Originally published on the McKinsey & Company website. Read Part 1 here.

Governments can potentially play an active and critical role in capturing the many benefits of implementing artificial intelligence (AI) technology across their country. They can choose from a variety of approaches, depending on factors such as local political and economic structures. And when these approaches are applied to different sectors, there may be unique challenges to navigate. Based on our benchmark analysis of early adopters of AI technologies, we have identified several initiatives.

GettyImages-1379895972-f79172.jpgPhoto: Getty Images.

Enabling a Vibrant AI Ecosystem

Countries may consider creating an AI sector or ecosystem consisting of skilled practitioners, research institutes, startups, and large enterprises. Five enablers can be helpful in creating a vibrant AI ecosystem that has the potential to unlock benefits for citizens, businesses, and government entities: AI regulations; a highly skilled workforce; globally recognized, cutting-edge research and innovation; a combination of domestic and foreign funding; and world-class data and computer infrastructure. Of course, these enablers require planning and resources to attain and are not guaranteed to have an impact. Globally, governments have spearheaded initiatives across the enablers:

  • Regulations. Given the quickly evolving security, privacy, and ethical risks related to the use of AI, governments may consider establishing a systematic approach to actively watch for and potentially even penalize organizations that do not effectively identify and manage the risks associated with AI. In 2021, the European Union became the first governmental body in the world to issue comprehensive draft regulations aimed specifically at the development and use of AI. These regulations suggest that organizations should have robust processes in place to manage AI risks and comply with existing and future regulations. Rather than scaling back on AI development, organizations may need to create a framework for risk management and compliance that will enable them to continue to innovate and deploy AI at a safe pace. Additionally, governments may want to define regulations on managing citizen data to the highest international data privacy standards, following guidelines from entities such as the United Nations.
  • Workforce. To build talent broadly in the population, Finland launched Elements of AI in 2018—a free online course designed to introduce AI basics to the general public. As the course was published, the Finnish government pledged to educate at least 1 percent of its population—a target that was quickly met and surpassed. The course is now available in more than 20 languages, and 750,000 people around the globe have completed it. Similarly, AI Singapore has launched LearnAI, a program that provides customized training courses targeted at various segments of society, including students, educators, industry professionals, and the larger public.
  • Research and innovation. The National Science Foundation in the United States founded multiple National Artificial Intelligence Research Institutes focusing on a variety of AI themes, and the U.S. government announced $1 billion in grant awards to create 12 new AI and quantum information R&D institutes. Likewise, AI Singapore’s AI research grants provide up to 1 million Singapore dollars (about $718,000) in funding to researchers focused on advanced AI to seed high-quality research efforts aimed at developing fundamental novel AI techniques, algorithms, and adjacent technologies.
  • Funding. U.K. Research and Innovation has committed to providing £530 million of funding for AI research and development, comprising £129 million for novel AI algorithms, tools, and techniques and £401 million for the applications and implications of AI. AI Singapore’s flagship program, 100 Experiments (100E), aims to solve AI problem statements for entities across different sectors by providing about 250,000 Singapore dollars (roughly $180,000) of funding per 100E project and giving access to a team of researchers and technical specialists.
  • Infrastructure. Singapore has set up the Centre of Excellence for Testing & Research of Autonomous Vehicles (CETRAN) in collaboration with Nanyang Technological University. At CETRAN, emerging AI innovations such as autonomous vehicles can be tested in a sandbox environment that aims to replicate the different elements of Singapore’s roads with common traffic schemes, road infrastructure, and traffic rules. Similarly, in Taiwan, the Ministry of Economic Affairs recently launched the Unmanned Vehicles Technology Innovative Experimentation Program, which licensed a company to conduct a one-year experimental sandbox operation for WinuBus, an electric, self-driving minibus.

Launching Transformative, National-level AI Programs

Some countries also launch transformative AI programs where they see the biggest opportunities for disruption based on their natural strengths. For example, Singapore is launching five programs in high-potential areas for the country, including smart cities and smart urban-mobility initiatives, a digital platform for businesses to access government services and resources, and an electronic-payments project. To help identify which programs to launch, countries can consider each program’s potential economic impact, how programs align with strategic priorities and inherent strengths, the readiness of the target sector to adopt AI, and the potential impact of programs on citizens.

Consider Setting Up an AI Authority

Many countries, including Saudi Arabia, Singapore, the United Arab Emirates, and the United Kingdom, have set up centralized AI authorities to realize the value of AI. This body typically is responsible for overseeing the country’s approach to AI adoption and benefits, from a mandate to mobilize the entire ecosystem to initiatives that drive the country’s overall AI agenda. The authority in Singapore, for instance, is part of the National Research Foundation, which reports directly to the prime minister’s office.

Moving Forward

Governments can potentially pave the way for capturing the full value of AI by considering some of the steps above, educating the private sector about the potential of AI, identifying where the biggest opportunities lie, and supporting the adoption of AI technologies in an ethical and secure manner that addresses the risks of these technologies. But governments cannot do this alone. Research institutions and universities, for example, may lead the testing and development of new AI algorithms and make their solutions available for commercialization. They may also collaborate with government entities to support the development of a comprehensive set of policies and guidelines for organizations to ensure secure, responsible, and ethical use of AI in the technologies they develop and deploy. Citizens can be catalysts for change by actively demanding higher-quality, faster, and more personalized services from public- and private-sector entities; they also can be vocal about the privacy, security, and ethical risks associated with AI. And the biggest potential impact could come from private companies, which can adopt and even innovate AI use cases, build employee capabilities, double down on AI investments, and adopt a systematic approach to identifying and managing the risks related to AI.

Indeed, a joint effort across the economy to build innovative new AI solutions and support the widespread adoption of AI through skill building, investments, incentives for adoption, and regulations can potentially help countries capture the economic value of AI. If approached carefully, with consideration given to the unique challenges, AI could have the power to fundamentally transform societies around the world.

Rawan Abukhaled, Jigar Patel, and Nikhil Shah contributed to this article.