How Governments Build Startup Ecosystems and AI Economies

Talk to policymakers in Brunei, the Gulf or Malaysia and you hear the same ambition in different words: an economy that depends less on one resource and more on people, technology and new companies.

The intent is clear. The hard part is turning it into companies that actually grow. Look at the programs that worked and the ones that stalled, and a handful of tools keep coming up.

1. National funds and funds of funds

Governments invest directly in startups or, more often, in venture funds that then invest in local companies. Sovereign wealth funds in the Gulf have become some of the largest technology investors in the world.

2. Public accelerators and incubators

State-backed programs help founders build their first company, often with grants instead of equity. The strongest ones partner with private investors and international programs rather than working alone.

3. Regulatory sandboxes

A sandbox lets companies test new products under the supervision of a regulator, with temporary flexibility. They are common in fintech and now in AI. In Europe, member states are required to set up AI regulatory sandboxes by August 2027.

4. Talent and visas

Startup visas and tech residence programs attract founders and engineers from abroad. Malaysia, the UAE and others now compete openly for technology talent.

5. Government as a first customer

Public services are one of the largest markets in any country. Governments that buy from local startups, through pilots and simple contracts, give them their first real customer and a reference.

6. AI-ready public services

Citizens now expect to ask questions and get clear answers. AI assistants on government portals, in local languages and with links to official sources, are one of the fastest, most visible ways to show progress.

What separates success from activity

Many programs produce events and reports but few companies. The ones that work measure outcomes: companies founded, capital raised, jobs created and products exported. They also connect local founders to international investors early.

Economies moving beyond oil and gas

Countries such as Brunei, with plans like Wawasan 2035, and the Gulf states with their national visions, are using these tools to diversify. The common thread is the same: invest in people, help companies reach real customers, and make the state an early adopter of the technology it wants to grow.