Introduction

Recently, the United Arab Emirates (UAE) federal government launched its UAE Vision 2021 & UAE Government Strategy 2011-2013, which identifies seven Strategic Priorities including “Competitive Knowledge Economy.”1 This is the most recent example of a formal statement by a Gulf State that it is focusing on the knowledge economy and international competitiveness. The Competitive Knowledge Economy Strategic Priority combines two rather complex and not well-understood concepts: international competitiveness and knowledge economy. This paper considers questions related to the international competitiveness of Gulf economies. In addition, attention is paid to the role that innovation and knowledge economy fundamentals play in impacting the international competitiveness of Gulf States. Indeed it is the premise of this paper that a lack of innovation and entrepreneurship on the one hand, combined with inadequate knowledge economy fundamentals on the other hand, are important constraints retarding the international competitiveness of Gulf States. Therefore, the paper tackles the issue of how to build a stronger more vibrant private sector in the Gulf economies by focusing attention upon key fundamental driving forces behind the international competitiveness of the most innovative countries in the world, namely knowledge economy fundamentals and innovation ecosystem competitiveness enablers.

Part of the interest in international competitiveness emanates from the desire of hydrocarbon-dependent Gulf States, particularly the Kingdom of Saudi Arabia (KSA), UAE, Qatar and Oman to build more diversified economies. A recent example of this desire is the Abu Dhabi Economic Vision 2030 document which identifies 12 sectors that Abu Dhabi wishes to diversify into. Unlike Dubai which is 90 percent diversified away from hydrocarbons, the Abu Dhabi economy is currently 66 percent hydrocarbon-based. Fluctuating oil prices and recognition of the narrowness of its economic base have led Abu Dhabi to develop a coherent strategy which identifies the key sectors that it wishes to move into. Some of these are totally new, such as aerospace and aviation. Mubadala, the sovereign wealth fund that has been given the responsibility to lead Abu Dhabi's diversification strategy, has entered into some major joint ventures with impressive international knowledgebased manufacturing enterprises such as GlobalFoundries Inc., the world's third largest semi-conductor foundry, in a bid to realize its diversification vision. Linked to the diversification strategy is a belief that diversified economies are more internationally competitive because they are more able to ride out commodity price fluctuations. Norway and Australia are used as examples of diversified commoditybased economies to illustrate the point.