KUWAIT CITY, March 9, (KUNA): An eminent expert has called for comprehensive structural reforms to boost integration among the country’s various sectors and enhance the financial basis to minimize effects on the State budget due to low oil prices.
Dr. Walid Abedmawlah said in an interview with KUNA that core of reforming the economy is finding alternatives to oil to broaden public income resources and balance the general budget, regardless of the fluctuating oil prices. The Kuwaiti economy heavily hinges on oil resources, accounting to 90 percent of the income and an equal proportion of exports. The oil sector secures 55 percent of the gross domestic product.
The state budget must be intuned to “economic turbulence and low oil prices,” he said, calling to “seize the opportunity and tackle the defects in the national economy for sake of rationalizing spending and diversifying income resources.” Expenditure rationalization must cover fuel prices, other subsidized basics that are a burden on the budget, he said noting that the International Monetary Fund has recommended scheduling hikes of the fuel prices in the middle term, out of “inflationary concerns.”
Abedmawlah, who recommended that subsidies’ rationalization must be transparent, said the private sector contributes with 30 percent of the GDP, as well as 58 percent of the nonoil GDP. This sector’s investments are centered in construction, communications, finance and retail trades; which are unattractive for the Kuwaiti workforce, 90 percent of which are employed in the public sector.
There are promising sectors, such as banking, commerce and real-estate, he said, but to shore them up, there should be clear development schemes. Some of the strong aspects of the national economy are availability of capital, skilled labor in some sectors and the GCC market “which is a robust economic and commercial realm that constitutes an incentive for the national economy in shadow of real integration policies based on common industrial and investment policies,” said Abedmawlah.
Shedding further light on problems affecting the Kuwait economy, he mentioned bureaucracy and lack of competition, where the World Bank ranks Kuwait 101 from among 189 countries (in the 2016 issuance). Kuwait’s low ranking is largely due to thorny permit measures, crediting, settling defaulting cases, investor protection and external trade, he said, adding opining further that income diversification should cover applying the added tax value, in harmony with other GCC countries, on non-necessary commodities and services.