The Role of AI in Developing Economies

Lahari Published on: 30 Jun 2024, 8:30 pm

Collected at: https://www.analyticsinsight.net/artificial-intelligence/the-role-of-ai-in-developing-economies

Artificial intelligence is considered a general-purpose technology with the potential to change humans radically. AI can create art, manage your investment portfolio, predict the next mutation of the virus, or even identify early symptoms of the disease.

It is not surprising, therefore, that many countries around the world are racing to harness AI as a way to make their businesses more competitive in export markets and discover new sources of comparative profits. Namely, this should command special interest from role of AI in developing economies, often dependent on exports as an engine of growth but possibly concentrated on just a few goods or commodities.

Much like the diversified investment portfolio is more reliable compared to a single security, diversification for these role of AI in developing economies makes them more resilient to such unforeseen shocks and provides a road to new sources of growth.

But how can AI actually help developing nations achieve faster and more sustainable growth? 

By applying this definition of product space to economics landscape, finding out which countries are in those kinds of areas where a country might have a comparative advantage and space to develop economically. We built an entirely new dataset of private AI investments, classified into 29 groups like robotics, agritech, autonomous cars, and gaming/e-sports. We then aggregated artificial intelligence specialization at the country level and constructed a network connecting AI to patterns of comparative profits in products and services.

The network clearly shows which industries are more closely related to which variants of AI technology. For example, the industries that produce boilers, chemicals, metal goods, and machinery are most closely related to robot automation. Visual search and image recognition benefit industries such as e-commerce by allowing users to find things just by snapping pictures and food manufacturing helps distinguish between good and bad basics.

We zeroed in on the growth-oriented sectors in each country, considering product, service, and AI specialization. The results provide recommendations for advanced and developing countries on how to take advantage of AI specialization as a means to diversify their sources of comparative advantage.

For example, our findings indicate that investments in robot automation could support the further development of metal goods production in Mexico. Similar to the case of travel services, investments in FinTech, related to payment and booking systems, could also support Mexico in maintaining a favorable position. Investments in AI agricultural technologies could favor farmer production in India.

The advances in communications technology mean most AI systems can now be “manufactured” in one place and operated and maintained elsewhere. That is what happens as the demand for AI-based services grows. For example, the industrial robots produced by German company KUKA Robotics embed a host of AI features, from vision systems to machine learning and complex control algorithms.

Kuka’s robotic systems manage to implement their implementations in various industries, such as electronic manufacturing, automotive, and even aerospace, in a number of countries.

The need for AI solutions could arise at all stages of a production process, starting with research and development continuing over manufacturing, distribution, maintenance, to recycling. It is the ability to offer the entire spectrum of AI services that strengthens an accumulator’s lead in contemporary global value chains and might determine future economic prosperity.

Finally, AI opens a window of opportunity for emerging role of AI in developing economies to diversify their exports and grow in a really sustainable way. By specializing in the use of AI applications in industries where they already hold a comparative advantage, developing countries will be able to extend into new niches.

For instance, the enhancement in the production of metal goods in Mexico using robot automation technologies or India’s employment of AI agricultural applications to enhance the productivity of farms could be such an advantage.

Furthermore, it can be strategic in empowering even the developing economies to participate in creating the AI systems and hence make them ready for emerging global value chains. A strategic adoption of the role of AI in developing economies into a more prosperous future.