create a healthy private sector, which means how business is conducted in the country is changing as well.
So, what’s the reality for companies on the ground, and who stands to benefit most from investment related to Saudi Vision 2030? Most importantly, how can AV companies make sure they’re in line to win the work?
Where’s the money?
Yousef A. Abdul Hadi, business development manager at Smart Technology Company, an integrator headquartered in Riyadh, says Vision 2030 has sparked an increase in investment into security. That means demand for SOCs, NOCs and command centres. In addition, his company is benefiting from commercial and entertainment projects with new hotels, cinemas and smart offices being built. “We are moving into these booming fields due to new, huge requirements on projects related to Vision 2030,” he confirms.
A flagship hospitality development is the Red Sea Project, and it’s staggering in its scope. The first phase alone, due for completion in 2022, will see the construction of 14 luxury hotels across five islands and two inland resorts, providing more than 3,000 hotel rooms. They’ll be joined by a new airport, a yacht marina, leisure and lifestyle facilities, as well as supporting logistics and utilities infrastructure, including 75km of new roads. If all goes to plan the project will complete in 2030, when it will offer 8,000 hotel rooms.
Tourism elsewhere is being driven by part of Vision 2030 that plans to increase the number of Muslims making the pilgrimage to Mecca, otherwise known as Umrah visitors. By 2030, Saudi Arabia wants to have the capacity to welcome 30 million Umrah visitors a year. To put that in perspective the country welcomed 8 million in 2015. More visitors require more hotels and better infrastructure with increased capacity. This will provide knock on opportunities for AV and Vision 2030 even specifically details that a new Islamic museum will use modern technology to deliver an immersive experience.
Sports facilities also stand to benefit as the kingdom tries to get its citizens to be more active. Hospitals and healthcare facilities will grow as investment ramps up. Education is a key area – by 2030, Saudi Arabia aims to have at least five Saudi universities among the top 200 universities in international rankings and will have to invest in the facilities to achieve that. And if all that isn’t enough, how about entire cities? New mega-city Neom, for example, will cover a total area of 26,500 sq km with the first section complete by 2025.
US-based IAD set up Saudi systems integrator ACE to deliver projects in the Kingdom in 2011. CEO Robert Cole outlines even more opportunities: “There are lots of theme parks and 2,000 movie theatres opening across Saudi Arabia. Companies like AMC and VOX are getting involved.”
Silver screen, golden opportunity
The official document setting out Vision 2030 says: “We consider culture and entertainment indispensable to our quality of life. We are well aware that the cultural and entertainment opportunities currently available do not reflect the rising aspirations of our citizens and residents, nor are they in harmony with our prosperous economy.”
The government specifically wants to increase household spending on cultural and entertainment activities inside the Kingdom to 6%.
Museums, art galleries and libraries are all on the cards but one of the biggest areas to benefit is cinema. The social reforms mentioned mean that after a ban on cinemas, Saudi Arabia is starting a movie theatre industry from scratch, which is a unique opportunity for theatre owners and technology suppliers.
The General Authority for Entertainment says that the entertainment sector needs 267 billion SAR (approximately €63 billion) to build suitable infrastructure for entertainment across the Kingdom. It is expected that investment in the entertainment sector will reach 18 billion SAR annually.
Vox Cinemas, a subsidiary of UAE-based Majid Al Futtaim, was awarded the second license to open cinemas in the Kingdom. The company plans to invest 2 billion SAR in 600 screens over the next five years, which Saudi officials estimate will bring the total number of cinemas in operation up to 350 and the number of screens to 2,500 by 2030. The image below is of the Vox Cinema 16-screen development at Al Qasr Mall in Riyadh.
The first cinema opened in Riyadh on April 18, 2018 and about 30 movie theatres are to be opened in 15 cities around the kingdom within five years.
It’s a safe bet as the audience is already there. The majority of Saudi Arabia’s 32 million strong population is under the age of 30. In fact, more than half of them are below the age of 25 years. Saudis spend about $30 billion (approximately €27 billion) annually on tourism and entertainment outside the kingdom already and part of Vision 2030 is to bring that back into the country.
How to get involved
With a surge of investment opportunities, how can companies make sure they get involved? “A new bidding system has been built by the government,” answers Hadi. “This is monitored, managed and centralised to release any contract and PO for any project or inquiry as a part of project quality control.”
The reaction to Vision 2030 within Saudi Arabia has been very positive although,
according to Hadi [pictured right], the massive changes involved with the initiative caused the market to initially slow. “[There were] huge changes on local projects and business strategy changes with new digital transformation requirements,” he says. “After two years the market became very clear and fair with a lot of new projects. Markets became active again and moved with IoT transformation as well.”
Hadi is at pains to note here that cybersecurity requirements place more and more demands on AV systems and integration. “A solid base is required for the future smart cities and IoT. This means AV, UC and visualisation investment is booming,” he says.
But, are the infrastructure and skills in place in Saudi Arabia to support such quick and rapid changes?
“There are around five to seven large pro AV integrators [in Saudi Arabia],” estimates Hadi. “That is very few according to the market’s projects and needs.” He adds that new installers have entered the market in the last two years. The government is actively encouraging new companies and has an aim to increase SME contribution to GDP from to 35%.
These companies should hopefully flourish in the favourable business environment that Saudi Vision 2030 lays out: “The recently established SME Authority plans to review laws and regulations thoroughly, remove obstacles, facilitate access to funding, and enable youth and entrepreneurs to market their ideas and products. At the same time, we will establish additional new business incubators, specialised training institutions and venture capital funds. These will aid entrepreneurs in developing their skills and networks.”
However, many of the projects related to Saudi Vision 2030 are so vast in their scope that no single local company has the resources to handle them on their own according to Hadi. Many will make joint ventures with other companies. “This has opened the door for a lot of international integrators to start working in and focusing on Saudi Arabia, especially American and European integrators,” he adds.
Cole [pictured left] says that there is still an underlying current that investors will look outside the kingdom for engineering expertise and technology deployment but adds ACE, the Saudi company he was involved in creating, is “making lots of waves”.
“There definitely is a lot of opportunity for companies within the kingdom,” he adds. “The issue the big firms outside of Saudi run into is they have to make a joint venture with the local partner to be allowed to work. Or they must go through SAGIA (Saudi Arabian General Investment Authority) to get their company set up in Saudi Arabia.”
Cole adds that the local companies are having to juggle the boom in opportunity with huge changes to how they run their businesses: “There's been a lot more taxation imposed within the kingdom, whether it's employment tax or VAT. The cost of living has gone up. So, that’s a challenge for businesses here.”
For Hadi, one of the challenges is a lack of good distributors in Saudi Arabia. “Most of them are integrators or resellers with one to three sales representatives, and some of them act as integrator and distributor at the same time which is unfair and creates conflicts and competition issues,” he says.
“In addition, Saudi Arabia’s custom policies are complicated due to many new logistics requirements and certificates which came in to the market within the last two years. These are designed to control the market quality as there were many fake products and illegal shipments. Now, all importers and exporters must follow the new Saudi customs system, which is a big challenge with new rules and policies for all of them.”
“It’s pretty strict importing kit into Saudi,” corroborates Cole. “Right now, it's changing quite a bit but actually it's good to help protect the consumer.”
There are hurdles to overcome to reach the ideals of Vision 2030. Hadi notes that Saudi Arabia is a huge country and it will take time to roll out the digital transformation that is necessary and required for many of the projects to be successful. Political issues could also affect the speed of the roll out. However, regardless of achieving specific targets, the bottom line is that Saudi Vision 2030 has already generated huge and positive investment in the country and promises to continue to do so for the next decade.