This paper aims to investigate the economic development status in the Persian Gulf region and investigate the underlying base for international competitiveness. The focus is on this geographic area because it comprises the wealthiest and fastest growing economies in the world and it provides a proper framework for studying the connections between these concepts. The main objective is to compute a development diagnosis and based on its results to reveal what could be done for further advancement as they are shifting from resource-based to knowledge-based economies. The countries considered in this study are Bahrain, Qatar, Oman and UAE. The methodology is based primary on qualitative analysis. The diagnosis revealed that even though in international reports these countries tend to be described roughly in the same terms, the reality is different. Qatar and UAE are prepared to turn into knowledge-based economies despite of being in different stages of economic development. The United Arab Emirates is the only economy from the region that has reached the most advanced stage of development because of its diversified structure. The findings pinpoint that a cluster-based development is a proper path for these countries to follow in the future, while building resilience is a must. Finally, enhancing the regional coordination is yet another solution to a steady, competitive economic development in the Persian Gulf. This study has an extensive, realistic perspective and it’s a contribution to the field as it uncovers the traits of the region in terms of economic upgrading.