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TechTalk / Treasury & Capital Markets
Middle East ramps up bid to become global AI hub
Abundant capital and enthusiastic government support attract interest from tech firms and start-ups
Jayde Cheung 14 Jun 2024

Weaning itself off its reliance on the oil industry, the Middle East is exploring opportunities in emerging sectors and has identified artificial intelligence (AI) as the next economic driver.

Like other prominent markets jumping on the bandwagon, the region is actively pursuing a roadmap to play a leading role in the new industry on a global scale.

According to an analysis by PricewaterhouseCoopers (PwC), the Middle East is expected to generate AI-associated revenue of US$320 billion by the end of the decade, accounting for 2% of the global total at the time.

Saudi Arabia, the largest sovereign in the region, is forecast to gain US$135.2 billion in revenue by 2030. PwC estimates that the United Arab Emirates (UAE) will see the fastest annual growth in the sector, up to 33.5%.

On the international level, the UAE and Saudi Arabia are expected to be the third and fourth largest AI economies, respectively, by the turn of the decade, in terms of the industry’s share in the GDP, closely following North America in second place. China will see the greatest gain from AI, up to 26% of GDP in 2030, according to PwC.

Other Gulf countries, including Bahrain, Kuwait, Oman, and Qatar, are also poised to capitalize on AI as a major tool in growing their respective GDPs.

AI contribution to GDP by regions, 2030

Source: PwC

All-out support

Technological advancement has been a longstanding principle incorporated into the transformational strategies of countries in the Middle East.

As early as 2017, the UAE has outlined an initiative to integrate AI into a range of sectors, including transport, health and renewable energy. The UAE government has also ramped up talent training and facility support to accelerate AI development. Under its 2031 National AI Strategy, the country plans to establish an AI-specific university and a state-owned AI company.

Saudi Arabia is equally determined to spur AI development with supportive measures and ample investment, and has established the Saudi Data & AI Authority (SDAIA) for this purpose. The agency has initiated a number of pump-priming activities, including the Middle East’s first generative AI accelerator programme, which partnered with the global AI start-up community New Native in 2023.

Earlier this year, the kingdom launched a US$100 billion AI and semiconductor chip fund to invest in the sector. The Public Investment Fund, the Saudi sovereign wealth fund, is also expanding its financing scope to the AI field. It has initiated discussions with Silicon Valley venture capital Andreessen Horowitz on the creation of a US$400 billion fund to explore opportunities in the sector.

Start-up funding

The abundant financial resources being devoted to the industry are paving the way for tech firms and start-ups to harness the region's AI potential to the fullest extent.

Data from Pitchbook show that AI start-up investment in the region witnessed a record high of 39 funding rounds in 2023, raising US$415.1 million. Start-ups involved in generative AI have secured sustained interest from venture capital funds, with the deal count in the segment growing steadily since 2017.

While governments in the Middle East enthusiastically support AI development, industries in the region are divided on AI adoption. A survey by consultancy McKinsey finds that some sectors in the Gulf Cooperation Council (GCC) countries, such as infrastructure and construction, are falling short of the average AI application across industries.

McKinsey suggests that the private and public sectors collaborate more closely to fully utilize AI resources in the region. “Yet an awareness of just how much value remains untapped by GCC companies should encourage them to act decisively and without delay,” it says in a comment. “AI adoption may often be a slow and challenging process, but the prize could be worthwhile.”

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