Kuwait’s ‘strategy’ beyond economics

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Dr Oussama Kanaan

Each Ramadan, at Diwaniyas and other evening gatherings, I am impressed by the intellectual richness of the discussions, which seem to have preferred topics of debate that vary from one year to the next. This year there appears to be a special interest in the economic implications of Brexit as well as, in more recent days, the trade war between the US and China. My approach sometimes surprises my interlocutors, especially given my profession as an economist. What I find most worrisome are not the immediate economic impact of the trade disruptions, but the consequences of the underlying movements of fear-based excessive nationalism and inward-orientation that are spreading globally, threatening to seriously reduce economic cooperation among countries, and raising the risk of broader conflicts. I often turn for illustration to the example of Kuwait, drawing on its own open-borders strategy for much of its history, merging a desire for national prosperity with a multilateral humanitarian, ethical approach and a bias for peace.

Viewed in a historical perspective, Kuwait played a key role since the eighteenth century as a regional center for commerce and free enterprise, as well as a haven for those fleeing persecution and conflict. Following independence in 1961, these two features provided an important basis for Kuwait’s development strategy. The country’s leadership appreciated the essential role of good governance in the development of a competitive, outward-oriented private sector. Laws were promulgated in a democratic setting, free from favoritism and discrimination, supported by an independent judiciary. The declaration of Kuwait’s Constitution was an important step in that regard, as it enshrined the principles of fair treatment regardless of gender, tribe, religion or sect. The creation in 1962 of the region’s first National Assembly was important in helping ensure that laws and government policy were guided by the people’s interests.

In addition to laying the foundation for an open economy to fully tap its people’s entrepreneurial spirit, Kuwait’s policymakers also recognized the merit, on both economic as well as humanitarian grounds, of opening the country’s borders to those fleeing conflict and civil strife. The combination of a liberal immigration policy, a legal and judicial framework that afforded protection against discrimination and human rights abuses, as well as freedom of expression, led to the inflow of highly skilled professionals, scholars and artists. Kuwait, starting in the 1960’s,thus became a major hub for intellectual activity, with a high-quality system of education and vocational training. Even Kuwait’s public sector, valuing merit-based employment including of expatriates, was renowned for its efficiency. I am always fond of repeating that Kuwait produced the Arab world’s most enlightened publications (including Al-Arabi and Al-Qabas) as well as institutions that competed brilliantly on the world stage including its national airlines and football team.

In addition to its pro-actively open trade and immigration policy within a sound governance framework, Kuwait’s leadership was keen on judiciously investing the wealth from its vast oil reserves while strengthening its global relations. Priority was given to public infrastructure investments to support private sector activity and strengthen transport routes and communication with the rest of the world. The world’s first sovereign wealth fund, the Kuwait Investment Authority, safeguarded the country’s assets through worldwide investments to maximize the welfare of its current as well future generations. Kuwait’s outward-oriented investment strategy, in addition to being financially profitable for the nation, also served to further enrich Kuwait’s foreign policy and commercial links with external markets, and provided a good foundation for diversifying the country’s export production pattern away from oil.

Kuwait’s leadership also strived to complement its investment strategy with a multilateral approach that served the broader Arab community. An important initiative in that regard was the creation of one of the first regional funds of its kind, the Kuwait Fund for Arab Development, to invest as well as share Kuwait’s wealth by financing development, technical assistance and employment-generating projects in other Arab countries. That initiative was followed by Kuwait’s hosting of the Arab Fund for Economic and Social Development, which pooled all Arab countries’ financial contributions for investments and aid to countries in need. Both Funds contributed to greater overall cooperation within the region and helped reduce economic disparities across countries.Kuwait has also played a leading role in enhancing regional cooperation through the peaceful resolution of disputes, most recently through active mediation within the Arab Gulf area.

Today’s world conditions are in many ways different from those Kuwait faced in its Golden Age. And yet Kuwait’s experience still offers valuable lessons, both to Kuwait’s new generation and the rest of the world. Do not fear greater openness to the world, whether in trade, investment, employment or in sharing of ideas, thoughts and knowledge; over time all sides are bound to gain. And keep the pursuit of humanitarian goals a core part of your development strategy.Those lessons are essentially the same as those reaped by Kuwaiti sea merchants who, shortly after the nation’s birth, courageously sailed on beautifully crafted boats to trade, learn, and build mutually beneficial relations in distant lands.

By Dr Oussama Kanaan

Dr 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

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