After Oil, Middle East Looks To AI To Power Its Future

The Middle East is undergoing a significant transformation, pivoting from its historical reliance on oil to embracing AI as a cornerstone of its economic future, in addition to augmenting the region’s critical oil and gas industry, too.

As countries like the UAE, Saudi Arabia, and Qatar pour billions into AI initiatives, the impact is expected to be profound, with estimates pegging this bleeding-edge technology’s contribution to be in the several hundreds of billions of dollars.

Economic Impact And Growth Projections

AI is poised to make a significant contribution to the Middle Eastern economy, with projections estimating a $320 billion boost by 2030, according to PwC.

This figure represents only about 2% of the global AI benefits, highlighting the region's growing importance in the tech landscape.

Saudi Arabia is expected to see the largest gains, with AI potentially adding over $135.2 billion to its economy, accounting for 12.4% of its GDP.

The UAE is not far behind, anticipating AI to impact nearly 14% of its GDP.

The growth rate of AI's economic contribution in the region is impressive, ranging from 20-34% annually.

Saudi Arabia, for its part, has partnered with AI startups like Groq to go from being a supplier of just oil to a major source of semiconductor capacity in the world.

Initiatives And Partnerships

The UAE has established the Artificial Intelligence and Advanced Technology Council or AIATC. The Federation of Seven Emirates also intends to establish itself as the global hub for AI by 2031.

Saudi Arabia's Vision 2030 strategy heavily focuses on AI as a means to reduce oil dependency. The country has projected that AI will account for 12% of Saudi Arabia's GDP by 2030, with the sector expanding at an annual growth rate of 29%.

Meanwhile, collaborations with tech giants are accelerating AI adoption in the region.

Microsoft's $1.5 billion investment in G42, a UAE-based AI company, is an example of this trend.

Similarly, Saudi Arabia's deal with IBM to train its Arabic large language model using the Watsonx platform shows the region's intention to develop locally relevant AI solutions.

Challenges And Opportunities

As AI's energy consumption rises, there are concerns about its environmental impact.

The International Energy Agency predicts that energy demands from data centers could double by 2026, requiring sustainable practices in AI deployment.

However, the Middle East's abundant energy reserves position the region to play a pivotal role in the AI revolution.

The region is blessed with oil and sunlight, and many countries, especially the UAE, are actively involved in the nuclear energy sector, Roberto Bocca, head of the Centre for Energy and Materials, and member of the Executive Committee at WEF, told The National earlier this month.

Another challenge that the Middle East faces currently is developing Arabic language models and local datasets for creating culturally relevant AI applications.

Last year, the UAE introduced the AI tool Jais, while Saudi Arabia developed the Arabic chatbot ALLaM.

Earlier this month, it was announced that ALLaM will be hosted on Microsoft's Azure, and would also be available via IBM's Watsonx platform.

Impact of US Import Rules

The impact of U.S. import rules has also shaped the region's tech landscape.

A strategic shift away from Chinese technology in favor of partnerships with Middle Eastern firms could improve U.S.-Middle East relations.

However, in May earlier this year, it was reported that the U.S. government has delayed the approval of licenses for exporting AI chips to the Middle East. This was done citing concerns over national security and the potential leakage of advanced chips to Chinese companies.

Microsoft has reportedly asked for "clarity and consistency" in U.S. export regulations that have impacted the delivery of advanced AI chips to the Middle East.

Conclusion

Oil contributed to nearly 39% of the Middle East’s GDP in 2017, and the region intends to bring it down to a little over 8% by 2040. The idea is to increase the contribution of other sectors like tourism, logistics, and manufacturing instead of contracting economies.

While the region is under no immediate threat of oil running out, a prediction by the International Monetary Fund (IMF) states that absent significant reforms, the Gulf region is at risk of losing its wealth.

AI, on the other hand, offers the Middle East a great opportunity to escape that predicament – it could be the J-shaped boost to the economy, allowing it to safely diversify away from oil.

Whether it will play out successfully or not remains to be seen.

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