ai & the digital revolution & implications for regional ... · science,23may...

AI & the Digital Revolution:Implications for Regional Economies

@ Order of Engineers & Architects Beirut

Dr. Nasser Saidi26 February 2019

Agenda

ü Some Economics of AI & Digitalisation

ü ME Digitalisation & AI Gaps

ü AI strategies

ü Recommendations & Key Takeaways2

Timeline of AI developments; AI/ML are General Purpose Technologies

Source: ”Harnessing Artificial Intelligence for the Earth”, PwC, WEF, Jan 2018

AI could potentially increase global economic output by ~$13 trn by 2030 (Source: McKinsey,2018)

Simulation: ~ 70% of companies adopting at least one type of AI technologies by 2030 & less than half of large companies using the full range of AI technologies across their firms

Source: “Notes From The AI Frontier: Modeling The Impact Of Ai On The World Economy”, McKinsey, Sep 2018

AI adoption & absorption could make a large contribution to growth in slow-

growing developed economies

AI skills penetration: increasingly global, but ME not on the map

Work done by machines could jump from 29% to more than 50% by 2025Source: The Future of Jobs 2018, WEF

Only 22% of AI professionals globally are female, compared to 78% male: AI gender gap is three times larger than other industry talent pools

Global AI hubs are emerging outside US: AI adoption rates will accelerate

China is rising in prominence in AIEquity deal share, 2014-2018

Investors splurged on Chinese AI startups in 2017 Equity funding share, 2014-2018

Source: CB Insights Jan 2019

Ten General Points about Automation & the Economy

1. Capital-Labor substitution is a fundamental, long-term process of modern growth;

2. Automation proceeds from physical & repetitive tasks to cognitive & contextual tasks;

3. The Digital Revolution continues and accelerates the process;

4. The Digital Revolution is science-based, raises the returns to R&D, and fosters a professional/technical class (managerial, R&D, design, higher education, healthcare);

5. National income shifts from basic labor to human capital, physical capital (natural capital, buildings, machines), and intellectual capital;

6. Work-time falls & is replaced by schooling/training, leisure & retirement;

7. Older households tend to benefit, younger households tend to lose;

8. Higher-income, higher-educated, and higher-talent families engage in intergenerational transfersto ensure intergenerational benefits; lower-income, lower-educated, and lower- talent familiesmay experience a rise or decline in wellbeing;

9. The IR revolution will also shift income from physical capital to intellectual capital (e-books, e-conference, e-commerce, e-banking);

10.We need five kinds of policies: new training, income redistribution, shared leisure, promotion ofhuman-machine complementarities (humanities along side IR), IP governance

Source: J. Sachs (2018)

Technology Polarizing Labour Markets: drove down labour share in 3rd industrial revolution => greater inequality

Source: Autor (2014) ‘Education, and the Rise of Earnings Inequality Among the "Other 99 Percent“,

Science, 23 May 2014, pp 843–851; cited in Mark Carney (2018).

Stylised Shares: Shift against Labor & Human Capital by 2050? Who owns IPR?

Source: J. Sachs (2018)

Jobs with tasks at risk of automation: wide range of estimates

Source: Nedelkoska, L and Quintini, G (2018), “Automation, skills use and Training”, OECD Social, Employment andMigration Working Paper.

Policy makers should prepare for five primary economic effects due to AI-driven automation

1. Positive contributions to aggregate productivity growth

2. Changes in the skills demanded by the job market, including greater demand for higher-level technical skills

3. Uneven distribution of impact, across sectors, wage levels, education levels, job types, and locations

4. Churning of the job market as some jobs disappear while others are created. Loss of jobs for some workers in the short-run, and possibly longer depending on policy responses

5. Policies to address the impact of AI: Universal Basic Income, wage subsidies, safety nets, tax on robots

Agenda



ü AI strategies

ü Recommendations & Key Takeaways

12

AI expected to contribute $320bn for the Middle East by 2030 from low base

• Middle East expected to accrue 2% of global benefits

of AI in 2030: $320bn

• Largest gains in KSA: $135.2bn/ 12.4% of GDP; UAE

sees largest relative gains: 14% of 2030 GDP

• Expected annual growth in the contribution of AI per year

across the region: 20-34%

Source: “The potential impact of AI in the Middle East”, PwC, 2017

AI in the Middle East

Source: Infographic from the AI Week Middle East 2018 conference

Great Expectations from AI globally but lagging in major sectors in ME

Source: “The AI Gap: Time For The Middle East To Take It Seriously “, BCG, Dec 2018

The AI Ambition-Action Gap in the ME

Only about one in 14 ME survey respondents have incorporated AI into their business offerings or processes, partially or extensively vs. 1 in 4 globally78% of Middle East executives have not yet materially adopted AI, compared to 54% of global respondents

Level of AI adoption in the organization (%)


Barriers to Adopting AI: lack of understanding by ME executives


Some Implications for ME Economies• Differences in AI & digitalisation penetration rates will likely widen

gaps between countries, sectors & workers • Relatively low wages may delay automation, implying lower than

otherwise productivity growth and a growing AI gap• ME economies are likely to have a larger share of jobs with tasks

at risk of automation, and a larger fraction of unskilled & semi-skilled implying greater automation vulnerability and rising unemployment

• Demographics can be a blessing or a curse• ME economies have a large share of employment in public

sector jobs and agriculture that will be subject to automation• Automation is likely to lead to higher poverty levels and social

and political unrest in the absence of remedial policies

Agenda



ü AI strategies


19

Existing International AI StrategiesEU: European AI Alliance that has established an overarching approach to AI and an agreement to cooperate among European countries

Nordic-Baltic Region: Ministers from the Nordic-Baltic region issued a declaration of collaboration on AI

United Nations: numerous ongoing initiatives related to AI including providing guidance on data privacy and on autonomous weapons

International Study Group of AI: France & Canada are developing a task force to make recommendations on the scope and implementation of the international study group

Charlevoix Common Vision for the Future of Artificial Intelligence: Leaders of the G7 agreed to a shared set of commitments for AI in Charlevoix, Canada

Existing AI Strategies in the region: not yet on policy agendasUAE: AI Strategy + dedicated ministerCovers 9 sectors: Transport, health, space, renewable energy, water, traffic, technology, education, environment 5 themes: • Formation of UAE AI Council; • Workshops, initiatives & field visits to

government bodies; • Develop capabilities & skills of all staff

operating in the field of tech & organisetraining courses for government;

• Provide all services via AI; full integration of AI into medical & security services;

• Launch leadership strategy + issue a government law on safe use of AI

Tunisia’s Secretary of State for Research created a task force & steering committee to develop a National AI Strategy. Primary goal will be to facilitate the emergence of an AI ecosystem

Saudi Arabia is developing an AI strategy as part of Vision 2030

Elements of an AI Strategy• Invest In and Develop AI: governments need to partner

with private sector to create ecosystem & provide incentives for R&D in health, education, energy, social welfare, transportation, and the environment

• Educate and Train Workers for Jobs of the Future: career ready STEM skills; focus on economic & tech inclusion; high-quality job training and tools

• Aid Workers in the Transition and Empower Workers to Ensure Broadly Shared Growth: Strengthen social safety net programs; Eliminate barriers to labour mobility; Universal Basic Income schemes

Agenda



ü AI strategies


23

E-Lebanon recommendations*

1. Establishment of a “National e-Lebanon Committee”

2. Set up an implementation plan for the e-Lebanon strategy

3. Define and collect key National ICT Statistics

4. Promote the financing channels and provide tax incentives for the national ICT sector

5. Speed up introduction of high bandwidth telecommunication services (broadband)

6. Increase the planned international gateway bandwidth

7. Reach an e-Society and Enhance ICT in educational sector

8. Establishment of a “National e-Government Strategy”

9. Enact a comprehensive legal and regulatory framework

10.Expedite implementation of the Telecom regulatory framework

* June 2003!

Lebanon should emulate Estonia & its push towards e-everything! • Named ‘the most advanced

digital society in the world’ by Wired: 99% of services available digitally

• Estonia was the first country in the world to adopt online voting in 2005!

• Estonia became the first country to launch e-Residency in 2014: now 50k+ e-residents from 157 countries + 600+ new companies

• Estonia has been providing digital identities & ID cards to its citizens & residents since 2002!

Takeaways & Recommendations • AI/ML is a GPT & will become as ubiquitous as the internet• Region needs massive investments in AI-enabling

ecosystems in order to participate in 4th industrial revolution & increase economic diversification • Region must build AI capacity: STEM+ education & skills• Create National Task Forces (Government + Universities +

Tech + Business) to develop AI strategy and policies• Develop network for international cooperation in AI• Lebanon can develop capacity to emulate Estonia. Focus

on FinTech + Education and R&D + Intelligent Government

Select References• BCG (2018): “The AI Gap: Time For The Middle East To Take It Seriously”, Dec• CB Insights (2019): “China Is Starting To Edge Out The US In AI Investment”, Feb• CB Insights (2019): “Artificial Intelligence Trends: What’s Next in AI?”• Mark Carney (2018): “AI & the Global Economy”. Speech at Rotman School of

Management, University of Toronto• McKinsey (2018): “Notes From The AI Frontier: Modeling The Impact Of Ai On The

World Economy”, Sep 2018• NBER Economics of Artificial Intelligence Conferences 2018 & 2017 (More:

https://www.economicsofai.com/papers)• Nedelkoska, L and Quintini, G (2018), “Automation, skills use and Training”, OECD

Social, Employment and Migration Working Paper• Nordhaus, W. (2015): “Are We Approaching an Economic Singularity? Information

Technology and the Future of Economic Growth”, NBER Working Paper 21547• PwC (2017): The potential impact of AI in the Middle East• Sachs, Jeffrey (2018): “R&D, Structural Transformation, and the Distribution of

Income”, IMF/INET Conference on the Economics of Artificial Intelligence• WEF (2018): ”Harnessing Artificial Intelligence for the Earth”, PwC, WEF, Jan• WEF (2018): The Future of Jobs report 2018• WEF (2018): Global Gender Gap Report 2018

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ai & the digital revolution & implications for regional ... · science,23may...

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