In 2025, the Middle East is undergoing a profound and complex economic restructuring. The once-dominant logic of “oil equals destiny” is being dismantled, from Saudi Arabia’s “Vision 2030” to the UAE’s “post-carbon economy” strategy, from Qatar’s diversified investments to Oman’s industrial revitalization plan. The entire region is witnessing a wave of economic transformation centered on “de-oiling” and characterized by state-led initiatives. This is not merely a passive response by resource-dependent economies to global energy shifts, but an active breakthrough that impacts national destiny, geopolitical competitiveness, and future discourse. Yet, behind the grand vision and impressive infrastructure, how far has this transformation truly progressed? And does it genuinely address deep-seated structural issues? We must maintain a sharp perspective, pierce through the propaganda bubble, and confront the harsh realities head-on.
I. Motivations for Transformation: Coexistence of Survival Anxiety and Strategic Vision
The economic transformation of Middle Eastern countries is by no means a fleeting trend. It stems from the convergence of three pressures: first, the accelerated global energy transition and carbon neutrality goals are compressing oil and gas revenue, with the International Energy Agency projecting that global net-zero emissions could reduce oil demand by over 75% by 2050 compared to 2020; second, a youthful demographic structure creates immense employment pressure, as youth unemployment in Gulf countries has long hovered above 15%, and a single-resource economy cannot provide sufficient high-quality jobs; third, heightened geopolitical uncertainty exacerbates risks, with overreliance on energy exports making national economies vulnerable to price fluctuations and international sanctions.
Against this backdrop, transformation is driven both by survival imperatives and strategic foresight. The “Vision 2030” initiative spearheaded by Saudi Crown Prince Mohammed bin Salman has entered a critical phase, with “giga-projects” such as the NEOM新城 (NEOM新城), the Red Sea tourism project, and the Qiddiya entertainment complex serving as symbols of this transformation. Meanwhile, the UAE has deployed its sovereign wealth funds (e.g., Mubadala and ADIA) globally to invest in technology, healthcare, and new energy industries. Recently, Abu Dhabi announced the establishment of the “AI and Advanced Technology Committee,” aiming to secure a leading position in future industries.
II. Progress and Highlights: The Initial Emergence of Capital-Driven “Hard Transformation”
A notable feature of the economic transformation in the Middle East is its “capital-intensive drive.” Leveraging decades of accumulated oil wealth, Gulf countries are investing heavily in non-energy sectors under the model of “state capitalism.”
The Rise of Tourism: Saudi Arabia welcomed over 100 million international tourists in 2024, with tourism revenue accounting for more than 10% of GDP for the first time; Dubai continues to solidify its position as a global tourism hub, with preparations for the 2025 World Expo progressing smoothly.
The Globalization of Sovereign Funds: Saudi Arabia’s Public Investment Fund (PIF) has invested in companies such as Uber, Nintendo, and Lucid Motors, emerging as a formidable force in the global capital markets.
New Energy Development: The UAE has completed the “Al Dhafra” solar power plant, the largest in the Middle East, while Saudi Arabia plans to invest $500 billion in the “NEOM Oxagon” project, the world’s largest green hydrogen initiative.
Competition among Financial Hubs: Riyadh, Dubai, and Doha have introduced financial liberalization policies to attract international financial institutions to establish regional headquarters, challenging the dominance of traditional financial centers.
These achievements cannot be overlooked, demonstrating the powerful resource mobilization capabilities and strategic execution of Middle Eastern countries.
3、 Structural dilemma: the “three illusions” behind the transformation
However, beneath the halo, the transformation still faces deep challenges and may even fall into a ‘phantom prosperity’:
Phantom One: Project driven ≠ Institutional change
The current transformation heavily relies on “mega projects”, but these projects are mostly led by the government and executed by state-owned enterprises, lacking market mechanisms and deep participation from the private sector. Frequent issues such as slow project implementation, cost overruns, and lack of transparency. The NEOM New City was originally scheduled to be partially opened in 2025, but its progress is currently only 30%, which has been questioned by the outside world as a “paper city”. If effective property rights protection, business environment, and legal system cannot be established, it will be difficult for capital to continue flowing in.
Phantom 2: Economic Diversification ≠ Social Diversification
Despite the government’s strong promotion of women’s employment and youth entrepreneurship, problems such as rigid social structure, disconnect between education system and industrial demand, and high proportion of foreign labor (over 80% in some countries) have not been fundamentally resolved. Local people still prefer public sector employment, with low participation from the private sector, obstacles in implementing “Saudization” policies, and weak social foundations for transformation.
Phantom Three: Capital Output ≠ Technology Endogenous
Although Middle Eastern sovereign funds invest globally, their core technology and management experience still rely on external sources. The local research and development capabilities are weak, and the number of patents and density of high-tech enterprises are far below the global average. If technology absorption and independent innovation cannot be achieved, one will become a “capital mover” and it will be difficult to build truly sustainable competitiveness.
4、 Geopolitical Game: Transformation is also a redistribution of power
Economic transformation is not only a domestic agenda, but also a geopolitical tool. Saudi Arabia and the United Arab Emirates are increasingly competing in investment direction and regional influence; Qatar accelerates its layout in the European energy market with natural gas revenue; Iran explores a path of transition to a ‘resistance economy’ under sanctions. The Middle East is shifting from “energy competition” to “competition for industrial and technological discourse power”. Whoever can make breakthroughs in fields such as new energy, artificial intelligence, and biotechnology will dominate the future Middle East order.
5、 Conclusion of Sharp Review: The transformation is not yet complete, and the road is long and obstructed
The transformation of the Middle East economy is a magnificent national experiment that demonstrates the survival desire and ambition of resource-based economies in the changing times. However, the real transformation lies not in skyscrapers and mega projects, but in breaking the “resource curse” and building an open, inclusive, innovative, and sustainable economic ecosystem.
At present, Middle Eastern countries have taken the first step towards “capital transformation”, but “institutional transformation” and “social transformation” still have a long way to go. If only oil wealth is used to build the future, and governance reform, educational reform, and social empowerment are ignored, even the grandest vision may become a mirage in the desert.
The world should pay attention to the transformation of the Middle East, neither underestimating its potential nor overestimating its progress. This transformation may reshape the global economic geography of the 21st century, but its success or failure ultimately depends on whether it can truly transform from an “oil country” to an “innovation country”.
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