Who will dominate the next era of technology?

Christine Lagarde, President of the European Central Bank, warned this week that we are witnessing a fragmentation of the global economy into competing blocs as a result of the rivalry between the US and China.

The result would be more instability and geopolitical tension “with each bloc trying to pull as much of the rest of the world closer to its respective strategic interests and shared values”, she said.

Beyond the growing confrontation cited by Ms Lagarde between powers in the West and East over Taiwan or Ukraine, the energy transition and rising rates of inflation, there will also be cultural and commercial competition over who will dominate the next era of technology. It increasingly feels like the beginning of the end of the era of western dominance that began in the 1990s with the widespread adoption of the World Wide Web. The arenas of generative artificial intelligence and e-commerce are becoming more democratic in terms of who controls them and has access to the bulk of their billions of users.

Ultimately, the question is — can a middle power emerge to contest this space along with the established leaders, the US and China?

The public release of ChatGPT has helped give the AI race new momentum and China’s is following suit with its own option. In the UAE, there have been a number of institutions and companies also pushing forward with homegrown AI-driven solutions and software.

China’s WeChat pioneered the super-app concept more than a decade ago. Reuters

More broadly, there has been a shift in recent years for e-commerce that reflects the changing needs of users. Amazon is already showing sports content, Saudi e-commerce platform Noon is to livestream IPL cricket, and Twitter, under Elon Musk, has tied up with trading platform eToro . Mr Musk will also pursue his own generative AI capabilities.

Thus the direction of travel for e-commerce is towards the end goal of becoming a one-stop-shop for all consumption online — and Etisalat confirmed this trend by buying a majority stake in ride-hailing service Careem’s own super-app for $400 million. Gartner expects that by 2027, more than 50 per cent of the global population will be daily active users of multiple super-apps.

When everyone has content then content is no longer king. What will win the game then? User experience and — more importantly — utility.

China’s WeChat pioneered the super-app concept more than a decade ago, evolving from a social network to becoming an integral part of daily life — at home and at work — mixing a selection of seemingly unrelated services in one place.

The UAE is perfectly placed to chart this path for its technology companies

Shopping, banking, working on documents, seeking out medical services and booking travel on your mobile device has become second nature. Why wouldn’t it be more convenient to do all of this on one platform? In the West, this flies in the face of a century of consumerist behaviour, not to mention anti-monopolistic sentiment. People like to have multiple options.

In other parts of the world, these feelings are not as strong as the desire for convenience.

It can come down to trust levels. Giving over your data or your custom to any company already feels like too much of risk, let alone all your habits being provided to one place. Yet we do it seamlessly with Apple, Google and others. The friction can come from perception.

This is where the culture and social wars come into play. The US has loudly shouted about China’s technological threat. TikTok and Huawei have been singled out. Yet apps in China are the largest in the world when it comes to mobile transactions.

Their success is measured more in terms of how many times a user visits per day while in the West it is typically about the overall number. The former is better representative of utility.

AI is all about that. The technology is being increasingly used to solve people’s day-to-day problems and complete tasks.

Every online brand will need to adopt this objective to keep growing. The most powerful and effective AI will win. If that comes from China or possibly the UAE, that will of course give the apps from that part of the world an edge. OpenAI putting ChatGPT out there for everyone to use is also a big boost for US hegemony, even if in the short to medium term it means some level of decline of giants like Google.

Between the opposite approaches of East and West there is room for a hybrid, one that recognises American innovation and speed, and mixes these strengths with the efficiency and effectiveness of the Chinese model to create an Arab super-app, that combined with AI, could supersede both.

The Gulf region and in particular the UAE, is both geographically perfectly placed and commercially nimble and philosophically open enough to chart this path for its technology companies through targeted and specific regulatory and policy-led initiatives.

If enough of them attempt to seize this opportunity then it may not be very long before a third bloc emerges to balance out some of the friction around the world.

UAE Premiership

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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.”