The Opportunities and Risks of Industrial Policy in the Gulf

Industrial policy, where the state supports companies through various forms of assistance, including favorable tax treatment, subsidies, cheap credit, and direct investments, is back in vogue. The days of “leave it to the market” are gone even in the bastion of free-market capitalism, the United States. The Gulf countries have never been shy about using the public sector to drive growth and development. Now they are even more actively pursuing industrial policies to try and diversify their economies away from oil. Diversification has been elusive in the Gulf, however, and there are questions about whether the current set of industrial policies will bring about the development of the new sectors and industries that are sought by regional policymakers. 

This event will delve into the issues of using industrial policy to drive growth and diversification in the Gulf. It will look at the lessons the Gulf countries should learn from their own experiences with these policies as well as from the successes and failures of policy implementation in other countries, drawing on recently published research papers: “Potential and Pitfalls in Industrial Policy” by Steffen Hertog and “Call of Duty: Industrial Policy for the Post-Oil Era” by Fuad Hasanov, et al. Done right, industrial policies can help with economic diversification, but there are risks that excessive state intervention could breed inefficiencies, waste state financial resources, and ultimately leave the economies of the region vulnerable to the looming global energy transition. 

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