Despite a surge in artificial intelligence adoption across Gulf economies, most organisations are stuck in early-stage experimentation, with few translating their ambitions into large-scale value creation, according to a new McKinsey & Company report.
“While nearly all organisations are using AI, more than two-thirds haven’t moved beyond pilots,” said the study, titled The State of AI in GCC Countries: In Pursuit of Scale and Value.
“Many people still equate AI with models such as ChatGPT. Knowledge of other AI tools and their potential is shallow. So I wouldn’t really say there is adoption at scale. It’s limited,” said one Gulf company executive surveyed in the report.
This and talent are among the main limiting factors to the adoption of effective AI, says Karan Soni, co-author of the report and a core leader of McKinsey's dedicated AI and advanced-analytics arm, QuantumBlack.
"Pilot purgatory is a real phenomenon and it's not a new one," he told The National on Thursday. Pilots are easy and cheap to implement, but they provide no real change in management to the organisation – scaling is very difficult yet transformative, he added.
If you spend $1 on technology, you have to spend $4 to $5 on change management, McKinsey says.
"To extend it to the entire company means you need to get your 20, 30 or 40 recruiters to be able to use that tool effectively in their workflow," said Mr Soni. This can take from weeks to years to see real, transformative change.
"You can affect change management anywhere [in] three to six months. If you're talking about a broader kind of transformation of the entire company, that is a multiyear journey," said the associate who helps lead at-scale digital and AI transformations for businesses across the Middle East and Asia.
This can take from one to four years, depending on the size of the organisation, he added.
Growing adoption
Banking and retail sectors have been at the forefront of adopting use cases of AI among Gulf countries, said Mr Soni. Now AI use is gaining cross sector adoption with industries such as manufacturing and others seeking to become early adopters.
The report finds that 84 per cent of surveyed organisations in the six Gulf countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE – have adopted AI in at least one business function.
This is an increase from 62 per cent in 2023. Yet only 31 per cent have expanded or fully deployed AI across their operations. Only 11 per cent are generating measurable financial returns from their investments.
To conduct the report, McKinsey and the GCC Board Directors Institute carried out an online survey of 139 senior executives and boards of directors in the six GCC countries.
In their findings, “high AI usage is out of sync with maturity or value,” the report concludes, warning that the gap between AI leaders and the companies lagging behind is widening.
According to the report, nearly 90 per cent of Gulf executives plan to increase AI budgets next year. But most have yet to align their AI road maps with clear performance metrics. Successful “value realisers” are the top 11 per cent of organisations.
McKinsey also highlights the region’s rapid embrace of agentic AI, which is designed to autonomously make decisions and act with minimal human supervision compared to the more commonly used generative AI.
With global competition accelerating, the consultancy warns that “Many GCC organisations may need to pick up the pace to stay ahead," the report concluded.
Gulf-US ties anchored in defence
Implementing AI that creates value is only possible with proper infrastructure, resulting from global partnerships and foreign direct investment, McKinsey reports.
This is reflective in the money being spent, as capital is moving to the industries of the future.
Greenfield FDI is increasing in industries supporting AI such as data centres, advanced manufacturing, metals and minerals, and also the energy to power it. Together, these make up a 75 per cent share of announced FDI globally.
To win worldwide, multinationals are hedging on bigger bets, with megadeals exceeding $1 billion comprising 47 per cent of deals from 2022 to May this year. This increased from 30 per cent between 2015 and 2019, McKinsey says.
Last week, Microsoft said it is planning to bring its total investment in the UAE to $15 billion by 2029, after the Trump administration's approval to export Nvidia chips for data centres in the country. Before that, in May Saudi Arabia's Humain and Amazon Web Services announced a $5 billion investment to accelerate AI adoption in the kingdom and beyond.
Meanwhile, the relationship between the Gulf and the US has become increasingly anchored in defence, as those regions team up to confront rising threats stemming from the latest technology, industry experts have said.
"As much as emerging technologies and AI have become the driver of the relationship, the anchor remains security and defence because without security none of this is possible," said Bilal Saab, senior managing director of research firm Trends US at the Tech Diplomacy in the Mena Region conference in Abu Dhabi on Thursday.
And with "oil [having] been replaced with AI", security once heavily focused on the energy sector has shifted to new-age infrastructure, most notably data centres, he said.
Talal Al Kaissi, chief global affairs officer of Abu Dhabi AI major G42, said AI and security go hand-in-hand, given the technology is key to several critical sectors that govern society.
"The UAE has experience of deploying consequential technologies, military technologies and peaceful nuclear energy that leadership had the foresight [to adopt several years ago], and that came at a time when AI wasn't even in the line of sight and hydrocarbons were plentiful," he said.
"But the mindset of diversification, not just of the economy away from hydrocarbons, positioned us in a way that created what we have today that capitalises on the UAE's competitive advantages."
10 tips for entry-level job seekers
- Have an up-to-date, professional LinkedIn profile. If you don’t have a LinkedIn account, set one up today. Avoid poor-quality profile pictures with distracting backgrounds. Include a professional summary and begin to grow your network.
- Keep track of the job trends in your sector through the news. Apply for job alerts at your dream organisations and the types of jobs you want – LinkedIn uses AI to share similar relevant jobs based on your selections.
- Double check that you’ve highlighted relevant skills on your resume and LinkedIn profile.
- For most entry-level jobs, your resume will first be filtered by an applicant tracking system for keywords. Look closely at the description of the job you are applying for and mirror the language as much as possible (while being honest and accurate about your skills and experience).
- Keep your CV professional and in a simple format – make sure you tailor your cover letter and application to the company and role.
- Go online and look for details on job specifications for your target position. Make a list of skills required and set yourself some learning goals to tick off all the necessary skills one by one.
- Don’t be afraid to reach outside your immediate friends and family to other acquaintances and let them know you are looking for new opportunities.
- Make sure you’ve set your LinkedIn profile to signal that you are “open to opportunities”. Also be sure to use LinkedIn to search for people who are still actively hiring by searching for those that have the headline “I’m hiring” or “We’re hiring” in their profile.
- Prepare for online interviews using mock interview tools. Even before landing interviews, it can be useful to start practising.
- Be professional and patient. Always be professional with whoever you are interacting with throughout your search process, this will be remembered. You need to be patient, dedicated and not give up on your search. Candidates need to make sure they are following up appropriately for roles they have applied.
Arda Atalay, head of Mena private sector at LinkedIn Talent Solutions, Rudy Bier, managing partner of Kinetic Business Solutions and Ben Kinerman Daltrey, co-founder of KinFitz
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What should do investors do now?
What does the S&P 500's new all-time high mean for the average investor?
Should I be euphoric?
No. It's fine to be pleased about hearty returns on your investments. But it's not a good idea to tie your emotions closely to the ups and downs of the stock market. You'll get tired fast. This market moment comes on the heels of last year's nosedive. And it's not the first or last time the stock market will make a dramatic move.
So what happened?
It's more about what happened last year. Many of the concerns that triggered that plunge towards the end of last have largely been quelled. The US and China are slowly moving toward a trade agreement. The Federal Reserve has indicated it likely will not raise rates at all in 2019 after seven recent increases. And those changes, along with some strong earnings reports and broader healthy economic indicators, have fueled some optimism in stock markets.
"The panic in the fourth quarter was based mostly on fears," says Brent Schutte, chief investment strategist for Northwestern Mutual Wealth Management Company. "The fundamentals have mostly held up, while the fears have gone away and the fears were based mostly on emotion."
Should I buy? Should I sell?
Maybe. It depends on what your long-term investment plan is. The best advice is usually the same no matter the day — determine your financial goals, make a plan to reach them and stick to it.
"I would encourage (investors) not to overreact to highs, just as I would encourage them not to overreact to the lows of December," Mr Schutte says.
All the same, there are some situations in which you should consider taking action. If you think you can't live through another low like last year, the time to get out is now. If the balance of assets in your portfolio is out of whack thanks to the rise of the stock market, make adjustments. And if you need your money in the next five to 10 years, it shouldn't be in stocks anyhow. But for most people, it's also a good time to just leave things be.
Resist the urge to abandon the diversification of your portfolio, Mr Schutte cautions. It may be tempting to shed other investments that aren't performing as well, such as some international stocks, but diversification is designed to help steady your performance over time.
Will the rally last?
No one knows for sure. But David Bailin, chief investment officer at Citi Private Bank, expects the US market could move up 5 per cent to 7 per cent more over the next nine to 12 months, provided the Fed doesn't raise rates and earnings growth exceeds current expectations. We are in a late cycle market, a period when US equities have historically done very well, but volatility also rises, he says.
"This phase can last six months to several years, but it's important clients remain invested and not try to prematurely position for a contraction of the market," Mr Bailin says. "Doing so would risk missing out on important portfolio returns."
PREMIER LEAGUE TABLE
1 Man City 26 20 3 3 63 17 63
2 Liverpool 25 17 6 2 64 20 57
3 Chelsea 25 14 8 3 49 18 50
4 Man Utd 26 13 7 6 44 34 46
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5 West Ham 26 12 6 8 45 34 42
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6 Arsenal 23 13 3 7 36 26 42
7 Wolves 24 12 4 8 23 18 40
8 Tottenham 23 12 4 8 31 31 39
Global state-owned investor ranking by size
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
World Cricket League Division 2
In Windhoek, Namibia - Top two teams qualify for the World Cup Qualifier in Zimbabwe, which starts on March 4.
UAE fixtures
Thursday, February 8 v Kenya; Friday, February 9 v Canada; Sunday, February 11 v Nepal; Monday, February 12 v Oman; Wednesday, February 14 v Namibia; Thursday, February 15 final
