Abu Dhabi

Source: Mufakiru Alemarat

Dr. Ali Mohamed Al Khouri

Industries and economies around the world are undergoing a major transformation due to the rapid advancement of artificial intelligence. As AI systems become increasingly integrated into the activities and operations of both the public and private sectors, their economic impact is becoming increasingly evident.

International reports indicate that artificial intelligence has become a major driver of global economic growth. According to estimates by the International Data Corporation (IDC), artificial intelligence is expected to contribute more than $19.9 trillion to the global economy by 2030, representing about 3.5 percent of global GDP.

For example, in sectors such as supply chain management, marketing and sales, current practice shows that generative AI alone could contribute $4.4 trillion annually to corporate profits; sectors such as retail and consumer goods are expected to see profits increase by $400 billion to $660 billion annually based on AI technologies.

According to a report issued by McKinsey Global Consulting, which includes an analysis of data from more than 500 companies worldwide, reliance on artificial intelligence in sectors such as human resources, marketing, sales, product and service development, and supply chains has contributed to revenue growth of more than 5 percent, significant improvements in production and operational efficiency, reduced reliance on human labor, and intelligently directed corporate resources toward the most productive and profitable activities, in addition to the pivotal role played by artificial intelligence in data analysis, predicting future needs to support business strategies, and decision-making.

Despite these positive prospects, AI carries significant risks, especially in the labor market. It is estimated that 40 percent of global jobs could be affected by AI technologies by 2030, with greater repercussions for routine and repetitive jobs in sectors such as manufacturing, transportation, and logistics. The percentage of jobs affected in advanced economies could reach 60 percent, while it reaches 45 percent in Arab countries, which means a potential impact on more than 130 million individuals, thus exacerbating the problems of unemployment and poverty, especially among low-skilled groups.

The potential impact of automation on job loss is not the only threat; the absence of strong and effective governance structures will deepen this challenge and multiply the effects of AI on society. The widespread spread of AI, from the point of view of observers, already raises high social and security risks that require governance structures that ensure that practices comply with the requirements of protecting individual rights, non-discrimination, and applying standards of transparency and accountability. Many of these observers agree that current governance models are insufficient to keep pace with the rapid development of AI technology, pointing to a number of risks, such as bias in algorithms and unethical decisions that AI may make without adequate controls.

For policymakers, the approach to dealing with the challenges and opportunities of artificial intelligence must take into account several axes, the first of which is related to investment in digital infrastructure and skills; countries with advanced digital infrastructure and a skilled workforce will be in a better position to benefit economically from artificial intelligence; this is evident in the advanced positions of some countries in the AI ​​Readiness Index, such as the United States of America, which ranked first, followed by the United Kingdom, Singapore, Canada, Finland, France, Germany, and South Korea. These countries have developed national strategies for artificial intelligence, and have significant investments in developing this technology in the public and private sectors.

At the same time, emerging markets will face greater challenges due to limited infrastructure and a lack of digitally skilled workforce. Addressing these challenges requires governments to prioritize investment in education, vocational training and digital qualification to prepare qualified cadres for the AI-driven economy.

The second axis requires focusing on unifying global standards to ensure the existence of a global governance model for the use of artificial intelligence. Such a model contributes to preventing regulatory gaps and adopting responsible and ethical practices. Unifying privacy, transparency, and accountability standards also ensures that systems are interpretable and understandable, and reduces the potential for misuse or manipulation of algorithms that may issue unfair or biased decisions as a result of the unbalanced data on which they were trained.

The third axis revolves around designing regulatory frameworks to create an environment that stimulates innovation and competition, so that governance practices do not become an obstacle to technological progress, but rather encourage responsible innovation. This means that policymakers must strike a balance between government regulatory practices and the flexibility required by development companies, without compromising public interests or exposing users to unjustified risks.

Regulatory sandboxes are a prominent international practice that allows companies to test new AI applications in a controlled environment before launching them in the market. This model provides a framework for companies to experiment with new solutions, while governments maintain oversight to protect public interests and ensure transparency.

The last axis is related to addressing the social and economic impacts of artificial intelligence, especially those related to the labor market; the possibility of replacing jobs with artificial intelligence is very large, especially in the manufacturing and logistics sectors; due to the ability of artificial intelligence to perform tasks in them more efficiently and at a lower cost.

There is no doubt that dealing with such transformations requires building social safety nets, such as unemployment insurance programs, and investing in retraining and rehabilitation programs to support individuals’ transition to emerging fields of work and provide them with advanced skills.

A McKinsey report expects millions of routine jobs in the Arab region to disappear due to automation, while artificial intelligence will contribute to creating about 100 million new jobs by 2040.

In short, countries that can strike a balance between innovation and ethical governance will be better able to benefit economically from advanced technology. Countries that fail to strike such a balance will expose their economies to the risk of rapid transformation without adequate controls, which will inevitably exacerbate social and economic gaps. These countries may find themselves facing destabilizing threats in the future.