Mountains of cash … how to utilize it?

The challenge facing all oil producing countries is how to utilize the mountains of excess cash generated by oil income. The oil income of the Organization of Petroleum Exporting Countries (OPEC) is expected  to reach $700 billion by the end of this year with Saudi Arabia’s daily income close to $1 billion and the rest of Opec members income for 3-7 days $1 billion and Kuwait $1 billion every 5 days. With such vast accumulated cash the challenge is how best to benefit and utilize the generated cash for the welfare of all.

Without doubt some of the income will be mismanaged and misdirected and bound to go astray particular in countries where the book-keeping and balance sheet don’t exist. We in Kuwait are fortunate that we don’t belong to that part of the world, and our expenses are regularly scrutinized by the State Audit Bureau and the National Assembly. The unexpected sudden increase in oil prices which has climbed to historical highs is causing us great confusion how to spend it but wisely. On short term basis the excess cash must be invested overseas until oil countries come with long-term invested plans, because their local economies are unable to absorb daily income. This warrants entry and opinions of the major financial institutions.

We in Kuwait seem to have run out of ideas for the time being and our past generations were more creative and looked deeper into our human resources to give their best. The overseas investments have their limits and it is time to seriously think of ways of making and creating new job opportunities for our youngsters and improve their capabilities and abilities. This is the only way to move forward as our financial resources are beyond our abilities and capabilities. It may take some time to come with the right answers but this will not happen without passing some laws through our parliament. Most importantly the land utilization law and liberalization laws to allow the private sector to move forward. The government owns more than 95 percent of the Kuwaiti land and with the BOT law still under revision almost all projects have been shelved awaiting the new laws to be approved.

Again we are unlike the rest of Opec countries that projects can be approved overnight without proper regulations which are making Kuwait slow in developing and reforming its economies but with sound and shared judgments rather than benefiting few individuals. This should always be our guidance as it used to be the past which will carry us into the future. For the rest of Opec countries a similar guidance to develop and benefit from the surge of oil prices is needed and Kuwait will lead for others to follow in its footsteps as we have successfully done with the future generation fund and Norway followed our example many years later.

e-mail: naftikuwaiti@yahoo.com

By Kamel Al-Harami
Independent Oil Analyst