Arun ShankarBeyond 2030, the impact of artificial intelligence on both the economy and society will almost certainly increase, so it is important for the Middle East to be strategically placed in order to provide a springboard for the future. Artificial intelligence is going to be a big game changer in the global economy, and much of the value potential is up for grabs. Artificial intelligence could contribute up to $15.7 trillion to the global economy in 2030, more than the current output of China and India combined. Of this, $6.6 trillion is likely to come from increased productivity and $9.1 trillion is likely to come from benefits to consumers.
In the wake of the fourth industrial revolution, governments and businesses across the Middle East are beginning to realise the shift towards artificial intelligence and advanced technologies. They are faced with a choice between being a part of the technological disruption, or being left behind. When we look at the economic impact for the region, being left behind is not an option. We estimate that the Middle East is expected to accrue 2% of the total global benefits of artificial intelligence in 2030. This is equivalent to $320 billion.
In absolute terms, the largest gains are expected in Saudi Arabia where artificial intelligence is expected to contribute over $135.2 billion in 2030 to the economy, equivalent to 12.4% of GDP. In relative terms the UAE is expected to see the largest impact of close to 14% of 2030 GDP. The annual growth in the contribution of artificial intelligence is expected to range between 20-34% per year across the region, with the fastest growth in the UAE followed by Saudi Arabia.
The magnitude of the impact expected in these two economies is unsurprising given their relative investment in artificial intelligence technology compared to the rest of the Middle Eastern region – both countries place within the top 50 countries in the world on the Global Innovation Index 2017 in terms of their ability to innovate and the outputs of their innovation. The development of non-oil sectors through investment in artificial intelligence technologies could strategically position the region for the years to come. The world is moving towards artificial intelligence and in these early stages of development, there is an opportunity for the region to become a key player in the global agenda.
State of play
Parts of the region have already embraced artificial intelligence and the new digital age. Analysis conducted by the IDC estimates that spending on cognitive and artificial intelligence systems in the Middle East and Africa region will grow from $37.5 million in 2017 to over $100 million by 2021, representing a growth rate of 32%. The UAE, Saudi Arabia and Qatar, in particular, have demonstrated strong commitment towards the development and implementation of artificial intelligence technologies.
Businesses in these parts of the region have been investing heavily in new technology, supported by governments as early consumers of the technology. Outside the Gulf economies, however, adoption has been slower. The differences in adoption levels are driven by differences in, for example, infrastructure and access to skilled labour, key enabling factors for artificial intelligence development.
It is important also to note that whilst the volatility in oil prices is taking its toll on the economic prospects of the region, it is creating the need for governments to seek alternative sources for revenue and growth. The development of non-oil sectors through investment in artificial intelligence technologies could strategically position the region for the years to come.
UAE
In UAE, artificial intelligence is at the forefront of the government’s strategic plans. In October 2017, the government launched its strategy for artificial intelligence, demonstrating its commitment towards the technological enhancement of the nation. Alongside this strategy, HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, appointed HE Omar Bin Sultan Al Olama as the first Minister of State for Artificial Intelligence. Within the UAE, Dubai is leading the way for artificial intelligence.
The Emirate’s strategies include, amongst others:
# A Smart Dubai strategy which aims to transform the city through innovation and digital transformation, launching an artificial intelligence smart lab in 2017. This is focused on training public and private sector employees in implementing artificial intelligence in their fields.
# Dubai 3D Printing Strategy, targeted at the construction, medical and consumer sectors . This has a goal of having 25% of buildings in Dubai constructed using 3D printing technology by 2030.
# Dubai Autonomous Transportation Strategy, which aims to cut transportation costs by 44%, carbon emissions by 12% and accidents by 12% by transforming 25% of all transportation in the city to autonomous modes by 2030.
The UAE’s dedicated strategy towards artificial intelligence and its initiatives to support the development of technologies places it in a strong position to develop itself as one of the leaders for artificial intelligence in the region, and quite possibly the world. The government has demonstrated its commitment towards artificial intelligence development in the country.
However, as well as investment in artificial intelligence, which it is clearly able to generate, the government will also need to create an environment which will allow the outcomes of these investments to become embedded in society. This will include, for example, preparing society and labour markets for the disruption through investing in education and skills development to allow people to adapt to the change. Similarly, legal institutions will also need to evolve to reflect the risks associated with artificial intelligence technology.
Governments have a fundamental role in setting up an environment in which all stakeholders can effectively engage in the development and adoption of artificial intelligence. Hence, the strategic focus on artificial intelligence at the highest levels of government in the UAE, if properly harnessed, provides a strong foundation for artificial intelligence-led growth.
Saudi Arabia
Saudi Arabia holds a clear vision for the future which points towards the development of artificial intelligence-based technologies. Saudi’s Vision 2030 and National Transformation Programme 2020 identify digital transformation as a key goal to activate economic sectors, to support industries and private sector entities, to advocate for the development of public- private business models and to ultimately reduce the country’s dependence on oil revenues through a diversification of the economy.
Strategic objectives as part of this vision include for example:
To improve the efficiency and effectiveness of the healthcare sector through the use of information technology and digital transformation. To achieve this, it has set itself a target to increase the percentage of Saudi citizens who have a unified digital health record from 0 to 70% by 2020.
To provide citizens with knowledge and skills to meet the future needs of the labour market. To achieve this, it has set itself a target to increase the percentage of Internet users in Saudi Arabia from 63.7% to 85% by 2020.
While there is some investment in artificial intelligence in Saudi Arabia, supported by a commitment by the government to digitally transform the country, investment is currently driven through domestic sources, and in particular the country’s Sovereign Wealth Fund. In order to maintain momentum in the pace of technological advancement in the country, there is a need for it to attract more foreign investment which is currently constrained by the challenges in the business environment; in 2017, the country ranked 92 out of 190 countries in the World Bank’s Ease of Doing Business index.
Addressing concerns raised by the business community will allow it to attract external investment, which will bring with it skills and expertise to upskill the local population. This will also allow it to reduce youth unemployment placing a burden on the economy, which has increased from 24.1% to 32.6% between 1991 and 2017, by generating high-skilled employment opportunities.
Key takeaways
- Artificial intelligence could contribute up to $15.7 trillion to the global economy in 2030. Of this, $6.6 trillion is likely to come from increased productivity and $9.1 trillion is likely to come from benefits to consumers.
- In the wake of the fourth industrial revolution, governments and businesses across the Middle East are beginning to realise the shift towards artificial intelligence and advanced technologies.
- Middle East is expected to accrue 2% of the total global benefits of artificial intelligence in 2030. This is equivalent to $320 billion.
- Analysis conducted by the IDC estimates that spending on cognitive and artificial intelligence systems in the Middle East and Africa region will grow from $37.5 million in 2017 to over $100 million by 2021, growth rate of 32%.
- UAE, Saudi Arabia and Qatar, in particular, have demonstrated commitment towards the development and implementation of artificial intelligence technologies.
- Governments will also need to create an environment which will allow the outcomes of these investments to become embedded in society.
- IDC finds the biggest opportunity for artificial intelligence in Middle East and Africa is in the financial sector, followed by public services, including education and healthcare, and manufacturing sector.
Market segments
The potential for artificial intelligence adoption varies by industry. Research conducted by IDC finds that the biggest opportunity for artificial intelligence in the Middle East and Africa region is in the financial sector. This is where it is estimated, 25% of all artificial intelligence investment in the region predicted for 2021, or $28.3 million, will be spent on developing artificial intelligence solutions. This is followed by the public services, including education and healthcare, and the manufacturing sector.
The potential gains at the industry level is likely to depend on two broad factors:
Ability to automate processes
Labour-intensive sectors, such as retail and health, with greater scope for automation, are likely to see the largest initial gains from artificial intelligence. These industries are expected to see significant labour productivity benefits from artificial intelligence adoption.
Use cases for enhancement
Sectors with compelling use cases in artificial intelligence applications are more likely to innovate in early stages of artificial intelligence development. PwC’s Data Analytics team have developed an Artificial Intelligence Impact Index through conducting a qualitative assessment to estimate the scale of product enhancements we will expect to see by 2030.
The analysis assessed almost 300 use cases to identify the scope for product enhancements through personalisation, product quality, and time savings for consumers as well as scope for increased variety in products. The index indicates the highest potential for product enhancements in the health, automotive and financial services sectors.
Despite the greater potential for direct gains in specific sectors, the gains are unlikely to remain concentrated in these sectors which develop and adopt artificial intelligence technologies. As these sectors experience growth through the direct effects of artificial intelligence, their demand for inputs from other sectors of the economy will also grow.
Similarly, the increased wages associated with higher labour productivity in these sectors will also increase consumer demand in all sectors of the economy. These indirect and induced impacts of artificial intelligence are likely to be felt by firms and consumers throughout the economy and will add to the total economic impact of artificial intelligence.
As our analysis underlines, artificial intelligence has the potential to fundamentally disrupt markets in the Middle East through the creation of innovative new services and entirely new business models. We have already seen the impact of the first wave of digitisation. With the eruption of artificial intelligence, some of the market leaders in ten, even five years’ time may be companies never heard of. Tomorrow’s market leaders are likely to be exploring the possibilities and setting their strategies today.
Facets of artificial intelligence
Artificial intelligence is a collective term for computer systems that can sense their environment, think, learn, and take action in response to what they are sensing and their objectives. Forms of artificial intelligence in use today include digital assistants, chatbots and machine learning amongst others.
Assisted Intelligence
Helping people to perform tasks faster and better. artificial intelligence systems that assist humans in making decisions or taking actions. Hard-wired systems that do not learn from their interactions. their interactions.
Automated intelligence
Automation of manual, cognitive and routine, non-routine tasks. Automation of manual and cognitive tasks that are either routine or non-routine. This does not involve new ways of doing things – it automates existing tasks.
Augmented Intelligence
Helping people to make better decisions. artificial intelligence systems that augment human decision making and continuously learn from their interactions with humans and the environment.
Autonomous Intelligence
Automating decision making processes without human intervention. Artificial intelligence systems that can adapt to different situations and can act autonomously without human assistance.
Adapted from potential impact of artificial intelligence in the Middle East, by Shivangi Jain, Economics Consulting, PWC.
