A flurry of recent announcements has ushered the Middle East – and the UAE in particular – into the leading ranks of nations embracing industrial digitalization. Much of the activity can be attributed to state-owned energy companies looking to modernize.
At the same time, Middle Eastern governments, and cities, are building digital policies to support their largest sectors and encourage growth in smaller ones. There have been a relatively limited number of start-ups in the Arabian Peninsula, compared to the US, for example.
This is in part countered by the enthusiasm of state-owned companies to deploy technology pilots and work with leading global technology firms, who in turn are investing heavily in this region.
The UAE has various policies, together creating a framework for industrial modernization. The most pertinent policies are the Abu Dhabi Vision 2030, the national 2031 AI strategy, the national strategy for advanced innovation, and sponsored technology clusters, such as the Dubai Internet City. The innovation strategy specifically names renewable energy, transport, water and space as sectors for technological focus.
In an unusual move, the policy appointed “CEOs of Innovation” for each government agency and allocated $3 billion annually for innovation.
Making it business-friendly
The UAE has various start-up incubators, but the small companies have struggled to scale into successful tech unicorns. Entrepreneurs criticize the costly fees to register businesses and the lack of regional investors. In answer, the government recently lowered costs of registration and started issuing five-year entrepreneurship visas to attract more talent.
The dearth of local digital technology offerings has opened the door to foreign companies, who have poured into the region, setting up research labs, training centres, and joint ventures with local clients. Siemens set up a digital grid centre in Abu Dhabi in December and SenseTime plans to build an AI R&D centre for smart cities and autonomous vehicles in Abu Dhabi.
ADNOC and DEWA have made the most significant strides towards digitalization in the UAE, announcing six significant initiatives between them since 2018. While in Saudi Arabia, Aramco and Sabic have announced five different joint ventures with tech partners since 2018.
These oil, gas, and power utility companies are relying on Honeywell, Schneider, Dell, Wipro, Tata, Chiyoda, Baker Hughes, Siemens and others to help them connect, monitor, and optimize their equipment and processes
Those most ahead have spent time and money on crafting long-term digital strategies. ADNOC started its transformation in 2017 and has spent millions on its Panorama Digital Command Center (developed by Schneider). This centre combines ADNOC’s 14 businesses and optimizes oil production costs, reduces carbon emissions, and avoids downtime.
These projects are not just marketing exercises meant to show the technology prowess of leading industrial companies. The benefits of digitalization, after a few years of investment, are proving out across oil, gas, power and manufacturing.
BloombergNEF calculates that using IoT, analytics, artificial intelligence and augmented reality tools, an oil refinery could reduce its cost of making a barrel of oil by 11.5 per cent, after one to two years of implementation.
Clear these hurdles first
There are two barriers for countries in the Middle East looking to make the most out of “Industry 4.0”. First, without homegrown technology skills and leadership, foreign tech companies and consultants will make the most of the digital economic benefit generated in the Middle East.
Secondly, governments must make sure it is not just state-owned fossil fuel companies mostly adopting digital technologies, but also new sectors like solar, electric vehicles, and advanced manufacturing.
More could be done to educate students, such as Abu Dhabi’s innovation hub, that hosts classes in app development, machine learning, virtual reality and robotics for students under 24. And governments could leverage growth in renewable energy and electric vehicle markets to mandate some level of connectivity and data analytics built-in to greenfield projects and city infrastructure.
- Claire Curry is with BloombergNEF.