Presentation of Country Reports

Country: Kuwait

Features of Privatisation Experience in the State of Kuwait

by Mr. Ishak Abdul Ghani Abdul Karim

General Manager

Economic Cooperation of the State of Kuwait

Economic Situation in Kuwait

During the last forty years, Kuwaiti general sector expanded due to many factors, such as weakness of private sector and phenomenon’s of petroleum wealth. The state of Kuwait became source of (85%) of G.D.P. and it employs (95%) of Kuwaiti employees, where the public sector focused on consumer economic activity and it was simple and totally based on public expenditure of Kuwait. The economy of Kuwait went through three steps during the relation between revenues and expenses.

First step

The balance or amplitude step during 60s or 70s, where the increase of expenses and it suited the increase of revenues and financial surplus.

Second Step

The stagnation and retreat step during 80s, where the expenses continued to increase with a stability of revenues which most of were external assets.

Third Step

The deficit step, which started after Iraqi invasion. During this step the expenses increases extremely, and revenues decreased, exhausting big rate from external assets, the government borrowed more than (8) billion K.D. to cover the expenses.

If deficit continued so it will lead to more exhausting of assets and public reserve, and increasing of loans. By looking to items of expenses, it shows that it can’t make great reductions on budget without decreasing the volume of public sector, especially circumstances don’t show a chance for great increase of revenues. If the recent situation continued, and without any changes of oil prices, the government should take many political and economic and social negatives maybe hold by resulting from studied and progressive privatization during five years.

Basis of economic reform in Kuwait

There are many basis of economic reform in state of Kuwait, such as

1.   Control or rationalize the public expenditure

2.   Increase the revenues on short and medium term, and enhance non petroleum revenues.

3.   Restructure the public sector, and remove the overlapping ion fields to raise productive efficiency

4.   Developments of supervision role of the state, and control monopoly

5. Privatization by issuing regulations and fixing the administrative institution which able to manage and implement it

6.   Developing private sectors, and removing government subsidies

7.   Focus on national labor, for encouraging them to pursue in the private sector.

Privatization objectives in Kuwait

The concept of privatization is transfer the management or ownership of activity with commercial characteristic, from the public sector to private sector, to raise efficiency and economic rationalization.

Privatization program in Kuwait aims to:-

·         Increase economic efficiency of all productive sectors

·         Decrease government expenditure and increase revenues

·         Develop the standards of public services

·         Liberalize the market, open the door for competition and attract foreign investment.

·         Ensure job opportunities on medium and long term

·         Reduce burdens and administrative, financial responsibilities of production sectors

·         Expand the principle of public assets to involve more number of citizens

All different sectors in Kuwait are candidate to privatization except fields that related to sovereign of state such as : defense, security, judiciary, legislation and oil production sector because of it’s strategic importance.

The expected advantages of privatization in Kuwait:

·         Decrease the volume of public sector, ensure new sources for public revenues

·         Increase the productivity of labour force

·         Raise the standard of services and improve it, and offer new services

·         Reduce the government subsidies to services and goods

·         Facilitate administrative procedures

·         Encourage the return of Kuwaiti capitals from abroad

·         Attract foreign investment

The state of Kuwait evaluated privatization process, and it established practical and actual bases to implement it, that because practical problems may appear that impedes privatization or the expansion of it. Those problems such as employees which work at public authorities and the contractor may dispense with them, the second problem is limiting public sector assets, which contain high initial value where it market value is very low, the other obstacle that may impede privatization is we don’t have public sector that obtain high capabilities and able technically and administratively to assimilate the public sector institutions, this problem vary from country to another.

There is a need to review laws and legislations, which relate to privatization process, and change some of them, removes restriction that occur in some countries on free trade competition.