The Future Trajectory of Artificial Intelligence Capabilities in Small Nations

I. Introduction: The Rise of AI and the Unique Context of Small Nations

The advent of artificial intelligence (AI) marks a significant turning point in global technological evolution, promising to reshape economies and societies worldwide. While the transformative potential of AI is universally acknowledged, its implications and adoption pathways vary considerably across nations, particularly when considering the unique circumstances of small states. Defining “small nations” is not a straightforward task, as scholarly and institutional perspectives differ on the most salient criteria. Population size is a frequently cited metric, with thresholds ranging from under 1 million ¹ to 1.5 million ² according to the World Bank and IMF, or even up to 5 million as per the UN Forum on Small States.² Economic size, often measured by GDP or GNI, also plays a crucial role in classification ⁹, and the World Bank provides income-based classifications that can intersect with the concept of smallness.¹⁰ Furthermore, the level of technological infrastructure, encompassing digital connectivity and ICT deployment ¹⁵, is increasingly recognized as a vital dimension in assessing a nation’s capabilities and potential in the digital age. The absence of a universally accepted definition necessitates a comprehensive understanding that considers a combination of these factors to appreciate the diverse group of nations under discussion.

Many small nations, particularly those classified as developing economies, often exhibit significant economic vulnerability due to their reliance on a limited range of exports or susceptibility to external shocks.³ This inherent vulnerability underscores the critical importance of exploring how AI can serve as a catalyst for economic diversification, resilience, and sustainable development within these states. By strategically adopting and leveraging AI technologies, small nations can potentially overcome some of their traditional limitations and forge new paths towards prosperity and global competitiveness. This report aims to explore the current landscape of AI initiatives in a diverse set of small nations, analyze the potential future applications of AI that hold particular relevance for them, examine the unique challenges and opportunities they face in this technological transition, investigate potential strategies and policies for fostering AI innovation, and consider the broader geopolitical implications of AI advancements for these states.

Table 1: Definitions of “Small Nations” Across Different Sources

Source	Key Criteria	Thresholds/Description
World Bank	Population	Under 1.5 million
UN Forum on Small States	Population	Under 5 million
IMF (Small Developing States)	Population	Under 1.5 million (excluding advanced economies and high-income fuel exporters)
ResearchGate Publication 21	Population, Land Area, Total Income	Lower 50% of distribution (population < 5.3 million in this study)
Encyclopedia.com 22	Population (primary), Area, Size of Economy	Common cutoff: 1.5 million (arbitrary, continuum of size more appropriate)
World Bank Income Groups 10	GNI per capita	Low, Lower-Middle, Upper-Middle, High income classifications

II. The Current Landscape of AI in Small Nations: Early Adoption and Strategic Initiatives

Several small nations are already demonstrating remarkable progress in embracing AI, showcasing diverse strategies and priorities. Estonia, a recognized digital leader, has implemented a comprehensive national AI strategy known as the “Kratt Strategy”.²³ This initiative aims to integrate AI across public services, private enterprises, research, and legal frameworks, building upon its earlier successes in digitalization. Key objectives include increasing AI adoption in public institutions through projects like the Bürokratt virtual assistant, enhancing the efficiency of widely used digital services with AI components, and promoting human-centered and trustworthy AI.²³ To support private sector adoption, the AIRE Centre for AI and Robotics provides assistance to businesses, while financial support and incubation programs further encourage AI implementation.²³ Estonia is also actively advancing AI research and education through initiatives like the IT Academy Research Program and ensuring high-quality data availability via an open data strategy.²³ A significant development is the “AI Leap” initiative, a nationwide program designed to integrate AI tools into all schools, providing students and teachers with free access to leading AI applications like ChatGPT Edu through a partnership with OpenAI.²⁴ This ambitious program, inspired by Estonia’s earlier “Tiger Leap” digitalization effort, aims to equip the next generation with essential AI skills and maintain the nation’s educational excellence.²⁵ Estonia’s proactive and nationally coordinated approach, coupled with strong public-private partnerships, serves as a compelling model for other small nations seeking to strategically embed AI into their governance and society, with a clear emphasis on long-term capacity building through education.

Iceland has also adopted a forward-looking approach to AI, publishing its national AI policy in 2021 with a strong emphasis on ethical development and utilization.²⁹ The policy prioritizes ensuring that AI benefits all members of society, supporting the digitization and competitiveness of the private sector, investing in AI education and local expertise, and actively participating in international discussions on AI regulation and standards.³⁰ Building upon this foundation, Iceland unveiled a draft Artificial Intelligence Action Plan for 2024-2026, outlining 25 targeted actions across five key sectors: ensuring equitable access to AI, empowering businesses, modernizing education, streamlining public services, and enhancing healthcare.³³ This plan leverages Iceland’s small population as an advantage, aiming to position the country as a model for responsible and inclusive AI integration.³³ The strategy also acknowledges the potential impact of AI on the workforce and emphasizes the need to address challenges related to education, ethics, data security, and infrastructure development.³³ Iceland’s approach demonstrates the importance of aligning AI development with core national values, such as inclusivity and sustainability, while capitalizing on existing strengths like a well-educated populace and robust technical infrastructure powered by green energy.³²

Singapore, with its strong focus on economic advancement, has set its sights on becoming a world-leading AI-powered economy through its National AI Strategy 2.0 (NAIS 2.0).³⁴ This strategy aims for excellence in AI to advance the field and maximize value creation, while simultaneously empowering individuals, businesses, and communities to use AI with confidence and trust.³⁶ The government has committed significant resources, with plans to invest S$1 billion over the next five years in computing infrastructure, talent development, and industry support.³⁵ This investment is intended to secure advanced AI chips, support leading companies in establishing AI centers of excellence, and fund training programs to significantly increase the number of AI experts in Singapore.³⁷ Singapore is adopting a sectoral approach to AI regulation, with specific guidelines and initiatives for finance, healthcare, and other key industries.³⁵ The city-state is also actively fostering international partnerships and participating in global AI and tech events to enhance its position as a global hub for AI innovation and implementation.³⁷ Singapore’s ambitious strategy, driven by substantial financial backing and a clear vision for economic transformation, illustrates the potential for even small, geographically constrained nations to emerge as significant players in the AI landscape through strategic investment and a global outlook.

Mauritius, recognizing the transformative potential of AI for socio-economic development, published its national Artificial Intelligence Strategy in 2018.³⁸ This strategy aims to position Mauritius as a regional leader in AI innovation and application, addressing national challenges such as declining productivity and an aging population across sectors like manufacturing, healthcare, fintech, agriculture, and tourism.³⁹ To coordinate efforts and oversee project implementation, the government plans to establish the Mauritius Artificial Intelligence Council (MAIC).³⁹ Incentives, including funding and tax credits, are being considered to support AI startups and adoption.⁴⁰ A notable example of AI application in Mauritius is the “DodoBot AI,” an AI-powered travel assistant designed to enhance the tourism experience by providing personalized recommendations and insider tips to visitors.⁴³ Furthermore, the government is exploring the integration of Large Language Models (LLMs) into the educational system to improve learning outcomes and bridge digital divides.³⁸ Mauritius’ approach highlights the strategic use of AI to address specific developmental needs and leverage key economic sectors, demonstrating a commitment to fostering an inclusive, knowledge-driven society.

Bhutan, while still in the early stages of AI adoption, has undertaken a comprehensive Artificial Intelligence Readiness Assessment (AIRA) in 2024 to evaluate its preparedness for integrating AI technologies across governance and public services.⁴⁶ The report identifies several challenges, including a shortage of skilled AI professionals, limited funding for research and innovation, and the absence of comprehensive ethical AI frameworks.⁴⁷ Despite these challenges, Bhutan has made strides in digital governance, including the establishment of secure digital platforms and the National Digital Identity (NDI) initiative.⁴⁷ The government is also exploring the potential of AI in key sectors like agriculture to improve crop yields and ensure food security.⁵⁰ Recommendations from the AIRA report emphasize the urgent need for a clear national AI strategy, the development of robust ethical frameworks, the strengthening of data governance, and investments in AI education to build a skilled workforce.⁴⁷ Bhutan’s approach underscores the importance of a thorough readiness assessment for small nations embarking on their AI journey, with a strong emphasis on ethical considerations and leveraging existing national strengths.

Malta has positioned itself as a potential “AI Launchpad” through its “Strategy and Vision for Artificial Intelligence in Malta 2030”.⁵⁵ The strategy aims to gain a strategic competitive advantage in the global economy as a leader in the AI field.⁵⁹ In 2019, Malta established an AI taskforce to identify growth opportunities and mitigate risks associated with AI development.⁵⁹ The Malta Digital Innovation Authority (MDIA) plays a key role in driving this strategy, launching initiatives like the “Technology Assurance Sandbox v2.0” to allow startups and small companies to test their AI innovations in a controlled environment.⁵⁹ The MDIA also launched the AI Applied Research Grant to fund AI research projects across various sectors, including sustainable tourism and healthcare.⁵⁹ Malta is also exploring the implementation of AI systems in specific sectors, such as transportation with the “Introduction of Shared Autonomous Mobility” (MISAM) project and research into autonomous buses.⁵⁹ Furthermore, the country recognizes the potential of AI in its maritime sector, exploring data and AI solutions for optimizing vessel operations, improving safety, and enhancing efficiency.⁶⁰ Malta’s strategy emphasizes creating a supportive ecosystem for AI innovation, particularly for startups and SMEs, and leveraging its potential in specialized economic domains.

Barbados is actively exploring the potential of AI, particularly in the healthcare sector, through a significant partnership between the BioMed X Institute, the Government of Barbados, and the European Commission.⁶⁵ This initiative, known as BioMed X Barbados, focuses on advancing the treatment of cardiometabolic diseases in individuals of African descent by employing artificial intelligence and deep molecular characterization techniques.⁶⁵ The project involves conducting an epidemiological study in Barbados, collecting data and samples to develop AI models that can optimize treatment regimens for this underrepresented population.⁶⁵ Barbados is also collaborating with Zindi, a global AI community platform, to establish and grow a vibrant AI ecosystem in the country, focusing on nurturing talent, fostering innovation, and creating new job opportunities in the AI sector through AI challenges and educational events.⁶⁹ Additionally, the island nation is exploring the potential applications of AI in its tourism sector, recognizing the technology’s capacity to transform various aspects of this vital industry.⁷⁰ Barbados’ initiatives demonstrate a targeted approach to AI adoption, focusing on addressing specific national health priorities and building local AI capacity through strategic partnerships.

Fiji has made Artificial Intelligence a cornerstone of its new National Development Plan (NDP), aiming to enhance research, development, and innovation (RDI) across both public and private sectors to drive economic growth and productivity.⁷¹ The plan focuses on incorporating AI and other Fourth Industrial Revolution technologies across sectors like agriculture, manufacturing, and environmental management.⁷² Recognizing its vulnerability to natural disasters, Fiji has partnered with the UN Capital Development Fund (UNCDF) and the InsurTech company Tractable to bring the speed and accuracy of AI to disaster recovery, using smartphone applications and AI-powered image assessment to verify insurance claims quickly after cyclones or floods.⁷¹ Furthermore, Fiji’s Deputy Prime Minister announced plans to establish a framework to safeguard internet users against AI threats, aligning with a broader cybersecurity strategy.⁷⁶ The government acknowledges the sensitivity of AI technology and is working to release this governance framework soon.⁷⁷ Fiji’s approach highlights the critical role of AI in building resilience against external shocks, particularly climate-related disasters, while also aiming to leverage the technology for broader economic advancement.

Table 2: Overview of Current AI Initiatives in Selected Small Nations

Country	Key Strategic Document/Initiative	Main Focus Areas	Notable Projects
Estonia	Kratt Strategy (2022-2023)	Public services, private business, R&D, education, legal frameworks	Bürokratt virtual assistant, AIRE Centre, AI Leap program (with OpenAI)
Iceland	AI Policy (2021), AI Action Plan (2024-2026)	Ethical AI, digitization, competitiveness, education, public services, healthcare	Public consultation on AI, focus on green energy applications
Singapore	National AI Strategy 2.0 (NAIS 2.0)	Excellence in AI, empowerment of individuals and businesses	Sector-specific AI adoption in finance, healthcare, manufacturing; AI Verify framework
Mauritius	AI Strategy (2018)	Manufacturing, healthcare, fintech, agriculture, tourism, public services	Mauritius AI Council, DodoBot AI travel assistant, exploration of LLMs in education
Bhutan	AI Readiness Assessment (2024), National AI Strategy (in development)	Governance, ethical AI adoption, agriculture, public service delivery	National Digital Identity, centralized data sharing platform
Malta	Strategy and Vision for AI in Malta 2030	AI innovation, economic growth, attracting investment	MDIA AI Applied Research Grant, Technology Assurance Sandbox, exploration of AI in transport and maritime
Barbados	Partnership with BioMed X, AI Ecosystem Partnership with Zindi	Healthcare, ecosystem development, tourism	BioMed X Barbados for cardiometabolic disease research, AI hackathons and community building
Fiji	Integration into National Development Plan (NDP)	Research, development, innovation across sectors, disaster management	Partnership with UNCDF and Tractable for AI-powered disaster recovery, development of AI governance framework

III. Unlocking Potential: Future Applications of AI for Small Nations

The future holds immense potential for small nations to leverage AI across various sectors, addressing their unique needs and limitations. In the realm of governance and public services, AI can significantly enhance efficiency and accessibility. Estonia’s Bürokratt serves as a pioneering example, demonstrating how AI-powered virtual assistants can streamline citizen interactions and improve the delivery of public services.²³ Similarly, Bhutan’s development of a National Digital Identity, potentially enhanced with AI, could lead to more secure and efficient provision of government services.⁴⁹ For small nations often constrained by administrative capacity, AI offers a pathway to automate routine tasks, optimize processes, and extend the reach of essential services to a wider population.

Optimizing resource management is another critical area where AI can provide substantial benefits, particularly for small nations heavily reliant on natural resources and vulnerable to environmental changes. Iceland’s focus on AI for renewable energy management ⁷⁹ and Bhutan’s exploration of AI applications in agriculture ⁵⁰ illustrate the potential for AI to enhance efficiency, predict optimal utilization, and promote sustainable practices. Furthermore, for small island developing states like Fiji, which are particularly susceptible to the impacts of climate change, AI-powered tools for flood mapping and disaster prediction are invaluable for building resilience and ensuring long-term environmental sustainability.⁸⁰

AI also presents significant opportunities for bolstering specialized economic sectors that are often central to the economies of small nations. Mauritius’ development of the DodoBot AI travel assistant showcases how AI can personalize the tourism experience, a vital industry for many small island states.⁴³ Malta’s exploration of AI in the maritime sector holds the promise of increasing efficiency, optimizing routes, and enhancing safety in shipping and port operations, key components of its economy.⁶⁰ Singapore’s advancements in fintech demonstrate how AI can drive innovation and create new opportunities in financial services, a sector where even small nations can establish a global presence.

In healthcare, AI can play a crucial role in improving delivery and outcomes, especially for small nations that may face limitations in the number of medical professionals or have remote populations. Barbados’ partnership with BioMed X exemplifies the application of AI in medical research and the development of personalized treatment regimens.⁶⁵ AI-powered tools can also assist in diagnostics, facilitate telemedicine services, and optimize the management of healthcare facilities, thereby enhancing access and quality of care for citizens across the nation.¹⁶

Finally, for small nations that are particularly vulnerable to natural disasters, AI offers powerful tools for enhancing preparedness and response capabilities. Fiji’s collaboration with Tractable and its use of AI for flood mapping demonstrate the technology’s potential in assessing damage rapidly and facilitating quicker recovery efforts.⁷⁴ AI can also improve the accuracy and timeliness of early warning systems, optimize the allocation of resources during crises, and support more effective disaster risk reduction strategies, ultimately saving lives and minimizing the impact of natural hazards.⁸⁴

IV. Navigating the AI Frontier: Challenges and Opportunities for Small Nations

Developing and implementing advanced AI capabilities presents a unique set of challenges for small nations. A significant hurdle is the limited talent pool in AI-related fields.⁴⁷ With smaller populations, the number of individuals with the specialized skills in machine learning, data science, and AI engineering is inherently limited, and the potential for brain drain to larger economies further compounds this issue.⁸⁶ Funding constraints also pose a substantial challenge.²³ The significant financial investments required for AI research, the establishment of necessary infrastructure like high-performance computing and data storage, and the recruitment of top talent can be difficult for nations with smaller national budgets to sustain, especially when competing with larger, wealthier countries.

Another critical challenge is data availability and access.²³ Training effective AI models necessitates large volumes of high-quality data, and small nations may lack sufficient domestically generated data to develop tailored solutions. Accessing and utilizing international datasets can also be complex due to data privacy regulations and geopolitical considerations. Furthermore, gaps in technological infrastructure can impede AI development and deployment.¹⁶ Reliable high-speed internet connectivity, adequate computing power, and a robust digital ecosystem are essential foundations for AI, and many small, particularly developing, nations still face limitations in these areas. Finally, the increasing reliance on AI and digital systems brings heightened cybersecurity risks.²⁹ Small nations may lack the specialized expertise and financial resources to effectively address the evolving and sophisticated cyber threats in the AI era.

Despite these challenges, small nations also possess unique opportunities in the AI landscape. Their smaller size can translate into greater agility and adaptability in adopting and implementing new technologies compared to larger, more bureaucratic states.⁹ This nimbleness can allow them to quickly capitalize on emerging AI trends and tailor solutions to their specific needs. A significant advantage lies in the potential for niche specialization.⁸⁹ By focusing their limited resources on developing expertise and AI applications in specific sectors where they have existing strengths or unique challenges, such as tourism, maritime affairs, sustainable resource management, or disaster resilience, small nations can become global leaders in these targeted domains without needing to compete across the entire AI spectrum. International collaboration presents another crucial opportunity.²³ Forming strategic partnerships with larger nations, international organizations, and even other small states can provide access to essential funding, technical expertise, and infrastructure that might otherwise be unattainable. Furthermore, small nations can differentiate themselves by prioritizing the development and deployment of ethical and human-centered AI solutions that directly benefit their citizens and align with their national values.²³ This focus on responsible AI can build trust and position them as thoughtful actors in the global AI discourse. Finally, leveraging open-source AI models and tools can significantly lower the barrier to entry, providing a cost-effective pathway for small nations to experiment with, adopt, and adapt AI technologies without the need for extensive proprietary investments.²³

Table 3: Challenges and Opportunities for AI Development in Small Nations

Category	Challenges	Opportunities
Resources	Limited Talent Pool, Funding Constraints, Data Availability and Access	Agility and Adaptability, Leveraging Open-Source AI
Focus	Technological Infrastructure Gaps, Cybersecurity Risks	Niche Specialization, Focus on Ethical and Human-Centered AI
Collaboration		International Collaboration and Partnerships

V. Charting the Course: Strategies and Policies for Fostering AI Innovation

To effectively foster AI innovation and growth, small nations can adopt several strategic policies. Developing comprehensive national AI strategies, as exemplified by Estonia, Iceland, Singapore, Mauritius, and Malta ²³, is a crucial first step. These strategies should clearly outline national priorities, set measurable goals, and define actionable plans across various sectors, ensuring a coordinated and focused approach to AI development and adoption. Investing in talent development is equally vital.²³ This includes implementing targeted education and training programs in AI-related fields at all levels, from primary and secondary education to vocational training and university programs, as well as supporting continuous professional development to ensure a future-ready workforce. Actively seeking and nurturing international collaborations and partnerships with other nations, international organizations, and research institutions is another key strategy.²³ These collaborations can provide access to knowledge, resources, and funding that may be otherwise limited.

Promoting niche specialization and innovation is a particularly effective strategy for small nations.⁸⁹ By identifying and supporting specific areas where they possess a competitive advantage or have unique national needs, small nations can focus their resources and develop world-class AI solutions in those domains. Establishing supportive regulatory environments is also critical.²³ These frameworks should encourage innovation while addressing ethical considerations, data privacy, security, and potential biases in AI systems. Regulatory sandboxes can be valuable tools for testing AI applications in a controlled setting before wider deployment. Finally, prioritizing investments in robust and accessible digital infrastructure is fundamental.²³ This includes ensuring widespread high-speed internet access, developing cloud computing capabilities, and establishing secure data centers to support the data-intensive nature of AI development and deployment. Exploring cloud-first policies can be a particularly cost-effective approach for nations with limited capital.

VI. The Geopolitical Dimension: AI and the Global Standing of Small Nations

In an increasingly digital world, the development of AI capabilities has significant geopolitical implications for small nations. Their ability to control their digital destiny and maintain sovereignty in the face of powerful global technological forces is closely tied to their capacity to develop indigenous AI solutions and infrastructure.¹⁵ Over-reliance on foreign AI technologies can create dependencies that potentially compromise national autonomy. Furthermore, in an era where national security is increasingly intertwined with cybersecurity, the development of AI-powered tools for both offense and defense is crucial for small nations to protect their critical infrastructure and national interests in the cyber domain.³²

While small nations may not possess the resources to compete with major global powers across the entire spectrum of AI development, they can enhance their international influence and geopolitical standing by strategically focusing on niche areas where they can develop unique expertise.²² By becoming leaders in specific AI applications or by championing ethical AI development, they can exert influence beyond their size in global discussions and collaborations. Forming alliances with other small and like-minded nations can further amplify their collective voice in shaping international AI governance frameworks. Moreover, small nations must navigate the complex geopolitical landscape of the global AI race, particularly the competition between major powers and the imposition of export controls on advanced AI technologies.¹¹⁵ Understanding these dynamics and forging strategic international partnerships will be essential for ensuring access to the critical resources and technologies needed to advance their AI capabilities.

VII. Conclusion: Envisioning the Future of AI Capabilities in Small Nations

The future of AI capabilities in small nations presents a landscape ripe with potential and nuanced challenges. Key trends indicate a growing recognition among these nations of AI’s transformative power, leading to the development and implementation of national strategies tailored to their specific contexts and priorities. Emerging opportunities lie in leveraging their inherent agility, focusing on niche specializations that align with their existing strengths, and actively engaging in international collaborations to overcome resource limitations. Prioritizing ethical and human-centered AI development can also serve as a distinguishing factor, enhancing their global standing.

Despite these promising avenues, small nations must also confront persistent challenges, including limitations in talent pools, funding constraints, and access to large datasets. Addressing these challenges will require strategic imperatives such as investing in comprehensive talent development programs, fostering robust international partnerships, and establishing supportive regulatory environments that encourage innovation while mitigating risks. Ultimately, the future trajectory of AI capabilities in small nations points towards a differentiated landscape. By strategically embracing AI, focusing on their unique strengths and values, and effectively navigating the geopolitical dynamics of the global AI race, these nations can carve out distinct and influential roles, contributing meaningfully to the advancement of AI and harnessing its power to drive sustainable economic growth, enhance societal well-being, and improve the quality of life for their citizens.

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