Economic Research Forum (ERF)

New horizons for economic transformation in the GCC countries

221
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

Economic roots of early marriage in Iran

Despite the documented harms of being married off before the age of 18, particularly for girls, early marriage remains common in parts of Iran. This column summarises research that sheds light on the economic factors that drive this practice, using unique provincial data to show that poverty, inflation and income inequality are key determinants –while religiosity is not. The findings suggest that economic policies can play a crucial role in reducing the prevalence of child marriage.

Natural disaster literacy in Iran: survey evidence from Tehran

The frequent floods, earthquakes, and heat waves in the Middle East and North Africa underscore the urgent need to assess the region's preparedness for natural disasters. This column summarizes the state of 'natural disaster literacy' in various parts of Tehran, the capital of Iran and one of the most populous metropolitan areas in MENA. Data from a survey conducted in the winter of 2020/21 enabled the development of a disaster literacy index, which helps to identify the city's most vulnerable districts.

Should Arab countries join the WTO’s agreement on government procurement?

Not all members of the World Trade Organization are signatories of the institution’s Agreement on Government Procurement – the GPA. Indeed, although many developing economies are now joining the agreement or at least acquiring observer status, it has long been thought that the costs outweigh the benefits. This column re-evaluates the pros and cons of GPA accession for Arab countries.

Financial development, corruption and informality in MENA

Reducing the extent of informality in the Middle East and North Africa would help to promote economic growth. This column reports evidence on how corruption and financial development influence the size of the informal economy in countries across the region. The efficiency of the financial sector in MENA economies reduces the corruption incentive for firms to seek to join and stay in the formal sector.

EU climate policy: potential effects on the exports of Arab countries

The carbon border adjustment mechanism aims to ensure that Europe’s green objectives are not undermined by the relocation of production to parts of the world with less ambitious climate policies – but it could impose substantial costs on developing countries that export to the European Union. This column examines the potential impact on exporters in the Arab world – and outlines possible policy responses that could mitigate the economic damage.

Climate change threats and how the Arab countries should respond

The Arab region is highly vulnerable to extreme events caused by climate change. This column outlines the threats and explores what can be done to ward off disaster, not least moving away from the extraction of fossil fuels and taking advantage of the opportunities in renewable energy generation. This would both mitigate the potential for further environmental damage and act as a catalyst for more and better jobs, higher incomes and improved social outcomes.

Child stunting in Tunisia: an alarming rise

Child stunting in Tunisia seemed to have fallen significantly over the past two decades. But as this column reports, new analysis indicates that the positive trend has now gone dramatically into reverse. Indeed, the evidence is unequivocal: the nutritional health of the country’s youngest citizens is rapidly deteriorating and requires immediate and decisive action.

Exchange rate undervaluation: the impact on participation in world trade

Can currency undervaluation influence participation in world trade through global value chains (GVC)? This column reports new evidence on the positive impact of an undervalued real exchange rate on the involvement of a country’s firms in GVCs. Undervaluation acts as an economy-wide industrial policy, supporting the competitiveness of national exports in foreign markets vis-à-vis those of other countries.

Green hydrogen production and exports: could MENA countries lead the way?

The Arab region stands at the threshold of a transformative opportunity to become a global leader in green hydrogen production and exports. But as this column explains, achieving this potential will require substantial investments, robust policy frameworks and a commitment to technological innovation.

Freedom: the missing piece in analysis of multidimensional wellbeing

Political philosophy has long emphasised the importance of freedom in shaping a meaningful life, yet it is consistently overlooked in assessments of human wellbeing across multiple dimensions. This column focuses on the freedom to express opinions, noting that it is shaped by both formal laws and informal social dynamics, fluctuating with the changing cultural context, particularly in the age of social media. Data on public opinion in Arab countries over the past decade are revealing about how this key freedom is perceived.




LinkedIn