Unlock Editor’s Digest Lock for Free
The phrase “data is a new oil” has added meaning to the Gulf Coast. The region’s leaders have invested heavily in artificial intelligence to diversify and modernize the fossil fuel-dependent economy. “Instead of exporting oil, we export data,” said Saudi Arabia’s finance minister Mohamed al-Jadaan earlier this year.
Ambition makes sense. AI requires a lot of capital, land and energy. The bay is rich in everything. Saudi Arabia’s new state-run AI company, Humain, is backed by a $94 billion public investment fund. Abu Dhabi, which manages 1.7TN in a sovereign wealth fund, invests through AI fund MGX. Last month, during President Donald Trump’s visit to the area, both funds helped develop partnerships with US tech companies, ensuring access to chips and talent in exchange for money and data center hosting facilities.
The timing is also appropriate. The International Energy Agency predicts that oil demand will peak by the end of the decade. Well done, the Gulf’s advance into AI can encourage large public servant investments in the region, increase productivity and facilitate cost burden. According to McKinsey, AI adoption could increase the Gulf Cooperation Council’s economy by $150 billion. However, success is not guaranteed. Serious hurdles get in the way.
The Gulf has historically uneven records that provide efforts to diversify the economy. Riyadh has already spent hundreds of billions of dollars on spectacular “giga projects” running beyond budget. The region needs to focus more on AI strategies as the fall in oil prices puts greater pressure on the fiscal year. There are resources to take advantage of the growing global demand for data processing capabilities. However, you should not rely too much on hosting your company’s data centers to drive growth. The vast amount of energy and water that facilities suck up suck up the risk of robbing other parts of the economy.
The region can achieve more sustainable growth from AI by promoting adoption in strategic industries. This includes manufacturing, port management and energy infrastructure. For example, Saudi Arabia Mako, the Kingdom’s oil company, has already used AI to detect blockages and leaks. Urban areas in the United Arab Emirates are particularly well suited to bring growth from AI integration given the applications of financial and smart city infrastructure. Smartly, these areas are the focus of Emirates’ 2031 AI strategy.
However, access to skills and talent is limited. Nowadays, the United Arab Emirates in particular can seduce talented technical experts from abroad with high pay and low taxes. However, to develop a resilient, independent AI ecosystem, the region needs to invest more in technical skills at home and fostering startups through the high-tech lab and its universities. Improving training and education is more important in general and is also important to mitigate the impact of technology-driven work mobility. A 2022 survey showed that UAE students were worse than the OECD average for mathematics, reading and science. In Saudi Arabia, AI-related roles suffer from a 50% employment gap, with machine learning and data science reportedly being the most popular skills.
Finally, the Gulf must develop a robust regulatory framework for AI. Foreign companies will be cautious about handing over data to entities managed by the authoritarian rulers of the region. If you want to host a data center, use your personal data to improve public services, or encourage AI experiments, Gulf countries need to show themselves to become trustworthy custodians.
The data may certainly be a new oil. But driving long-term economic growth from AI is not as easy as building a rig or pipeline.
