A productive cross-sectoral innovation ecosystem underpins the world’s leading economies, enabling countries such as the US, China and Germany to respond effectively to existential challenges, economic inefficiencies and commercial opportunities – ultimately bolstering economic sustainability. In recognition of this, Saudi Arabia’s government is working to plug gaps in the Kingdom’s own innovation ecosystem by ensuring each sector of its economy has a strong research, development and innovation (RDI) component.
Saudi Arabia’s sovereign reserves and reformed regulatory frameworks have enabled rapid economic diversification, and its flourishing RDI entities have made significant contributions to the Kingdom’s search for solutions to national challenges, which include water scarcity, genetic diseases, the Covid-19 pandemic, the energy transition and food insecurity. Moving forwards, with a more thorough and efficient RDI governance structure taking shape, enhanced private sector participation will be key to boosting human capital, supporting start-ups and localising production across a number of strategically targeted industries in order to support the realisation of the goals of Vision 2030, the government’s long-term socioeconomic development strategy.
Vision 2030 has at its core the transformation of the Saudi economy from one dependent on oil and gas into a knowledge- and information-based economy. The development of advanced education institutions is intended to feed a vibrant and productive innovation ecosystem that drives GDP growth through the diversification of industry, with modern technological capabilities and infrastructure providing the bedrock for national security and a sustainable society.
Since its establishment in 1977, the King Abdulaziz City for Science and Technology (KACST) – formerly the Saudi Arabian Centre for Science and Technology – has been an important component of the Kingdom’s RDI activities. Historically, KACST functioned as the national RDI regulator and also the national laboratory. KACST has also instrumental in the formation of other innovation-related entities – including the King Abdullah City for Atomic and Renewable Energy, and the Communication and IT Commission – while also guiding landmark national RDI programmes, including the launch of the Arab world’s first satellite in 1985 and, more recently, the Genome Project (see analysis). The latter involves the complex procedure of mapping the genome of the Saudi population in order to enhance treatments for genetic and non-communicable diseases, some of which are between five and 10 times more prevalent in the Kingdom than in any other country.
In recent years the Kingdom’s economy-wide governance structures have been placed under the microscope so that inefficiencies, bottlenecks and potential solutions to such issues can be identified. Relating specifically to the innovation value chain, it was decided that KACST’s dual role as both regulator and operator presented a potential conflict of interest, while redundancy of certain activities was also identified.
As a result, in June 2021 the Council of Ministers approved the formation of the RDI Authority (RDIA). Once operational, the RDIA will become an integral component of a three-tiered governance framework. The first of those tiers will see the Supreme Committee for RDI supervising policy formulation and direction, while also setting the funding ceiling for public RDI expenditure. The second tier will see the RDIA in charge of management and funding distribution, coordinating RDI activities with government ministries. Lastly, tier three involves execution with universities, national laboratories, tech players such as incubators and accelerators, and private investors and non-governmental organisations.
The RDIA is populated by various government ministers, with the minister of communications and IT (MCIT), Abdullah Al Swaha, sitting as chairman of the board, reflecting the instrumental role technology plays at each level of the RDI value chain. Al Swaha is also chairman of the boards of the Saudi Space Commission, KACST, and the Communication and IT Commission. “Currently, the MCIT has a symbiotic relationship with the RDIA, with a number of our experts engaged in the formation of the national RDI strategy and the incubation of the RDIA,” Ibrahim Babelli, former deputy minister of the MCIT, told OBG. “In a similar manner to the establishment of the Saudi Space Commission, the MCIT deployed a team to help re-launch the new entity, and that team is now being weaned off. We will follow a similar model for the RDIA, so eventually the MCIT’s relationship with it will be no different to that of any other ministry,” he added.
Education institutions have a multifaceted role to play in developing the Saudi RDI ecosystem. Indeed, the entire education system is being revamped and curricula redesigned to instil problem-solving capabilities and digital literacy in students at all levels, while public entities, such as the non-profit endowment organisation Mawhiba Foundation (Mawhiba), identify and nurture the Kingdom’s brightest minds from a young age. “Once gifted students are identified, Mawhiba works closely with its partners through research and mentorship programmes, sometimes from as early as seventh grade all the way through to twelfth grade,” Basil AsSadhan, deputy secretary-general for gifted services at Mawhiba, told OBG. “The idea is to ingrain a researcher mentality so that when they enter university, the students can maximise their contribution and output,” he added.
In addition to university research departments being key executors, courses delivered by higher education institutions are being redesigned to foster greater entrepreneurial and creative capacities among the Kingdom’s academics. Initiatives such as the Human Capabilities Development Programme – overseen by a purpose-formed arm of the government of the same name – and the multiple partnerships that universities, technical and vocational schools, and training institutions are entering into with RDI-related multinationals – such as Huawei, Boeing and Ericsson – are enabling the Kingdom to raise the competitiveness of its human capital in a global economy increasingly driven by scientific and technological expertise.
One of the core goals of the education component of Vision 2030 is to see five Saudi universities rank among the world’s top 200, and an institution’s RDI capabilities carry significant weight in determining its standing. In 2016, the year Vision 2030 was launched, the highest-placed Saudi university on the Centre for World University Rankings’ list was King Saud University, in the 602nd position. The 2021-22 iteration saw King Abdulaziz University reach the 278th position, and in terms of research it placed 225th. That same year, King Abdullah University of Science and Technology (KAUST) placed 304th overall, and King Saud University placed 371st. Making up the top five in the Kingdom were King Fahd University of Petroleum and Minerals, and King Abdulaziz University for Health Sciences, placing 705th and 1440th, respectively. Meanwhile, the 2021 Shanghai Ranking of world universities placed King Abdulaziz University and King Saud University in the 101-150 range, with the former placing in the top 50 for the following subjects: instruments science and technology; food science and technology; mechanical engineering; chemical engineering; energy science and engineering; and electrical and electronic engineering. KAUST appeared in the 201-300 range.
Work remains if the Vision 2030 goal is to be achieved, but such advancements in a relatively short period give reason for optimism and is indicative of the rate of progress being made towards the plans’ goals. Furthermore, the SCI mago rankings, which rate countries based purely on research capacities and include all research-related entities, placed Saudi Arabia 17th in terms of citation of research outcomes out of232 countries in its 2021 list. This reflect the fact that while the modernisation of an entire education system may take a number of years, the focus on RDI is bearing fruit.
One challenge that has been flagged by multiple government figures is the issue of the Kingdom’s top research talent leaving to join other international entities. Indeed, the government and the private sector must work together to keep the most talented Saudi individuals engaged with RDI-related activities if it is to achieve its innovation goals.
The Saudi Authority for Intellectual Property (SAIP) was formed in 2017, bringing all matters associated with intellectual property (IP) rights under the purview of a single government body, allowing for more efficient IP regulation and stakeholder coordination.
With an increasingly productive research pipeline and the government’s courting of private finance, IP regulation that instils confidence in inventors and investors is crucial. Work carried out by SAIP to clarify and strengthen each step of the IP protection procedure and framework culminated in the April 2022 announcement that it would release a new IP strategy that aligns the Kingdom with international best practices. The strategy aims at enhancing the efficacy and adequacy of IP protection offered to international investors operating in the Kingdom. A key feature of the strategy involves the reduction of the patent registration period from 24-36 months to 12 months, which is hoped will encourage local and international entrepreneurs to incubate their innovations in the Kingdom. The SAIP will also increase monitoring for patent violations and carry out regular inspections to protect intellectual property rights of original content creators.
In addition, SAIP is offering consultations and specialist certification programmes to raise awareness and knowledge of the complexities of IP protection, and has also entered into a partnership with the World Intellectual Property Organisation (WIPO) to establish a network of IP support centres throughout the Kingdom. The announcement of the new strategy comes amid a recent surge in patent and trademark registration, coinciding with a rise in entrepreneurship in Saudi Arabia. In 2020/21 patent applications and trademark, industrial model and copyright registrations rose by 11%, 26%, 48% and 57%, respectively. SAIP believes that the introduction of the new strategy will enable the Kingdom to improve its standing in international patent and innovation rankings. WIPO ranks nations based on the number of patents, among other factors, registered annually (locally or abroad). Saudi Arabia placed 24th out of 100 countries for activity recorded in 2020 – a one place improvement over 2019 and the highest ranking in the Arab world.
Senior officials from various government ministries and research institutions told OBG that another key challenge the Kingdom faces is enhancing the output of its RDI ecosystem. “We have been conducting research for quite some time in Saudi Arabia, and while innovation is glamorous and receives a lot of attention, development does not receive the attention it requires, with hardly any funding. Globally, development is largely carried out by the private sector, which is not the case yet in Saudi Arabia,” Babelli told OBG. This bottleneck – representing the period when significant investment in development is required and risk of failure rises – is not exclusive to the Saudi RDI ecosystem; indeed, other countries have experienced it while developing their own innovation value chains.
The enhancement of high-tech industries, such as military and space, can offer a partial solution. Although the most sensitive research in these areas is classified, there is scope for private sector involvement in various stages of the RDI process. “Events such as the Cold War and the Apollo space mission, for example, saw vast sums spent on RDI, spawning civil innovations that decades later we all still enjoy,” Abdulaziz Al Malik, RDIA foundation team member and executive director of the Life Sciences and Environment Research Institute at KACST, told OBG.
Indeed, core to Vision 2030 is the development of the local military and space industries, and Saudi public and private entities have entered into partnerships with major international players such as US firms Lockheed Martin, L3Harris and Axiom Space in order to boost domestic capacities and manufacturing. It will take a number of years for these industries to develop, but there appears also a clear understanding of how to address the development inefficiency from further down the value chain in the interim. The Ministry of Education is working closely with universities across the country to enable better commercialisation and industrialisation of research and ideas, while the disconnect between the private business community and the development stage of the innovation cycle is being gradually closed.
In July 2022 the National Aspirations and Priorities for RDI initiative was launched. The government stated that the strategy will see RDI investment rise to around 2% of GDP by 2040, with health and wellness, sustainable environment and energy targeted to drive that growth. In addition, the government is expected to spend around $33bn developing its ICT sector in 2022, and it was announced at the inaugural 2022 LEAP conference held in Riyadh that there were around $6.4bn in investment in Saudi tech companies.
According to Magnitt’s “2021 Saudi Arabia Venture Capital (VC) Report”, the titular year saw the Kingdom attract $548m in VC – a national record and 270% increase on 2020. Moreover, between 2017 and 2021 the amount of VC injected into the Kingdom rose by 1174%, reflecting multiple initiatives of the government to foster greater entrepreneurship and innovation. In the MENA region only the UAE attracted more VC in 2021. Foreign direct investment (FDI) also showed robust growth, rising by 257% to $19.3bn in 2021. Professional and scientific businesses, and ICT businesses accounted for 147 and 133 of the total 4400 licences issued, respectively – the fifth- and sixth-highest sector totals.
“A decade ago the Kingdom was more focused on incubators, then on accelerators. Now, we have many investors and venture capitalists being drawn to the market. While, there is still a funding gap, we are slowly bridging it,” Ahmad Al Naimi, general partner at STV, MENA’s largest independent VC fund by assets under management, told OBG. “The Kingdom’s major RDI-related institutions and companies are creating centres and magnets for talent, resulting in increased international interest in the Saudi market and the creation of original products,” he added.
Saudi Aramco, the world’s largest oil-producing company, has added to its already extensive RDI capacities by launching LAB7, through which it will provide pre-seed and early-stage funding to start-ups whose innovations carry the potential to positively impact global sustainable development, increase operational efficiency and boost productivity. LAB7 will seek to onboard start-ups involved in energy and sustainability, digital transformation and advanced manufacturing – all key components of Vision 2030. The facility’s scientists and engineers will help entrepreneurs with complex ideas, enabling them to progress through each stage of the RDI process, ultimately bringing products to market.
Other initiatives are being mobilised by leading RDI institutions. In April 2022 KAUST established the KAUST Innovation Fund, through which it will invest up to $200,000 in seed-level, high-tech businesses and up to $2m in early-stage companies whose business plans highlight large potential markets for unique products and whose teams contain the expertise to drive technical and commercial success.
Meanwhile, KACST, the MCIT and the Saudi Federation for Cybersecurity, Programming and Drones have partnered to create the Garage – a start-up centre inspired by the origin stories of Apple, Amazon and Google, and positioned as Saudi Arabia’s answer to Silicon Valley. Emerging and disruptive tech start-ups selected for residence will be awarded grants of up to $100,000 and, potentially, investment reaching $500,000. They will also gain access to KACST’s labs, rapid prototyping facilities, other specialised equipment and open-plan work spaces designed to foster idea-sharing and knowledge transfer. Between them, the above initiatives offer a plethora of support, and technical, incubation and talent development services to start-ups, with some of the Kingdom’s most accomplished and experienced scientists, researchers, innovators and entrepreneurs on hand to provide mentor services.
A new governance structure will take time to mature, and there may be an element of legacy resistance to overcome during that process. The additional challenges of boosting human capital, attracting and retaining talent, and stakeholder alignment also remain. Improvements in these areas must be properly harnessed to ensure that RDI leads to a strong pipeline of commercially viable products, but progress is being made to that effect. The Kingdom’s largest companies and funds’ increasing engagement with RDI-related activities should continue to draw the attention of international investors, while the development of appropriate governance structures and investment frameworks will be of great benefit. With those elements now in place, it should only be a matter of time before Saudi Arabia’s innovation value chain is capable of truly driving national industrial and economic growth.
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