Kuwait, economic diversification

Economic diversification represents one of the main strategic goals set by the Gulf Cooperation Council (GCC). This approach was adopted in 1986 after the collapse of oil prices that reached seven dollars per barrel. This called for the introduction of policies of austerity and led to delay in payment of salaries in some institutions and the postponement of many projects due to cuts in expenditure. Since then, successes made by GCC countries have varied greatly and relatively. The UAE and Saudi Arabia, for example, achieved significant progress in diversification of sources of income and reducing reliance on oil. A few years later, Qatar followed suit and made significant progress, as the UAE managed to develop important sectors, such as tourism, services, and some modern industries in the UAE and energy -based industry. Saudi Arabia succeeded in developing consumer products, while Qatar has developed gas-related industries and services. At the same time, Oman and Bahrain made some progress. This progress was made because Oman has made the most of its strategic location, while Bahrain was the first Gulf country to establish its financial centre since the mid-seventies. However, the strategic approach embraced by two countries is in need of further investments in the next years.Kuwait remains the only country where contribution of most non-oil economic sectors declined after the Iraqi invasion in 1990, especially after hundreds of companies and foreign institutions, including banking and investment institutions, moved elsewhere in the region. This coincided with influential local developments in the absence of domestic investments by both public and private sectors which were limited to the minimum level directed to meet some local needs, while political tensions intensified between the government and the Ummah Council (Parliament), which played and is still playing a negative role in the economic field. The premature and ill-advised decisions led to a flight of capital and cancellation of important development projects, such as huge the petrochemical project with Dow Chemical, a US company, which lodged a case against Kuwait demanding compensation of $2.1 billion (Dh7.72 billion). The company won the case last month, thus doubling Kuwait’s loss. During the past two decades, Kuwait has not implemented any development projects with significant economic value, while its dependence on oil revenues have increased. This approach demonstrates a neglect of non-oil sectors. Unlike Kuwait, the UAE, Saudi Arabia and Qatar have contributed significantly to the development of non-oil sectors, which comes in line with their approach of diversifying sources of national income. Negligence was not limited to the lack of implementation of new projects. Other sectors such as finance, transportation and aviation have also suffered. This is evident from the financial position of the Kuwaiti Airways Corporation, which is on the verge of bankruptcy. As for tourism, it has not been given any attention from the government, despite the organisation of the annual “Hala February” festival. In fact, Kuwait has not benefited from its distinguished geographic location to play a more role in development of the regional and global trade. If this situation continues like this in Kuwait, hopefully not, out of love for Kuwait and because it is an important part of the GCC bloc, Kuwait will face real difficulties after two or three decades. This expectation is based on more than one reason pertaining to oil depletion and development of the fastest growing renewable energy sources. However, there is still room for Kuwait which can take quick and practical steps to catch up with its counterparts in the GCC. Kuwait can benefit from the experiences of other Gulf countries, especially the UAE, Qatar and Saudi Arabia. To achieve this, Kuwait must work towards finding common ground necessary to create a harmony between the executive and legislative powers in the country. Unfortunately, Kuwait missed many important opportunities because of useless political disputes in parliament, which is supposed to focus on the nation’s future and contribute to the development of society by finding alternative sources of income. To achieve this seriously, Kuwait can allocate one session of each legislative chapter, called “economic session” to be dedicated to discussing issues of development, diversification of income sources and approval of projects that would contribute to the diversity and the development of non-oil economic sectors. It can also enact legislation that provide more facilities to investors and businessmen as well as to follow up the progress made between one session and another with transparency to ensure the implementation of works and businesses from various aspects. Maybe, this seems difficult due to conflict of interests within the parliament and the interest of parliamentary members to maintain their seats at the expense of development. Yet, Kuwait’s future deserves to top the list of priorities and be placed top on all plans and strategies in order to develop the country economically, whether there is oil and not. from gulfnews.com