Economic Update

Published 20 Jul 2022

– Several nations are embracing AI to diversify and bolster their economies

– While still in the early stages, countries are crafting AI strategies to fit their specific needs

– AI is making oil and gas companies more efficient and helping to monitor emissions

– Major investment in AI education being made to develop homegrown talent

As part of ongoing efforts to diversify their economies and build a platform for sustainable future growth, MENA nations are increasingly turning towards artificial intelligence (AI).

A slew of recent investment and initiatives – primarily in academia and the government, but also in the private sector – has reinvigorated interest from industry leaders around the globe in the potential for AI to strengthen the efficiency and sustainability of MENA economies.

AI could bring about an additional $320bn in economic growth in the MENA region by 2030, according to a report from the Economist Impact (EI) and Google published earlier this year.

Many long-term economic strategies in the region target high-value sectors with the potential to benefit from the Fourth Industrial Revolution – a raft of technological advancements in AI, data and cloud computing that merge the physical, digital and biological worlds.

AI’s economic potential

In recent years the UAE, Saudi Arabia, Qatar and Egypt have published ambitious, government-driven strategies to develop AI. However, much of their momentum was derailed in the Covid-19 pandemic’s early months, as attention turned to dealing with the unfolding heath situation, the broader economic downturn and the collapse in oil prices.

Despite the temporary setback, the pandemic has underscored the urgency of economic diversification, and several MENA nations have accelerated investment in non-hydrocarbons sectors where AI could play a key role.

Global private sector investment in AI, largely driven by companies in China and the US, increased by 40% in 2020, according to research from Stanford University, underscoring the surging interest in the field and its potential applications, especially in high-value-added sectors.

A March report from Saudi management consultancy Strategic Gears recommended that the country focus on harnessing AI to boost three sectors – oil and gas, government services and financial services – that already contribute more than 50% of GDP. Manufacturing, health care, education, automotive, retail and e-commerce, and transport are also positioned to benefit from the technology.

Rather than being restricted to ICT and tech-based fields, AI is expected to have a far-reaching impact across broader economies and will be key to realising long-term economic plans.

“The implementation of AI is helping businesses become more customer-centric, efficient, productive and competitive in both local and regional markets,” Said bin Abdullah Al Mandhari, CEO of ITHCA Group, an Omani ICT company, told OBG.

“This is already the case in Oman’s oil and gas industry, and it will be particularly important moving forwards for priority sectors like fisheries, tourism and logistics. AI can ultimately help unlock these sectors’ potential, see them become significant contributors to national GDP and help achieve their targets under Oman Vision 2040.”

Cybersecurity is another area where AI can add value. As OBG recently detailed, cyberattacks have been on the rise since Russia’s invasion of Ukraine, presenting an elevated threat to emerging markets.

According to media reports, an extensive phishing campaign that involved the impersonation of the UAE’s Ministry of Human Resources was recently discovered with the help of an AI digital risk-monitoring platform from India’s CloudSEK.

Energy efficiency gains

In a region where several countries derive sizeable portions of GDP and export revenue from hydrocarbons, it is unsurprising that the energy sector has attracted significant AI investment from governments and companies looking not only to diversify away from oil and gas, but also to bolster the sector’s efficiency and reduce its carbon emissions.

Abu Dhabi National Oil Company (ADNOC) has already deployed machine learning to mine its historical and current data, which has helped generate scenarios and forecast operations that have, in ADNOC’s estimation, generated $1bn in “business value” over three years.

AI is also expected to be highly valuable in enabling the transition to green energy by managing the decentralised electricity systems renewable sources rely upon and monitoring carbon emissions.

To this end, in May London-based AI start-up Arloid Automation announced three new partnerships across the Middle East to track and reduce emissions.

Investment in the future

Given their large youth populations, many MENA nations are making significant investments in AI education, training and research to ensure that such technologies play a key role in the future economy and workforce.

Of the $320bn the EI-Google report estimates that MENA nations will generate by 2030 thanks to the adoption of AI, Strategic Gears expects Saudi Arabia to yield 42%, partly due to its investment in education. Roughly three-quarters of Saudi Vision 2030 goals involve data and AI, and the Kingdom plans to train 20,000 data and AI specialists by the end of the decade.

Highlighting this focus, in April national energy major Aramco signed a memorandum of understanding with King Abdullah University of Science and Technology to establish a new research centre to advance AI technological development.

Among the UAE’s largest investments in AI education was the establishment of the Mohamed bin Zayed University of Artificial Intelligence (MBZUAI) in 2019. Located in the smart city and innovation cluster of Masdar City, MBZUAI ranks 30th globally among institutions that conduct research in AI, computer vision, machine learning and natural language processing, according to computer science metrics-based platform CSRankings.

Elsewhere, Qatar has several branch campuses of renowned universities such as Carnegie Mellon University in the US, where students can pursue AI-related degrees and research. The country is also home to the Qatar Centre for Artificial Intelligence, which is working to attract talent to its AI faculty and establish a research and policy centre.

Given that AI’s benefits are multi- and intersectoral, MENA countries can craft strategies and build AI tailored ecosystems to suit their respective economic and social structures.

For example, as part of the Egyptian government’s efforts to harness AI for economic growth and quality-of-life improvements, it is allocating funds for teacher training programmes and other AI-related vocational initiatives.

As MENA nations and other emerging markets continue to invest in AI education, some industry figures say they may have a distinct advantage over developed nations by leveraging local talent.

“With the drive towards affordability – a defining trait in developing markets – now also a feature of more advanced markets, software engineers in developing markets are gaining a competitive advantage based on the combination of their inherent affinity for cost-effective solutions and the possibilities opened up by AI,” Soham Chokshi, CEO and co-founder of logistics software provider Shipsy, told OBG.

However, to realise this competitive advantage and achieve significant improvements in domestic AI capacity, countries the region will also need to incentivise investment.

“In order for Oman Vision 2040 to become a reality and accelerate economic development, the country needs to work on creating a business environment conducive to greater investment in advanced technology, particularly in the area of AI and data analytics,” Maqbool Al Wahaibi, CEO of Oman Data Park, told OBG. “In this context, local IT companies will need to prepare to compete against global players that are expanding their presence in the local market.”