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The last couple of months have seen a flurry of Artificial Intelligence (AI) deals in the United Arab Emirates (UAE) and Saudi Arabia as both countries aim to establish themselves as major AI players.

The UAE in June a memorandum of understanding (MoU) with South Korea’s Samsung to promote AI learning among youth. The UAE’s Technology Innovation Institute announced in May that it had released a new AI model to with rival models from big technology companies.

Saudi Arabia has a deal with US technology giant IBM to train the kingdom’s ArabicÌęlarge language model ‘ALLaM’ using IBM’s Watsonx AI platform. The Saudi media ministry meanwhile an MoU with Microsoft Arabia to integrate AI in local media outlets.

Both the UAE and Saudi Arabia have ambitious goals to diversify their economies away from depending on energy revenues, with investment in digital transformation, particularly AI, a key part of the strategy.

“AI is not just a buzzword anymore, it is becoming a reality, one that is very important to the MENA region’s future,” Nermine El Saadany, regional vice-president for the Middle East at US-based non-profit organisation the Internet Society, told °źÂț”ș.

Other key developments include the UAE in MarchÌęestablishing the AI-focused technology investment firm , which aims to build up assets worth more than $100 billion in the next few years.

In April, Microsoft it was investing $1.5 billion in G42, one of MGX’s founding partners, as part of a deal between the Emirati company and the US government to divest from Chinese technology in favour of US technology. The UAE’s state minister for AI, Omar Sultan Al Olama, told in May that the UAE and the US would invest more in AI as part of a strategic partnership.

Meanwhile, Saudi Arabia announced in March that it plans to set up a $40 billion fund to invest in AI. The project reportedly involved talks between Saudi Arabia’s Public Investment Fund and Silicon Valley venture capital firm Andreessen Horowitz as well as other financiers.

If implemented, the fund would make the kingdom the world’s largest investor in AI. The Financial Times in May that a Saudi fund has participated in a $400m investment round in Zhipu AI, a prominent Chinese generative AI start-up.

Saudi Arabia and the UAE are not the only regional countries that have invested in AI. Qatari Prime Minister in May that his country has adopted $2.5 billion in incentives for programs on AI, technology and innovation. Egypt meanwhile has partnered with Italy to an AI centre in Cairo.

A knock-on effect for MENA

As both Saudi Arabia and the UAE compete to take a leading position in AI at a global level, these announcements are bound to have a significant impact on the wider digital ecosystem in the region.

“This surge in investment could position the UAE and Saudi Arabia as major players in the global AI landscape, fostering innovation and attracting talent from across the MENA region,” Mohammed Soliman, director of the Strategic Technologies and Cyber Security Program at the Middle East Institute (MEI) in Washington, DC, told °źÂț”ș.

Indeed, such investments could boost the MENA region’s overall standing as a tech destination and help transform its status from mainly a technology consumer to a technology innovator.

Consultancy has estimated that AI could contribute $320 billion to the MENA region’s economy by 2030, with $135.2 billion in Saudi Arabia alone. All this comes against the backdrop of the United States and China remaining the dominant players in the AI space.

However, any long-term push into AI would necessitate a focus on attracting and creating more tech talent. “Both countries will need to invest in education and training programs to cultivate a strong pool of AI engineers, data scientists, and other specialists,” says Soliman.

Digital talent

Saudi Arabia and the UAE have launched various programs to teach Information and Communications Technology (ICT) skills from a young age. According to data from the International Telecommunications Union (ITU), the two Gulf states have made progress when it comes to improving basic, intermediate, and advanced digital skills.

However, studies indicate that a shortage of talent remains a barrier to technology adoption in both countries. A 2023 by cybersecurity company Kaspersky showed that 62% of employees in Saudi Arabia feel the need for better digital skills in their work with computers and other digital equipment, with 45% afraid of losing their jobs due to a lack of IT competencies.

A 2023 by US software company ServiceNow found that around half of workers surveyed in the UAE (54%) said their formal education did not prepare them for today’s working world. Half of the firms surveyed in the UAE as part of the 2022 Hays GCC Salary Guide their biggest challenge when recruiting staff was a shortage of suitable candidates in areas such as AI, cybersecurity, and cloud engineers.

"AI could contribute $320 billion to the MENA region's economy by 2030, with $135.2 billion in Saudi Arabia alone"

However, the wider MENA region has a large pool of science, technology, engineering, and mathematics (STEM) graduates. Several MENA countries according to research by fDi Intelligence in 2023 were among the top 20 geographies in the world with the highest proportion of , including Oman (39.5%), Iran (39%) and Tunisia (37.9%).

Such countries could benefit from the Saudi and Emirati push into AI by providing the necessary talent. For instance, El Saadany told °źÂț”ș that the ICT talent pool of Egypt, one of the region’s key start-up ecosystems, “is huge and diversified” and could be “very helpful to both Saudi Arabia and the UAE in their AI endeavours”.

Knock-on effects for the wider region from the Emirati and Saudi AI funding push could include investments in AI-related businesses elsewhere in the region and the movement of talent in the form of skilled individuals and companies to Saudi Arabia or the UAE.

But amidst global competition for ICT jobs further investments in training are required as many STEM graduates in the MENA region do not have the skills actually needed for today’s job market, as observed by a 2022 UNESCO .

The authors highlighted expanding partnerships with the private sector as a way to improve the quality of education. An example of such an initiative can be found in Jordan, where the country’s Information and Communications Technology Association (int@j) has been remedial skills training via boot camps for university graduates.

Beyond skills

For Saudi Arabia and the UAE to benefit from their pledged AI investments in a sustainable way, they must also address other challenges including “data privacy concerns, data governance frameworks, and potentially collaborate on regional data-sharing initiatives,” MEI’s Soliman says.

El Saadany of the Internet Society sees a focus on reviewing existing regulation, potentially with outside help, as particularly important. This should not only include regulation directly referring to AI, but also areas such as cloud computing, which is fundamentally changing the access to and location of data, content, and services, El Saadany adds.

Another challenge stems from the ongoing trade war in the semiconductor industry between China and the US. Various MENA countries, including the UAE and Saudi Arabia, have signed deals with both Chinese and US companies to drive their digital transformation. However, as tensions between Washington, DC, and Beijing intensify, additional pressure from either side could threaten this diversification strategy. Ìę

At a time when investments in MENA start-ups are in flux, big-ticket announcements on AI emanating from the Gulf could provide a lifeline to revitalise the MENA digital ecosystem. The MENA region’s talent pool will play a key role in the success or failure of the Gulf’s AI endeavours.

Manuel Langendorf is a researcher and consultant on digital transformation in the Middle East and North Africa.

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