Dr. Saad Mohsen Naji:*
In the midst of an intense global race toward digitization, AI-driven digital administration has become a defining feature of institutional transformation. While such technologies promise unprecedented levels of efficiency, accuracy, and speed, they also carry inherent risks and challenges. If not managed wisely, these risks can undermine the sustainability of economic organizations, particularly in developing economies such as Iraq and several Arab countries.
A critical review of e-government initiatives across the region reveals that their shortcomings often stem not from financial constraints, but from the failure to establish well-structured teams proficient in the latest technologies and capable of managing them effectively. This underscores the centrality of human capital and the need for continuous education. Technology, no matter how advanced, remains ineffective without qualified human resources to harness its potential.
Digital transformation, when pursued through abrupt leaps rather than gradual integration, tends to disrupt traditional organizational structures. Field studies show that downsizing skilled personnel without offering reskilling opportunities creates dangerous execution gaps. A striking example is the collapse of Borders Books, which failed to adapt to digital publishing and exited the market in 2011. More recently, the streaming platform Quibi invested nearly $1.8 billion into short-form video content without adequately addressing user behavior, leading to its shutdown just six months after launch in December 2020. These cases highlight the non-negotiable need to align digital solutions with market behavior and user expectations.
The integration of artificial intelligence also reveals a significant digital skills gap among public sector employees. The World Bank recommends a phased approach to digital transformation that incorporates sustainable reskilling of staff to ensure long-term success. Moreover, the lack of interoperability between legacy systems and new digital platforms leads to disjointed user experiences and market losses—as seen in the case of Sears, the retail giant whose failure to integrate physical stores with its digital platform led to its closure in 2018. The company’s downfall was rooted in a disconnect between corporate culture and the digital capabilities of its workforce.
Economically, digital platforms exert downward pressure on prices due to their inherent transparency. Without delivering clear added value, institutions risk losing their competitive edge rapidly. Additionally, building secure and highly available digital infrastructure is a costly endeavor—especially in countries lacking robust technological ecosystems.
Cybersecurity threats are becoming more acute in tandem with the expansion of digital operations. Security reports from 2024 highlight a sharp increase in cyberattacks targeting government systems in countries where digitization has outpaced cybersecurity investments. The primary vulnerability, according to these reports, lies in the imbalance between spending on user interfaces or cloud infrastructure and underinvestment in cybersecurity.
Digital inclusion remains a fundamental challenge. Digital services often benefit urban populations and younger generations, while the elderly and rural communities are left behind—widening the digital and social divide. Harvard Business Review stresses that institutional resistance to change—whether from employees fearing job loss or from senior leaders who fail to genuinely embrace transformation—is a key driver behind the failure of digital initiatives.
In conclusion, AI-powered digital administration offers a powerful lever for enhancing performance and transparency in Iraq and across developing economies. However, it is not a silver bullet. Success requires a balanced approach that harmonizes technology with human capability, and ambition with realism. This involves adopting an integrated strategy based on sustained investment in human capital, the endorsement of transformative leadership, the implementation of secure and equitable digital governance, and the pursuit of inclusive digitization that reaches all segments of society.
Through this holistic framework, developing countries can reap the benefits of digital transformation while avoiding its pitfalls.
* Dr. Saad Mohsen Naji, Expert in Digital Economy, Vice President and Secretary General, Iraqi Business Council in Jordan
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