Every year during Ramadan, I look forward to the delights of discussions at social gatherings after Iftar with people from all walks of life. This year I had the opportunity to more closely interact with the younger generation of Kuwaitis, mostly college students and fresh graduates. I was not surprised that most of their questions to me focused on economic issues. However, what was most impressive was that many of the questions were concerned much less with the expected issues of the day, such as the impact on Kuwaitis’ living standards with lower oil prices, and more about what Kuwait can do to help the rest of the Arab world tackle its mounting economic challenges. Conflict in so many Arab countries are intensifying, worsening unemployment and poverty, and depriving a large part of their populations of means to cover their basic needs. So many refugees are streaming out of death zones, facing increasingly strict immigration rules and harsh conditions of exile in much of the world.
What then could Kuwait do to help? Is there a good role model for a national economic strategy that also benefits the region as a whole? My own response to the young: Start by reflecting on, and appreciating, Kuwait’s own traditions, ideals, and achievements.
Kuwait has over the years demonstrated the effectiveness of an inclusive economic development strategy many features of which other countries have subsequently emulated. As early as the 1950s, Kuwait’s policymakers pressed ahead with a development strategy, initiated by the 11th Ruler of Kuwait His Highness the Amir Sheikh Abdullah Al-Salem Al-Sabah, which not only ensured high rates of economic growth, but also included policies that steadily diversified sources of growth and benefited all social groups. One important innovation toward that end was the creation in 1953 of the world’s first sovereign wealth fund, the Kuwait Investment Authority (KIA). The KIA has prudently managed the country’s oil-generated assets in a way that valued a broad range of investments in support of globally competitive private sector activities. Its decisions have also carefully balanced the country’s current consumption needs with those of future generations, given the uncertain feature of oil income streams.
In its investment decisions, the KIA has placed a high value on both productive “human” as well as “physical” capital. To cite just one example from recent years with which I am most familiar, the KIA has supported the development and hosting in Kuwait of the IMF’s Middle East Center for Economics and Finance (CEF), where I work. The CEF is the first education and training center of its nature in the region, benefiting Arab economic public sector officials and enabling a continual exchange of views among economic experts, scholars and civil society.
Immediately following independence, of paramount importance to policymakers was the creation of institutions supported by a robust legal framework and competent, independent courts to help ensure good governance, minimize the risk of corrupt practices, and enable Kuwait to fully tap its entrepreneurial talent and spur growth-enhancing private investments. The Constitution signed in 1961, also an initiative by HH the Amir Sheikh Abdullah Al-Salem, was a key instrument toward that end, as it decreed the equality before the law of all of Kuwait’s people irrespective of background or personal traits. It also underpinned the creation in 1962 of the most empowered legislative body in the region, Kuwait’s National Assembly, with the authority to provide effective checks and balances on the executive branch.
From the outset, it was clear that Kuwait’s policymakers cared not only about ensuring balanced and equitable growth within Kuwait, but also were keen to take the lead in reversing the widening economic disparities within the Arab world. The disparities emerged from both the skewed geographical distribution of oil reserves across the region, as well as the consequences of conflict and refugee crises stemming from the 1948 and 1967 wars. Kuwait’s leadership chose an economically imaginative and sound approach to reduce such disparities while at the same time enhancing inclusive within-country development. A first step was the establishment of the Kuwait Fund for Arab Development (KFAD), whose primary aim was sharing Kuwait’s wealth by financing infrastructural and poverty-alleviation projects and granting technical assistance to less fortunate countries. The success of the operations of KFAD, which was the first of its nature for a developing country, in turn spurred Kuwait’s leadership to initiate and permanently host the Arab Fund for Economic and Social Development (AFESD), in which the entire Arab world’s financial contributions were pooled for broadly the same purpose as the KFAD.
Kuwaiti policymakers grasped human capital investment’s potential to drive socially equitable economic growth long before that relationship was formalized in rigorous economic models. Their strategy was ingenious in that it combined the objective of building Kuwait’s human capital with the humanitarian goal of alleviating the refugee crisis. Kuwait was keen on facilitating the entry of refugees and freedom of expression, which led to large inflows of highly skilled engineers, scientists, economists, writers and artists escaping strife and conflict. Kuwait became renowned as a global hub of intellectual activity, producing the Arab world’s leading publications, such as the monthly literary periodical Al-Arabi and the daily Al-Qabas. The impact on the quality of education and vocational training in Kuwait was considerable, while the cross-fertilization of diverse, multi-disciplinary talents in the country contributed to the regional eminence of virtually all Kuwaiti institutions, including even internationally iconic ones such as its football team!
Today, the Arab world is facing challenges on many fronts, many of which may appear so daunting as to discourage some, including the youth, from taking action toward reversing the downward spiral. Kuwait is a prime example — and there are others in the Arab world — of a country which, from very modest beginnings, courageously pursued a judicious path of inclusive development that gave priority to building brilliant human capital with good governance, while at the same time pursuing its ideals of humanitarian service and peaceful integration with the regional and global communities. It is important to fully appreciate and harness the traditions, principles and forces that have enabled the country’s success. And you do not need to search for them in some far away glamorous, magical land of miracles. They are still right here.
Oussama Kanaan is the Director of the IMF’s Middle East Center for Economics and Finance (CEF). The CEF’s website address is www.cef.imf.org .
By Oussama Kanaan