INTERVIEW: AI’s transformative role in the GCC economy

Over the next 5–10 years, Artificial Intelligence (AI) will create significant economic opportunities across the Gulf Cooperation Council (GCC) states, particularly in key sectors such as energy, smart cities, logistics, and healthcare, according to Faisal Hamady, Managing Director and Partner, BCG.

He told Zawya Projects that the GCC’s access to vast proprietary datasets in oil and gas, mobility, and healthcare will serve as a key differentiator, enabling the development of highly specialised AI models that drive efficiency, innovation, and competitive advantage.

“As AI adoption continues to expand, these sectors will drive economic growth, strengthen global competitiveness, and position the GCC as a key player in AI-led innovation,” he noted.

In terms of AI’s sectoral impact, in energy and smart grids, AI-powered solutions will enhance efficiency, predictive maintenance, and grid optimisation, supporting the region’s transition to renewable energy and improved operational performance, according to Hamady.

“With a strong focus on sustainability, AI will help manage energy distribution, reduce waste, and improve grid resilience,” he said.

He pointed out that AI-driven smart city initiatives are already underway, with the UAE leading efforts in AI-powered traffic management, digital identity systems, and urban planning.

“These advancements will improve urban infrastructure, enhance public services, and set global benchmarks for AI governance,” he explained.

The BCG executive underlined that AI will also will reshape logistics and transport, which is a key focus area for Gulf countries in their economic diversification agenda.

“Predictive analytics, AI-driven fleet management, and autonomous transport solutions will streamline supply chains, reduce costs, and improve efficiency,” said Hamady. In healthcare, he continued, AI will play a growing role in medical diagnostics, genomics, and personalised medicine, enabling faster and more accurate treatments.

“AI-driven healthcare solutions will contribute to the region’s ambition of becoming a leader in medical tourism and advanced healthcare services,” he stated.

Excerpts from the interview

How do you compare the GCC’s AI advancements with global leaders like the US, China, and the EU?

The GCC, particularly the UAE and Saudi Arabia, has made significant strides in AI development, emerging a global AI contender, just behind AI pioneers such as the US, China, and the EU. While the US leads in AI innovation through investment, research, and commercialisation, and China is rapidly scaling AI development with government-led initiatives, the GCC is catching up through strategic investments, national AI policies, and a focus on key economic sectors.

• AI Readiness & Investment: The UAE and Saudi Arabia have high AI readiness, leveraging government-backed strategies, foreign direct investment (FDI), and robust data ecosystems to advance AI adoption​.
• Economic Prioritisation: AI pioneers like the US dominate global AI with homegrown startups, major tech firms, and strong academic research. The GCC, particularly the UAE, is creating AI-friendly regulatory frameworks, establishing AI-focused research centres, and attracting global AI companies​.
• Infrastructure & Talent Development: AI pioneers invest in large-scale computational infrastructure (such as AI supercomputers). The UAE is competing by establishing AI research hubs, attracting global AI talent, and building AI-friendly infrastructure​.
• Sector-Specific AI Deployment: Unlike the US and China, which focus on broad AI applications, the GCC is targeting specific sectors like energy, logistics, and government services, where AI has the potential to generate significant economic output​.

What are the lessons that China's DeepSeek holds for the region, and especially UAE and Saudi Arabia?

DeepSeek R1, China’s open-weight AI model, provides valuable insights for the UAE, Saudi Arabia, and Qatar as they continue to develop their AI ecosystems. One of the key lessons is cost-efficient AI development—

DeepSeek R1 was trained at a relatively low cost, proving that effective AI models do not necessarily require multi-billion-dollar investments. This presents an opportunity for GCC nations to optimise AI training expenditures while focusing on localised AI applications that cater to their economic and societal needs.

Additionally, DeepSeek R1 highlights the importance of AI localisation and sovereignty, emphasising the need for homegrown AI models that ensure data security and independence.

The UAE and Saudi Arabia have already made strides in this area, with initiatives aimed at developing Arabic-language AI models and region-specific applications. Similarly, Qatar’s AI market is witnessing a surge in investments and regulatory alignment with the US and EU to enhance AI deployment across various sectors, including smart cities and digital transformation efforts.

Another crucial takeaway from DeepSeek R1 is the emphasis on AI talent and research collaboration between academia and industry. The UAE’s Key Thinkers Program and Saudi Arabia’s AI research initiatives are well-positioned to follow this model, fostering a strong AI talent pipeline.

Qatar, meanwhile, has integrated AI into its Third National Development Strategy (NDS-3), positioning itself as a global AI hub through economic diversification and digital transformation efforts. The open-weight nature of DeepSeek R1 has also demonstrated how making AI models more accessible can drive economic growth and technological adoption.

GCC countries could benefit from adopting similar strategies, particularly in government AI applications, smart infrastructure, and financial services. As AI continues to evolve, the UAE, Saudi Arabia, and Qatar have the opportunity to leverage cost-effective, localised, and research-driven AI models to enhance economic competitiveness and technological leadership in the region.

What factors are attracting global AI and tech professionals to the region? How can governments and businesses here retain top AI talent?

The UAE and Saudi Arabia are emerging as global AI talent hubs, attracting top professionals through a combination of financial incentives, strategic government initiatives, and business-friendly policies. Competitive salaries, tax-free income, and a lower cost of living compared to major tech hubs in the US and Europe make the region particularly attractive for AI professionals.

Additionally, national AI strategies, such as the UAE’s AI and Blockchain Council and Saudi Arabia’s National AI Strategy, provide a stable and well-supported environment for AI research and development. These initiatives are complemented by significant investments in AI education and upskilling programs, including AI PhD scholarships and professional certifications, ensuring a steady pipeline of skilled talent.

Moreover, AI-friendly business regulations, such as 100 percent foreign ownership in AI startups, relaxed visa policies, and accelerator programs, further position the UAE as a preferred destination for AI professionals looking to establish and scale their work.

To retain top AI talent, governments and businesses in the region must focus on strengthening AI research and development infrastructure. Establishing dedicated AI research hubs and test beds will provide professionals with access to advanced technology and foster innovation.

Additionally, forming cross-border AI partnerships with global pioneers will keep talent engaged in high-impact AI projects while promoting knowledge exchange. Furthermore, adapting to the evolving work preferences of AI professionals by supporting remote-friendly policies and flexible work models will enhance retention efforts. By creating an ecosystem that combines financial incentives, cutting-edge research opportunities, and a supportive regulatory environment, the UAE and Saudi Arabia can position themselves as long-term destinations for the world’s top AI talent.

Do you think global AI regulations are aligning or becoming fragmented? How does this impact AI deployment? Also, how does it affect businesses operating across borders?

Global AI regulations are becoming increasingly fragmented, with major economies adopting distinct governance models. The EU’s AI Act is taking a highly regulated approach, emphasising transparency, bias mitigation, and strict liability requirements.

In contrast, the US follows a more market-driven model, focusing on AI innovation with ethical guidelines rather than rigid legal frameworks. Meanwhile, China integrates AI governance within state policies, prioritising AI-powered economic growth while maintaining strong government oversight. This divergence in regulatory approaches creates complexities for businesses and governments looking to establish consistent AI deployment strategies.

For companies operating across borders, regulatory fragmentation presents several challenges. Businesses must navigate varying AI compliance requirements, leading to increased operational complexity and higher costs. AI models may also require localisation to align with different regional policies, further driving up development expenses.

However, this regulatory landscape also presents opportunities for regions like the GCC to position themselves as leaders in AI governance. By fostering intergovernmental AI discussions and global AI ethics panels, countries such as the UAE are aiming to bridge regulatory gaps and establish a balanced framework that supports innovation while addressing key governance concerns.

As AI regulations continue to evolve, businesses will need to stay agile, ensuring compliance while capitalising on emerging opportunities in AI-friendly markets.

(Reporting by Anoop Menon; Editing by SA Kader)

(anoop.menon@lseg.com)

Subscribe to our Projects' PULSE newsletter that brings you trustworthy news, updates and insights on project activities, developments, and partnerships across sectors in the Middle East and Africa.