The most important source of sustainable economic growth in advanced economies is homegrown innovation, underlain by high allocations of resources to research and development. The Gulf economies realize this and have set out economic visions that target improving homegrown innovation as part of a transition to a knowledge economy.
However at present, the Gulf economies realize low levels of homegrown innovation and technological advancement, indicating the need for further reforms. Among the many factors that contribute to the weakness of homegrown innovation is the guest-worker system used to manage migrant workers, as it creates perverse incentives for knowledge transfer, and discourages investment in long-term knowledge production infrastructure. This paper argues that the Gulf countries should consider introducing a structured path to naturalized citizenship for highly-skilled migrant workers, as this will improve homegrown levels of innovation.
