The objective of this research is to conduct an in-depth analysis of the AI industrial strategies, key policy frameworks, and ecosystems of Saudi Arabia and the UAE, alongside case studies of Korean companies entering these markets. Based on this analysis, the study aims to propose policy implications and government support measures to facilitate the strategic expansion of Korean AI companies into the region, incorporating a comparative evaluation of the distinctive characteristics of each country’s AI sector.

Saudi Arabia and the UAE, the focal points of this study, are leading Arab oil-producing nations whose geopolitical and economic influence has grown significantly since the mid-1970s oil crisis. Today, AI technology is emerging as a cornerstone of their socio-economic transformation, driven by substantial financial resources and strategic advantages in renewable energy. By fostering advanced AI capabilities and robust industrial ecosystems, these countries seek to reduce their dependence on oil, enhance economic efficiency, and secure sustainable drivers of future growth.

While South Korea and these two countries share the common challenge of building sovereign AI ecosystems to become leading players in the global AI industry, they are uniquely positioned to complement each other’s strategic gaps through mutual cooperation. South Korea is well placed to leverage the vast capital reserves and strong policy commitment of Saudi Arabia and the UAE toward AI integration. This environment provides fertile ground for Korean AI startups to attract investment and scale into the Middle Eastern market.

At the same time, Saudi Arabia and the UAE can benefit from South Korea’s expertise in areas ranging from data center infrastructure to AI semiconductor supply chains, while collaborating on AI-driven initiatives to strengthen their domestic manufacturing bases. Ultimately, by maintaining balanced cooperation with both the United States and China, South Korea and these Gulf countries can establish strategic partnerships for mutual growth, further deepening the economic ties that have evolved since the 1970s.

Following an overview of the foundational industrial strategies for AI development in Saudi Arabia and the UAE, Chapter 2 examines key policy frameworks and the current status of AI infrastructure, R&D, and startup ecosystems, as well as regulatory environments and AI service adoption. Both countries intensified their AI initiatives in the late 2010s as part of a strategic transition from oil-dependent economies to knowledge-based economies. To this end, they are implementing comprehensive industrial policies, including the formulation of national AI strategies, the establishment of dedicated national agencies and state-owned enterprises, and the expansion of international cooperation with global technology leaders.

However, these two countries exhibit distinct characteristics that defy simple categorization as similar Arab oil-producing economies. Differences in economic and population scale, the proportion of native citizens, industrial structures, and openness to foreign investment result in diverging strategic priorities. For instance, while Saudi Arabia emphasizes a “self-reliant” sovereign AI model centered on domestic development and its internal market, the UAE pursues an “open” sovereign AI framework that leverages global networks, international talent, and the open-sourcing of its proprietary Falcon model.

Furthermore, reflecting the UAE’s federal structure, Abu Dhabi and Dubai are spearheading distinct AI trajectories. Abu Dhabi prioritizes the development of robust infrastructure by constructing large-scale data centers through strategic partnerships with U.S. technology firms and developing Arabic-specific LLMs. In contrast, Dubai positions itself as a global gateway, serving as a premier testbed for AI startups and facilitating diverse pilot projects to attract international innovators.

Chapter 3 analyzes the AI industry ecosystems of Saudi Arabia and the UAE using key indicators such as cloud service market size, semiconductor trade volume, AI research output, and venture capital investment. Driven by strong leadership, national strategic visions, and substantial capital, both countries are experiencing rapid growth across these dimensions.

Saudi Arabia is aggressively expanding its data center infrastructure and increasing semiconductor imports to ensure stable AI development and deployment. While its global share of AI research publications—a proxy for sovereign AI capability—is rising, its research productivity (measured by publications per million people) remains relatively modest.

Meanwhile, the UAE is spearheading the “Stargate UAE” project to strengthen its AI data center and cloud infrastructure. Notably, as of 2023, its semiconductor imports exceeded those of Saudi Arabia by more than fourfold. Through proactive global talent acquisition and open research collaboration, the UAE has developed the capability to produce proprietary Arabic large language models (LLMs), with its AI research productivity now surpassing that of the United States.

In terms of international cooperation, both countries maintain a strategic balance, avoiding overreliance on either the United States or China while leveraging cutting-edge global technologies. Furthermore, although venture capital investment appears lower than in major economies, this reflects a distinctive market structure in which AI investment is predominantly driven by state-owned enterprises rather than the private venture sector.

Chapter 4 examines South Korea’s AI policies, implementation framework, and support systems for overseas expansion. It assesses the competitiveness of the domestic AI industry by analyzing national statistics and global AI indices. Furthermore, the chapter identifies the patterns and characteristics of market entry into the Middle East through sector-specific case studies of Korean AI companies in Saudi Arabia and the UAE.

Regarding the policy framework, although the national AI agenda has gained momentum under the current administration, challenges remain in coordinating inter-ministerial interests and formulating efficient and detailed policies. Notably, a comprehensive support system tailored to the Middle Eastern market has yet to be fully established.

In terms of market structure, while the Korean AI market is expanding rapidly, a clear bifurcation exists: a small number of large corporations lead the development of large-scale models and infrastructure, while a large number of startups dominate the AI application sector. This division is also reflected in their market entry strategies in the Middle East; large corporations primarily focus on large-scale AI platforms—such as data centers and smart cities—whereas startups concentrate on specialized AI application services.

By country, Saudi Arabia currently accounts for a higher number of Korean market entries than the UAE. In Saudi Arabia, cooperation is expanding across the entire AI value chain—from infrastructure to development and application. In contrast, in the UAE, Korean companies are primarily entering AI application sectors, particularly in healthcare and transportation.

Chapter 5 outlines strategic frameworks for Korea–Middle East AI cooperation and proposes support measures to facilitate the expansion of Korean AI startups into the region.

First, it is imperative to establish high-level strategic partnerships. Given that Saudi Arabia and the UAE predominantly adopt a “top-down” approach driven by strong central leadership, establishing an integrated bilateral cooperation framework—comprising senior government officials and key corporate stakeholders—is essential to ensure seamless market entry.

Second, the joint development of “AI green infrastructure” should be prioritized. This entails the synergistic integration of the Middle East’s abundant renewable energy resources with Korea’s AI semiconductors and data center capabilities.

Third, fostering AI talent and establishing joint R&D platforms are critical for both South Korea and Gulf oil-producing countries. This can be achieved through collaborative research with leading institutions and the development of joint degree programs.

Fourth, joint AI solution demonstration projects should be actively promoted. To bridge the gap between R&D and commercialization, private sector participation should be encouraged through large-scale pilot initiatives.

Fifth, the establishment of a dedicated cooperation fund is essential for the timely implementation of strategic projects. By providing financial support for joint ventures, technology transfer, and pilot programs, both sides can accelerate the realization of their shared strategic objectives.

Meanwhile, to facilitate the international expansion of AI startups, the following concrete support measures are proposed.

First, it is necessary to consolidate fragmented support policies currently dispersed across multiple ministries and agencies into an integrated support system. Such streamlining would prevent inefficient competition over performance metrics among government bodies and eliminate duplication in budget allocation.

Second, as startups entering the Middle East often face barriers related to investment, labor, and tax regulations, as well as unfamiliar commercial practices and complex bidding procedures, establishing a unified market intelligence platform is essential. The systematic provision of country-specific market entry information would significantly reduce information search costs and mitigate entry risks for startups.

Third, the initial market entry phase entails substantial costs, including in-depth market research, brand positioning at trade exhibitions, and the establishment of local offices. Government-backed partial funding for these upfront expenses would incentivize startups to pursue opportunities in the Middle East more proactively and serve as a catalyst for attracting subsequent private investment.

Fourth, to address supply–demand imbalances and potential conflicts of interest within the nascent AI ecosystem, the support system should promote value-chain collaboration. This can be achieved by expanding R&D funding for collaborative projects among startups at different stages of the value chain and by providing incentives for mutually beneficial cooperation.