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Hello everyone, welcome to this special interview. I'm Lean Bushkayer from Forbes Middle East and I'm honored to be joined today by Dr. Muhammad Laran. Thanks for being with us. Thanks for having me. Dr. Muhammad, today we meet at the joint charger investment forum and the World Investment Conference.
Can you tell us from your perspective, can gatherings like this genuinely influence how and where capital flows and how important are such gatherings and platforms in rebuilding trust and fostering cooperation? So they're very important um especially for um rebuilding understandings, collaboration and therefore opening the way to capital.
And why they important? Because first and foremost, they increase people's understanding of what's going on in a very important part of the world. And by bringing people here and by people experiencing what's going on, it it just is completely different understanding of that. Secondly, you're able to meet with a wide range of people.
And this is particularly important in a world in which the in between where many things are coming together um needs to be understood well. So whichever way you look at it, this is a very important gathering. Absolutely. And you know, I just can't help but talk about what happened last night with the gold, you know, um dropping at it the highest percentage since years and after reaching actually record highs.
So can you tell us some people actually say that this is just profit taking others um are worried about how it the role of gold as a safe haven. So from your perspective, is gold still a true hedge against uh global uncertaintities or are investors starting to rethink its place um in their portfolios?
And looking ahead, can you tell us what signals will you be actually observing and to tell you that if the gold is losing its place in the investment portfolio? So let's take one by one. First, the 5% fall in price, which was the largest that we've seen for for many years, came after over 60% gain. And part of it is the reference you made to speculators.
So, gold is fundamentally being driven by two long-term investors. A lot of central banks are buying gold and their purchasing habit is slow and consistent. And above that there's made much greater adoption by institutional investors. I'm seeing that gold in a typical portfolio is going from 0 to 2% all the way up to 10%.
When you have such consistent buyers with a significant amount of buying power, it attracts speculation. So on top of that pyramid if you like you have a speculation group and that means that it makes the gold overshoot on the way up and overshoot on the way down. So there's no doubt in my mind that gold will remain attractive to both central banks and institutions there and therefore the trend of the price is to continue to be up.
But there's also no doubt in my mind it's going to be a volatile path because it will attract speculators and speculators tend to exaggerate volatility around what I suspect will be a rising trend for for gold prices. A couple of days ago, you actually said that what differentiates the US from other economies is actually its investments in AI and AI companies.
So now that you have visited the GCC, specifically the UA, can you tell us how do you see the region's ability to actually compete in the AI and digital transformation sector and what's unique that you see here that you don't see around the world? So the AI promise which is enormous in terms of enhancing productivity and enhancing growth has two components on it.
one that people focus on a lot which is the innovation component the working on AI as important is what's called diffusion getting it out to people that's called working with AI and if you look at the US the most of the focus on the US is working on AI and competition among some very very impressive firms as who will have the best AI and it's changing by the day but ultimately What's going to matter for the economy is diffusion part which brings me to the UAE.
The UEE has taken diffusion really seriously. So it has strategic guidelines to what it is that AI is meant to do. Promoting growth, improving government efficiency, um in enhancing talent and has a diffusion policy. this notion of AI in every citizen's hands. You don't find this anywhere else. You don't find the strategic overview together with the bottomup implementation.
And that is why people look look at the UEE as an example of what you need to be thinking about in order to get AI diffusion right. You've also described the current AI wave as a rational bubble that is boosting the US growth. But as AI adoption actually accelerates around the world unevenly, can you tell us if this is going to widen the global productivity gap around the world leaving emerging markets like the Middle East being behind and what can regional investors and policy makers actually do to ensure that they are ahead of the game and part of this uh change.
So if you look at US economy today and if you look at US financial markets, AI is in the driving seat. AI is driving economic growth through investments in data centers in the enablers of AI. AI is driving part of spending because of its wealth effect. And if you look at the marketplace, it is the technology companies that have led the market increase and have literally pulled the other up with them in the process.
So AI is very important but you are having something that we see typically in general purpose innovations which is overinvestment and you have it for good reason. That's why it's rational. It's a rational process to overinvest in such an promising technology as AI. If you look at the promise the payoff to AI is so large that investors and companies will tend to try and reach for that and what you will have is many bets being placed on the AI ecosystem but there will be only a few winners.
So the notion of it's rational, it is because it's highly competitive. The payoff is enormous and there's many actors in this drama. But the bubble part is not all of them are going to succeed. So there will be tears. This is very different from the model that China has adopted which is top-down guidance.
This is bottom up competition innovation that I think is much is much more dynamic. What about the rest of the world? The rest of the world has to understand that if they don't get on the AI train, they will be left behind because AI has an enormous labor enhancing capability. It allows decision makers, it allows computer programmers, it allows everybody to have with them an intellectual companion that can significantly increase your productivity.
Now, not all of it is good. I call it the 8020. You have to be able to unleash the aid and risk manage the 20. And that is really important. And for those who get left behind, catching up will be harder and harder. And as you know um again that we're speaking about the region, Saudi Arabia and the Gulf overall actually have um sustained their capex push in an unprecedented way.
So um from your point of view, do such mega projects actually risk overheating or overleveraging the system or do they actually represent the kind of investment that the world needs and what indicators would tell you if this spending is sustainable? There's no economic approach that that's risk-free.
Every economic approach has benefits and has challenges. So you're right in identifying both the upside and the risk that have to be mitigated. Um most of the investment right now is what I call enabling investment. It is to allow others to be crowded in to the ecosystem and you see this in terms of the foreign direct investment inflows to this part of the world.
They're very high and the rest of the world has understood that there's something special happening and there's a transformation going on. How do you judge this? You judge it in terms of the trust and the confidence that others have to co-invest with you. That that is the most important thing because at the end of the day prosperity is about partnerships.
It's about public private partnerships. is about domestic global partnerships and you judge success in terms of how well these partnerships are doing and as you work with global investors can you tell us how global investors view the Saudi and the Gulf investment they are interested in what these mega projects enable that that is it they most of them and I say most not all of them but most of them are seen as great enablers for other things if you like it opens the way for lots of other activities.
So the most basic investment is in infrastructure that allows other activities to take place. So as long as they are enablers, yes, they will have quite an important impact. Dr. Muhammad, you have Egyptian roots but at the same time a global career. So you know the point of perspective of both parties.
So, can you tell us what do you find are common misconceptions about the Arab or the Middle East economies in global finance circles? You know, you're right. I've always lived in the in between. Yeah. Um in between cultures. Um the amount of misconception about this part of the world is still very large.
It's coming down, but it's still very large. People are realizing more and more that this is a very dynamic part of the world that has lots of young people. that these young people once they are enabled can do incredible things. Um so there are many misconceptions but they are coming down compared to what they've been for many decades.
And then in this part of the world um is an understanding that we can learn as much from each other as we can learn from the outside world. And there's much better understanding now that it's not just about the latest western um thing that but it's also about what gets created internally and we are seeing internal efforts that are as good as if not better than some of the outside things that in the past we used to admire greatly
and you know a lot of things are happening in the region. So many uh new um updates have happened. So from your point of view, what could be the most promising uh part of the region or specifically a country uh when it comes to you know um uh to dominating the uh region's investment hub? Are we still going to see the Gulf in the lead or are there some promising other countries that are coming up uh that are you know uh more attractive to global investors nowadays?
So if you put the region simply in terms of its economic and commercial attributes, it's hard to beat it. You have natural wealth, you have financial wealth, you have educated populations, you have underexploited trade between them. So if you put simply the region and look at it analytically, the upside is enormous.
And as we've learned from the GCC, what it takes for that upside to be to realize is leadership and the understanding of the obligation to future generations of prosperity. And I think it's that understanding that also is attracting a lot of capital from outside. It's viewed as the hot area. If you look around the world, it's is the part of the world that has the highest growth.
It's a part of the world that has the most foreign direct investment and it's a part of the world that has considerable wealth. So analytically there is so much upside. It just leadership is what's going to continue to unleash that upside. And uh Dr. Muhammad I want to ask you about something. If we hopefully meet in a year from now, what do you think is the one um global or regional shift that investors would wish they have paid more attention to?
Not just the innovation part of AI, but the diffusion side of AI. Who is adopting AI fastest? How are they adopting AI? Who is bringing AI to the average citizen? Um right now too much of the attention on AI is simply on those at the frontier but it is the firms that are at the frontier that also excel in diffusion and that's the thing that that investors in years time will be surprised by how important the diffusion part.
I go back to this notion it's not only about working on AI it's also about working with AI. That's a really nice note to end with. Um, thank you so much for joining us today and for sharing your insights with us. Thank you so much. My great pleasure. Thank you.
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