This document discusses strategies for GCC countries to transition to knowledge-based economies by leveraging existing strengths. It defines key characteristics of knowledge economies and assesses the performance of the UAE, Qatar, Singapore, Norway, and Switzerland based on World Bank knowledge economy metrics. The UAE and Qatar lag in innovation and economic incentive regimes compared to benchmarks. Priorities include continuing focus on innovation, improving regulatory environments, and attracting/developing human capital through measures like recruiting top academics and implementing entrepreneur visas. Transitioning to knowledge economies will help GCC countries diversify beyond oil dependence and achieve sustainable growth.

1. Transformation to a Knowledge-Based
Economy in the GCC:
Leveraging Existing Strengths
MacroTrends Conference on Business and Social Science:
Nice 2016, 20-21 June, Nice, France
Alexandros Papaspyridis, PhD*
Director, Lumia Commercial Sales, Greater Asia, Middle-East & Africa (GAMEA)
Microsoft Mobile Device Sales Microsoft Gulf LLC | Building 8 |Dubai Internet City
Tel +971 555 926 708
E: alexpa@microsoft.com
*The views expressed are his own and do not necessarily represent the views of
Microsoft Corp.
Tatiana Zalan, PhD
Associate Professor of Management, American University in Dubai, Media City,
UAE
Tel : +971 4 318 3341
E : tzalan@aud.edu

2. Agenda
 Background and motivation for the paper
 Knowledge economy – definitions, characteristics and
measurement
 The UAE and Qatar’s international standing on
knowledge economy metrics
 Key priorities and actions
2

3. 3

4. 4

5. Oil dependence
5

6. The end of oil
 Gulf Economies such as the UAE have prospered not only due to
oil revenues but primarily due to a successful Government-led
developmental model that has driven GDP growth averaging 4.8%
from 2000 to 2014 (www.tradingeconomics.com).
 Oil receipts are now down in excess of 60%, exerting negative
pressures in the GCC
 KSA wants to generate $100 billion per year in non-oil revenue.
 Dubai feels the impact of reduced oil revenues in the GCC.
 Study by Harb (2008) on the long and short-run relationship
between oil exports, non-oil GDP and investment in five major
GCC oil exporting countries suggests that
 an economy’s poor performance is not caused by a fall in oil
revenues;
 other factors – particularly the quality of education and
institutions – may affect economic growth.
6

7. Innovation is key to sustainable growth
 World Bank Report (2013) shows that the relationship between
competitiveness (GCI) and KEI is weaker in the GCC than the rest
of the world
 Knowledge economy factors play a smaller role in those countries,
given their level of competitiveness.
 This is problematic in the light of the current pressures to create
rewarding employment opportunities for GCC nationals outside the
public sector.
 GCC countries have identified innovation and transitioning to a
knowledge-based economy as critical components of
sustainable growth (Ibrahim, 2010; Tadros, 2014; Hvidt, 2015).
 The UAE has set as part of its Vision 2021 to become the
economic, tourist and commercial capital for more than two
billion people.
 Qatar – Vision 2030, the CEO of Qatar Foundation has recently
called for a significant research investment boost.
7

8. What is a knowledge economy?
8
Economic success is increasingly based on the effective utilisation of
intangible assets such as knowledge, skills, and innovative potential as the
key resource for competitive advantage. The term ‘Knowledge Economy’ is
used to describe this emerging economic structure (Work Foundation, UK).
Key characteristics of knowledge and knowledge-based economy:
 Knowledge has positive externalities (spillovers, increasing returns,
network externalities);
 Knowledge has low excludability and rivalry – public good;
 The primary basis for competition for rims is innovation (vs price);
 Consumers must be unhindered by distortions (trade barriers,
discriminatory taxes);
 Entrepreneurs capture a large proportion of the profits they produce,
profits are a reward for risk;
 A successful knowledge based economy has a high bankruptcy rate and an
active M&A market;
 The social consequences of a knowledge economy is an uneven income
distribution.

9. Assessing performance as a knowledge
economy
If you cannot measure it, you cannot improve it (Lord Kelvin)
1. Set internationally measured key performance indicators (KPIs)
2. Define a roadmap of how these KPIs should evolve;
3. Assess progress against these international rankings on a regular
basis in order to define corrective actions.
We look at data for five economies for which we can draw meaningful
comparisons:
 the UAE and Qatar from the GCC; and a benchmark group comprising
three countries:
Singapore, an economy often quoted as a role model for the GCC;
Norway, a country with significant wealth from oil; Switzerland, a
small, wealthy, globally competitive economy with few natural
resources that has built its success on innovation.
Qatar had the highest GDP growth p.a. over the 10-year period from 2004 to
2014.
9

10. Singapore is a relevant benchmark
 Singapore ranks No 4 by the World Competitiveness Report
(IMD, 2016)
 A relevant model of government-led, innovation-driven
development.
 Singapore has enjoyed an average 5.3 % annual GDP growth in
the last 10 years.
 Singapore is investing heavily in selected high technology
areas (e.g., biotechnology, aerospace)
 Attracting star academics from abroad, encouraging private
investments by MNCs;
 Ensuring knowledge spillovers through commercialisation
agencies while maintaining its high commitment to indigenous
innovation and R&D through substantial public investments.
10

11. Knowledge economy metrics – World Bank
11

12. International Standing
absolute values and rank – 2008
12

13. International Standing
absolute values and rank – 2012
13

14. KEI ranking chart 2012
14

15. Findings and key priorities
 The GCC group lags on economic incentive regime, innovation (the biggest
gap) and education, while the smallest gap is on ICT.
 The UAE is almost unchanged in rankings (42nd but improved in absolute
values), Qatar slipped 24 positions (54th and slipped in absolute terms),
Singapore is unchanged (23rd), Norway slipped 5 positions (5th) and
Switzerland slipped 7 positions (10th).
 Sub-indices:
 the UAE improved in education and ICT, slipping on EIR and innovation.
Qatar improved on EIR and slipped on education, innovation and ICT.
 Key priorities:
 Innovation
 Economic incentive regime
 Human capital
As the example of Singapore shows, progress along multiple paths
simultaneously is needed.
15

16. Priority 1. Innovation must continue to
be a priority on the national agendas
 The UAE and Qatar’s innovation priorities have not been
benchmarked internationally.
Set milestones against international benchmarks and track
progress regularly.
 Entrepreneurs are missing as a key component of the
national innovation system in the UAE National
Innovation Strategy.
 Support high-impact entrepreneurship through, for example,
government-created venture capital funds (e.g., Singapore’s
multi-billion Technopreneurship Investment Fund).
 High-impact entrepreneurship (in high-tech sectors in knowledge-
intensive industries) has the highest multiplier effects (Powell &
Snellman, 2004; Moretti, 2012).
16

17. Priority 2. The regulatory regime must
be improved
 A knowledge economy can only exist under genuine market
conditions allowing for success and failure.
 Institute bankruptcy laws within dedicated innovation free trade zones to
encourage entrepreneurs and innovators to take risks and fail, if necessary.
 The cost of setting up a business in the UAE (the best ranking MENA
country on the ease of doing business) can be substantial.
 Simplify the procedures, and reduce costs and time required to start a
business in the GCC in these free trade zones.
 IP protection is crucial for inventors as a reward for risk, and yet
inventions are often left unprotected because of cumbersome
procedures.
 Improve the IP regime across the GCC: while the UAE and Qatar are members of
WIPO’s TRIPS, there are no specialist IP courts and a lack of specialist local
advocates.
17

18. GCC countries spend little on R&D
18

19. Priority 3. Human capital must be
attracted, developed and retained
 Recruit star academics from abroad who in turn will bring over their
teams to establish world-class science parks and universities which are
currently missing in the GCC (the exception is KAUST).
 Move beyond the ‘teaching-only’ university model to a ‘research and
teaching’ university model.
 Institute smart immigration policies – for example, entrepreneur visas
ensuring a temporary or permanent residency status for qualifying
entrepreneurs and scientists (such as in Singapore, the UK and
Canada).
 Provide favourable conditions to attract entrepreneurs and
encourage gestation with indigenous innovators.
 Encourage a favourable attitude towards innovation starting from
primary school by organizing awards, contests and boot camps.
19

20. Thank you!
Questions?
20