While some in the US are looking to more oil as the solution to the energy problem (see yesterday's posting), the oil-rich nations of the Middle East are looking to build a knowledge economy. Over the past year or so, more attention is being paid by the media on the transformation of some of the Gulf States. For example, this morning's Wall Street Journal is running a page one story on Oil States Sprout Financial Hubs.
The transformation has been going on for some time. As Joe Saddi, Karim Sabbagh, and Richard Shediac note in their report, Oasis Economies:
Research and development in high technology is booming; enterprise zones have attracted the likes of Hewlett-Packard, Cisco Systems, and Microsoft. Local companies are investing in streaming video and other technological applications. Manufacturing, too, is on the rise. Driven in part by growing demand from China, the region’s petrochemical sector is exploding, with more than 190 projects currently operating across the Gulf; its $28 billion biotechnology and pharmaceutical manufacturing industry has enjoyed double-digit growth each year. Many consumer packaged goods companies are opening factories in the region, in part to serve its growing middle class and in part to export goods to Europe and the rest of Asia. In short, the region — once an end consumer in the world market — has begun to transform itself into a supplier.
Earlier this week, the Brookings Institution held an event on Building a Knowledge Society in the Arab World. That meeting highlighted a recent Brookings report on the subject. The report was an assessment of where things stand five years after the United Nations Development Programme's study, Arab Human Development Report 2003: Building a Knowledge Society. The assessment is best characterized as guardedly optimistic:
Our conclusion is that Arab countries, as a group, have made significant progress in most of these areas, especially compared with their own history. Yet, other regions have advanced even faster and tremendous challenges—such as creating 100 million new jobs for the region’s mushrooming youth population—loom ahead. The Arab world must reinvigorate its efforts or be left behind. Many new initiatives are underway, but it is too soon to assess their impact. Success, ultimately, will be judged by what is achieved, not by what is invested.
Last January, the Arabian Knowledge Economy Association held its first annual conference on the Arabian Knowledge Economy.
The Gulf states figured out a long time ago that they can not sustain their economies simply on oil. In the past, they have tried diversifying in a number of ways. Primarily has been to move down stream in the energy production process with more refining capacity, other petrochemical facilities and even ownership of gasoline retail establishments. Now they are clearly moving toward the I-Cubed Economy with huge investments in education and in research.
There is no guarantee that they will be able to make this transformation. However, they are clearly moving in the right direction.
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