The creation of the Mohammed ibn Rashid Al-Maktoum Foundation with an endowment of $10 billion is aimed at “contributing to the development of a knowledge-based society, by supporting and empowering young minds and focusing on research, education and investment in the infrastructure of knowledge.”
This is indeed a whiff of fresh air to the Arab world, but it is important to remember the adage that “a few flowers don’t make a garden.”
The acknowledgment by the UAE vice-president, prime minister and ruler of Dubai that “there is a wide knowledge gap between us and the developed world in the West and in Asia,” is a good start. Equally laudable is his assertion that “our only choice is to bridge this gap as quickly as possible, because our age is defined by knowledge.” However, the most difficult part of the process lies in drawing up a strategy and implementing it.
It is hard to challenge the fact that the oil-rich region is also very socially backward. The only other region in the world with an income level lower than the Arab world is Sub-Saharan Africa. Arab countries have the world’s largest proportion of young people — 38 percent under the age of 14. Even more alarming is the fact that more than 25 percent of the world’s unemployed youth between 15 and 24 years are in this region. Between 2002 and 2025, with Saudi Arabia’s population expected to double to 48.5 million, Egypt’s likely to grow from 73 to 103 million, and Iraq’s, from 24 to over 40 million, unemployment and its impact should indeed be a priority concern.
According to the 1999 World Development Report, “For countries in the vanguard of the world economy, the balance between knowledge and resources has shifted so far toward the former that knowledge has become perhaps the most important factor determining the standard of living — more than land, tools, and labor. Today’s technologically advanced economies are truly knowledge based.”
That premise rests on breaking away from the neo-classical economics model, which recognized only two factors of production — labor and capital — for over two centuries. Instead, new growth theorists stress on a third dynamic — technology, where knowledge is seen as increasing the return on investment.
Taking a cue from this and realizing the need to diversify their oil-reliant revenues, some Gulf Cooperation Council (GCC) countries are attempting to tread the “knowledge economy” route — “one in which the generation and exploitation of knowledge play the predominant part in the creation of wealth,” where human capital is the chief source of economic value, and education and training the main tools.
With respect to economic diversification, more than $1 trillion is estimated to be invested in infrastructure and real estate projects in the GCC, with more than half of these projects already under way, translating into one of the largest construction booms in the world. The Saudi government is planning to privatize 20 state-owned corporations and institutions. The new economic cities in Rabigh, Hail, Madinah and Jizan, as well as the new industrial city in Jubail, are expected to attract over $100 billion in investments and create about a million new jobs.
Dubai is a good example of the post-oil age in the Gulf — some statistics suggest that oil contributes to only about four per cent of the emirate’s GDP, down from 50 per cent in 1975. While Plan Abu Dhabi 2030 has just been announced, it is estimated that declared projects and those under development are worth about $400 billion. The emirate is positioning itself as a manufacturing hub with plans under way for aluminum smelters, as well as aerospace components and shipbuilding ventures. And, Qatar has earmarked $130 billion for investments in the next six years, with about 50 percent of it going into the non-oil sectors.
Just as the GCC countries are attracting investments, they are also on a buying spree abroad. Financial institutions and government investment arms are diversifying across asset classes and regions — recent estimates put Saudi Arabia’s foreign assets at $250 billion, Kuwait’s has grown from $60 billion in 1995 to over $200 billion, and the UAE’s is estimated at more than $500 billion.
It is obvious that the GCC countries have learnt a lesson after squandering oil wealth during the 1970s. Thus, for the first time, high oil price is accompanied by economic diversification. Economic reform is also encouraging private sector growth, which in turn is providing competitive and underprivileged nationals with opportunities to take up challenging jobs, rather than rely just on the public sector.
However, while the diversification plan appears to be chugging along smoothly, the road toward creating a knowledge economy is very bumpy. While the GCC countries have the required financial resources and leadership, it is important to ensure continuity in the core management of every enterprise that is put up, which requires a proactive national workforce.
The GCC countries suffer from a deficient educational system, particularly lacking in providing an adequate foundation for human resource development. As a consequence, this strategic and wealthy region has failed to generate a capable indigenous work force that can keep pace with the advanced skills and technological capabilities required. Instead, the region is dependent on foreign technologies and labor.
Since the academic-industry linkage is a major force in the knowledge economy, the newfound understanding in the region is that the learning community will facilitate a rich environment of ideas, creativity and expertise that will stimulate strategic growth for companies.
Though incomparable, the hope is that expanding Western- and Asian-styled universities in the UAE, Qatar and Kuwait might end up doing what Stanford University did for Silicon Valley — provide the right human resources. Perhaps the attempt is also to draw a leaf out of Japan’s modern history, which shows the benefits of investing heavily in people.
However, the GCC countries must hasten the process of exploring the interaction between technological change and human capital if diversification has to sustain. Here, it is worth emulating the Singapore model for a start.
Attributing part of the city-state’s success to education in the English medium, the architect of modern Singapore Lee Kwan Yew recently told a group of young Arab and Asian leaders: “What we did was to switch the education from native languages to English and keep native languages as a second language. It was a very difficult thing to do, emotionally. If it was done by legislation, we would have had riots. Instead we let the market decide who got the better jobs. Parents then began to shift their children into English language schools with the mother tongue as the second language. Forty years later, we are connected with the world because the modern world is in English.”
At the same time, the next phase of development in the region must focus on bridging the gap between research and application. The youth must be empowered with tools required to face the challenges of the new economy. Crucial factors that could help meet these requirements are e-learning and e-education.
The incidence and transfer of knowledge within the Gulf society could benefit from institutional support, such as the just-announced foundation, which will act as an added incentive to public spending on education and training, providing grants for research and development, and enhancing information systems. Research partnerships between higher education and public industries and private businesses could boost the region’s economies and return value to the societies.
In doing all this, it is important to constantly remember that higher education and research in today’s world is not just an academic exercise. It is a source of economic opportunity, industrial innovation and social progress.
(Dr. N. Janardhan is the program manager of Gulf-Asia Relations and the editor of “Gulf in the Media” at the Gulf Research Center in Dubai.)