War shock rekindles Kuwait debate over privatization law

• Does Kuwait need, more than ever, to activate its privatization law to alleviate its budget deficit in the coming years? What are the benefits of privatization for the Kuwaiti economy?

Does the local private sector have the financial capacity to undertake the tasks it would manage on behalf of the state?

The daily posed these questions to several economic experts, who believe that Kuwait currently needs to activate privatization more than ever before. Economic expert Ahmed Al-Khashnam called for the activation of the privatization law after the end of the war the region is witnessing between the US-Israel and Iran, which has entered its seventh week. He highlighted that the war has disrupted Kuwaiti oil exports, which will inevitably affect the current state budget, leading to losses amounting to billions of dinars. Al-Khashnam explained that privatization would be a lifeline for the Kuwaiti economy in the future, reducing dependence on oil as a primary resource, which currently accounts for over 95 percent of national income. If the war were to continue for nearly a year, it would not only affect the state budget but also Kuwaiti society as a whole, given that salaries depend on oil revenues. A prolonged war would lead to higher inflation rates. Implementing privatization mechanisms would benefit the Kuwaiti economy in several key ways

• By contributing to the diversification of income sources
• By resolving a significant part of the employment challenge.
• By attracting more foreign capital to the Kuwaiti market
• By reducing a substantial portion of the financial burden on the state budget.
• By reducing bureaucracy that hinders the growth of the national economy.

Al-Khashnam also noted that privatizing housing, for example, would help reduce the backlog of housing applications, which continues to increase annually due to population growth. He called for updating the 2010 privatization law in light of recent developments, indicating that the law is no longer attractive for privatization.

Al-Khashnam stressed that if the privatization process is to begin, it should include housing, the Ministry of Public Works, and certain sectors within the Ministry of Health. He also noted that other countries in the region have advanced further in privatization, despite Kuwait having started early by conducting studies related to private sector involvement in managing government projects.

Meanwhile, former Secretary of the Kuwait Transparency Society and an economic expert Dr. Manal Al-Kandari affirmed that privatization is one of the most prominent economic tools countries resort to in order to achieve efficiency in resource management and promote economic growth. She highlighted the importance of activating privatization in Kuwait so that it does not remain heavily dependent on oil revenues.

Dr. Al-Kandari emphasized that privatization has become one of the most important strategic options for diversifying income sources and supporting the labor market. She explained that implementing a privatization system will create a more competitive and transparent environment, in addition to attracting foreign investors seeking promising opportunities. Privatization contributes to reducing red tape and bureaucracy and improving operational efficiency, which increases investor confidence in the local economy. It is an important means of developing other sectors such as tourism, logistics, telecommunications, and renewable energy, especially as these areas can create new sources of income, reduce dependence on oil, and enhance long-term economic stability. Dr. Al-Kandari highlighted the vital role of privatization in creating job opportunities and developing young people’s skills to meet labor market demands. She stated that opening up the field to the private sector will have a positive impact on entrepreneurship, encouraging young people to establish their own businesses instead of relying entirely on government jobs. Dr. Al-Kandari affirmed that despite the advantages of privatization, it may face some challenges, such as job insecurity or rising prices. She emphasized the importance of providing sufficient guarantees for workers in the private sector through legislation.

In addition, the CEO of the Center for Future Foresight Consulting and Studies and an economic expert, Qais Al-Shatti, affirmed that privatization is one of the most important pillars that must be implemented to alleviate the pressures on Kuwait’s budget resulting from the repercussions of the wars witnessed in the region. He highlighted that the most important advantages of implementing privatization include accelerating economic reform, promoting sustainable development, increasing investment opportunities, improving management, encouraging innovation, achieving financial savings, reducing costs, narrowing the budget deficit, stimulating the private sector, attracting capital, and enhancing competition.

Al-Shatti summarized the potential risks of privatization as an increase in bribery and fraud during the process, which raises the chances of corruption and mismanagement, and may lead to greater monopolization due to the lack of genuine competition. He expressed concern that privatization could lead to the monopolization of the privatized facility or resources by a single company or a limited number of companies, thereby reducing real competition.

Al-Shatti emphasized that these risks can be addressed by establishing a robust system of oversight and transparency, strengthening the role of independent institutions, effectively enforcing anticorruption measures, promoting civic participation, and enhancing good governance.