epa07080358 A view of a detail of a screen as part of an interactive installation that illustrates the 'big data' used by multinational and provided by its clients, in the German Spy Museum in Berlin, Germany, 01 March 2018. The German Spy Museum gives an insight into the history of espionage. The exhibition shows from the ancient spying devices to the most recent surveillance techniques. EPA/FELIPE TRUEBA
Cutting-edge technology is now a driving force in the region's business landscape. EPA

Technology

Eight in 10 Middle East business execs say tech is part of daily life in the region

A new report from Accenture sheds light on regional companies' tech appetite and readiness

Alkesh Sharma
Alkesh Sharma

14 October, 2018

The majority of business executives in the Middle East believe technology is firmly embedded in the daily activities of the region and that industries and governments are using it to transform their core operations and reshape methods of working and communicating, a new report says. 

Eighty-three per cent of Middle East businesses and IT executives agreed that through technology, companies are weaving themselves into people's everyday lives – from ordering groceries online to bringing a yet-to-be-built Dubai penthouse to life in virtual reality – according to Accenture's Technology Vision 2018 report. The IT company surveyed 6,400 related businesses and executives for its research.

Tech adoption is poised for growth as executives said they are prioritising investments in artificial intelligence (64 per cent) and the internet of things (68 per cent) in the coming months.

“Countries across the Middle East region are committed to harnessing technology and the power of AI as an engine for economic growth and diversification,” said Alexis Lecanuet, regional managing director at Accenture Middle East and Turkey.

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Read more:

[ UAE firms must illuminate dark data or miss out on massive opportunity, experts say ]

[ Gitex Technology Week: Multi-cloud platforms to steer Middle East firms towards profits ]

[ Exclusive: Hyperloop Transportation exploring potential Saudi routes ]

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The UAE is the front-runner in the region, according to Accenture, which said the implementation of AI has the potential to boost economic growth by 1.6 per cent of GDP, adding $182 billion (Dh668.3bn) to the economy by 2035. 

In Saudi Arabia, use of AI is forecast to contribute more than 1 per cent of GDP, adding $215bn to the kingdom's economy by 2035.

“The UAE continues to witness the exponential speed at which technology is disrupting industries, and as a future-focused country, it is fortunate to have the mindset required to leverage these technology advancements,” said Mr Lecanuet.

Examples of commitment to digital transformation range from Saudi Arabia's vision for Neom, a planned mega-city that will implement AI for every resident, to the UAE's strategy for AI, a major pillar of its Centennial 2071 objectives, which Omar Al Olama, the world's first Minister of Artificial Intelligence, is helping to oversee.

The challenge for most is to keep up with the rapid pace of advancement. Seventy-seven per cent of UAE executives surveyed agree that AI is advancing faster than their company’s pace of adoption. When it comes to understanding the extent to which employees understand how AI can be used within an organisation, only 12 per cent of the UAE executives reported their employees have a full understanding of the process.

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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.”

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