How the Gulf is Racing to Diversify Itself
- Param Vastani
- Nov 30, 2025
- 4 min read
What do the UAE, Qatar and Saudi Arabia have in common? Apart from sitting on massive oil reserves, they all have successful airlines serving hundreds of destinations worldwide. Qatar Airways and Emirates, the biggest players in the region, are considered some of the best airlines in the world in terms of service and quality. They enjoy active support from their respective states and serve all populated continents. They have played a major role in putting cities like Doha and Dubai on the world stage and attracting international traffic to them, and form a puzzle piece in the quest for diversification of the regional middle-eastern powers.
The need to diversify comes from the increasing volatility of the hydrocarbon market in recent years. Though it has been a part of building the Gulf’s economies, the industry is unlikely to be sustainable in a century reserves are increasingly exploited and exhausted. UAE and Saudi Arabia’s GDP Is comprised of around 30% by the oil sector, making them heavily prone to price changes and fall in demand. The reputation for fossil fuels has also been on the decline as the climate crisis worsens. Moreover, there are precedents of how resource-rich nations often fail to expand their economies, such as Venezuela or the mineral-rich countries of Africa. Thus, over the past few decades, and especially in the 2010s, the regional economic powers of the Middle East have accelerated their efforts for economic diversification and changing their global image.
Airlines
One of the most widely visible efforts is tourism. In many middle-eastern nations as mentioned, airlines have been an important focus for countries like UAE, Qatar, Saudi Arabia as well as Oman, Kuwait, Bahrain and Jordan having regionally prominent ones. Qatar and UAE’s airlines have changed the way global air traffic works. With the help of their perfect location between Europe and populated parts of Asia and Oceania, the airlines have rerouted global air traffic through Dubai, Doha, and Abu Dabhi. They have been able to achieve Economies of Scale as they connect all their destinations to the hubs in their countries. For example, they are able to meet demands for people in Sydney, Mumbai, Bangkok, Kuala Lumpur to travel to destinations such as Paris by routing all these people to Dubai or Doha first, and then merging them on a single flight to Paris. Multiply this with hundreds of destinations and average costs drive down. Further, these airlines are heavily backed by their governments, allowing them to offer higher quality services to customers than competitors.
Tourism
The countries have also been developing their tourism and hospitality sectors, as seen in examples such as Dubai with the Burj Khalifa and the rest of its unique projects. Particularly, Dubai has gained a reputation in the recent years from its quick transformation and luxuriousness. Saudi Arabia began ramping up tourism efforts and has made significant strides in this, with several projects in development under the program ‘ Vision 2030’. These ambitious projects have made the news from time to time such as the Line City or the Cube Project, further attracting global attention. All these are currently in development and the actual success and long term sustainability is yet to be seen.
Further attracting attention to their countries, the Gulf states hosted or have committed to host major events such as Qatar with the Football World Cup in 2022, for which it built multiple new stadiums in a short span of time. Dubai has become a venue for sporting events for Cricket, Tennis etc. as well as major events like the World Expo in 2021. F1 events are also conducted in the region. Saudi Arabia will host the 2034 Olympic Games. All this brings worldwide attention to these countries and allows them to show themselves to the world. Another aspect is buying sports teams, such as the football teams Paris Saint Germain FC and Al-Nassr FC, which have some of the biggest footballers of today, being owned by entities in Qatar and Saudi Arabia respectively.
Attracting Investment
Saudi and UAE have introduced Special Economic Zones for attracting production and exports by giving exemptions to foreign producers. Saudi also aims to increasingly localize its defense industry, which is becoming more essential for it as the region grows unstable.
Diversifying into renewable and green energy is also a part of their efforts, with huge projects in the aforementioned Vision 2030, such as the NEOM Green Hydrogen Project.. Dubai, Doha and Riyadh have also become financial hubs. The cities have gained a reputation for lavishness, attracting wealth. The Saudi Tadawul stock exchange has seen increased foreign participation, and Dubai International Financial Centre (DIFC) is home to hundreds of MNCs. Selling stakes of state-owned companies, such as Aramco, or expanding their companies into foreign markets through subsidiaries and buying assets has also been a part of this. Attracting the wealthy from all over the world, by doing things such as exempting taxes, has also brought in money.
Challenges
One of the major parts of this has been changing their global reputation. The countries still face criticism in various aspects, such as not being very democratic or criticisms relating to human rights, with the exploitation of South Asian workers in building stadiums becoming a massive controversy during the FIFA world cup. Moreover, recent events have made the region unstable again, with the resolution of the current conflict and the proxy war with Iran being some of the issues. Many of these plans such as the Line City also seem unrealistic, atleast to the extent at which they were announced. Moreover, there is also a problem of a slow private sector with disproportionate government involvement.
The future outlook for these plans seems bright if they succeed. They could play a role in normalization of relations and the relative stabilization of the region if cooperation is achieved. Successfully transferring away from fossil fuels to greener alternatives will also help avert a future energy crisis. The efforts for diversification are critical for any country for economic stability and help keep a country’s economy stable when a sector collapses. Policy efforts are needed to attract foreign direct investment and augment economic growth through sectoral changes.
Sources
Comments