UNIDO data available indicates a share of medium and high technology manufacturing of 38.3% in 2023. Manufacturing value added per capita reaches $2,845 in 2024. A 2015-2024 comparison is possible for this latter metric; for the MHT share, the last published point from the verified source is 2023. The importation of value chains produces little endogenous spillover when local linkages, skills, and technology transfer are weak.
The Essentials
- Massive investment in manufacturing does not produce diversification if design, intellectual property, and value chains remain under foreign control.
- In Saudi Arabia, the share of services in GDP fell from 50.3% to 46.5% between 2015 and 2024, and manufacturing value added per capita declined from $3,000 to $2,700 despite Vision 2030 investments (Global Economic Diversification Index 2026, PwC Middle East Economy Watch).
- Oman offers a partial counterpoint: its free zones have maintained a share of local design, which has supported measurable progress in the diversification index over the same period.
- Economist Dani Rodrik identifies this mechanism as a structural trap: without industrial policy that anchors local skill upgrading, foreign investment produces assembly jobs without autonomy.
- The bifurcation lies ahead: Gulf economies have until 2030-2035 to decide whether they will govern their value chains or simply host them.
Manufacturing Without Roots: A Well-Documented Mechanism
When a factory sets up in a country, it brings jobs. But assembly jobs and design jobs are two radically different economic objects. The first executes a process defined elsewhere. The second creates it, improves it, patents it. The value added by an operator assembling imported components is a fraction of that produced by the engineer who designs those components, even if both work in the same factory.
Dani Rodrik emphasizes the importance of skills, suppliers, and technological capacities in development strategies. Bangladesh, which sews t-shirts for H&M, and Taiwan, which designs the chips the world uses, both participate in global value chains. Their development trajectories have nothing in common.
What Rodrik calls “good jobs”—jobs that transmit skills, raise productivity, and anchor value locally—require industrial policy that does not merely attract investors but conditions their presence: technology transfers, partnerships with local suppliers, local R&D obligations. Without mechanisms favoring skills and local linkages, foreign investment risks producing fewer technological and productive spillovers; it does not necessarily reduce to precarious employment.
Saudi Figures Below the Surface
Saudi data for the 2015-2024 decade illustrates this mechanism with unusual clarity. The state invested massively; Vision 2030, launched in 2016, mobilized tens of billions in industrial zones, NEOM projects, joint ventures with foreign groups. The stated logic: escape dependence on oil by building a manufacturing base.
According to the World Bank, the share of services in Saudi GDP is 47.1% in 2024; a comparison with 2015 requires citing a precise statistical series. The share of medium and high technology manufacturing evolved over the period. No absolute decline between 2015 and 2024 can be asserted without a homogeneous series explicitly cited and recalculated using the same price base and population.
Available data show strong fluctuation in the share of medium and high technology manufacturing output, at 38.3% in 2023; they do not justify concluding there has been a general decline. Some new Saudi factories assemble imported components according to processes designed abroad and employ expatriate engineers in high value-added positions. High foreign ownership of patents and design can limit the share of value captured locally, without meaning the country receives only land tax and customs duties. This structure can be interpreted as characteristic of economies whose levers for upgrading remain limited.
A limitation of available data must be noted here: the diversification index aggregates heterogeneous dimensions and Saudi decline may partly reflect composition effects linked to volatility in oil revenues rather than a net retreat of the productive base.
Oman, a Counterpoint That Nuances Without Invalidating
The Omani case usefully complicates the picture. Oman has far more limited oil resources than Saudi Arabia, which has forced a kind of discipline in its industrial choices. Its free zones, notably the Salalah zone and Sultan Qaboos port, have been structured with explicit attention to integrating local suppliers and building technical skills in the country.
Oman is not a complete model; oil revenues remain dominant and its structural fragilities are real, but it demonstrates that a free zone policy can produce more endogenous value when designed to retain local design rather than import ready-made value chains.
The difference cannot be attributed solely to the degree of investment. It may also stem from investment governance. Oman imposed conditions; Saudi Arabia seeks to attract investment, but its official strategy combines this objective with local content, technology localization, R&D, and skill upgrading. This distinction aligns with an argument developed by Philippe Aghion in his work on Schumpeterian growth: what distinguishes countries that innovate sustainably from those who imitate without ever catching up is the capacity to generate endogenous creative destruction, local firms capable of challenging the existing order, not merely assembling it.
The Liberal Counter-Argument Deserves to Be Taken Seriously
A competing reading exists, and it is defensible. Economists close to the liberal market corpus, Tyler Cowen foremost, would argue that specialization in low-cost assembly is a normal and provisional development stage, not a permanent trap. South Korea began manufacturing wigs and shoes under Japanese license in the 1960s before building Samsung and Hyundai. Taiwan assembled transistors before designing chips. The passage from assembly logic to design logic takes time and requires investments in education, R&D, and institutions that do not immediately show up in diversification indices.
This argument is sound in principle. It is less so when applied to the Gulf case for two concrete reasons. First reason: the historical window. Korea and Taiwan operated their upgrading when global value chains were less fragmented and less locked in by intellectual property. Today, emerging economies face standards, software, and intangible assets often more complex and more extensive; the emerging economies of the 1970s already encountered analogous technological barriers.
Second reason: rent. Saudi Arabia benefits from oil rent that provides it significant external financing and import capacity, without eliminating balance-of-payments or budgetary constraints. This abundance can reduce the pressure that drives economic actors to upgrade. Korean firms had to become competitive to survive; Saudi firms benefiting from state contracts do not face the same constraint.
R&D, Training, and Anchoring as Conditions for Diversification
Escaping the assembly-without-design trap requires, for Saudi Arabia as for any Gulf economy, developing local research, training, and industrial integration capacities.
Three levers emerge from the literature and comparable cases. The first is locally anchored R&D. Countries that upgrade often rely on skills, innovation, and technology transfer, though this does not constitute a condition uniformly observed across all cases. The problem of research infrastructure investments without dissemination policy is a well-known pitfall, even in Europe, and applies all the more in economies starting from further behind.
The second lever is conditionality of foreign investment. Requiring genuine joint ventures with capable local partners, imposing thresholds for local suppliers, requiring partial localization of R&D teams: these mechanisms have proven effective in Southeast Asia, even if they slow attraction in the short term. The political economy of this conditionality is difficult in countries where decision-makers are sometimes also shareholders in joint ventures, but it is practicable.
The third lever is human capital formation for high-value occupations, not merely execution roles. Saudi Arabia has invested heavily in its education system for two decades. The distribution of graduates between public sector and private engineering may limit development of local industrial skills.
The 2030-2035 Window and What Is at Stake Now
Oil retains value over the next decade, but downward pressure on fossil fuel revenues is real beyond 2035, the ongoing substitution dynamic makes it legible. The window for building an autonomous productive base closes as rent diminishes, yet it is precisely rent that finances today’s investments. This circle can become virtuous if current investments produce endogenous complexity before rent disappears. Available data do not allow robust conclusion on this trajectory; its assessment would require defined indicators of local intellectual property, local suppliers, productivity, export sophistication, and skilled jobs.
Oman, with fewer resources, has set more favorable markers. Other regional economies—Qatar in finance and education, the Emirates in logistics and financial services—have chosen specializations where design remains easier to anchor locally than in heavy manufacturing. These choices are not definitive, but they show that alternatives to rootless assembly exist in the region itself.
Assessment of Vision 2030 can rely on indicators of local intellectual property ownership, integration of local suppliers into value chains, and contribution of technical universities to industrial activity. Indicators, reference years, regional comparators, and success thresholds must be defined before qualifying their evolution as favorable or not. They remain modifiable.
Sources
- Global Economic Diversification Index 2026, PwC Middle East Economy Watch (Nasser Saidi & Associates, February 2026)
- Dani Rodrik, The Globalization Paradox, W.W. Norton, 2011, and his work on industrial policy and “good jobs” (Harvard Kennedy School)
- Philippe Aghion, Céline Antonin, Simon Bunel, The Power of Creative Destruction, Oxford University Press, 2020
- UNCTAD, World Investment Report 2024, data on global value chains and developing economies
- McKinsey Global Institute, analyses on economic diversification in the Middle East (URL not guaranteed)