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The phrase “data is the new oil” has added meaning in the Gulf. Leaders in the region are investing heavily in artificial intelligence to diversify and modernise their fossil fuel-dependent economies. “Instead of exporting oil, we will export data,” said Saudi Arabia’s minister of finance, Mohammed al-Jadaan, early this year.
The ambition makes sense. AI requires lots of capital, land and energy. The Gulf has all those in abundance. Humain, Saudi Arabia’s new state-owned AI company, is backed by the country’s $940bn Public Investment Fund. Abu Dhabi, which manages $1.7tn in sovereign wealth funds, is investing through AI fund MGX. Last month, during President Donald Trump’s visit to the region, both funds helped to develop partnerships with US tech companies, securing access to chips and talent in exchange for money and data centre hosting facilities.
The timing is apt too. The International Energy Agency forecasts oil demand to peak by the end of this decade. Done well, the Gulf’s foray into AI could drive up investment, improve productivity and ease cost burdens in the region’s hefty civil services. According to McKinsey, AI adoption could boost the Gulf Cooperation Council economies by $150bn. But success is not guaranteed. Significant hurdles lie in the way.
The Gulf has a spotty record historically in delivering on efforts to diversify its economy. Riyadh is already spending hundreds of billions of dollars on grandiose “giga projects” that have run over budget. With falling oil prices putting more pressure on public finances, the region will need to be more focused with its AI strategy. It has the resources to tap into the rising global demand for data-processing capacity. But it should not rely too heavily on hosting companies’ data centres to drive growth. The vast amounts of energy and water the facilities suck up risk sapping other parts of the economy.
The region can achieve more sustained growth from AI by encouraging adoption in its strategic industries. This includes manufacturing, port management and energy infrastructure. For instance, Saudi Aramco, the kingdom’s oil company, has already been using AI to detect blockages and leaks. The UAE’s urban centres are also particularly well positioned to generate growth from AI integration, given its applications in finance and smart city infrastructure. Sensibly, these areas are the focus of the emirates’ 2031 AI strategy.
But access to skills and talent is a limitation. Right now the UAE in particular is able to lure talented tech experts from abroad with high salaries and low taxes. However, to develop a resilient, self-sustaining AI ecosystem, the region will need to invest more in nurturing tech skills and start-ups at home, through tech institutes and its universities. Improving training and education more generally is crucial, too, to cushion the effects of tech-driven job displacement. A 2022 study showed that students in the UAE perform worse than the OECD average in maths, reading and science. In Saudi Arabia, AI-related roles reportedly suffer from a 50 per cent hiring gap, with machine learning and data science the most sought-after skills.
Finally, the Gulf will need to develop a robust regulatory framework for AI. Foreign companies will rightly be cautious about handing over their data to entities controlled by the region’s autocratic rulers, who could use it for nefarious means such as surveillance. If they want to host data centres, utilise private data to improve public services, or encourage AI experimentation, Gulf countries will need to show themselves to be trustworthy custodians.
Data may indeed be the new oil. But driving long-term economic growth from AI won’t be as straightforward as building rigs and pipelines.
