Here’s how developing countries can reduce the Artificial Intelligence gap

AI is essential for productive transformation and job creation in developing countries.

F. Scott Fitzgerald1 said that the “test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function”. This statement holds true with reference to today’s lopsided debate on Artificial Intelligence (AI). The negative perceptions of AI are associated with potential privacy violations and the spread of disinformation, the erosion of human rights and the replacement of labour, leading to unemployment and further inequality.

Yet AI is emerging as one of the critical technologies of the Fourth Industrial Revolution (4IR), and large corporations as well as small and medium-sized enterprises (SMEs) in developing countries could benefit considerably from using AI to improve their level of productivity. To drive the productive transformation in SMEs in developing countries, three factors need to be considered: (i) the changing nature of productive activities beyond manufacturing; (ii) the exponential growth of digitalization and AI; and (iii) the practical use and applications of AI in productive activities.

Artificial Intelligence beyond manufacturing

AI refers to the ability of a system, computer or robot to learn and carry out tasks that are usually performed by humans who have the capacity to reason and act. Typical examples of AI applications are production robots, smart assistants, self-driving cars, automated financial analyses and investments and travel booking agents, just to name a few. One key feature of such technologies is their combinatorial effects and the exponential growth they imply.
When used in manufacturing, AI contributes to cost reductions for firms, simplifies their processes, streamlines supply chains and saves resources. Moreover, it enhances predictive machine maintenance, minimizes scrap, increases defect zero yields, forecasts components demand and estimates inventories. AI is also revolutionizing customer service – chatbots can be used to provide 24-hour customer support and to predict individual customers’ needs.

In manufacturing, AI contributes to cost reductions for firms, simplifies processes, streamlines supply chains, and saves resources.

Although the role of manufacturing in development has been key from a historical perspective, attention is increasingly shifting towards the potential role of services for growth in developing countries. The question therefore arises whether ‘platformization’—the combination of the production of physical goods with services and digital platforms—could accelerate productivity in developing countries (e.g. by providing local firms access to technologies and markets).

In manufacturing, AI contributes to cost reductions for firms, simplifies processes, streamlines supply chains, and saves resources.

The need for speed

Technology is developing at an exponential rate and the use of AI in production activities is on the rise worldwide. China is one of the leading AI users in a range of industries, from production, and distribution to urban planning2; in Brazil, Alice Assistant, which was developed by a start-up, is used in farming and agriculture to improve harvesting processes3; in Nigeria, RxAll has developed an application to identify counterfeit drugs.

Planning for digitalization, technological upgrading and the use of AI in production or supply chain activities pose a major challenge for SMEs in developing countries45, due to the lack of adequate technological knowledge and financial resources, skills, absorption capabilities, availability of technologies as well as proper legal frameworks. Although SMEs in high-income countries face similar challenges, the use of AI is not necessarily indispensable if they occupy a niche in the market and produce highly specialized goods not offered by others, but most of the developing world need to accelerate the catching up on AI capacities (see figures below).

AI players worldwide, 2009-2018

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