Is the Middle East ready for its AI breakthrough?

March 2023 Al-Monitor PRO Trend Report 

3944 words

 

Introduction

The eerily human dialogues of ChatGPT elicited a mixture of awe and fear from members of the public and governments worldwide. Some worried the artificial intelligence chatbot was a few lines of code away from sentience. Others, like plagiarism-wary professors, harbored more rudimentary concerns.

Companies and state agencies in the United Arab Emirates seemed to welcome the new technology with headlong excitement. The Dubai Electricity and Water Authority (DEWA) announced in early February that it would use ChatGPT to enhance its customer service, one week before the fine-tuned version of the program officially launched. Eschewing the skepticism of deans and school boards abroad, the country’s Ministry of Education vowed to make ChatGPT a mainstay of Emirati learning. As a part of its commitment to “adopting trailblazing technologies,” UAE’s education minister proclaimed on March 3 that the country would begin developing AI-powered tutors to assist shorthanded educators.

Industry experts following MENA’s tech industry were unsurprised by the Emirati embrace of ChatGPT. Regional governments, especially the UAE and its oil-reliant neighbors, recognize AI as an essential catalyst for growth and diversification. Attempts to harness the technology’s revolutionary potential have begun to yield some fruit. Global tech giants are less shy about opening up shop and supporting government initiatives. Promising local companies backed by generous, deep-pocketed regimes are sprouting up across the region.  

Yet many of the region’s AI aspirations have yet to materialize. Whether they will is not a given. Pledges and partnerships are only a part of the battle. Success, experts predict, will hinge on strong investment incentives, labor and education reforms, and measured, ethical implementation of new technology.  

Note: This trend report does not include the AI sector in Israel. For more on that topic, read our upcoming memo from David Rosenberg.

 

1. State of Play: AI Industries in MENA

 

The Gulf is the epicenter of AI activity in the region. “Adoption levels are differentiated throughout the region by distinct drivers, namely infrastructure and access to skilled labor,” Mohammed Soliman, director of the Middle East Institute’s Strategic Technologies and Cyber Security Program, told Al-Monitor. “But the Gulf is way ahead in the game.”

Deep coffers and high-quality infrastructure have enabled Gulf countries to kickstart new AI projects and lure foreign help to support them. The UAE and Saudi Arabia are leading the charge.

“It’s mostly a situation where a couple of wealthier governments in the region — the UAE, Saudi Arabia and to some degree Qatar — are making investments to implement AI technologies within government entities and providing some kind of incentives to private sector companies,” Robert Mogielnicki, a senior resident scholar at the Arab Gulf States Institute in Washington, noted.

The area’s AI initiatives are largely government driven. AI is a keystone of Saudi Arabia’s Vision 2030 scheme, a development blueprint for the kingdom’s post-oil future. The Fintech Times approximates that 70% of Vision 2030’s strategic goals involve data or AI. The Saudis rolled out a National Strategy for Data and Artificial Intelligence in 2020. The plan established a national Data and Artificial Intelligence Authority tasked with attracting upward of $20 billion of AI investment and training thousands of Saudi data specialists, with the ultimate goal of cementing the kingdom as a global leader in AI R&D by decade’s end. The kingdom is simultaneously positioning itself as a forum for international dialogue on AI; the world’s AI thought leaders and industry magnates congregated in Riyadh last year for the Global AI Summit, an international conference on developments in the sector. AI also features prominently in the country’s eye-catching (and bank-breaking) megaprojects. Addressing Global AI Summit attendees last September, Nadhmi Al Nasr, the CEO of the futuristic city-in-waiting NEOM, said “everything that happens in the city will be monitored and enabled by AI technologies.” 

The UAE piloted its national artificial intelligence strategy in 2017. Established the same year, the country’s Ministry of Artificial Intelligence — the world’s first — has spearheaded efforts to “enhance the government performance levels by investing in the latest technologies and tools of artificial intelligence and applying them in various sectors.” Two years later, Abu Dhabi founded the Mohamed bin Zayed University of Artificial Intelligence, the world’s first university dedicated solely to the study of AI. Dubai has hosted AI Everything, one of the world’s largest AI summits, for several years running.

Its GCC peers have undertaken similar efforts. Bahrain (with the help of Microsoft) launched an AI academy in 2020 to train machine learning specialists; the kingdom published an AI-focused "Digital Strategy" last year. Qatar published a preliminary national AI strategy in 2019 and established the Qatar Center for Artificial Intelligence to sponsor research in the field. Oman plans to integrate AI across a number of sectors as a part of its Vision 2040 plan.

Countries outside of the Gulf have also been bitten by the AI bug. Egypt launched its own AI strategy in 2019. Cairo hopes the plan, chock-full of inexplicit pledges to apply existing tech and nurture its own AI ecosystem, will serve as a roadmap to developing an economy based on “the emerging technologies of the Fourth Industrial Revolution.” Turkey did the same two years later with similarly broad ends in mind. Tunisia started workshopping national AI guidelines in 2018. Morocco began hosting annual national AI conferences in 2019 to piece together a concerted AI strategy.  

To be sure, many of these plans remain aspirational. Implementation has at times been halting and uncertain.

“It’s one of these things that everyone realizes is going to be important and are trying to find ways to incorporate it into existing and future initiatives,” Mogielnicki remarked. “I get the sense that everyone is grasping for a concrete way to incorporate these technologies and weave them into these initiatives.”

Some aspects of these sweeping pledges and plans have begun to find their footing. Much of the progress so far has come in the form of “adaptive innovation,” according to Nir Kshetri, an AI researcher and professor at the University of North Carolina in  Greensboro. Though MENA governments are eager to develop local AI industries, they are still heavily reliant on foreign tech and expertise.

Countries are “bringing in innovation from other parts of the world and adapting it to local circumstances,” Kshetri told Al-Monitor. “They do not have their own technology, and they have to attract foreign investment and foreign companies.”

MENA states, Kshetri added, are “trying to apply artificial intelligence in basically every economic sector” — principally energy, transportation, finance, education and health.

With the help of IBM and German software conglomerate SAP, the Abu Dhabi National Oil Company has employed AI to expedite the speed and accuracy of rock analysis. ADNOC has also developed a machine-learning program to analyze terabytes of data and generate prospectuses on prospective projects, condensing a process that once took months to a matter of minutes; the company estimates the program has generated $1 billion in value since 2017. The Umm Al Houl desalination plant in Qatar utilizes an American AI program to optimize its operations and conserve energy.

Qatar’s Hamad International Airport has deployed AI algorithms to enforce health protocols and detect runway hazards. Dubai’s Roads and Transport Authority has tested the use of AI systems to ease congestion on the emirate’s metro.

A number of countries leveraged AI to facilitate detection, prevention and treatment programs during the pandemic. Saudi Arabia and the UAE, for instance, developed AI-based apps to trace the spread of the virus.

Though multinational corporations continue to be essential facilitators of AI development and implementation across MENA, “There are very serious [government] initiatives to try to create [a local] ecosystem of startups,” an executive at a large tech company operating in the region told Al-Monitor.

A small yet active regional AI industry is beginning to take shape as a result. FACEKI, a Bahraini firm specializing in facial recognition technology, expanded operations into Saudi Arabia in November 2022. G42, a firm based in Abu Dhabi, has grown rapidly since its founding in 2018, providing AI solutions across a number of sectors. Technology Innovation Institute, a government-backed research consortium based in Abu Dhabi, told reporters on March 15 that it was developing its own language-processing model to rival ChatGPT. BioNTech, the German immunotherapy company that pioneered COVID-19 vaccine technology, announced a $697 million acquisition of Tunisian AI startup InstaDeep in January.

Ambitious government initiatives and a growing local AI sector have boosted MENA’s presence in the global AI development space (though, on the whole, the region’s progress pales in comparison to developments in Europe, North America and East Asia). The 2022 Global AI Index, a melange of metrics designed to compare the strength of countries’ AI industries, ranks Saudi Arabia, the UAE and Qatar 26, 34 and 47, respectively. Saudi Arabia — which, according to the report, boasts the world’s best operating environment and third-best government strategy — tops Belgium, New Zealand, Russia and Italy. Saudi Arabia, the UAE, Qatar and Turkey also break the top 50 of the 2022 Government AI Readiness Index, an assessment of government ability to manage AI developments. The UAE ranked highest among the bunch at 22.  

 

2. Rationales and Roadblocks

 

Why are MENA states so keen on developing their AI industries? For struggling regional economies like Egypt and Turkey, stunted by inflation and deep structural inefficiencies, investing in AI presents a clear path toward modernization and growth.

Gulf states are driven by similar, if more existential, motivations. “No one has more to lose than the oil-rich Gulf states in the post-oil era,” Ravishankar Sharma, a professor at Zayed University in Abu Dhabi, told Al-Monitor.

Gulf governments recognize that their petrochemical economies do not have long-term viability. The pandemic-induced collapse in fuel prices depicted this bleak future in stark relief. Their economic future lies in discovering and exporting knowledge and tech, not oil or gas. AI is an essential component of the highly digitized, knowledge-based economy they hope to cultivate.

“The old way the economy was working is not sustainable,” said the executive who spoke anonymously to Al-Monitor. “They need to diversify. If you’re going to diversify, you need to digitize the economy.”

AI, a technology that requires minimal human management and streamlines some labor-intensive jobs, is especially attractive to Gulf countries with small local populations.

“Most [Gulf states] have relatively small economies, small sectors [and] small workforces. With an industry like AI, you don’t have to have a large workforce, just a highly skilled one,” Mogielnicki remarked. “They don’t need an overhaul of the whole economy or a massive workforce of hundreds of millions of people to create these kinds of profitable ventures.”

MENA countries, particularly the GCC states, are cognizant of their vulnerabilities and AI’s potential to mend them. This awareness and urgency has been a boon for AI development.

“They have explicit policies,” Kshetri noted. “They invest a lot of money in big projects; that’s a positive thing.” 

The region’s economic powerhouses — namely Saudi Arabia and the UAE — have the “financial resources to back up initiatives,” Mogielnicki added.

The development and implementation of AI in MENA is also facilitated by relative comfort and familiarity with AI among the general public, particularly in the Gulf.

Around 70% of the GCC’s population is younger than 30 and well-acquainted with up-and-coming technologies. According to a 2017 PwC survey of consumer responses to digitized health care, roughly two-thirds of respondents in Saudi Arabia, the UAE and Qatar said they would be comfortable replacing human doctors with robotic practitioners, compared to 41% and 39% of respondents in Germany and the United Kingdom, respectively.

“People are really comfortable with artificial intelligence [in the region],” Kshetri stressed.

In countries where governments are spearheading AI development, strong and centralized governance structures can also expedite the implementation of AI programs.

“You’ve got top-down decision-making that means when tech-friendly policies are created, there isn’t going to be a lot of political backlash,” Mogielnicki suggested. “And you’re unlikely to see the creation of regulations or laws that might hamper or disincentivize technology companies from rolling out experimental technologies in the region.”

However, the road ahead is riddled with obstacles. 

Developing and applying AI requires a highly skilled, tech-savvy workforce. The Gulf — and MENA more broadly — lacks it.

“In any industry, you have difficulty finding people, finding talent, finding skills — whether it’s a hotel manager, whether it’s a banker, whether it’s a CEO of a company. That’s why there are so many foreigners [in the Gulf],” the tech executive remarked. “There is difficulty finding a population with the right level of education to be able to be upskilled.”

Kshetri and Sharma attribute this dearth of skilled labor to a “lack of high-quality academic training, inadequate on-the-job instruction and a cultural mindset that keeps people away from careers in the digital field.”

These difficulties are compounded by a timid entrepreneurial culture. “You don’t necessarily have a culture of innovation in the region,” Mogielnicki observed. “You have a couple of hubs, you have some entrepreneurs, but I think the commitment to innovation is a relatively recent thing.”

“The economy is mostly family businesses,” the executive added. “It’s very hard to find people in their garage doing what Bill Gates did years ago, for example.”

Small market size, comparatively low levels of economic creativity and sometimes confounding regulatory environments mean that the region also struggles to attract foreign direct investment, an essential ingredient for cultivating AI growth. Investment struggles surface on the homefront too. Despite splurging on AI-focused projects and digitization efforts, GCC governments are straining to nurture an innovative business environment suitable for AI development. The Global Innovation Index, an annual assessment of economic innovation trends, pins this paradox on an inability to efficiently translate massive investment into creative output. Part of the problem, Kshetri noted, is the region’s meager spending on research and development. MENA economies spend well below the global average on R&D, an essential ingredient for innovating in any industry.

Limited regional collaboration on AI has also hindered growth. A “lack of trust” among neighbors, the executive observed, has precluded the kind of “cooperation on AI and data policies” — data sharing, policy and infrastructure coordination, etc. — that has been conducive to technological development in places like the European Union. 

 

3. 2023 Outlook

 

• Few experts expect a seismic shift in the progression of AI industries in MENA in the coming year. “If there were to be a major accelerating event, I think COVID would’ve been that event,” Mogielnicki noted. “I don’t see a huge incentive for there to be a radical change.”

• Despite long-term hopes of fostering a dynamic and competitive local AI sector, MENA governments will likely continue to focus their energies on wooing and partnering multinational tech firms. “In the short term they may import more of these technologies from other parts of the world and try to adapt it to the local environment and solve local problems,” Kshetri predicted. “That makes more sense for them” as they attempt to ease their economies off petrochemicals and imbue their populations with the skills needed to kickstart tech companies of their own. “I think they want to prioritize local firms, but they realize there are a lot of constraints there and they’re going to have to bring in multinationals in the early days. They can’t get around that,” Mogielnicki added. “They just don’t have the human resources for a sustainable industry.”

• To that end, MENA governments will attempt to sweeten incentives for foreign firms and talented techies. “We can expect there is going to be much more investment from these countries in acquiring experts and specialists,” Samar Fatima, a research fellow at RMIT University in Melbourne, told Al-Monitor. Since 2020, for instance, Riyadh and Abu Dhabi have expanded visa and citizenship opportunities for specialized workers and wealthy potential investors. In February 2021, the Saudi government launched Program HQ, a bundle of incentives designed to entice companies to open up shop in the kingdom. The UAE announced in 2020 that it would allow foreigners to own 100% of companies established in the Emirates. Other reforms simplifying the licensing and permit application process soon followed.

• As a result, foreign AI companies have continued their gradual procession into the region. Samotics, a Dutch AI manufacturer, announced in mid-February that it was opening an office in the UAE as it seeks to expand operations in the region. Just over a week earlier, QuantumBlack subsidiary McKinsey & Company’s AI consultancy opened offices in Egypt, Saudi Arabia and the UAE. Expect this influx to continue.

 

4. Case Study: 'Local Champions’

 

Despite undertaking proactive efforts to attract foreign experts and enterprises, MENA governments “are making a tremendous effort in skilling and upskilling the local population,” the executive remarked. The end goal: “trying to create local champions” — talent and tech of their own.”

Few local champions have garnered as much hype or market power as G42. The Abu Dhabi-based AI consortium founded in 2018 is chaired by Mansoor Al Mansoori, a member of Abu Dhabi’s governing Executive Council. Aflush with $10 billion in funds, the company has two principal investors: Mubadala, an Abu Dhabi sovereign wealth fund, and Silver Lake, an American private equity firm.

G42 boasts 11 subsidiaries across a range of sectors. Its healthcare arm (suitably named G42 Healthcare) partnered with Israeli biotech firms in 2020 to develop COVID screening tools. That same year, G42 subsumed Bayanat, an Emirati company specializing in geospatial analysis. It also established AIQ, a joint venture with ADNOC dedicated to developing AI programs for the energy industry. G42 also manages its own cloud service and data centers. In late February, the company branched into professional racing, teaming up with the Mercedes Formula 1 squad. On March 6, it unveiled plans to list its data analytics arm, Presight, on the Abu Dhabi stock exchange via a $495 million IPO. The following week, it acquired a $100 million stake in ByteDance, the Chinese parent company of TikTok.

To some observers, G42’s feverish growth is a testimony to the potential of well-managed and well-funded local AI projects.        

“The government is putting a lot of resources and effort behind them, and they’re going to get somewhere. There is real political will, economic will and economic resources,” the executive noted. “I would not underestimate some of the local champions and where they can go.”

There is room for skepticism. G42, despite its initial success, is still leagues behind the international tech behemoths leading the charge on AI. More importantly, it is uncertain if a wave of other local startups will follow in its wake. G42’s progress has not erased the economic and cultural barriers that continue to stymie the Gulf’s technological development. Similarly, Tunisian AI startup InstaDeep’s $697 million acquisition by BioNTech in January, overshadowed by the Maghreb’s chronic bureaucratic hurdles and economic stagnation, may not prove as pivotal in the region’s tech industry as optimists hope. The companies appear to have thrived despite their environment, not because of it.

“They don’t have the digital ecosystem of suppliers, solution providers, academia — everything is not that linked,” Fatima noted. “Ecosystem development is a challenge, and it takes time.”

This ecosystem is no minor variable. “You can have a great idea to do something,” the executive stressed, “but you need an entire ecosystem that is conducive to your startup to pick up.”  

Short-term fixes also have their limitations. A promising entrepreneur or academic may be reluctant to ship off to MENA, relatively disconnected from peers and more clear-cut possibilities.

“How will you incentivize an entrepreneur to come to the Middle East? He has to have achieved something, but if he has achieved something and set up a startup, it’s already too late,” the executive remarked. “You need people to go and chase potential.”      

                                                

5. Key Takeaways

 

• Few doubt that AI could contribute handsomely to MENA’s long-term economic growth and sustainability. PwC predicts that the region’s AI aspirations, if actualized, could generate $320 billion in benefits for the region by 2030 (roughly 2% of the $15.7 trillion the firm expects AI to contribute globally). Saudi Arabia is expected to reap the greatest benefits in absolute terms ($135.2 billion); relative to overall GDP, PwC analysts expect the UAE to be the region’s biggest beneficiary of an AI boom (contributing to 13.6% of Emirati GDP). They also anticipate that AI’s contribution to the region’s economy will grow between 20-34% year on year over the coming decade.

• Some experts share the firm’s optimism. “[The Gulf] could become a hub for Africa, Central Asia and South Asia,” the tech executive remarked. “I don’t see other countries in the region, except Israel, that are so ready for the technology revolution.” Others are more cautious. “These governments have a lot of confidence in themselves and their abilities, but it’s easy to have confidence when the going is good, and they’re coming off very strong years,” Mogielnicki said. “I wonder if, down the road, the center of gravity for AI will shift into other areas.”

• AI applications in health, education and other public interest sectors will likely continue to command the most attention (and funding). “One area they are likely to develop really well is delivering services to people using AI,” Kshetri predicted. Mogielnicki forecasted that the health sector in particular will remain near the top of the region’s AI agenda moving forward. “I see a really high demand for AI in health care to either help countries whose health care systems are overwhelmed right now to help attend to their populations, like Egypt, or in countries that are in a better stead but want to keep up a really high quality of care, like in the GCC,” he said. 

• The feasibility of regional AI strategies and the ability of governments to execute them will be put to the test over the coming years, as states pivot from planning to implementation. MENA countries are beginning to put “a lot of effort into materializing AI’s benefits, not merely aiming for something,” Fatima observed. 

• The pressing question is whether or not, or to what extent, AI’s potential can be realized. Education and vocational reforms will be key determinants of AI’s success. “They have to develop their manpower,” Kshetri remarked. “And that manpower should be able to conduct research and development locally so that they can solve local problems and possibly export their technology to other parts of the world.” “There needs to be investment in talent development,” Sharma warned. “Talent has to catch up with needs.”

• Promoting science, technology, engineering and mathematics (STEM) curricula in primary and secondary schools; enhancing STEM and data science programs at universities; and sponsoring industry-backed vocational programs could begin to help bridge this gap.        

• As AI programs begin to take shape and the technology’s applications continue to expand, MENA governments will need to formulate guidelines addressing a host of ethical and security concerns, including algorithmic bias, data privacy, cybersecurity threats and data governance. Few, if any, regional plans have spelled out explicit policies on these matters, and preexisting regulations on data regulation are scarce. “The difference between success and failure of AI systems has to be in the domain of ethics and trust,” Sharma warned.

• More local champions may begin to take off as MENA’s workforce acquires new skills and regional entrepreneurs gain confidence. The growth of local firms may strain government relationships with foreign ones and test their durability in the region. “The multinational tech firms that want to work on AI in the region look at the creation of local firms as pretty serious competition,” Mogielnicki noted. “It’s going to be very hard for a multinational to compete with them.”

• Some experts doubt whether the potential benefits of AI will be evenly enjoyed. Aspirational countries slumping from crisis to crisis, like Egypt or Turkey, may struggle to muster the financial and political capital needed to develop AI industries or the infrastructure (i.e. data centers) needed to sustain them.  “I don’t see there being huge, galvanizing support for promoting AI in countries that are in dire economic situations,” Mogielnicki said. “The question is: Will they be in the same situation where they’re just struggling to stay afloat, or will they have stabilized and be able to move toward making progress on promoting these next-generation industries?”