Jeanne-Mây Desurmont | 7 November 2024

Summary

• The UAE aims to become a global leader in AI and technology by 2031, driven by its National AI Strategy and efforts to diversify its economy from oil and gas. Key initiatives include partnerships with foreign tech companies like Microsoft and the establishment of AI research institutions.

• The UAE's tech diplomacy is a core aspect of the Emirati foreign policy, using its investments in data infrastructures and AI to forge global partnerships. It is positioning itself as an alternative to global powers in semiconductor production, increasing its role in the global chip supply chain.

• However the UAE must balance its relations with both the U.S. and China in the tech sector. While aligning more with U.S. tech firms, it maintains defence ties with China, navigating a complex diplomatic landscape to avoid disputes with either power.

Over the last decade, the United Arab Emirates (UAE) has increased its potential to become a major player in the global market for artificial intelligence (AI), high technology, data infrastructures and cloud services. This ambition is driven by the 2017’s National Strategy for AI and its main objective to become the “world leader in AI by 2031”. The growth in the digital economy is also generated by the need to modernise and to diversify the Emirati economy and to reduce its reliance on oil and gas income. As a result, in 2021, internet and technology related goods and services contributed to 11.7 percent of the GDP and is predicted to contribute over 20 percent by 2031. The Emirates has been counting on the research and academia to propel the nation’s technological edge. This is illustrated by the inauguration of the Mohamed bin Zayed University of Artificial Intelligence in 2019 and the Technology Innovation Institute in 2020 which launched the first Arabic natural language processing model in 2022 - Noor - and the Falcon large language model in 2023. 

The UAE is also heavily relying on its state-own investors such as the state-owned tech conglomerate Group 42 (G42), whose portfolio is constantly growing. G42’s objective is to merge its AI, cloud services and IT subsidiaries into a single entity and to launch another investment company, this time specialising in AI, data centres and semiconductors. The Emirati government is also supporting partnerships between G42 and key foreign companies, such as Microsoft and OpenAI. This includes the deal between Microsoft and G42, according to which Microsoft will invest in G42 and in return, G42 will offer its AI services for Microsoft’s Azure platform. This will also promote Microsoft’s expansion in the Middle East and Africa. 

The new technological capability enables the UAE to conduct its diplomacy based on digital infrastructures and technology and it is an increasing aspect of the Emirati foreign policy. As the UAE aims to find new markets for its tech companies, it also broadens its diplomatic relationships in the Middle East and beyond. Actually, the UAE can leverage its investments in other nations’ data centres by obtaining concessions and access to data held by UAE operators, to further train AI models. Countries like Malaysia are making strategic partnership with the UAE over AI, as the agreements are less constraining than Chinese and American conditions. In addition, the UAE is gradually increasing its semiconductor production with the main goal to become a new competitor in the chip wars. By becoming an alternative to the global powers on the chip market, this new production cluster can also increase the resilience of the global semiconductor supply chain. 

However, the UAE’s digital infrastructure diplomacy is also a balancing act between its two major investors, the United-States and China. U.S. officials are concerned that China will obtain key and sensitive technology through the UAE as American intelligence agencies are monitoring the relationships between the Emirati tech companies and China. While the U.S. is pressuring the UAE to strengthen its commitments, the latter has communicated that on AI and technology it prefers to align with the U.S. rather than China. As such, G42 has made compromises to access American technology and partnerships like selling its shares in Chinese companies. On the other hand, the UAE is safeguarding and upgrading its ties with China in the defense domain by increasing air and naval exercise with the Chinese counterparts. 

Forecast

• Short-term

  • While the UAE needs to build up on the current momentum driving its digital growth, it is likely that it will be challenged by the lack of talents in addition to the financial constraints. To foster an environment of constant innovation, the government and the companies need to adopt effective industrial and immigration policies to facilitate and attract talents from the main technological powers.

• Medium-term

  • It is also very likely that a regional competition between the UAE and Saudi Arabia will emerge as they are currently racing to become the main AI developer of the Middle East. Saudi Arabia has also signalled that it preferred a partnership with the U.S., yet it is also currently investing in Chinese start-ups. This different approach is highly likely to inform the Emirati government as it favours cooperation with American firms rather than obtaining Chinese technology.

• Long-term

  • The UAE’s digital growth is also informed by the efforts of the U.S. to regulate China’s access to semiconductors and AI technology. Therefore, there is a high likelihood that the UAE will need to sustain its efforts to reassure the U.S. about its relations with China, especially in the defence and security domain, thus securing key partnerships with American firms. However, if the U.S.’s concerns are starting to obstruct Abu Dhabi’s ambitions in the technological area, there is a high probability that the UAE will pivot to its Chinese counterpart.