The latest generation of artificial intelligence (AI) models are transforming entire sectors of the economy. For Qatar, an economy where much of the wealth is based on the fossil fuel industry, there is both an opportunity and a need to nurture startups and growing businesses in AI and other emerging technologies. To build an ecosystem of hi-tech startups and growth firms, public and private sectors need to work together.
There is a national strategy for AI in the Qatari economy, using the concept of AI+X, which envisages AI optimally integrated into all aspects of the economy. The Ministry of Communications and Information Technology has launched a ‘Smart Qatar’ (Tasmu) programme, designed to develop the digital economy, part of the Qatar National Vision 2030.
Qatar’s strategy envisages the creation both of startups and of enterprises co-founded with multinational firms. Google Cloud established a regional office for the Gulf in Qatar in May 2022. A network of partnerships is being established, including key stakeholders such as the Qatar Science and Technology Park, Invest Qatar, Ooredoo, Meta, Microsoft and Qatar Free Zone Authority. Hamad Bin Khalifa University is another strategic partner, along with the Innovation Lab, the Digital Incubation Centre, Tasmu Accelerator and Tasmu Digital Valley.
The Tasmu Digital Valley is an innovation cluster. It has identified 15 priority areas of high potential growth, including Internet of Things (IoT), big data analysis, cybersecurity and systems integration.
The Qatar Development Bank’s investments in small and medium-sized companies topped QR100mn for the first time in 2021. The top three sectors were sports technology, Internet of Things projects and fintech. In March this year, the bank launched a co-investment product for startups, involving an investment of $1mn per deal by the bank, and investments from local and global funds.
All these developments are promising, but announcing partnerships is the easy part; the bigger challenge is ensuring that the partnerships deliver, and that at least some of the startups scale effectively and prosper. It is of concern that in the past 10 years, a couple of technology startup companies begun in Qatar had to relocate to neighbouring countries in order to grow; some of them were successful in turning themselves to multi-million-dollar businesses.
We have seen our neighbouring countries advancing in the technology field and succeeding in establishing the right eco-systems that enable their entrepreneurs to prosper. The Qatar AI strategy needs to be updated. It was drafted in 2019, and in the world of AI four years is a long time. A new generation of language model AI products such as Chat-GPT have become mainstream since. This strategy should also address other challenges in establishing Qatar as a technology hub, such as the ability to hire the best talent, which has been highlighted by entrepreneurs. There needs to be an effective fast-track visa system that prioritises attracting talent from around the world, based on expertise in AI and the targeted technology priority areas.
Another strategy to help build the local ecosystem is the concept of in-country value (ICV). Other countries in the Gulf specify that some 30-35% of the value of public sector contracts must go to local firms. The ICV valuation metrics in Qatar could be reformed to create the right incentives to develop companies in sectors of strategic importance with guaranteed contracts from the government. This will mean steady revenue for those startups from public sector contracts.
Physical geography is a factor also in building hi-tech innovative business clusters. The Qatar Science and Technology Park (QSTP) is a good initiative but Msheireb Downtown Doha can be a better fit given the creative nature of entrepreneurs and their employees – company founders, their funders and creative partners thrive in a physically close environment where there are many shared areas, coffee shops and restaurants. Google Cloud has preferred Msheireb for its headquarters in Qatar.
The Government has started to capture data-focused infrastructure projects which is a great strategy, however it needs to have a bold ambition for the whole economy, and to see building a world-class AI business ecosystem as a strategic priority. There needs to be large investments, support for talent, ability to scale and prosper, and rigorous monitoring to assess the commercial returns and benefits to the wider economy. One way to attract top entrepreneurs is for Qatar Investment Authority to establish a fund of $5-10bn, for investment in startups in Qatar, with conditions to hire nationals for 20% of posts. It should partner with venture capital funds from the US with a strong track record of backing successful enterprises, to ensure a proper vetting process for investment and exit strategy. It does not make sense that funds out of Qatar are investing millions in US and Europe without demanding that they move part or all of their operations to Qatar.
Qatar needs to develop a private sector venture capital industry to invest in local businesses, including hi-tech firms. In a mature economy, venture capital can provide funding for each stage of business growth, including seed capital for promising startups, as well as funding at Levels A, B and C as a company proves its success and scales. Series C investments can run into the tens or hundreds of millions of dollars as a business establishes itself and begins to go global. The next stage for many firms is an initial public offering (IPO). Snoonu is a success story, it raised Series B funding of $12mn led by Qatar Development bank.
There is a historic opportunity, given the substantial capital in the Gulf and the problems with funding in the west following the collapse of Silicon Valley Bank, for Qatar to be a world leader in the world’s next industrial revolution, powered by AI.
In forthcoming articles, I will discuss how AI is impacting different industries, with a focus respectively on finance, healthcare and oil and gas.
The author is a Qatari banker, with many years of experience in the banking sector in senior positions.
