High tech promise of a post-oil future

From a proposed new “cloud hub” in Saudi Arabia to a project by Dubai to put blockchain at the heart of its so-called Silicon Oasis, Middle East governments are putting cutting edge technology at the heart of plans to transform their economies.

The Saudis are even planning to build an entire new high-tech zero carbon megacity, Neom, where robots will outnumber humans, goods will be delivered by drone and education will be online.

The drivers behind the region’s embrace of the tech economy include a dwindling reliance on traditional oil and gas sales and an ever-growing youth population – more half the inhabitants of the Middle East are under 30 – that would once have sought jobs in the extensive public sector.

These Middle Eastern millennials are as connected and tech savvy as their American, European and Asian counterparts. Now with greater government engagement, the high-tech landscape is becoming more structured.

Dubai’s Silicon Oasis is a 2.8 square mile tech hub launched in 2005 as a government-owned free zone. It provides a living and working space to encourage foreign investment and cater to the needs of tech industries.

Away from the prosperous Gulf region, there are similar developments. In Algeria, where tech entrepreneurs have complained in the past about the barriers to raising finance, the government has launched a smart city project to foster technology transfers and partnerships.

Neighbouring Morocco set up the Rabat Technopolis a decade ago to promote a knowledge economy in fields such as electronics, nanotechnology and biotech.

The Middle East region also has its own Uber-style ride-hailing service, Careem, that operates in 80 cities across 13 countries. Jamalon, founded by a Jordanian of Palestinian origin, now dominates an online Arabic language book market that had been ignored by international online retailers.

These diversifying trends are crucial for economic development of the poorer and richer countries alike. But visions of a high-tech future come with a health warning from some outside experts and entrepreneurs that regional governments have to get their educational, regulatory and infrastructure frameworks right if the economic transformation is to succeed.

In some sectors, governments are seeking to support innovation rather than just follow existing models. The United Arab Emirates was an early backer of Virgin Hyperloop One, part of the Virgin group. In Dubai this year, the company unveiled a prototype of its high-speed travel pod that might soon be transporting passengers between UAE cities at speeds of up to 760 mph.

Dubai’s blockchain strategy is aimed at putting into digital ledgers all official transactions from payments to licence renewals to visa applications from 2020. The promise of this paperless future is that it will ease the foundation and running of new businesses.

Similarly, Saudi Arabia this year launched its first public cloud data centre, in partnership with the German software company SAP, as part of its planned digital transformation. The programme has involved SAP training 750 young Saudis who had been unemployed.

Those with long memories may question the commitment of governments involved. In the past, some grandiose schemes to transform regional economies and to wean them off oil and gas have slowed whenever the prices of those commodities recovered. But the long-term price trend is persistently downwards and, in the face of growing populations and high levels of youth unemployment, governments have no option but to innovate.

Rabah Arezki, the World Bank’s chief economist for the Middle East and North Africa, and Hafez Ghanem, its regional vice president, wrote in a recent commentary that the region had all the ingredients to leapfrog into the digital future, including large, well-educated young populations who had already adopted digital and mobile technologies on a wide scale.

The two World Bank experts added: “The digital economy holds the promise of a new way forward, but it is still in its infancy, and young people face obstacles in putting technology to productive use.”