Artificial Intelligence is more than a buzzword these days. Its reach extends to smartphones, computers, translations between foreign languages, and systems which filter spam emails and identify harmful content on social media. It can even detect cancerous growths in the human body. With its application in vast areas and industries, AI makes the day-to-day lives of humans easier.  

As of 2021, 44 countries have developed their own national AI plans, showing the willingness to lead the global AI race. These include China and India, which are leading the way in building the developing world's plans. Oxford Insights, a consultancy firm that advises organizations and governments on matters relating to digital transformation, has ranked the preparedness of 160 countries across the world. In their 2021 Government AI readiness Index, the USA ranks first, followed by Singapore and the UK. The lowest-scoring region of the index includes sub-Saharan Africa, the Caribbean and Latin America, and some central and south Asian countries. The developed world has the inevitable edge in making rapid progress in the AI revolution.  

According to the IMF, new technologies like AI, ML, robotics, big data, and networks are expected to transform how we work. But they could also have a significant impact on the developing economies. For example, the opportunities and potential sources of growth that the US and China enjoyed during their initial stages of development are different from what Cambodia and Tanzania are facing today.  

The McKinsey report published in 2018 focused on modelling AI’s potential impact on the economy. Based on a micro-to-macro and simulation-based approach, it gives a balanced view of both the possible benefits and the costs associated with the adoption of AI. The report tries to highlight that AI has the potential to deliver an additional economic output of around $13 trillion or 16% of global output by 2030, thereby boosting global GDP by about 1.2 per cent a year. Furthermore, an early average simulation indicates that by 2030, 70% of companies will adopt any one type of available AI technology. However, despite the gains, the report clearly states that the adoption of AI could widen the performance gap between countries, companies and workers, with early adopters capturing an additional 20-25% economic benefits.  

Impact of AI on developing economies 

According to the McKinsey report, despite the potential of AI to contribute to global GDP, it can widen the gaps between countries' organizations and workers. With improvements in computing power capacity and progress in algorithms, AI’s reach has broadened across industries. The impact of AI can be felt over time, gathering pace after five to ten years. While the small initial implications can lead to hyped judgement about the adoption of AI, the benefits to early adopters become visible only in later years.  

With greater economic capacities, these wealthy countries are better positioned to make a significant investment in the research and development needed for creating modern AI models. However, the developing countries have more urgent priorities like education, sanitation, healthcare, and feeding the population. These are priorities that override digital transformation. Therefore, situations like these would widen the divide of the existing gap between developing and developing countries. 

Beyond the hefty price tag, another issue faced by the developing countries is the growing toll that AI takes on the environment. For instance, CNNs costs upwards of $150,000 to train, and it will create 650 Kg of carbon emissions during training. This is five times the emission generated by a car during an entire lifetime. Developed countries have already been leading contributors to carbon emissions, by which the burden will fall on developing nations. The global south generally suffers disproportionate environmental crises, such as extreme weather, drought, flood and pollution, partly because of its limited capacity to invest in climate action.  

The IMF Report 

A staff report published by the IMF finds that new technology risks widening the gap between rich and emerging countries by shifting more investment to advanced economies where automation is already established. This would have negative consequences on the jobs of the developing counties.  

IMF models look at two countries- advanced and developing to understand the impact of AI. The following were the factors considered: 

• Labours 
• Capital 
• Robots 

According to the report, the divergence between developing and advanced economies can occur in share-in production, investment flows, and terms-of-trade. Their report states that “the landscape is likely going to be much more challenging for developing countries which have hoped for high dividends from a much-anticipated demographic transition”.  

Bridging the gap 

The gap created by the race is not all bad news. According to a 2020 study, AI can help achieve 79 per cent of the targets within the SDG. Also, the benefits of AI in the global south could be vast, from improving sanitation to helping with education to providing medical care. These changes could have significant flow-on effects. However, equitable participation in the development and use of technology is essential to achieve the actual value of “good AI”. This means that the developing world will need more technological and financial support from the developed countries in the AI revolution. 

Source:

IMF Blog

Government AI Readiness Index 2021- Oxford Insights 

Economic Times 

McKinsey Report