‘Kuwait lags behind in diversification’

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Vital to reduce economy’s links with politicians

KUWAIT CITY, July 16: The Kuwait Economic Society (KES) called for a review of the degree of politicians’ interference in the economy, strengthening the economic formation of politicians, and solving the problem of bureaucratic decision-making, reports Al-Rai daily. In a press statement, it stressed that the global oil market is likely to undergo huge shifts in the near future that may limit oil revenues. The society explained that it has become important to reduce the economy’s link with politicians, and to link its fate more with specialists.

This is not without the importance of having a supportive political will. Due to years of politicization of the economy, Kuwait has become the last in the Gulf to diversify the economy and the country’s non-oil revenues. Within the Gulf, it is considered most reliant on crude oil exports, most affected by fluctuations in the oil industry, and the most vulnerable in terms of exposure to energy price fluctuations. It is also considered most likely to face potential deficits, the least open in terms of trading partners in the world, and the most dependent on the Asian markets.

Kuwait has clearly lagged behind the Gulf countries in diversifying its economic activities and exports due to various factors, the most important of which is political interference in the economy, and the poor continuity of reform and development programs due to the rapid pace of government change and limited administrative stability, all of which are recent economic classifications that reflected successive governments’ failure to diversify exports of Kuwait or its revenues, which are frighteningly dependent on oil.

The success of governments in most countries is measured by their ability to create job opportunities as per concrete and sustainable economic plans. However, this important criterion does not represent any concern of successive governments who are indifferent to the increasing unemployment rates. The society referred to the report issued by the Central Statistical Bureau in September 2022 concerning unemployed Kuwaitis. They explained that, according to the data of the Civil Service Commission (CSC) as of 2021, the number of unemployed Kuwaitis reached 7,668.

The number of unemployed, as highlighted by the Public Authority for Civil Information in its report on population and labor force issued in September 2021, was 32, 851. This means that the unemployment rate amounted to about 7.2 percent, or more than four times the number of the unemployed, according to the figures of the Central Statistical Bureau. Questions are being raised about these actual figures in this regard. The society stated that the establishment of a fund to manage state assets is a smart strategic idea for Kuwait at the time, especially since many countries established such a fund, or under the name of a body that is specialized in managing state assets to optimally benefit from then, with high efficiency on which the fund will be built.

Although Kuwait is the first in the world to implement the idea of sovereign funds, the passing of more than 60 years has not succeeded in saving public financial sustainability that still depends on oil as a basic resource. There is no doubt that Kuwait, over the past 50 years, has used a large part of the state treasury. Revenues are well invested in infrastructure and education, but a large part goes to operating expenses, and to a lot of extravagance and waste through what is called the distribution of wealth to citizens. The goal may be noble, but it turns it into an investment that adds value, to drain!

On the other hand, the society made it clear that the principle of transparency and governance is one of the most important investment pillars absent from sovereign funds. These public funds, estimated at hundreds of billions, have no clear control over them. They are presented to the National Assembly once a year, and the State Audit Bureau’s notes remain pending without a response. The investment commission does not manage private funds for a person or a company, and therefore it has the right to do whatever it likes with these funds.

This is vague, and it does not provide adequate reports about the deals it concludes, or even the ones it concluded decades ago, and the gains and losses that were achieved from them. The society stressed that it is not accusing anyone, but in the current period and with what is being circulated about the embezzlement of sovereign funds, it is necessary to talk about the issue of disclosures and transparency, which has been absent in the Public Authority for Investment for decades under the pretext that the law does not allow the disclosure of information. It said, “The disclosure of fully managed assets carries with it geo-political risks, as the government claims, in a volatile and flammable region.

On the other hand, there is an inherent right of the people to know how their money is managed, where it went, and what gains or losses it achieved. The state deals with old concepts that no longer exist, and is not commensurating with achieving transparency in investments that the world is making every effort to achieve, as dozens of international reports are issued annually to clarify the size and quality of these investments, and the size of the losses or gains that have been achieved in them. In the era we are currently living in, there is no longer information that can be kept secret. Despite all that, we find the deep-rooted government mentality dealing with the principle of “as usual”, forgetting the economic foundations based on transparency and objectivity, as if we did not come up with a lesson as happened to the world in the global financial crisis. Some of them are due to the lack of correct data and lack of transparency in many economic investments, which caused the financial collapse that the world witnessed in 2008.

In light of infl ation and the middle class, the society confirmed that the rise in food prices pushed overall infl ation in Kuwait to its highest level in three years. This was the result of a combination of high international food prices, partly linked to the decline in the US dollar, prolonging supply chain problems and rising prices by dealers, whereas for local retail it triggered higher purchase prices.

On the other hand, we do not see any significant role on the part of the executive authority or the legislative authority, and we believe that the future outlook for food prices is still unknown to decision-makers.” It is remarkable to note that among the GCC countries, Kuwait and Saudi Arabia have witnessed inflation in food prices since the beginning of 2020 against the backdrop of rising global food prices. In contrast, the remaining GCC countries have mostly witnessed constant prices for food items.

What is surprising from this data is that the annual inflation rates in Kuwait for that period are the highest compared to the Gulf countries, despite government support for some of the basic food items. At the same time, those countries, with the exception of Kuwait, are trying to reduce their dependence on food by investing in agricultural lands and technology in their countries and foreign countries.

Many studies indicated that the Saudi Agricultural and Livestock Investment Company (SALIC) imported more than 350,000 tons of wheat from Ukraine, Canada and Australia in 2021, which represents approximately 10 percent of the country’s needs. Hassad, the agricultural arm of the Qatari sovereign wealth fund, has also purchased land in Sudan and Australia, and has plans to invest hundreds of millions of dollars in agricultural projects in Kenya, Brazil, Argentina, Turkey and Ukraine.

The society said, “As for Kuwait, we always hear that the Kuwait Investment Authority has been planning to invest in agricultural lands abroad for years. What makes us suspicious about the fact that the local government measures will not work is the exposure of the Kuwaiti economy, which touches the limits of 75 percent, so that Kuwait will be one of the countries most dependent on imports to meet most of its needs for commodities.

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