KUWAIT CITY, Aug 15, (Agencies): Misuse of Kuwait’s state budget surplus, including unproductive spending, has led to structural imbalances in the Gulf Arab economy, HH the Amir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah was quoted as saying by state news agency KUNA on Monday.

“The misuse of the surplus and not investing it in the right direction has led to structural imbalances in our economy and threatens the future of the country in the implementation of programmes and financial obligations,” Sheikh Sabah said.

He was speaking at the first meeting of an advisory committee set up to look into how Kuwait should address domestic and global economic developments.

His comments chimed with remarks by central bank Governor Sheikh Salem Abdul-Aziz Al-Sabah last month that Kuwait’s overreliance on oil revenue and the government’s control of all sectors of the economy were causing imbalances in the economy.

“The continuation of irresponsible consumer waste and an excessive increase in current unproductive expenditure have deepened the imbalances and the distortions in the economy,” Sheikh Sabah added.
Kuwait posted a budget surplus of KD 5.3 billion in the 2010/11 fiscal year. Oil revenue accounts for more than 90 percent of the state’s budget, however, putting the economy at risk if currently high oil prices fall sharply.

In June, Kuwait’s parliament approved a budget of KD 19.4 billion ($71 billion) for the 2011/12 fiscal year, the biggest budget since at least 2003 and a 19 percent jump from the previous year. Kuwait’s fiscal year starts in April.

Kuwait’s economy was worst hit in the Gulf by the global financial crisis due to plunging oil prices, with the IMF estimating its economy shrank 5 percent in 2009.

A Reuters poll in June forecast Kuwait’s economy would grow 4.4 percent in 2011 and generate a fiscal surplus of 20.2 percent of gross domestic product in 2011/12.

The meeting comes amid fears of another global recession that could dampen the price of oil, which provides more than 93 percent of Kuwait’s public revenues, and impact its $300 billion (210 billion euros) of foreign investments.

“We have to adopt measures to rectify the direction of the state budget,” said the Amir who called for “sacrifices” to enforce long-delayed reforms, without revealing the type of measures.
Senior government officials including the central bank governor attended the meeting called to study the possible impact of the US downgrade and European sovereign debt crisis on Kuwait’s domestic economy.
The price of Kuwaiti oil has remained above $100 a barrel for most of the current fiscal year which began on April 1.

Kuwait’s current economic indicators are encouraging but oil remains the main driver of the economy with reforms on the backburner amid non-stop political disputes between parliament and the government.
Last month, Standard & Poor’s rating services raised the OPEC member’s local and foreign currency sovereign credit ratings to AA from AA- on the back of strong public finances.
S&P however pointed to Kuwaiti weaknesses including heavy reliance on hydrocarbons, recurring deadlock between parliament and the government, lack of transparency and a slow pace of reform.
The backbone of security in any country is the economy, the Amir said, and “we thank God for what he granted us of the blessings and assets allowing the establishment of a strong, solid and stable economy that ensure reasons for progress, prosperity and a decent life for the people of Kuwait in the present and the future. However, the practice in abusing financial surpluses has led to a number of structural imbalances in our national economy, thus, becoming a heavy burden and genuine concern threatening the country’s future and its ability to implement its programs and meet its various financial obligations.” The Amir went on to say that “in the face of the continuation of irresponsible wasteful consumption and excessive increase in current non-productive expenditure, these distortions and imbalances have deepened and their effects and consequences have been complicated, and I am not here to diagnose this problem and discuss the details, as you are experienced and competent in this field but what our economic reality is witnessing anticipates risks that are difficult to predict their limits of effects, in a way that does not tolerate being slow in addressing it.”

The Amir called for adopting a package of measures to ensure correct course of the general budget of the state and activating the role of the private sector to shoulder its responsibility to participate actively in economic activity and to address other imbalances, which impede our national economy.

“So the total of such developments and their implications requires of us a serious stand to review our situation and take the necessary and serious steps to protect our national economy and ensure a decent life for the people of Kuwait and their generations to come ... it is our responsibility before God, the homeland and the people.”

The Amir pointed out that the aim of this meeting is to discuss this issue in all its dimensions and to provide practical suggestions to address it, leading to completion of the desired goals that guarantee to improve and strengthen the capacity of the State of Kuwait to meet the economic challenges and achieve the sought developmental objectives.

The Amir added that each reform has a cost and sacrifices, but within a minimum level so as to achieve balance between interests of the country and the aspirations of citizens and their desires, “and I am convinced that my brothers and citizens, as always will be at the level of national responsibility in understanding and adopting any steps that achieves the national interest and for generations to come.”
The Amir also called on members of parliament to reflect the responsible cooperation in the understanding and support of proposed procedures and approaches to achieve the desired objectives as a national project that includes everyone.

“I am confident that when you commit to this national and noble mission, you will be assisted by studies and research by sincere national minds that will help you in your quest to reach the economic goals and sought objectives, and I invite you to build on these studies and research and try to take advantage of them and bring about your visions and views to ensure the speedy implementation and accomplishment of your mission in the service of the hopes and aspirations of the people of this dear homeland,” the Amir said.
Sheikh Sabah said he has full confidence in “your care and ability to reach the best solutions and most successful ways to address imbalances witnessed by our economic situation and strengthen our national economy in all sectors and fields, but let me mention some things that I see must be taken into account while presenting your views and your comments in this regard.”

First: Taking into account those with low incomes in all measures proposed.

Second: Solutions must be realistic and be part of the capabilities and capacities available.

Third: Selecting an appropriate mechanism of action for the implementation of solutions to ensure proper implementation in accordance with a specific timetable and effective monitoring and evaluation.

Fourth: Commitment to the full standards of transparency and equal opportunities in the implementation of activities, programs and various projects in order to achieve the integrity required to ensure a good investment of state resources and to devote maintaining of public money.

Fifth: Overcoming conventional frameworks in dealing with the requirements of economic reform and creating better and faster ways and the most flexible to achieve the desired goal.

Sixth: Good definition and marketing of proposed programs to the citizens and use of the media with a message aiming to raise awareness of the contents of these programs and their feasibility and the benefits that can accrue to the citizen through them and achieve the necessary guarantees for their generations to come for a better life.

His Highness the Amir said he may commission HH the Prime Minister Sheikh Nasser Mohammad Al-Ahmad Al-Sabah or any of his deputies to follow the work of this committee and get the job done, hoping that the committee shall make a report of the results of its actions and recommendations as soon as possible and within a limited timeframe.

Crown Prince
His Highness the Crown Prince Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah also delivered a speech before the consultative committee.

The Crown Prince said the members of the committee that they have been commissioned by HH the Amir to come up with their reviews and opinions, as well as proposals to him as they are well-experienced figures.
The Crown Prince added that Kuwait is proud to have a constellation of Kuwaiti sons who are able to do this task to the fullest.

Al-Khorafi
National Assembly Speaker Jasim Al-Khorafi said Monday that there was a need to face negative repercussions resulting from the world’s economic events that affect the nation’s economy.
The aim of the meeting was to find necessary solutions for the protection of the Kuwaiti economy, he said, adding that there were already plans in this regard being put in place.
In the coming stage, any such threats to the economy will be faced by a duo of state departments including, the Planning Council and the Cabinet’s Economic Committee, he added.
On the constantly turbulent situation in the National Assembly, he said, it was the responsibility of the current parliament and future ones to solve these issues and ensure national unity.
Politics has affected economic assessments “whereby companies have been facing difficulties in addition to banks falling short of covering their debts,” he said, stressing the need to share these responsibilities.

Commerce minister
Minister of Commerce and Industry Dr Amani Bouresli warned on Monday of expected impact of upcoming “global economic challenges” and proposed steps to cope with such an eventuality.
Addressing a meeting of the consultative committee for reviewing international and domestic economic developments, Bouresli said, “We will experience a phase of major economic challenges.”
The minister proposed the formation of several sub-committees to draft plans about best means to cope with the economic problems, namely schemes to enable citizens take part in shouldering responsibilities in this respect. She also proposed launching a national campaign against excessive consumption of the national resources, making the nationals involved in the construction of the country, increasing resources of the national income through execution of feasible and infrastructural ventures.

KCCI Chief
Abdul Wahab Al-Wazzan, board member of the Kuwaiti Chamber of Industry and Commerce (KCCI), affirmed necessity of maintaining political stability. “Political conflicts paralyze the development and the national economy,” he said, stressing that political disputes constitute the major stumbling stone hindering execution of the development schemes.

Former minister of commerce and industry, Ahmad Baqer, echoed Bouresli’s concerns as to the prospected challenges. “We need solutions to tackle flaws in the structure of the national economy, for such defects may affect the future of the next generations,” he pointed out.

The crucial meeting was attended by Governor of the Central Bank of Kuwait Sheikh Salem Abul Aziz Al-Sabah, Minister of Finance Mustafa Al-Shimali, Dr Bouresli, Minister of State for Development Affairs Abdul Wahab Al-Haroun and Minister of Electricity and Water Salem Al-Uthayna. It also involved the head of the Economic Development Committee Nasser Al-Roudhan, his deputy, Ali Al-Bader, Abdul Mohsen Al-Hunaif, Yahia Al-Sumait, Bader Othman Malallah, Ahmad Yaacoub Baqer, Bader Al-Mukhaizeeem, Adel Al-Sebeeh and Adnan Al-Bahr, as well as other eminent economic and business figures.

The head of the committee of economic development, Nasser Al-Roudhan, said His Highness the Amir’s call to hold this meeting now reflected his deep concern at the economic conditions.

He also agrees that plans have been worked out, but they have not been implemented.
Anas Al-Saleh, member of the Chamber of Industry and Commerce, affirmed the necessity to have a competent administration to carry out the guidelines of the Amir for resolving the financial crisis.
Adnan Al-Bahar, representative of the private sector, said sovereignty of the expenditures preoccupied members of the commission. He also called for privatizing the public sector.

Hamzah Abbas also warned of the impact of an international recession on the national economy, noting that the state budget alarmingly has grown from KD 4 billion to KD 20 billion.