Our economy is good, and privatization is the solution

This news has been read 1088 times!

ACCORDING to our finance minister, Kuwait’s economy is strong and solid, but short of cash and liquidity. This is attributed to our increase in annual expenses which cannot be met because the global oil price has not reached the range of $90 per barrel and above. Adding to this is our MPs’ usual request for increasing cash benefits, including an increase in the monthly salaries and benefits for government employees. These benefits and subsidies currently cost more than KD 1,500 per month for each citizen through subsidies for oil, water, electricity, food baskets, allowances, and retirement benefits.  

At the same time, our government simply cannot refuse our MPs’ demands and is unable to face the usual grillings, because it has only one choice of conceding, as it just cannot survive otherwise, and wouldn’t last.

Of course, we have many options including borrowing from international financing houses, or even borrowing from our sovereign wealth fund, if approved by the parliament, as the funds belong to our future generations.

There is another alternative, which is to copy Saudi Aramco in selling five percent of its shares to generate cash to pay for its mega projects.

There are rumors circulating in the market about the possibility of Aramco selling another five percent in the coming months and of China being the top candidate to participate in the second sale. This probably must be aimed at covering the expenses of another mega project or for contributing to financing the hosting of the World Cup in 2034.

It seems that Saudi Arabia is going on a spree of projects just to become the top leader in almost every field such as tourism, sports, culture, music, opera, theatre, and new events, in the hope of recovering its long-term investments with clear objectives.

On the other hand, Kuwait Petroleum Corporation owns more than ten companies of various oil activities covering every aspect of the oil industry such as both upstream and downstream, refining, shipping, petrochemical, aviation, lube oils factories, overseas exploration, and overseas retailing activities. The government can generate millions of Kuwaiti dinars by selling up to 40 percent of its activities to the private sector, especially since most of our oil companies originally were partially or wholly owned by the private sector.

For example, Kuwait National Petroleum Company was 40 percent private, and Kuwait Oil Tanker Company (KOTC) and Petrochemical Industries Company (PIC) were 100 percent privately owned. Hence, what is the harm in converting or selling parts to the private sector like the way we are doing currently with our local gas stations, as two main stations are privately owned?!

This way the government can benefit from generating cash and avoiding the hustle, financial downgrading, and the search for the best deal. Selling part of its assets certainly could lead to more efficient and better organization while keeping the company slimmer.

This however would be possible only if there was someone to listen or to lead, or if such ideas would have been accepted by the parliament without being accused of “selling the country”.

In order to be serious, we need to prepare and form professional teams that are ready to initiate, present the idea to the parliament and the executive authority, and debate on it, so that it is not killed before birth.

Despite our strong economy, the government must be ready for new challenges. It must be clever and have smart initiatives, instead of issuing the same old statement that Kuwait is short of cash, something that none of us believe.  

By Kamel Al-Harami
Independent Oil Analyst
Email: [email protected]

This news has been read 1088 times!