Digitalization and smart government policies for economic growth: a comparative analysis of GCC Islamic economies

Purpose This study analyzes the impact of digitalization and smart government policies on economic growth in Islamic economies, focusing on six Gulf Cooperation Council (GCC) countries: Saudi Arabia, the UAE, Oman, Bahrain, Kuwait and Qatar. It investigates how digital transformation affects gross domestic product (GDP) growth and labor productivity, with specific attention to the moderating roles of governance and institutional frameworks within digital Islamic finance. Design/methodology/approach A mixed-methods research design was employed, combining quantitative panel regression with comparative case study analysis. Secondary data from 2008 to 2023 were sourced from the World Bank and Worldwide Governance Indicators (WGI). The Arellano-Bond dynamic panel model was used to measure the impact of digitalization, governance and oil dependence on economic outcomes, while comparative case studies assessed digitalization strategies, smart policy initiatives and the integration of digital Islamic finance across GCC countries. Findings Results indicate that digitalization positively influences labor productivity, with marginal significance (coef. = 0.083, p = 0.06), suggesting that countries with well-developed ICT infrastructure, including Saudi Arabia, UAE, Qatar and Kuwait can translate digital adoption into productivity gains. Labor productivity appeared insensitive to trade openness (coef. = 0.008, p = 0.871) and oil prices (coef. = 0.042, p = 0.493), reflecting structural reliance on oil and heterogeneous trade integration. Digitalization also had a positive, though not statistically significant, effect on GDP growth (coef. = 0.158, p = 0.172). While trade openness (coef. = 0.107, p = 0.386) and oil prices (coef. = 0.174, p = 0.187) were nonsignificant, the findings highlight the potential of digital policies in enhancing economic growth and labor productivity in technologically advanced GCC countries. Qualitative analysis highlights that while all GCC nations pursue digitalization initiatives, the integration with governance and Shariah-compliant finance is at an early stage, requiring strategic alignment to enhance economic diversification. Practical implications The study offers actionable insights for policymakers, emphasizing the need to align digital transformation priorities with economic diversification goals, particularly in FinTech, e-commerce and Islamic financial services. Digitalization in Islamic finance can improve financial inclusion and promote sustainable economic development, reinforcing the role of smart government policies in shaping future growth trajectories. Originality/value This article represents one of the first comparative empirical studies of digitalization and smart government policies in GCC Islamic economies. It advances understanding of the relationship between digital transformation, institutional efficiency and resource dependence, proposing a governance-performance framework that highlights country-level differentiation.