Why Kuwait has to adapt new resource and change now
Kuwait has almost 10% of the world’s estimated oil reserves and one of the biggest private equity funds in the nation. Nevertheless, amid this wealth, Kuwait lags behind the other nations with much lower per capita income on a set of criteria, including healthcare and education. Kuwait suffers because its economy depends on petroleum and little else. This ensures that Kuwait’s economy is going to be exposed to high energy prices. To make matters worse, the majority of the public are working in the state sector at low rates of productive capacity.
Kuwaiti legislators have a moral responsibility, to be frank to people today. Kuwait has a number of serious problems that desperately need to be tackled.
Next, Kuwait needs to diversify the economies away from the dollar, which accounts for 90% of all revenues. High oil prices will intensify policy efforts to ensure a “safe landing” for everyday citizens who may be impacted.
Second, no-capex investment dominates government spending. Last year, wages and subsidies totaled KD16.3 billion, accounting for 75 percent of the total expenditure of KD21.8 billion. Kuwait’s finance minister suggested last year that, unless these investments were reduced, Kuwait’s general reserves could run the risk of exhaustion by 2020.
Second, job creation is a must. Considering that Kuwait’s unemployment remains stable at 5 percent, the labor force will rise by 80 percent by 2030 at current growth levels. That’s about 21,000 new jobs that are expected each year. According to a representative of the Supreme Planning Council of Kuwait, the number of jobs may be as large as 400,000 to 600,000 over the next 15 years.
Eventually, Kuwait continues to suffer from being located in an unstable region that is inherently deterring foreign investors. Nevertheless, Kuwait’s Emir, Sheik Sabah Al-Ahmad Al-Sabah, diplomat par excellence, receives a great deal of global admiration, which transforms into recognition and protection for Kuwait as well. This soft power can be funneled to support the key goal of ‘ Kuwait’s Vision 2035 ‘: maximizing the inbound foreign investment. There is little disagreement about the initiatives required.
Kuwait’s experience with entrepreneurship has traditionally been impressive, with firms such as Agility and Zain rising from sleepy government-owned companies becoming competitive, international market leaders. In addition, their popularity has led to significant job creation in Kuwait. Needless to say, there has been little momentum since then. It is now important that efforts are made to classify all state-owned entities and activities appropriate for private ownership.
Kuwaiti enterprises are overly regulated. Everywhere from school fees and loans and food prices is subject to public regulations. Although strategically tolerable, it hinders the demand side of free-market dynamics and discourages foreign direct investment. If private-sector job creation is to be expected, regulations need to be significantly eased in order to stimulate economic development and encourage international investment and transfer of technology and resources.
Support the private sector needs
The common lament of Kuwaiti entrepreneurs is that the main obstacle to new investment is not the lack of capital, but the lack of land and labor restrictions. Delays in-licenses and permissions for private construction ventures have contributed to even more delays in acquiring ground. Kuwait has to search for a link to Taiwan, Recognizing that the most effective infrastructure development approach is not just to enable, but proactively nurture private enterprises.
Leverage international investments and partnerships
While any reform plan will inevitably depend on the government as an enabler rather than a builder, this does not prevent the government from also proactively engaging in business-building initiatives in sensitive sectors through collaborations with foreign players. This will facilitate the consolidation and growth of the Kuwaiti market.
Madeenat Al Hareer must go-ahead
A plan to build 200 square kilometers in northern Kuwait, known as Madeenat al Hareer, is a requirement, not an alternative. Kuwait needs to attract foreign investment in its transportation, manufacturing, real estate, education, and industrial sectors. It’s needed to create work. Any recommendation that overseas investors are not possible to ignore the political and economic complexities.
Successful changes would require coordination between a number of government agencies and the defense of ambitious projects from political intervention.
Kuwaiti people have traditionally been among the most laborious in the country. Nearly 200 years ago, long before the discovery of oil and with limited natural resource extraction, Kuwaitis built large fleets of seagoing vessels and generated competitive markets by opening up to the public.