Amazon is looking to launch its services in Saudi Arabia and is actively negotiating over the matter with the Middle Eastern country's administration, Reuters reported Thursday, citing sources familiar with the talks. The Seattle, Washington-based tech giant is said to be prioritizing its Amazon Web Services division for the expansion, presumably due to the weak competition in Saudi Arabia's cloud segment. The negotiations are understood to be in an early phase and Amazon is still unlikely to establish a direct presence in the country over the next two years. Apple is said to be much closer to reaching a licensing agreement with Riyadh but won't have its own store in Saudi Arabia prior to 2019, according to the same sources.
The reported move is widely interpreted as the next major step in the revamped economic policy of the country led by Crown Prince Mohammed bin Salman whose administration has been aggressively pushing for diversification over the last two years due to falling oil prices that are unlikely to recover. With the vast majority of the Saudi economy being reliant on the oil industry's exports, the government must move quickly if it's to prevent a significant economic decline in the near future, industry watchers keep warning. Riyadh has been loosening legislation regulating foreign investments in the country since 2015, having indirectly prompted Amazon to acquire Middle Eastern eCommerce giant SOUQ last spring. The purchase provided the company with a foothold in the kingdom, albeit one that's still indirect in nature as SOUQ keeps operating in a relatively autonomous manner. The move was sanctioned by the Saudi government and is now being leveraged as a basis for additional investments on Amazon's part.
Strengthening its ties with Amazon would also be a natural evolution of Riyadh's growing technology ambitions which first manifested themselves on a global level once the country pumped billions of dollars into SoftBank's Vision Fund that's been backing unicorn startups — private companies with valuations north of $1 billion — for the better part of the year. A Middle Eastern expansion would also allow AWS to revitalize its declining growth and reinforce its leading position in the global cloud market that's now threatened by Microsoft's Azure and Google's Cloud.