Economic Research Forum (ERF)

New horizons for economic transformation in the GCC countries

1562
The countries of the Gulf Cooperation Council (GCC) have historically relied on hydrocarbons for economic growth. As this column explains ahead of a high-level ERF policy seminar in Dubai, emerging technologies like artificial intelligence, blockchain and robotics – what some call the fourth industrial revolution – present a unique opportunity for the region to reduce its dependence on oil and make the transition to a knowledge-based economy.

In a nutshell

To move from oil reliance to a technology-driven economy, the GCC must overcome structural hurdles, including the need for a highly skilled workforce and a culture of entrepreneurship and innovation; ensuring that technological progress benefits all parts of society is crucial for sustainable growth.

Smart manufacturing is advancing with initiatives like Saudi Arabia’s plan to automate 4,000 factories, boosting efficiency and job creation; sustainability is prioritised through initiatives in renewable energy; smart cities are leveraging the new technologies to enhance urban infrastructure and sustainability.

The establishment of GCC-wide innovation hubs, shared digital platforms and cross-border regulatory frameworks will foster greater cooperation between nations, enabling the region to attract global investment, create high-value jobs and enhance its geopolitical influence.

The countries of the Gulf Cooperation Council (GCC) – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE) – have historically relied on hydrocarbons for economic growth. While oil and gas revenues have fuelled modernisation and development, this reliance has made the region vulnerable to oil price fluctuations and global shifts towards renewable energy.

What some call the fourth industrial revolution – which is characterised by emerging technologies such as artificial intelligence (AI), the internet of things (IoT), robotics and blockchain – presents a unique opportunity for the GCC to reduce its dependence on hydrocarbons and make the transition to a knowledge-based economy.

Challenges and opportunities for the technology-driven diversification of the economy

The transition from oil reliance to a technology-driven economy is not without its challenges. The GCC must overcome structural hurdles, including the need for a highly skilled workforce and a culture of entrepreneurship and innovation. Moreover, regulatory frameworks need to evolve rapidly to address the legal, ethical and social implications of emerging technologies. Ensuring that technological progress benefits all segments of society is crucial for sustainable growth.

Despite these challenges, the fourth industrial revolution offers unprecedented opportunities. AI, the IoT and other technologies are transforming sectors like manufacturing, energy and healthcare. For example, Saudi Arabia plans to automate 4,000 factories as part of its Vision 2030, increasing efficiency and creating high-quality jobs. Similarly, Dubai’s 3D Printing Strategy aims to make the UAE a global leader in advanced manufacturing, while reducing dependence on imports.

In the energy sector, AI and blockchain are optimising energy management and supporting the transition to renewables. Saudi Arabia’s National Renewable Energy Program plans to generate 50% of its electricity from renewable sources by 2030, positioning the country as a leader in solar and hydrogen technologies. These innovations contribute not only to economic diversification but also to global sustainability efforts.

Other sectors, such as tourism and finance, are also benefiting from the technologies of the fourth industrial revolution. In tourism, AI and smart city initiatives are enhancing visitor experiences and promoting sustainable practices, making the GCC an attractive destination for global travellers. Fintech innovations, including blockchain and AI, are transforming the financial sector, making banking and payments more efficient. Bahrain and the UAE have emerged as fintech hubs, fostering innovation in financial services and contributing to long-term economic resilience.

Workforce development for a digital economy

The success of the fourth industrial revolution in the GCC hinges on developing a highly skilled workforce capable of thriving in the digital economy. As automation and AI replace low-skill jobs in sectors like construction and oil extraction, reskilling and upskilling the workforce is essential. The GCC nations are investing in lifelong learning programmes and vocational training to prepare citizens for emerging fields such as AI development, data science and cybersecurity.

Saudi Arabia’s Digital Skills Initiative and the UAE’s Artificial Intelligence Academy are prime examples of efforts to provide advanced digital skills training to the population. These initiatives are supported by partnerships with global technology companies like Microsoft, IBM and Google, which are helping to foster knowledge transfer and workforce development. By building a resilient workforce, the GCC can ensure that its citizens are equipped to compete in the global digital economy.

Regulatory challenges in the era of the fourth industrial revolution

As the GCC embraces digital transformation, regulatory frameworks must evolve to address the legal, ethical and social implications of new technologies. Cybersecurity, data privacy and the ethical use of AI are key areas where updated regulations are needed. Saudi Arabia’s National Cybersecurity Authority and the UAE’s National Cybersecurity Strategy are examples of efforts to protect critical infrastructure and safeguard sensitive data.

In addition, the regulatory landscape for blockchain and fintech technologies requires careful development. Blockchain offers opportunities for enhancing transparency and efficiency in sectors like finance and logistics – but without comprehensive regulatory frameworks, it also poses potential risks. Bahrain’s Regulatory Sandbox provides a controlled environment for fintech start-ups to innovate while ensuring compliance with financial regulations. Clear governance structures are crucial to ensure that technological advancements are both secure and ethical.

Sustainability and green technologies

The fourth industrial revolution presents a unique opportunity for the GCC to align its economic growth with global sustainability efforts. Saudi Arabia’s Vision 2030 and the UAE’s Clean Energy Strategy emphasise the importance of renewable energy and sustainable development. Neom, a futuristic city under development in Saudi Arabia, is also designed with a strong focus on sustainability, aiming to be powered entirely by renewable energy.

The UAE’s Masdar City is another example of the region’s commitment to sustainability. The project integrates renewable energy, smart grids and sustainable construction practices, making it a model for sustainable urban development. Lusail integrates automated waste management and sustainable water use, aligning with Qatar’s National Vision 2030. Similarly, Kuwait’s Silk City aims to transform the nation’s economy through smart infrastructure and transport, while Oman’s Duqm Smart City focuses on logistics and trade, using AI and the IoT for urban management and resource efficiency.

Opportunities for regional and global leadership

The fourth industrial revolution offers the GCC not only an opportunity to transform its own economies but also to take on a leadership role in the global digital economy. By investing in digital infrastructure, AI-driven industries and renewable energy, the region can become a hub for innovation and technology development. The GCC’s strategic location between Asia, Europe and Africa positions it as a key player in global trade and technology markets.

Regional collaboration will be essential to realise fully the benefits of the fourth industrial revolution. Joint initiatives in research and development, education and technology transfer can accelerate the pace of innovation across the GCC. The establishment of GCC-wide innovation hubs, shared digital platforms and cross-border regulatory frameworks will foster greater cooperation between nations, enabling the region to attract global investment, create high-value jobs and enhance its geopolitical influence.

Conclusion

The fourth industrial revolution presents a transformative opportunity for the GCC nations to achieve economic diversification and global leadership. By embracing advanced technologies such as AI, the IoT and blockchain, the region can reduce its dependence on hydrocarbons and build knowledge-based industries that drive long-term growth. But this transition will require significant investments in human capital, infrastructure and regulatory frameworks. To capitalise fully on the fourth industrial revolution, the GCC must prioritise workforce development, foster innovation ecosystems and ensure that regulatory frameworks keep pace with technological change. By aligning national strategies with the opportunities presented by the fourth industrial revolution, the GCC can become a global leader in both the digital economy and sustainability efforts, contributing to global climate goals while ensuring long-term economic resilience.

Tags: , , , ,

Most read

Trust in Lebanon’s public institutions: a challenge for the new leadership

Lebanon’s new leadership confronts daunting economic challenges amid geopolitical tensions across the wider region. As this column explains, understanding what has happened over the past decade to citizens’ trust in key public institutions – parliament, the government and the armed forces – will be a crucial part of the policy response.

Climate change: a growing threat to sustainable development in Tunisia

Tunisia’s vulnerability to extreme weather events is intensifying, placing immense pressure on vital sectors such as agriculture, energy and water resources, exacerbating inequalities and hindering social progress. This column explores the economic impacts of climate change on the country, its implications for achieving the sustainable development goals, and the urgent need for adaptive strategies and policy interventions.

Small businesses in the Great Lockdown: lessons for crisis management

Understanding big economic shocks like Covid-19 and how firms respond to them is crucial for mitigating their negative effects and accelerating the post-crisis recovery. This column reports evidence on how small and medium-sized enterprises in Tunisia’s formal business sector adapted to the pandemic and the lockdown – and draws policy lessons for when the next crisis hits.

Assessing Jordan’s progress on the sustainable development goals

Global, regional and national assessments of countries’ progress towards reaching the sustainable development goals do not always tell the same story. This column examines the case of Jordan, which is among the world’s leaders in statistical performance on the SDGs.

Qatarisation: playing the long game on workforce nationalisation

As national populations across the Gulf have grown and hydrocarbon reserves declined, most Gulf countries have sought to move to a more sustainable economic model underpinned by raising the share of citizens in the productive private sector. But, as this column explains, Qatar differs from its neighbours in several important ways that could render aggressive workforce nationalization policies counterproductive. In terms of such policies, the country should chart its own path.

The threat of cybercrime in MENA economies

The MENA region’s increasing access to digital information and internet usage has led to an explosion in e-commerce and widespread interest in cryptocurrencies. At the same time, cybercrime, which includes hacking, malware, online fraud and harassment, has spread across digital networks. This column outlines the challenges.

Economic consequences of the 2003 Bam earthquake in Iran

Over the decades, Iran has faced numerous devastating natural disasters, including the deadly 2003 Bam earthquake. This column reports evidence on the unexpected economic boost in Bam County and its neighbours after the disaster – the result of a variety of factors, including national and international aid, political mobilisation and the region’s cultural significance. Using data on the intensity of night-time lights in a geographical area, the research reveals how disaster recovery may lead to a surprising economic rebound.

Qatar’s pursuit of government excellence: promises and pitfalls

As Qatar seeks to make the transition from a hydrocarbon-based economy to a diversified, knowledge-based economy, ‘government excellence’ has been identified as a key strategic objective. This column reports what government effectiveness means in terms of delivery of public services, digitalisation of services, and control of corruption – and outlines the progress made to date on these development priorities and what the country needs to do to meet its targets.

The impact of climate change and resource scarcity on conflict in MENA

The interrelationships between climate change, food production, economic instability and violent conflict have become increasingly relevant in recent decades, with climate-induced economic shocks intensifying social and political tensions, particularly in resource-constrained regions like MENA. This column reports new evidence on the impact of climate change on economic and food production outcomes – and how economic stability, agricultural productivity and shared water resources affect conflict. While international aid, economic growth and food security reduce the likelihood of conflict, resource scarcity and shared water basins contribute to high risks of conflict.

Education and health in Tunisia: is human capital at risk?

Tunisia has made significant strides in enhancing the skills, knowledge and health of its population, all cornerstones of economic growth and social progress. This column examines the state of the country’s education and healthcare systems, identifying structural weaknesses that could jeopardise human capital and, by extension, progress towards achieving the sustainable development goals.