According to McKinsey research, artificial intelligence (AI) has the potential to bring the Gulf Cooperation Council (GCC) nations in the Middle East real value worth up to $150 billion. That's almost nine percent or more of the GDP of the GCC as a whole, yet given how swiftly AI technologies like generative AI are evolving, that number may soon be eclipsed. It has been widely reported that organizations in the area are already taking action to realize the value of AI.
Careem, a company with operations throughout the region and its headquarters in Dubai, claims to have used artificial intelligence to block 35,000 fake users on its meal delivery, payment, and transportation platform. The AI-powered virtual assistant of the Dubai Electricity and Water Authority has responded to nearly 6.8 million questions since its launch in 2017. Additionally, the Fourth Industrial Revolution Centre at Saudi Aramco asserts that since 2010, flare emissions have decreased by 50 percent as a result of using data and AI to monitor conditions and take preventative action.
AI Adoption Rate in GCC
In the GCC nations, different sectors are embracing AI at varying rates. Retail businesses have advanced the most, with 75 percent of respondents from that industry reporting that their businesses had implemented AI in at least one business function. Respondents in the capital projects and infrastructure (CP&I) and financial services sectors claim that their respective companies have made less progress on the same measure. It's possible that various factors influence the speed of adoption in various industries. Since they compete on a global scale and operate in a market where efficiency gains in production, distribution, and maintenance can be made, many energy and materials firms, for instance, were among the first to invest in AI.
Retail businesses have a wealth of data that they have long mined to gather consumer insights and to guide pricing and promotions, making them the fastest adopters of AI among the participants in our survey. According to the reports, retail organizations are currently deploying AI quickly utilizing the same data. On the other hand, many Middle Eastern construction firms are either unable to gather the data needed to train AI models at this time or lack the skills to combine the data they do have.
Challenges in Adopting
Another problem is size. The majority of companies in the construction sector are subcontractors and smaller businesses, many of which do not use Internet of Things (IoT) technology to get the data that AI needs. Due to this, industry analysts claim that it is difficult to efficiently acquire data and that the early costs of AI are prohibitive. Similar issues affect smaller financial services businesses. According to the reports, the organizations are currently unwilling to undertake the costly investment that AI represents.
Regulations constitute a barrier in the financial services industry, according to interviewees. Regulators in certain nations forbid some data from being stored on public clouds elsewhere. Additionally, financial regulators have not yet built a relevant risk framework, despite recognizing the potential value of risk-related AI models, making it challenging to secure regulatory approval for AI deployment.
However, the analysis also reveals that businesses using AI currently have only begun to scratch the surface of its potential. First of all, industry experts claim that fewer businesses are utilizing more sophisticated machine learning analytics and AI models. The energy and materials industries, for instance, frequently employ linear, regression-based analytics tools for control procedures. According to one industry expert, just a small number of downstream refineries are now utilizing machine learning models to optimize end-to-end operations and realize savings of up to $1 per barrel. Additionally, hardly any commercial procedures apply to AI. Only one-third of respondents reported utilizing AI in marketing and sales, despite this being the biggest area of application in our survey.
High Performers in Tapping AI’s value
An earlier McKinsey report evaluated the potential value of a variety of AI use cases across several industries and how that value was distributed based on business activities. The supply chain management and manufacturing use cases examined, for instance, in retail and consumer packaged products, had the potential to produce a value equal to about 2.6 percent and 1.8 percent, respectively, of worldwide industry sales. Risk use cases in the financial services industry, like fraud detection and debt management, present a sizable opportunity.
Adopting AI technology and new working methods involves significant organizational change, so realizing that promise will never be simple. But over the past five years, global work and research have made obvious what sets high-performing businesses that get 20 percent or more of their revenue from AI apart from others.
The steps great performers take to develop their AI capabilities are the four categories of strategy, organization and people, data and technology, adoption, and scaling. It demonstrates how respondents to the GCC survey feel about the performance of their own companies in the same areas. For instance, only 30 percent of respondents claim that their firms have a well-defined AI strategy or the necessary talent. In terms of data and technology, just 35 percent of respondents believe their companies have the architecture and infrastructure to enable AI, and only 25 percent believe they have an efficient change management strategy in place. On no metric did more than 50 percent of respondents answer that their companies are in a strong position.
Governments and companies in the Middle East are starting to grasp the global trend towards AI and advanced technologies in the aftermath of the fourth industrial revolution. They must decide whether to participate in the technological upheaval or fall behind.
Being left behind is not an option considering the region's economic significance. In 2030, we predict that the Middle East will profit from two percent of all AI benefits worldwide. This is equal to 320 billion US dollars. Absolute gains are anticipated to be highest in Saudi Arabia, where AI is predicted to contribute approximately $135.2 billion to the economy in 2030, or 12.4 percent of GDP, compared to the UAE.
Through the development of cutting-edge new services and completely new business models, artificial intelligence has the potential to profoundly disrupt markets in the Middle East. The effects of the first wave of digitization are already evident. A few of the market leaders in 10, even five years, maybe firms you've never heard of due to the explosion of AI. The world is advancing towards AI, and given its infancy, there is a chance for the area to play a significant role in the global agenda. The $320 billion scenario considers the current state of the region. The influence of AI on the local economy, however, might be increased by bigger, unexplored prospects.