Forward to the future: why the Government should focus on artificial intelligence


At 1% ten years ago, online sales in China have now grown to more than 40%. What are the implications, and how should the Ukrainian Government respond?

With rapidly developing technology, new methods of production emerge, markets expand, and society evolves equally fast.

Businesses use artificial intelligence (AI) systems increasingly more often to help them use resources more effectively and overcome information barriers.

Consumers get access to a wider range of products and services at lower prices.

Why should the state focus on the evolution of artificial intelligence in Ukraine, and what steps should the new Government make in this sector?

Technologies set off the natural forces of market competition.

Online sales in the Chinese economy that were 1% just ten years ago now exceed 40%. More and more companies introduce artificial intelligence systems into production as this increases their performance through process automation and saves time and human costs.

In addition, AI maximizes the personalization of service delivery.

The use of artificial intelligence is becoming part of our life. For example, the number of smart devices in our homes has been growing. According to Gartner, 6 billion IoT devices were connected in 2016, a figure that could exceed 14 billion in 2019.

Areas concerned

Artificial intelligence has every chance to transform the potential of the global economy. According to PwC estimates, it can add $15.7 trillion by 2030. AI can be most benefited from by China (26% GDP growth in 2030) and North America (14.5% GDP growth), which is equivalent to $10.7 trillion.

The main drivers of economic change resulting from the use of artificial intelligence include workforce automation, which can add up to 11% of world GDP, or about $9 trillion, by 2030, and innovations in goods and services that can increase GDP by about 7% by 2030, or by $6 trillion.

AI algorithms will be applied most actively in three core areas.

One is the state that formulates policies and priorities, carries out public procurement, raises investment, and funds projects. For example, using AI systems in public services, designing open data policies, developing support programs for AI startups and engaging them in GOVTech activities.

Another is businesses whose flexibility, high-quality management, and fast implementation enable them to expand machine learning, IoT, AR/VR, and robotics.

The third one is a public–private partnership that experts consider to be most optimal for shaping the new industry. It is about AI development, space exploration, smart cities, new energy and transportation.

Steps the Government should take

The key objective of the Government is to thoroughly support AI implementation across the economy, identify areas for the implementation of the first projects such as infrastructure, logistics, bioeconomy, agriculture, education, and public services.

It is equally important to set the proper policy foundations and guidelines for new opportunities of developing AI-based technologies.

The Government should focus on devising a coordinated national AI strategy, legislative and ethic standards, promoting inclusion in technology and people's understanding of AI benefits, encouraging the public and private sectors to introduce AI technologies, open, and provide equal access to, data, use AI to boost their HR potential.

Why public–private partnership matters

Public–private partnership (PPP) is a system of win-win collaboration between the state and the private sector to achieve a certain goal.

By pooling resources and sharing risks and rewards, the parties implement projects attractive for investors, create or renovate profitable projects that need investment. This synergy helps create new markets, resolve social and economic problems, and improve the business climate.

According to the Ministry of Economy, 186 PPP-based agreements were concluded before July 1, 2019. Most of them were in infrastructure, gas production and transportation, water treatment and distribution. AI can be a model of how PPP promotes high-tech industries, speeds up development and investment.

However, AI and big data research is quite expensive. Equipment and experts for neural network testing and implementation can cost dozens of millions of dollars annually. The state cooperates with the private sector to introduce new technologies more effectively and successfully.

Special features of AI development include the demand for experts. We currently lack human resources because of an imbalance between humanities and STEM education, a lack of domestic demand, and a brain drain to more developed countries.

The PPP format in education can secure an effective AI development. This involves designing curricula collaboratively, introducing grants and scholarships for STEM students, acquiring state-of-the art IT technologies.

More profoundly, this may involve collaboration to develop science parks and innovation spaces — environments where infrastructure is available to bring technology suppliers and end users together to identify the skills, business models, and cross-industry ecosystems for the creation of new technologies.

One should start with national and research universities that have the staff and a certain support infrastructure to work with AI technologies and fill the gaps in knowledge and methodology. This concerns, among other things, large-scale data analysis, projection, visualization, and algorithm design.

However, PPP faces legislative challenges that impede the creation of a competitive country and the reaping of benefits of such a partnership.

Key challenges — there is no system for managing a partner's fiscal and financial risks, a private partner cannot be replaced when it defaults on its financial obligations, the algorithm for determining concession payments is not clear, and the contracting process is complicated and protracted.

Concurrent effort to improve legislation and formulate a consistent policy of AI and data development will help develop high-tech sectors of the economy, and, as a result, achieve the desired economic effect.

The development of artificial intelligence is an investment in the future

This story surely is not about quick wins. AI implementation can produce an economic effect only gradually and make it visible over time. However, its contribution to economic growth may triple by 2030 compared to the scope of the next few years.

How can people benefit from the development and use of artificial intelligence? The public will get higher-quality personalized goods and services, and bureaucrats will save time used to perform routine tasks and spend it on finding creative and innovative approaches to improving services.

Olha Kravtsova, Project Manager of the CMU Reform Delivery Office, exclusively for The Ekonomichna Pravda


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