The Middle East’s blank canvas is perfect for cutting-edge tech

Brid-Aine Parnell

Wednesday 28 February 2018

Countries like Saudi Arabia, Jordan and the UAE are spending billions diversifying away from oil and into ICT. But it’s not just the cash that can make the region an IT powerhouse – it’s that much of the region doesn’t have the barrier of legacy systems.

The Middle East has its barriers for technological innovation, but it also has one key advantage: a lack of entrenched legacy systems.

In the last 20 years, countries in the Middle East have become increasingly aware of the need to diversify away from the industry that made many of them rich: oil and gas. With wholesale prices and reserves falling, ‘black gold’ is no longer the booming engine for Middle Eastern economies it once was.

Technology is the future

A number of states have recognised that technology could be a key sector for future growth. Saudi Arabia is in the process of building up a sovereign wealth fund that will control more than US$2 trillion by 2030. Its aim is to diversify away from oil and gas, and a huge part of that strategy has included investments in ICT. It has invested US$45 billion in a tech fund run by SoftBank, sunk US$3.5 billion into ride-sharing firm Uber and aims to give Richard Branson’s Virgin Galactic a share of its US$1 billion investment into US-based space companies.

According to Jordan’s Economic and Commerce Bureau (ECB), ICT is the fastest-growing sector in the country, expanding by 50 per cent each year. As the Middle East’s startup hub, the city of Amman has attracted funding not only from the government, but also from international organisations. USAID established the Jordan Competitiveness Program in 2013, a scheme aimed at attracting US$700 million in foreign direct investment and creating 40,000 jobs over five years. Last year, the World Bank announced its Innovative Startups Fund Project, investing US$50 million alongside US$49 million from the Central Bank of Jordan to provide early-stage financing and encourage entrepreneurship.

Blank slate

There are some struggles that are common across the region for the budding technology sector, particularly issues around cybersecurity and regulations that hamper innovation, such as outdated bankruptcy and intellectual property laws. But many states also have an advantage that’s unheard of in developed world economies: a clean slate on which to start building.

For major companies and countries in the developed world that want to embrace cutting-edge technologies, legacy systems are a huge barrier. The cost and inefficiency of ripping out existing infrastructure to be replaced by the latest and greatest innovations is prohibitive. In many cases, entities end up trying to integrate new technologies with the old in ways that aren’t always successful. In other scenarios, the best technology remains frustratingly out of reach.

The world’s first Dubai

Perhaps no one state in the Middle East exemplifies that clean slate as well as the Emirate of Dubai. The city-state wants to have the world’s first blockchain-powered government. It also wants to be the world’s 3D-printing hub by 2030 and the world’s smartest city by 2021. It’s also home to the world’s first Ministry of Artificial Intelligence, with a robust mandate to make Dubai a heavy hitter in the future of AI.

A mere 70 or so years ago, Dubai was just a small fishing village. Today, it’s a gleaming metropolis of skyscrapers and manmade islands. Dubai has suffered a slowdown after the global financial crisis and, with oil money drying up, many of those skyscrapers and islands currently lie empty. But it still represents an unprecedented opportunity to embrace new technologies.

In transportation, for example, the Dubai Metro, which is still being added to, is the world’s largest autonomous train route. In September, Dubai trialled the first flight of the Autonomous Air Taxi, a two-seater taxi drone, and the city is also looking to become home to the world’s first Hyperloop train system. The government is hoping that 25 per cent of the total transportation in the city will be autonomous by 2030, saving an estimated AED 22 billion in annual economic costs.

All of this is possible because Dubai is starting its transportation infrastructure from scratch. In the UK and the US, cities are struggling to even update signalling systems for urban rail networks because there isn’t enough alternative transportation or public will to support extensive shutdowns of vital routes, and there are significant costs and difficulties for upgrades. That’s no surprise when the first journey on a London tube was in 1863 and the first subway opened in New York in 1904.

Ambitious minds

In every Middle Eastern state, there are a number of factors at play in the embrace of the ICT sector. For example, absolute monarchies are still common in the region (Saudi Arabia and the United Arab Emirates), and when technology becomes a focus for the ruler, government bodies tend to quickly and single-mindedly focus on the goals. And while the oil riches are running out, much still remains and is funnelled into enormous sovereign wealth funds and other investment vehicles that can back the government’s ambitions.

But the lack of legacy systems means a huge barrier to cutting-edge technology is already out of the way. Dubai may not be able to achieve every one of its ambitious tech targets, but its blank canvas provides the ultimate experimental playground for the latest innovations.