The opportunities for mutual investment are tremendous, much like those accruing to the members of the Association of Southeast Asian Nations, the South American trade bloc Mercosur, and other regional economic blocs established. Whether it is Saudi tourists spending their income in the bazaars of Bahrain, fishing in the Arabian Sea off of Oman, or purchasing luxury perfumes produced in the UAE, there is ample space to grow existing consumer markets. As Saudis’ living standards rise, so will the opportunities to profitably trade with Riyadh, and the countries in the Kingdom’s immediate proximity are best placed to exploit the emerging opportunities. The liberalization-led growth of the Middle East’s largest economy-Saudi Arabia-can play an immensely positive role in raising living standards in the Kingdom’s neighbors through various channels. However, there is considerable unrealized economic potential in the region. Poor education, marginalization of women, political instability, and violent conflict have also played a role in the region’s economic stagnation. For some countries, the leftist economic policies exported by the former Soviet Union have stifled economic growth for decades. Unfortunately for the people of the Arab world, the region’s economy has been hamstrung by poor economic statecraft since World War II. In other words, a larger slice for the Kingdom need not imply a smaller slice for the UAE. Most revolve around the proposition that Saudi Arabia’s policies will make the region’s economic pie larger. In the case of the Middle East’s two largest economies, there are several reasons to be optimistic about the effects of competition. Positive outcomes likely from economic competition Within the European Union, Paris and Frankfurt-and previously London-have vied for decades to be known as Europe’s financial capital, yet the competition appears to have been constructive rather than destructive, as the growth of each creates demand for the services of the others. For example, while American cities New York and San Francisco compete fiercely in many domains, in general, the economy of each metropolis benefits from the success of the other because it creates business for their supposed rival. However, a quick look at some of the other leading economies in the world suggests that this narrative might be flawed or overly simplistic. This has served to reinforce the view that the two countries are on an economic collision course. This has set the stage for the narrative of an economic war between Saudi Arabia and the UAE.īeyond this, many of the activities that have made Dubai a magnet for the region’s talent- such as its art scene, restaurants, hospitality, luxury hotels, and shopping-have been targeted by Saudi Arabia’s economic policymakers as areas for development within the Kingdom. A regional headquarters is what economists call an indivisible asset, which can’t be divided into smaller pieces-meaning that Riyadh’s gain must be Dubai’s loss. When Saudi Arabia announced plans in February requiring international companies to have their regional headquarters in the Kingdom as a precondition for participating in government contracts from 2023 onward, many interpreted the move as a shot across the bow at the UAE since Dubai is the location of choice for most companies operating in the region. While many commentators have been keen to interpret Saudi Arabia’s attempts to transform Riyadh into the Middle East’s economic capital as a threat to the economic interests of the United Arab Emirates (UAE), a more nuanced analysis suggests something akin to a rising tide that will lift all boats. OctoSaudi Arabia’s economic transformation benefits the UAE too