Podcast Summary: Kuwait Programme Seminar: The Gulf and the Knowledge Economy

Podcast: LSE: Public Lectures and Events
Date: November 11, 2010
Speakers: Will Hutton and Christopher Davidson
Host: LSE Film and Audio Team

Episode Overview

This episode features a seminar examining the challenges and opportunities facing Gulf states as they attempt to transition from oil-driven economies to knowledge-based economies. Renowned commentators Will Hutton and Dr. Christopher Davidson share expert perspectives on the institutional, cultural, and political obstacles facing the Gulf, and consider the effectiveness of current strategies for economic diversification and educational reform.

Key Discussion Points and Insights

1. The Meaning and Importance of the Knowledge Economy

Will Hutton [03:25 – 16:15]

• The "knowledge economy" refers to a sector where value is generated predominantly through knowledge-intensive activities such as ICT, advanced manufacturing, business services, the creative industries, education, and health.
• In the UK, knowledge-based industries now comprise about 45% of GDP and employ nearly two-fifths of the workforce, double the share since 1970.
• There has been a shift in investment from tangible assets (machines/buildings) to intangible ones (brands, R&D, organizational capital), with intangibles now tripling since 1970.
• Successful knowledge economies require sophisticated ecosystems: strong universities, research centres, clear regulation, competitive markets, and innovative, adaptable institutions.
• Example: Companies such as Rolls Royce and Dyson transitioning from manufacturing to "manu-service" firms, highlighting the increasing value of services and intellectual property.
• Will Hutton:

  "Most manufacturing companies are transmuting from being manufacturing companies into what the Americans call Manu service companies... In Britain, one of the most obvious examples is Rolls Royce." [06:30]

The West’s Enduring Advantage

• Knowledge economies are difficult to build due to complex institutional requirements (patent law, competition, finance, education, etc.).
• Hutton challenges the belief that Asian economies (the BRICs) will easily eclipse the West, arguing that institutional barriers will maintain a substantial gap.
• Will Hutton:

  "The knowledge economy is so hard to do and the institutions required to do it... are so difficult to do. You can't do it off the shelf. And Western economies have such a leadership edge here..." [11:35]

2. Challenges for the Gulf States

Institutional and Cultural Obstacles

Will Hutton [12:45 – 16:15]

• While spending oil surpluses allowed Gulf states to rapidly build physical infrastructure, fostering a sustainable knowledge economy is far more demanding.
• Small domestic markets, weak private sectors, the absence of entrepreneurial tradition, and limited investment in creative/intangible industries hamper progress.
• Human capital: Oil wealth has reduced incentives for young people to pursue education or entrepreneurial careers, and education systems remain weak.
• Will Hutton:

  "The educational structures, the standing of teachers, the standing of education attainment is very, very low. And of course you can't do the knowledge economy..." [15:47]

• Institutional “soft infrastructure” such as rule of law, transparency, critical press, and tradition of argument are prerequisites for innovation, but difficult to nurture in the political climate of many Gulf states.
• Despite positive steps (notably in UAE and Bahrain), challenges like religious fundamentalism and resistance to new ideas remain significant.
• Will Hutton:

  "This is a rather precious flower. Incubating it and growing it, I think, is extraordinarily challenging." [15:35]

Firm Strategy Dilemmas

• Gulf economic development ministries face hard choices: Should firms localize, vertically integrate, or build franchises? Building innovative companies from scratch is described as “amazingly challenging.”

3. The Gulf On-the-Ground: Policy, Education, and Reform

Christopher Davidson [16:15 – end (~40:00)]

• The rise of the "knowledge economy" was partly rhetorical, often used as a fashionable slogan in government strategy documents rather than as a real conceptual shift.
• Anecdote: Davidson recounts working to set up Dubai’s Knowledge and Human Development Authority, where the term "knowledge economy" was inserted into documents wherever possible to align with official strategy.

  “I remember one meeting... going through our articles in the document, trying to insert the words knowledge economy wherever we could—sometimes in completely random places." [18:37]

Knowledge Economy as Economic Diversification

• For Dubai and other Gulf states with declining oil reserves, knowledge initiatives were often seen simply as tools for diversifying economies, not as ends in themselves.
• "Knowledge Village" free zone serves more as an educational investment hub—hosting branches of foreign universities—than a true research center or engine for local skills development.
  • Focus is on “educational tourism”—students come from across the region, contributing to the economy, though not necessarily building indigenous knowledge.
• Indigenous universities output little research; there is hardly any technology transfer to the local populace.

The Labour Nationalisation Challenge

• Gulf economies heavily rely on expatriate workers at all levels. Policies have tried (unsuccessfully) to “nationalise” the workforce via quotas and incentives.
• The real answer lies in raising the competitiveness and qualifications of Gulf nationals so they can thrive in emerging knowledge-based sectors.
• New foreign branch universities (esp. in Qatar) now have quotas for nationals, aiming to train a new generation and reduce reliance on expatriates.
• Key example: Qatar’s National Research Foundation introduces rigorous peer review and links research to national needs—a positive, if nascent, trend.

Systemic Barriers: Education, Status Incentives, Culture

• Primary and secondary education remain weak, undercutting higher education and sectoral ambitions for the knowledge economy.
• Language barrier: University students often face abrupt switches from Arabic to English, creating deep inequities in tertiary education.

  "There were students in the class who couldn't understand a word the teachers were saying... enormous disparities in the student body." [31:20]

• Oil “rentier” states guarantee jobs and welfare, reducing citizens’ drive to pursue training or meaningful employment.

  "This has created a system which in my mind has stripped away incentives, firstly for people to actually find meaningful employment and secondly to actually be motivated to complete studies..." [33:11]

• Teaching and academia are low-status careers, making it hard to attract nationals—especially men—to those positions.

  "At one point I had all four of the male Dubai National School teachers in my office... that's how serious the situation was." [34:25]

Social and Political Constraints

• Gender, civil society restrictions, press/media controls, and internet censorship all challenge the possibility of a truly open research and innovation culture.

• Many foreign university branches do not address local realities, sometimes failing to recruit locals or offer regionally relevant curricula.

  "Even New York University and Abu Dhabi will have no minimum requirement for number of national students to enroll and doesn't seem to be teaching anything connected to the reality of the region." [36:50]

• Political complications such as restrictions on students of certain nationalities (e.g., Israeli or Iranian) further complicate the goal of genuine internationalism.

Notable Quotes & Memorable Moments

• Will Hutton: “You can't do the knowledge economy... the soft institutional infrastructure, which I've talked about, relates very strongly to the governance, wider governance issues, a press that holds truth to power, the rule of law, accountability and transparency, a tradition of argumentation...” [15:47]
• Christopher Davidson: “What became quickly apparent to me is that all of the consultancy companies... were all having to sing to the same tune. And that tune was being made up by a document called the Dubai Strategic Plan 2015.” [17:25]
• Christopher Davidson: “Knowledge Village was essentially a free zone park for foreign universities to set up branch campuses... more about bringing foreign direct investment into Dubai by removing red tape for foreign companies, in this case foreign universities...” [20:30]
• Christopher Davidson: “The only real long-term solution is that of increased competitiveness of the local population... to actually allow them to out compete expatriates for jobs in the new sectors of the economy, many of which are oriented towards knowledge.” [24:25]

Important Timestamps

• [03:25] – Will Hutton introduces the knowledge economy, defines it, and discusses Western trends
• [11:45] – Hutton challenges idea of the West being “overtaken” by BRIC economies
• [13:10] – Hutton discusses difficulties for Gulf states: small markets, lack of private sector, weak educational systems
• [16:15] – Christopher Davidson shares his first-hand experience with Dubai’s "knowledge economy" initiatives
• [20:30] – Davidson discusses Knowledge Village and the true drivers behind education reforms
• [22:55] – Labour nationalisation and higher education reforms in Qatar and UAE
• [31:20] – Challenges of language and equity in Gulf higher education
• [33:11] – Impact of oil wealth on incentives for education and employment
• [34:25] – Status crisis of teaching; lack of male role models in UAE schools
• [36:50] – Problems with locally irrelevant "prestige" university projects

Tone and Language

• The speakers maintain a candid, sometimes wry tone, balancing academic rigor with vivid anecdotes and accessible language.
• Both are critical but constructive, frequently highlighting both positive developments and gaps or contradictions in policy.

Final Thoughts

While the Gulf states have taken initial steps—often bold and well-funded—to build knowledge economies, the speakers argue true transformation will require a much deeper restructuring of incentive systems, education, social structures, and governance. The UK and other Western countries have an opportunity to support these efforts, but “off-the-shelf” solutions will not be sufficient.