The public sector is still the main driver of ICT spending and investment

Abu Dhabi has established itself as a regional and global leader in the adoption of ICT infrastructure, with the government in particular investing significant sums in digital platforms for business and citizen services. As well as in adopting technology, Abu Dhabi plays an increasingly active role in global research and development, with the Mubadala Development Company, a state-owned investment firm, holding stakes in several strategically important sectors. This sustained commitment to ICT has seen Abu Dhabi, and the UAE in general, climb several global rankings for ICT readiness and, according to Swedish telecoms company Ericsson, has placed Abu Dhabi alongside Dubai and Doha as the region’s tech leaders.

In Numbers

According to the emirate’s statistical agency, Statistics Centre - Abu Dhabi, the ICT sector added Dh20.8bn ($5.7bn) in real terms to the economy in 2013, representing growth of 13.2% and equivalent to 2.9% of GDP. In that year, the sector was also responsible for Dh6.3bn ($1.7bn) of gross fixed capital formation at current prices, representing 3.3% of total investment, as well as 0.9% of total employment.

According to the International Data Corporation (IDC), business IT spending in the UAE will rise by 8.3% in 2014, to reach $4.3bn. The biggest investor in technology will be the public sector, which IDC expects to invest $1.12bn, or a quarter of business IT spending, followed by combined finance (banks, insurers, asset managers and so on) at $720m.

In the World Economic Forum’s 2014 Network Readiness Index of countries, the UAE ranked 24th, up one place on 2013, and it did particularly well in the area of government usage of ICT – ranking second, after Singapore. It also ranked 33rd globally in the 2013 ICT Development Index published by the International Telecommunication Union (ITU), its score of 6.41 placing it second in the region, just after Qatar in 31st position. The ITU, which is the UN agency responsible for ICT, highlighted the UAE as the ranking’s highest climber, moving up 12 places on its 2012 position.

Policy

As a target sector for economic diversification, as well as an enabler for diversification in other sectors, ICT has in recent years received a good deal of government attention. The state is also a key driver of private ICT business, as public bodies are among the most prominent users of such services.

The state’s involvement in the sector can be divided broadly into two types: initiatives that facilitate its own business, and those that strengthen ICT in the wider economy. Driving strategy in the first category is the Abu Dhabi Systems and Information Centre (ADSIC), an independent body responsible for modernising government services through ICT. Set up in 2005 as a committee and turned into a larger centre in 2008, the ADSIC has a “mission to integrate the offerings of multiple government entities into a single, cohesive ICT strategy for the emirate,” said Rashed Al Mansoori, the centre’s director-general. To do so, it has worked with more than 55 local government entities and 44 federal ones to provide 1114 services through the government’s e-portal, abudhabi.ae.

Integration on such a large scale will be a key challenge going forward, particularly as government departments have varying levels of readiness. As a result, there will be new opportunities for private organisations to play a role. “Demand in the coming years will be driven by integration projects and the development of mobile platforms,” Salem Al Maamari, former CEO of C4 Advanced Solutions, told OBG.

“The rapidly converging ICT sector is in a growth cycle with an emphasis on military and safety applications as well as e-government programmes that aim to make systems safer, faster and more accessible. As a result, there is strong demand for cost-effective, customised solutions and intensive product support,” Leon Shivamber, CEO of Atlas Group, told OBG.

ADSIC is now helping government agencies shift their ICT strategy from “e-government” to “smart government” – that is, making public services accessible not just on the internet but also on mobile devices. Among the 60 mobile services currently available is CityGuard, an app that allows residents to use their smartphones to submit photo, video or audio material regarding non-emergency public issues such as safety, consumer protection, the environment, public works, transportation and public services. In the first half of 2014 alone, the app achieved a total of more than 40,000 downloads.

Submissions from CityGuard are handled by the Abu Dhabi Government Contact Centre, which can also be called directly on a single number, 800 555. The centre (whose workforce is 100% Emirati) is a key element in ADSIC’s strategy, as it provides citizens with consolidated “one-stop shop” access to government services, and demonstrates that successful ICT is not just about being high-tech.

Al Mansoori of ADSIC told OBG, “Much of our work is about simplifying services in order to deliver them on platforms. This involves four stages: first we streamline the business process, then we review the legislation, then we build a framework for cooperation among the different entities and finally we implement the technological solution. Technology is only the final stage in the complete process.”

Another example of ADSIC’s success is visible in the Abu Dhabi Business Centre – an online one-stop shop for business services that it set up in cooperation with the Department of Economic Development. The centre offers businesses a number of online services, including registration, advertising permits, licence renewals and amendments, and payment of fines.

ADSIC’s work has led to global recognition for Abu Dhabi – its e-Citizen programme, for instance, which provides citizens with ICT training, was awarded first prize in the category of “Information Technology Applications and e-Learning” during the 2014 World Summit on the Information Society held in Geneva. Future developments will include services involving the Health Authority - Abu Dhabi, the Abu Dhabi Education Council and the police, and ADSIC is also finalising the government’s strategy on open data, as well as the use of geo-spatial data in government services.

Investment

The second part of the government’s ICT strategy is to spur economic diversification by investing in technology. A key player in this sector is Mubadala, which has a diversified investment portfolio managed by its ICT unit. The majority of Mubadala ICT’s investments are in the local market, with a smaller amount of venture capital invested abroad, and one major offshore project.

Mubadala ICT also owns Yahsat, a satellite communications firm (both commercial and consumer) established in 2007, which has grown to become the world’s eighth-largest satellite company by revenue. Yahsat has two satellites, operated by Emirati engineers, that offer broadcast and data services, while a third, due for launch in 2016, will extend Yahsat’s satellite broadband service YahClick to another 600m users in 17 countries (see Telecoms overview).

Another growth area in Mubadala’s ICT portfolio is data centres. Khazna, founded in 2012, offers wholesale facilities targeted at the UAE and GCC markets (the latter currently stores up to 98% of its data abroad). Mubadala also has a 100% stake in Injazat Data Systems, which opened the region’s first Tier 4 data centre in 2009 and offers a range of services to businesses, including cloud-based computing, IT outsourcing and business process outsourcing.

Mubadala continues to look for new investment opportunities in the sector. Mounir Barakat, head of the firm’s ICT unit, sees the biggest growth potential in data. “Everything we’re seeing at the moment suggests that we will see significant growth globally in data broadcasting, connectivity, analytics and storage,” he told OBG. “So strategically we really like the data story, and it is certainly influencing our investment strategy, particularly with regard to infrastructure.”

Infrastructure

Abu Dhabi is already well ahead of the curve in its adoption of the latest technical infrastructure, making it an attractive destination for high-tech companies looking to invest in the region. According to the FTTH Council Europe, an industry body, the UAE leads the world in fibre to the home or building, with a total of 85% of households having access to this type of connection.

However, while this figure reflects the technology’s widespread availability – owing to long-standing policies of telecoms firms Etisalat and du to install fibre in all new developments – it masks a relatively shallow uptake. In fact, the UAE’s non-mobile broadband penetration rate was 12.5% (measured per 100 inhabitants) as of end-2013, or 1,043,000 subscribers, of which 841,000, or 81%, have fibre connections, according to the country’s industry regulator, the Telecommunications Regulatory Authority (TRA).

The main reason for the limited uptake of these services is probably their high cost. The World Economic Forum ranks the UAE 85th in the world for ICT affordability, similar to advanced markets like France and the UK. As a result, the ITU puts the country at 48th internationally for fixed-broadband penetration. Indeed, while UAE subscribers can access packages with speeds of up to 50 Mbps, price constraints lead most customers to opt for deals restricted to 1-2 Mbps. The result is a large under-utilisation of fibre capacity – “dark fibre” in the jargon.

Expansion of fixed-broadband penetration is thus likely to require reduction in retail prices. The TRA has for a number of years focused on moving the market in this direction through liberalisation measures, chiefly bitstream access, which would involve the two state-owned operators sharing their infrastructure and hence enabling direct competition. It is expected to have some impact on pricing: Etisalat currently holds a dominant position in terms of network control, with 89% of business users compared to du’s 7%.

Bitstream access may eventually lead to an even more significant change in market conditions: the opening up of spare capacity to third-party internet service providers. This would require establishing wholesale price rates for dark fibre. After the launch of bitstream, likely to take place in 2015, dark fibre may be placed on the regulatory agenda, although “triple-play” telephone, internet and television packages are likely to be the next target for liberalisation.

One company that is applying Abu Dhabi’s quality ICT infrastructure is the UAE Advanced Network for Research and Education (Ankabut). Launched in 2006 and funded jointly as of 2009 by the emirate’s ICT Fund and Khalifa University, Ankabut is implementing an advanced broadband network to link universities and schools across the UAE, the idea being to encourage research and innovation by providing fast web speeds at a very low price. The firm plans to roll out its high-speed network to 100 universities and 420 K-12 schools within two years. It will also work to link up with surrounding countries, thus advancing the emirate’s role as a regional ICT centre by providing its neighbours with greater access to research data from Europe, the US and Singapore, with which it is already connected. “Abu Dhabi and the UAE have a goal to become a knowledge economy, but in order to do so we have to establish the necessary infrastructure to support education and research,” Fahem Al Nuaimi, the CEO of Ankabut, told OBG. “By providing high-capacity, high-speed broadband connectivity between educational institutions, not just domestically but also internationally, we are fostering greater collaboration and enabling the country to be a global leader in research, education and innovation.”

Security

As public and private entities increase their usage of cloud computing, cyber security is growing in importance. To deal with cyber threats, the government established the National Electronic Security Authority by federal decree in 2012. The decision has proved timely: according to data gathered by Symantec, the UAE was the third-most-targeted country for the recent Gameover Zeus virus, with 40, 000-80,000 computers affected – 8% of the global total.

Security challenges have required ever greater coordination between the public and private sectors. C4 Advanced Systems, for example, a 100% Emirati-owned company, works with the government to provide security solutions across a range of platforms.

According to Al Maamari, as government moves towards smart platforms and open data, ensuring security has grown ever more complex. “New entities to tackle this issue have been formed and a lot has been done,” he told OBG. “But implementation is always difficult. It is a constant process that requires regular updating, as well as continuous investment in human capital to meet new threats.”

Outlook

ICT is a vital enabler in Abu Dhabi’s economic diversification strategy, and the emirate is investing considerable resources to ensure it remains at the cutting edge. The coming years are likely to see sustained growth in a number of areas, such as data storage and analysis, cyber security and mobile-based “smart” platforms to deliver services.

Perhaps most importantly, however, through the efforts of companies like Mubadala, the UAE is becoming increasingly well positioned to capture growing regional demand for these services, positioning Abu Dhabi at the forefront of the Gulf’s high-tech future.