BY: SOPHIE OLVER-ELLIS
With the Arabian Gulf mired in a constant era of extreme oil price volatility, the region’s governments have had to accept the unavoidable truth that they can no longer depend on oil rents as their predominant source of revenue and, therefore, needs to diversify their economic base. This challenge is particularly pertinent to Kuwait. Despite hosting the sixth largest proven oil reserves in the world, the state has socio-politically and economically stagnated over the decades to the point that it is now branded as having one of the least interesting economies and is the sleeping giant of the Arabian Gulf. Kuwait is also lagging far behind its GCC counterparts because it has been ranked last in the region for its economic competitiveness, legal framework, and effective governance regime; all of which are critical components for successfully diversifying their political economy. Despite these dire socio-political and economic conditions, it is crucial that the country moves beyond its extreme oil dependent development model. Noted by the government itself, cutting frivolous public spending, fixing the state budget imbalance, and ending the waste of their natural resource revenues will be critical for the country’s long-term socio-economic survival.
In response, Kuwait recently unveiled an ambitious plan to transform the country into an economic hub with new employment opportunities, transferable knowledge amongst technological and scientific industries, and the creation of a strong private sector that will lead the economic diversification efforts. The government declared Vision 2035, the new development agenda, to be the golden ticket that will build a ‘New Kuwait.’ Through unifying socio-political and economic actors, it should guarantee a sustainable and prosperous future for the country in the post-oil dependent era. It is, therefore, imperative to ask whether the Kuwaiti government is pursuing an achievable Vision that can be successfully implemented by 2035 or just an unachievable pipedream that the government will never meet?
The overarching objective of Vision 2035 is for the government to transition the country’s socio-economic affairs from an oil-dependent economy, to a regulatory actor in a diversified knowledge-based private sector driven economy. The government’s goal is to reduce their contribution and role in the implementation of national development projects from the current rate of 90 percent to a more sustainable rate of 30 to 40 percent. To achieve this goal, the central strategy is for the private sector to boost their involvement in the national economy and spearhead the advancement in a range of sectors such as renewable energy, education, healthcare, transport, tourism, and ICT. Kuwait is also seeking to attract billions of dollars in foreign direct investment by encouraging small and medium enterprises to conduct business in the country. To facilitate this venture, the Ministry of Commerce and Industry amended numerous laws, which sought to regulate the establishment and activity of private sector companies. For example, to attain a commercial license, the government reduced the processing time from the previous average of 60 days to a more respectable 3 days and reduced the cost from KD 10,000 to KD 1,000. As a result of this favourable private sector business climate, 2017 estimates showed the annual issuance of commercial licences increased from 3,600 to more than 12,000.
To further facilitate the establishment of a private sector driven economy, as advocated in Vision 2035, the Northern Gulf Gateway mega project has been on the agenda. The project will be comprised of a world-class airport, a knowledge zone, industrial parks, and education centres all located within a 1,000-square kilometre radius in the north of the country. This ambitious development is estimated to contribute $220 billion to Kuwait’s GDP, creating more than 400,000 jobs for the national citizenry, especially the youth, while attracting more than 3 million tourists annually. The Northern Gulf Gateway and Vision 2035 should be the catalyst that enables Kuwait to start regaining their status as a business hub of the Arabian Gulf and become a dominant actor in the global economy.
However, despite such ambitious promises and diversification strategies in place, the government has failed to take into account the fact that the public sector is still a competitor to the private sector. Take for example the fact that over the oil development decades, the public sector spearheaded Kuwait’s economic development and provided guaranteed employment for the national citizenry as part of the largesse social contract. This competition resulted in an extremely segmented labour market and economy divided between both the public and private sector and national and migrant workforce. If the government wants Vision 2035 to succeed, they need to shrink the public sector’s role in the economy, especially with regards to its employment of the national citizenry, who will be needed if the private sector is to successfully fulfil their role as a leader in the economic diversification efforts.
The government should also re-evaluate the Vision’s goal of reducing Kuwait’s migrant population from 70 percent to 60 percent by 2030. As the development projects will need a large skilled labour force, such as engineers, foreign language teachers, and doctors, which currently cannot be completely met by the Kuwaiti population, then expelling such a critical source of skilled manpower will be detrimental to the Vision’s implementation. Conversely, this dubious and unachievable goal is indicative of the widespread criticism that the plan is not realistic and unattainable, because not only is the Vision advocating generic strategies that are irrelevant to Kuwait’s socio-economic conditions, but there is no real urgency to implement substantial change. Some of the Vision’s recommendations, such as the role of the private sector and Northern Gulf Gateway, dates back more than seven years and has still not made headway in transforming Kuwait into a diversified knowledge-based private sector driven economy. Therefore, it is one thing for Kuwait to have an ambitious Vision, but unless the government implements it with relevant strategies and dedication from all socio-economic and political actors, Vision 2035 will remain a pipedream and, Kuwait will remain the sleeping giant of the Arabian Gulf.
Dr Sophie Olver-Ellis is a political economist with a PhD, which focused on the transforming political economies of the Arabian Gulf, from the University of Bath. She holds over nine year’s research experience with particular expertise on the changing social, political and economic structures of the Gulf region by exploring the changing dynamics within the oil economies and how they are preparing for the post-oil era.
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