The first article in this series presented the new scope and scale of power the states of the Arabian Peninsula are currently enjoying. The second article focused on their quest for strategic autonomy, arguably the most important and consequential development in their foreign policy. This third article in the series puts forward the vulnerabilities they confront.

The Arabian Peninsula states have for decades pursued economic diversification from oil and gas. They have intensified such efforts over the past decade, partly because the 2008 world financial crisis opened attractive opportunities to all investors holding liquid assets and partly because they have been adopting more innovative and less conservative investment strategies, as discussed in the first article in this series. 

However, the vast majority of these diversification efforts have yielded limited results. The economies of all the Arabian Peninsula states remain highly, and in some cases almost entirely, dependent on hydrocarbon exports. 

The new diversification efforts launched in the past decade are ambitious and for many among the region’s youth also stirring. There are mega-investments designed to create colossal and ultra-modern urban spaces. There are also forays into new industries to which the Arabian Peninsula states are allocating tens of billions of dollars. But most of the investments are experimental, and in almost all cases the states of the Arabian Peninsula are importing the technology and talent needed for these endeavours to function. 

This points to a second vulnerability. Over the past two decades, the peninsula states have achieved impressive breakthroughs in their educational and healthcare systems. Yet, their human capital has remained far below its potential. Their educational systems lack world-class universities. Local businesses in the region do not produce any significant research and development in their industries. And despite at least three decades of major investments in scholarships, technology transfers to the Arabian Peninsula or excellence by its companies or citizens abroad are negligible. 

This is related to a third vulnerability – that of the social contract. Since the discovery of oil on a large scale in the peninsula over 70 years ago, the prevailing social contract in the region has been anchored on the state taking care of its citizens. This has meant not only free education and healthcare, but also shielding large segments of the population from the need to succeed in competitive jobs in a market-based economy. 

The result has been that whereas the states of the Arabian Peninsula now boast a thin cadre of highly competent managers and business leaders, vast swathes of the workforce, across all the generations, do not have any experience in a really competitive job market.

Demographics exacerbate this vulnerability. The populations of the states of the Arabian Peninsula have more than doubled over the past three decades, albeit starting from a small base. As discussed in the first article in this series, population growth rates have been slowing down over the past few years, but the bulk of the region’s population is still under 35 years old, with a major cohort of teenagers. These young people will be entering the workforce at a time when their countries are transforming the social contract that has prevailed in the region over the past half century. 

Expectations add to the pressure. The peninsula’s well-educated young people, with by far the best living standards and highest exposure to the West in the entire Arab world, will increasingly demand more serious representation, the empowerment of the local civil society, and more checks and balances in the political economy than has ever been the case in the region before. 

There are indications that influential centres of power within the ruling structures in the Arabian Peninsula do not adamantly oppose this trend. But as the social contract evolves in the region, the delicate dynamics of having better political representation and a more open civil society could force on the peninsula’s societies and ruling structures questions that most of them – perhaps with the exception of Kuwait – have never confronted before. 

Demographics present another problem. In most of the Arabian Peninsula states, expatriates constitute the majority of residents, in some cases exceeding 80 per cent of the population. Over the past half century, these expatriates have expected and accepted to live in and contribute to their host societies in return for attractive financial remuneration and, for many, very comfortable standards of living. 

However, this deal has been changing slowly but steadily. There are now large groups of expatriates, and their children, who consider the Arabian Peninsula states that they have been living in for decades as their home. Many have invested heavily in building their lives there. The region’s political structures recognise this changing situation and increasingly the Arabian Peninsula states have been introducing schemes to retain and attract highly talented or affluent groups and usher them onto paths towards long term settlement and perhaps even eventually naturalisation.

But these schemes are still very selective and small in scale. As time passes, and as the social contract evolves towards more political openness, the states of the Arabian Peninsula will need to find more sustainable solutions to their remarkable situation of being modern, developed societies in which the vast majority of the population is made up of non-citizens.

Identity is also an increasingly fraught issue. Almost all the societies of the Arabian Peninsula were until a few decades ago highly conservative, inward-looking, and largely homogenous in their values and outlooks. Large-scale Western education, exposure to the world, wealth, and the presence of millions of expatriates from different cultures have opened the societies of the Peninsula to new values, ways of living, and frames of reference. The old identities are no longer dominant and in some Arabian Peninsula states are increasingly marginalised. 

If current demographic trends persist, it is almost certain that some Peninsula societies will become truly multicultural within a generation. This could prove to be a major boon in terms of evolving a local form of social liberalism that the peninsula has never experienced before. However, it could also lead to serious tensions as old cultures – whose adherents see themselves as the owners of the land and of the wealth – face the threat of losing their power and prestige.

History, in other parts of the world, indicates that in such situations cultural conflicts are more likely to come about than harmonious coexistence. 

These are all serious vulnerabilities. Addressing them will require smart and courageous policies, as well as luck. These vulnerabilities and the peninsula states’ quest for strategic autonomy point to different potential scenarios in the foreseeable future, which we will discuss in the next and last article in this series. 

* The writer is the author of Islamism: A History of Political Islam (2017) and Egypt on the Brink (2010).

* A version of this article appears in print in the 15 June, 2023 edition of Al-Ahram Weekly