Proceedings of API Conference 2025: Empowering the future: Energy Transition and Economic Diversification in Arab Countries
API Conference 2025: Empowering the future: Energy Transition and Economic Diversification in Arab Countries
📍City of Kuwait – State of Kuwait, Kuwait🗓️ 15-16 September 2025
Foreword
Conference: API Conference 2025: Empowering the future: Energy Transition and Economic Diversification in Arab Countries
Date: 15-16 September 2025
Location: City of Kuwait – State of Kuwait, Kuwait (Offline)
Website: https://apiconf.arab-api.org/ The Arab world stands on the threshold of a transformative era, where three converging forces, namely the escalating impacts of climate change, the accelerating global shift away from fossil fuels, and the sweeping disruptions of the Fourth Industrial Revolution, are fundamentally redrawing the contours of the region's development path and long-term sustainability. Inaction in the face of these compounding challenges carries grave consequences for Arab economies of all types. For oil-exporting Arab countries, oil price volatility, the global shift toward renewable energy, and intensifying pressure to curb carbon emissions are steadily undermining the long-term viability of fossil fuel revenues as a reliable source of national income. Oil-importing Arab countries navigate a different yet no less demanding landscape, one shaped by rising energy import costs, unsustainable subsidy burdens, and the consequent weakening of fiscal positions, heightened debt vulnerabilities, and constrained capacity to invest in productive economic ventures. Consequently, Arab planners are coming to terms with an uncomfortable truth: climate change is actively deepening the pressures the region already faces, undermining critical infrastructure, disrupting core economic activities, and shrinking employment opportunities, most severely in climate-sensitive sectors such as agriculture, fisheries, and tourism. In recognizing these challenges, the “Arab Planning Institute at Kuwait” organized an international conference in collaboration with the “Mohamed Bin Rashid School of Government” and the Arab Energy Organization (formerly OAPEC) in September 2025, reaffirming its leading role in shaping the planning discourse on the challenges and issues facing economic diversification and energy transition in Arab countries. Central to this discourse are the interconnected dimensions of industrial policy, financing, technology, and human capital, which remain the primary forces shaping Arab development and the risks it carries. The conference sought to explore visions and policies for a new framework for a more promising development horizon, grounded in a realistic approach that addresses the structural shortcomings of Arab economies, accounts for growing climate risks, and aims to accelerate the energy transition and enhance economic diversification and competitiveness. The conference drew an exceptional level of scholarly engagement, with 19 papers carefully chosen from over 200 submitted proposals, reflecting both the growing significance of the topic and the competitiveness of the selection process. The research compiled in these proceedings represents a carefully curated cross-section of the work presented, spanning the critical dimensions of economic diversification, energy transition, industrial policy, financing, technology, and human capital. Taken together, these papers offer a substantive and forward-looking body of knowledge, and it is hoped that policymakers and researchers alike will draw on them as a meaningful reference for deepening their understanding and shaping informed, effective policy responses to the challenges facing Arab economies. It is our pleasure to make these articles available to researchers and planners worldwide who share a commitment to advancing knowledge and shaping a more sustainable future for the Arab region. Adel A. AI-Wugayan
DirectorGeneral Preface Most Arab countries are at a critical crossroads today, facing myriad long-standing economic and financial challenges that are thought to undermine their growth and development potential. These challenges are expected to be compounded by global climate change that the world is witnessing. Concerted international efforts to accelerate the energy transition away from fossil fuels and the emergence of the fourth industrial revolution are gaining momentum, all of which will significantly affect Arab economic development and its sustainability. Arab economies are a diverse and heterogeneous group in terms of levels of economic development, resource endowments, and institutions. Although Arab oil-dependent economies, thanks to oil rents, dominate Arab GDP (80% of Arab GDP) they are facing serious problems linked to the volatility of international energy prices (crude oil and natural gas), making fossil fuel dependence an unstable source of rents, and running the risks of accelerating global transition to clean energy and pressures to phase out carbon emissions, which threaten the long-term global demand for fossil fuels. Arab oil countries are also responsible for most Arab CO2e emissions, and hence for efforts to combat climate change as part of their pledges to reach net-zero emissions by 2050 or 2070. Arab oil-importing countries face different but equally important challenges to those faced by oil-exporting countries, the most important of which are high energy import bills (17% of commodity imports in 2024) and high costs of energy subsidies , contributing to fiscal deficits and increasing public debt, leaving little financial room for maneuver and a limited capacity to finance productive investments needed to boost economic growth. However, despite disparate economic challenges, all Arab countries are confronted with the effects of climate change, which negatively affect infrastructure, economic activities, the quality of economic growth, and employment opportunities, particularly in sensitive sectors such as agriculture and water supply, and increased demand for electricity due to longer hot summers. These challenges are intertwined with the other challenges that countries are already facing, such as shortages of skilled personnel in technology and industry, the limited financial resources needed to support economic transformation and investment in new sectors, the widening technology gap, low investment in research and innovation, low quality of development institutions, and an inadequate planning system. This overlap among the different challenges and risks facing Arab countries complicates priorities and, to varying degrees, hampers the economic reforms and policies geared toward enhancing structural transformation, competitiveness, and economic diversification that have been underway for decades. Given the lack of tangible progress, Arab countries are required more than ever to undertake bold, comprehensive structural reforms that embrace innovation, strengthen regional cooperation, and develop flexible policies that seize the opportunity of global energy transformation to enhance economic diversification and improve competitiveness in the age of the knowledge planning system. To better understand the ramifications of global energy transformation on Arab economies, the Arab Planning Institute in Kuwait (API-Kuwait) organized an international conference on “Empowering the future: Energy Transition and Economic Diversification in Arab Countries during the period 15-16 September 2025. The aim of the conference was to highlight the various challenges and issues facing the processes of economic diversification and energy transformation in Arab countries, particularly those related to industrial policies, financing, green technology, and human capital, whose performance hitherto has, in one way or another, hindered Arab economic development and probably magnified associated risks. Most Arab countries need to explore modern visions and policies that could crystallize a new framework for developing a more promising development horizon, grounded in a realistic approach capable of addressing the most important gaps and shortcomings in the structure of Arab economies, considering growing climate risks, deeper digital transformation, and proliferation of generative AI, to accelerate energy transformation and strengthen economic diversification and competitiveness. The conference also aimed to highlight the multidimensional challenges and opportunities associated with the requirements of energy transformation and economic diversification in Arab countries to achieve the desired sustainability, along the following themes: Most Arab countries face binding constraints and challenges, including fluctuating energy prices and growing climate risks with implications for growth, macroeconomic stability, financial stability, and labor markets. Arab countries need to embrace the fourth industrial revolution to accelerate energy transition and advance economic diversification by investing more in new digital technologies, artificial intelligence, and automation to improve energy efficiency and reduce operating costs, and to promote entrepreneurship and green start-ups, strengthen the quality of human capital, and rehabilitate the workforce, digitalize infrastructure, and support industries of the fourth industrial revolution. Energy-poor Arab countries could benefit greatly from the new energy diversity enabled by the transition to a green economy, including electrical energy storage technologies, grid integration of renewable energy, and carbon reduction in heavy industries through clean energy solutions. Despite decades of economic development, Arab countries need today more than ever before to diversify and enhance the sophistication of the economy and strengthen national competitiveness in areas such as technical and professional services, green and ecological tourism, smart logistics, hi-tech manufacturing, knowledge technology-intensive non-oil sectors, the circular economy, new roles of small and medium-sized enterprises in diversifying the economy - promoting innovative systems and knowledge-based economies. These actions need to be also complemented by accelerating structural transformation through strong smart industrial policies and diversification, addressing labor market imbalances to maximize the impact of green energy projects on unemployment rates, reforming education systems to bridge the skills gap in emerging industries, and accelerating economic diversification, and at the same time, overhauling the effectiveness of social protection systems during periods of economic transformation. New industrial policies and governance are needed to promote sustainability by establishing policy incentives and regulatory frameworks for renewable energy adoption; advancing national policies and Arab cooperation for economic reform and diversification; addressing regulatory challenges in clean energy projects; and enhancing the role of international organizations and partnerships in supporting transformations in the region. Improving the work of institutions and governance structures to promote equitable and comprehensive economic diversification. Financing energy transition and economic diversification (the role of local and international investments in accelerating energy transition and economic diversification - the contribution of Arab sovereign wealth funds and development banks to economic diversification, and encourage the role of alternative financing mechanisms and debt sustainability, and modernize risk management strategies for investors and governments during the transition period, and public-private partnerships to develop renewable energy infrastructure).
Date: 15-16 September 2025
Location: City of Kuwait – State of Kuwait, Kuwait (Offline)
Website: https://apiconf.arab-api.org/ The Arab world stands on the threshold of a transformative era, where three converging forces, namely the escalating impacts of climate change, the accelerating global shift away from fossil fuels, and the sweeping disruptions of the Fourth Industrial Revolution, are fundamentally redrawing the contours of the region's development path and long-term sustainability. Inaction in the face of these compounding challenges carries grave consequences for Arab economies of all types. For oil-exporting Arab countries, oil price volatility, the global shift toward renewable energy, and intensifying pressure to curb carbon emissions are steadily undermining the long-term viability of fossil fuel revenues as a reliable source of national income. Oil-importing Arab countries navigate a different yet no less demanding landscape, one shaped by rising energy import costs, unsustainable subsidy burdens, and the consequent weakening of fiscal positions, heightened debt vulnerabilities, and constrained capacity to invest in productive economic ventures. Consequently, Arab planners are coming to terms with an uncomfortable truth: climate change is actively deepening the pressures the region already faces, undermining critical infrastructure, disrupting core economic activities, and shrinking employment opportunities, most severely in climate-sensitive sectors such as agriculture, fisheries, and tourism. In recognizing these challenges, the “Arab Planning Institute at Kuwait” organized an international conference in collaboration with the “Mohamed Bin Rashid School of Government” and the Arab Energy Organization (formerly OAPEC) in September 2025, reaffirming its leading role in shaping the planning discourse on the challenges and issues facing economic diversification and energy transition in Arab countries. Central to this discourse are the interconnected dimensions of industrial policy, financing, technology, and human capital, which remain the primary forces shaping Arab development and the risks it carries. The conference sought to explore visions and policies for a new framework for a more promising development horizon, grounded in a realistic approach that addresses the structural shortcomings of Arab economies, accounts for growing climate risks, and aims to accelerate the energy transition and enhance economic diversification and competitiveness. The conference drew an exceptional level of scholarly engagement, with 19 papers carefully chosen from over 200 submitted proposals, reflecting both the growing significance of the topic and the competitiveness of the selection process. The research compiled in these proceedings represents a carefully curated cross-section of the work presented, spanning the critical dimensions of economic diversification, energy transition, industrial policy, financing, technology, and human capital. Taken together, these papers offer a substantive and forward-looking body of knowledge, and it is hoped that policymakers and researchers alike will draw on them as a meaningful reference for deepening their understanding and shaping informed, effective policy responses to the challenges facing Arab economies. It is our pleasure to make these articles available to researchers and planners worldwide who share a commitment to advancing knowledge and shaping a more sustainable future for the Arab region. Adel A. AI-Wugayan
DirectorGeneral Preface Most Arab countries are at a critical crossroads today, facing myriad long-standing economic and financial challenges that are thought to undermine their growth and development potential. These challenges are expected to be compounded by global climate change that the world is witnessing. Concerted international efforts to accelerate the energy transition away from fossil fuels and the emergence of the fourth industrial revolution are gaining momentum, all of which will significantly affect Arab economic development and its sustainability. Arab economies are a diverse and heterogeneous group in terms of levels of economic development, resource endowments, and institutions. Although Arab oil-dependent economies, thanks to oil rents, dominate Arab GDP (80% of Arab GDP) they are facing serious problems linked to the volatility of international energy prices (crude oil and natural gas), making fossil fuel dependence an unstable source of rents, and running the risks of accelerating global transition to clean energy and pressures to phase out carbon emissions, which threaten the long-term global demand for fossil fuels. Arab oil countries are also responsible for most Arab CO2e emissions, and hence for efforts to combat climate change as part of their pledges to reach net-zero emissions by 2050 or 2070. Arab oil-importing countries face different but equally important challenges to those faced by oil-exporting countries, the most important of which are high energy import bills (17% of commodity imports in 2024) and high costs of energy subsidies , contributing to fiscal deficits and increasing public debt, leaving little financial room for maneuver and a limited capacity to finance productive investments needed to boost economic growth. However, despite disparate economic challenges, all Arab countries are confronted with the effects of climate change, which negatively affect infrastructure, economic activities, the quality of economic growth, and employment opportunities, particularly in sensitive sectors such as agriculture and water supply, and increased demand for electricity due to longer hot summers. These challenges are intertwined with the other challenges that countries are already facing, such as shortages of skilled personnel in technology and industry, the limited financial resources needed to support economic transformation and investment in new sectors, the widening technology gap, low investment in research and innovation, low quality of development institutions, and an inadequate planning system. This overlap among the different challenges and risks facing Arab countries complicates priorities and, to varying degrees, hampers the economic reforms and policies geared toward enhancing structural transformation, competitiveness, and economic diversification that have been underway for decades. Given the lack of tangible progress, Arab countries are required more than ever to undertake bold, comprehensive structural reforms that embrace innovation, strengthen regional cooperation, and develop flexible policies that seize the opportunity of global energy transformation to enhance economic diversification and improve competitiveness in the age of the knowledge planning system. To better understand the ramifications of global energy transformation on Arab economies, the Arab Planning Institute in Kuwait (API-Kuwait) organized an international conference on “Empowering the future: Energy Transition and Economic Diversification in Arab Countries during the period 15-16 September 2025. The aim of the conference was to highlight the various challenges and issues facing the processes of economic diversification and energy transformation in Arab countries, particularly those related to industrial policies, financing, green technology, and human capital, whose performance hitherto has, in one way or another, hindered Arab economic development and probably magnified associated risks. Most Arab countries need to explore modern visions and policies that could crystallize a new framework for developing a more promising development horizon, grounded in a realistic approach capable of addressing the most important gaps and shortcomings in the structure of Arab economies, considering growing climate risks, deeper digital transformation, and proliferation of generative AI, to accelerate energy transformation and strengthen economic diversification and competitiveness. The conference also aimed to highlight the multidimensional challenges and opportunities associated with the requirements of energy transformation and economic diversification in Arab countries to achieve the desired sustainability, along the following themes: Most Arab countries face binding constraints and challenges, including fluctuating energy prices and growing climate risks with implications for growth, macroeconomic stability, financial stability, and labor markets. Arab countries need to embrace the fourth industrial revolution to accelerate energy transition and advance economic diversification by investing more in new digital technologies, artificial intelligence, and automation to improve energy efficiency and reduce operating costs, and to promote entrepreneurship and green start-ups, strengthen the quality of human capital, and rehabilitate the workforce, digitalize infrastructure, and support industries of the fourth industrial revolution. Energy-poor Arab countries could benefit greatly from the new energy diversity enabled by the transition to a green economy, including electrical energy storage technologies, grid integration of renewable energy, and carbon reduction in heavy industries through clean energy solutions. Despite decades of economic development, Arab countries need today more than ever before to diversify and enhance the sophistication of the economy and strengthen national competitiveness in areas such as technical and professional services, green and ecological tourism, smart logistics, hi-tech manufacturing, knowledge technology-intensive non-oil sectors, the circular economy, new roles of small and medium-sized enterprises in diversifying the economy - promoting innovative systems and knowledge-based economies. These actions need to be also complemented by accelerating structural transformation through strong smart industrial policies and diversification, addressing labor market imbalances to maximize the impact of green energy projects on unemployment rates, reforming education systems to bridge the skills gap in emerging industries, and accelerating economic diversification, and at the same time, overhauling the effectiveness of social protection systems during periods of economic transformation. New industrial policies and governance are needed to promote sustainability by establishing policy incentives and regulatory frameworks for renewable energy adoption; advancing national policies and Arab cooperation for economic reform and diversification; addressing regulatory challenges in clean energy projects; and enhancing the role of international organizations and partnerships in supporting transformations in the region. Improving the work of institutions and governance structures to promote equitable and comprehensive economic diversification. Financing energy transition and economic diversification (the role of local and international investments in accelerating energy transition and economic diversification - the contribution of Arab sovereign wealth funds and development banks to economic diversification, and encourage the role of alternative financing mechanisms and debt sustainability, and modernize risk management strategies for investors and governments during the transition period, and public-private partnerships to develop renewable energy infrastructure).