Technology & Innovation

Pushing forward: the future of AI in the Middle East and North Africa

June 14, 2022


Pushing forward: the future of AI in the Middle East and North Africa

June 14, 2022

Walter Pasquarelli

Tech & Society at Economist Impact

Walter Pasquarelli is a Manager within the Tech & Society team, where he delivers research and engagement programmes that use evidence and data to drive change on critical tech policy issues. Prior to this Walter was the AI Policy Lead at an international consultancy where he advised governments and leading tech companies on AI benchmarking and strategy. As part of this he also worked as a consultant with the Open Data Institute on enabling data sharing across different sectors. Walter is an AI Policy Fellow at the Institute for Policy Research at the University of Bath. He holds a Master’s degree from the University of Cambridge and regularly guest lectures on tech policy and ethics at universities.

In the past decade artificial intelligence (AI) has shifted from the peripheries of policy attention to the centre of investment and political focus. Global investment in AI has soared since 2010, increasing from a mere US$0.8 billion to US$78 billion in 2021–an increase of over nine thousand percent. In 2019, the Economist Intelligence Unit forecasted the economic impact of AI in Saudi Arabia and the UAE, estimating that US$ 200 billion and US$ 122 billion respectively, could be added to the GDP if the governments introduced policies to build talent and capital. 

In this report, three years later, we explore the developments in AI in the Kingdom and the UAE but we widen our lens to consider other countries in the region - with a specific focus on Saudi Arabia, UAE, Qatar, Egypt and Kuwait. Momentum and new initiatives in the field of AI policy have continued throughout the pandemic. But are countries in the MENA region moving fast enough and putting in place the right policies to maximise AI's benefits while minimising its potential for negative impact?

As the region is looking into a post-COVID future, this report examines the current state of AI in the MENA region and provides a high-level outlook for the next decade. It examines AI investment, industry trends in the region, the policy environment and challenges, and a series of policy takeaways based on international good practice for policymakers looking to develop their AI ecosystems and capabilities.

Key findings include: 

The potential economic impact of AI on the region’s economic growth is significant, with the MENA region estimated to accrue US$320 billion by 2030 from value added by AI. This derives mostly from costs saved from automating processes as well as improving products and services across the region’s industries. Annual growth in the economic contribution of AI is expected to reach between 20-34% per year across the 

region, with the highest rates occurring in the UAE and then Saudi Arabia. The potential economic impact of AI in the MENA, however, is likely to rise even further with a more recent country-based study by EIU forecasting that Saudi Arabia and the UAE alone will be accruing US$ 200 billion and US$ 120 billion, respectively. 

The growth of national AI strategies, departments and initiatives, underscores the importance of AI to the region’s economic transformation. In the past few years the UAE, Saudi Arabia, Qatar, and Egypt have all published ambitious strategies as well as developed wide-ranging e-government initiatives. The UAE was the first to publish its AI strategy in 2017, followed by Egypt in 2019. These initiatives have continued in the past year with both Qatar and Saudi Arabia unveiling their strategies in 2021. The UAE and Saudi Arabian AI strategies stand out globally for establishing specific AI related governmental departments. According to one global benchmark that assesses government strategy for AI, Saudi Arabia and the UAE score higher than the United States, while Egypt scores higher than Brazil and Israel - each being considered regional AI leaders. This is in large part due to the importance of MENA governments in fostering AI capabilities, as opposed to these countries which are more private sector led.

The region is characterised by a government-led investment strategy aimed at stimulating the nascent tech sectors. Governments in the region have freed up comparatively large budgets for investing in developing their AI capabilities. At the national level Saudi Arabia has pledged US$20 billion government investment with the aim to establish 300 startups by 2030. These figures dwarf European leaders such as Germany which pledged €5 billions in comparison. The reason for this is both governments’ ambitions to diversify their economies as well a need to stimulate their relatively small tech sector. In the UAE these investments are paying off with Careem becoming the region’s first tech unicorn in, and more companies such as STC Pay surpassing the US$ 1 billion mark.

AI strategies published by MENA countries emphasise cultivating AI talent, creating an AI friendly business environment, but are behind on policies ensuring the responsible use of AI. In addition to a common focus on data, business environment and technological infrastructure as key areas of policy and investment attention, nurturing domestic talent is one of the top policy priorities across the MENA countries’ strategies. Saudi Arabia, for example, sets itself a KPI to make +40% of its workforce data and AI literate by integrating AI into the curriculum designed by the Ministry of Education as well as private educational institutions. Egypt’s AI strategy proposes establishing technical and vocational training and declares an ambition to establish itself as a talent hub. Some of these provisions, investments in AI education and solutions are also aimed at reducing risks related to unemployment, with Qatar’s strategy aiming to transition the country to a sustainable knowledge-based economy. 

Currently no country in our set has published a national AI ethics / responsible AI framework. Qatar makes mention of ethics in its AI strategy, and similarly, Egypt has been exploring the establishment of a responsible AI charter. Only at the city-level Dubai provides an AI Ethics Toolkit, including principles, guidelines as well as a self-assessment form for developers  wanting to ensure the trustworthy and safe use of AI.

Governments in the region are deeply involved in the cultivation of their AI ecosystems as well as initiatives to integrate AI into government itself.  AI is seen as a key tool for helping increase the speed, accessibility, and effectiveness of public sector operations. This should reduce costs in the long run – one study forecasts that efficiencies generated by AI technology can support Middle Eastern government budgets by up to $7 billion annually. However governments across the region are characterised by a high proportion of its citizens working in government services, with at least two thirds of citizens in Saudi Arabia, the UAE, and Qatar working in the public sector. This gravitation towards working for the public sector leaves the countries’ region with less talent for founding and joining AI companies.

The COVID-19 pandemic resulted in an increase in online retail and commerce, which has generated deeper pools of customer data that can be used for optimising AI algorithms and improving customer experience.  The retail sector has historically been rooted in gathering insights about customers, products, suppliers and purchasing behaviour. Because of the global pandemic there has been an increase in the production and availability of customer data, which is used for developing AI-systems to analyse habits and patterns more effectively. For example, over 70% of Egyptian consumers have increased their online shopping habits since the onset of the pandemic. The e-commerce sector in the GCC is now expected to grow to $50 billion by 2025. Through this increased availability of customer data, AI is expected to become a more widely applied part of retailers’ day-to-day operations.

The financial services and banking sector is predicted to become the highest spender on AI technologies, with 25% of all AI investments in the region going into the finance sector. The use of AI in the banking sector is expected to contribute as much as 13.6% to the region’s GDP by 2030. This would take shape through a range of applications, such as deep learning for algorithmic trading, fraud analysis and investing, as well as smart portfolio management and customer profiling. However, in the MENA region there are still adoption challenges, including adapting AI applications to fit with the regulatory environment of Islamic law, lack of available capital, and a shortage of workers with the necessary technical skills to develop AI-based technologies.

The travel and tourism sector envisions various possible uses for AI, but obtaining the necessary and complete data remains a significant challenge. AI has the potential to help people and companies customise travel experiences. However, while there are several off-the-shelf applications, more useful applications are tailored based on a wide range of datasets including route data, flight statistics data, and data on government restrictions, all of which are found in different sources and formats, and require contextualising for each of the region’s markets. 

The transport sector stands to benefit from AI, with its contribution to the economies of the Gulf countries and Egypt forecast to reach 15% of GDP in 2030. AI is expected to be integrated across a wide range of applications within the transportation sector, from predictive transport management, improving traffic safety, and most notably, autonomous vehicles. Countries in the region are setting ambitious targets to foster its development, with Dubai setting a KPI of 25% for all car journeys to be made via driverless cars by 2030.

The impact of AI systems on the energy sector is expected to be substantial, contributing over 6% to the region’s GDP by 2030. The UAE, Saudi Arabia, Qatar, Kuwait, and Egypt have historically derived much of their wealth through oil and gas reserves. Through macroeconomic reform programs such as Saudi Arabia’s Vision 2030, countries in the MENA region are diverting investments away from traditional energy sources, including the use of AI technologies to achieve renewable energy targets. For example, AI and machine learning are being implemented in smart grids to refit electricity grids and reduce system losses and carbon emissions. In the transition towards renewables, AI is expected to play a major role in supporting countries in the region. 

The efficacy of investment and technological development hinges on having a suitable policy environment, which presents some challenges across the region. The biggest policy challenges facing the MENA region include lack of AI talent, fragmented data governance and privacy regimes, and an insufficient focus on trust and safety. Political and competitive impulses have so far prevented a centralised data regulatory mechanism like other regions such as the Asia-Pacific Economic Cooperation (APEC) or the European Union (EU) were able to achieve. The UAE, Saudi Arabia and Egypt recently published Protection of Personal Data Laws but these have not been fully implemented yet and are split among different government bodies, making compliance more challenging for companies, or creating public uncertainty about the ways in which user data may be processed. Getting the balance right in establishing an appropriate policy and regulatory framework to facilitate safe and responsible AI deployment is a priority for the region.


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