The strong fall of world market prices for oil and gas since summer 2014 poses an important economic policy challenge for the six member countries of the Gulf Cooperation Council (GCC; Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates). Large decreases of public oil and gas export revenues put considerable strain on government finances in all GCC countries since the year 2014. This, in turn, highlights the long-term need for raising the economic importance of non-oil sectors.

While the fiscal and external accounts of GCC economies continue to be dominated by oil and gas export revenues, the economic policy goal of nonoil economic development is not a new one. A stronger emphasis of GCC governments on non-oil economic development already became observable after the end of the first oil price boom (1974-1985). Not least as a result of substantial budgetary pressures during much of the 1990s, most GCC governments implemented various liberalisation measures which aimed at fostering non-oil economic growth such as the lifting of restrictions to foreign investment and the end of government monopolies in certain non-oil sectors (e.g. real estate, financial sector, telecommunications).

In addition to allowing for a greater role of the private sector, GCC governments sought to advance the development of non-oil economies through large-scale public investments, most notably, during the years of the second oil price boom (2002-2013). This included large public investments in the economic infrastructure which aimed at improving the production conditions for public and private sector companies within non-oil sectors (e.g. build-up economic cities, expansion wholesale ports, increase electricity production capacities). Furthermore, GCC governments invested heavily in the business expansions of (partly) state-owned companies in different non-oil sectors (e.g. petrochemicals, aluminium, air transport, wholesale port operations, real estate).

This more active non-oil economic development stance of GCC governments since the 1990s was accompanied by a shifting perception of GCC economic policies within the academic literature. For a large part of the 1980s and 1990s, the economic policy stance of the GCC countries was largely seen through the lenses of rentier state theory (e.g. Beblawi 1990; Luciani 1990). This line of thought typically emphasised the distributive nature of GCC economic policies as exemplified by the strong expansion of public sector employment and the build-up of extensive welfare systems for local populations since the 1970s.