In the first half of the twentieth century, Arab economies relied heavily on primary sectors, with agriculture and natural resources forming the mainstay of production, with a limited margin for industry and services. With the discovery of oil in the Gulf states, the region entered a new phase characterized by an unprecedented economic boom. However, this boom was accompanied by a state of rentier dependency, which reshaped the structure of the state and the economy in a way that increased its vulnerability to the fluctuations of global markets. Hence, the dilemma of the “single-state economy” emerged, as the massive influx of oil revenues strengthened rentier state institutions, preventing economic diversification and leading to a pattern of unbalanced growth that relied more on government spending than on innovation and productivity.

In recent decades, globalization has imposed a new reality, with Arab markets accelerating their openness to international trade and foreign capital flows, driven by economic reform programs and liberalization policies imposed by international financial institutions such as the International Monetary Fund and the World Bank. However, this openness has not always been in the best interests of Arab economies, as it has led to increased dependence on imports, making many Arab countries more vulnerable to imported inflation and external financial crises. Meanwhile, foreign direct investment has not had the desired impact on sustainable development, often directed toward rentier and consumer sectors rather than investment in infrastructure and productive sectors.

Meanwhile, geopolitical tensions escalated, and internal and regional conflicts erupted, disrupting economic growth and redrawing the map of economic priorities in many Arab countries. Economies that had hoped to achieve sustainable development found themselves facing urgent security and political challenges, depleting resources and crippling their productive capacities. At the same time, youth unemployment rates increased, amid an educational system that failed to keep pace with the demands of the new economy. This led to rising social frustration and created an environment ripe for unrest and instability.

Amid these challenges, serious attempts have emerged to reshape the Arab economic model, based on the concepts of the knowledge economy and the innovation economy. The focus on developing human capital, investing in technology, and promoting entrepreneurship has become part of the development strategies of a number of Arab countries, which have realized that a resource-based economy alone will not guarantee long-term sustainability. Tendencies have also emerged to enhance regional economic integration, through initiatives aimed at unifying Arab markets through free trade zones and long-term economic agreements. These efforts reflect a growing awareness of the need to unify efforts to address common challenges.

However, despite these ambitious trends, the fundamental question remains: Can the Arab economy transform from a resource-dependent, rentier economy to a productive, innovation-driven economy? To answer this question, the role of the state must be reconsidered, not only as an engine of growth through public policies, but also as a guarantor of an economic framework that provides an environment conducive to competition, investment, and technological development. An economic approach must also be adopted that goes beyond traditional economic models, drawing on the experiences of countries that have successfully transitioned from rentier economies to dynamic economies, such as South Korea and Singapore. These transitions were not simply the result of capital accumulation, but rather the result of advanced educational policies, investment in technology, and a comprehensive economic vision spanning decades.

The transformations taking place in the global economy today, with the rise of new economic powers and the reshaping of globalization in light of technological and environmental changes, require Arab countries to rethink their position within this changing system. The world is moving toward a smarter economy that is less dependent on natural resources, a trend that requires a restructuring of priorities, with a focus on innovation, advanced manufacturing, and the digital economy, rather than reliance on traditional economic models that have not proven effective in confronting emerging challenges.

The future of the Arab economy depends not only on its ability to capitalize on available opportunities, but also on its preparedness to confront the structural challenges that hinder its development. Either it can build a new economic model that combines dynamism, productivity, and sustainability, or it will remain stuck in a vicious cycle of recurring crises.