By Geoffrey Martin
Rai Insights Contributor
Kuwait: Plans designed to boost non-oil revenues and implement structural reforms has become an urgent policy matter for Kuwait’s government as part of the “Kuwait 2035” development program. The idea of “Kuwaitization” of the labour force has been on the lips of every policymaker involved in this project, as key to success is a planned reduction of expatriate labour and an increasing in Kuwaiti citizens. And for all the incentives and rhetoric its been a complete failure to this point. Why? Is it because Kuwaitis are lazy? Or that expatriates are to blame?
Of course, it is neither, nothing is that simplistic. As a Huffington Post article recently noted laziness “is not a trait that one has or does not have but is instead a set of states and habits. I think that what we call laziness is actually a blanket term for a wide range of behaviors that have different roots and origins.” Keeping this in mind this article explains the challenges and uncomfortable reality of Kuwaiti employment and expat reform in conjunction with the challenges facing economic reform and transformation.
The current parliamentary programme to increase the number of Kuwaitis in the labour force is headed by populist members of parliament. This group argues that the problem is not Kuwaitis trying to enter the labour force; it’s the expatriates. Expatriates are stealing the jobs of citizens, as well as costing the government billions of dinars in free health care, and other services. Furthermore, hundreds of thousands of expats are in Kuwait illegally, usually with their families, who are finding ways to stay in the country through elicit means. In general, the solution to these problems is to slowly (or quickly) rollback benefits and make life in Kuwait untenable to these parasites. It is important to note that the term “expatriates” is generally meant to identity Egyptians and Indians, not other nationalities. This narrative is overwrought, and although it has been quite popularized recently by Safa Hashem, virtually every parliamentarians has called for a wide range of measures to lower the expatriate population and “non-Kuwaiti Kuwaitis”. These measures have a high degree of support from the populace, especially among middle class, hadhari circles. Some of the most recent proposals include:
- Introducing a 2-4% tax on expatriate remittances.
- Revoking the citizenship of widows of Kuwaiti men.
- Claims that there 300,000 Kuwaiti citizenships were forged.
- Forcing expatriates to pay taxes for walking on the street.
- Deporting foreign teachers
- Taking away subsidized healthcare
- Banning expatriates from driving
- Caps on how long for expats can stay in Kuwait (10-15 years)
The thinking is that these steps will lead to more Kuwaitis entering the economy. In this narrative, Kuwaitis citizens are hemmed in by expatriates, and waiting in the wings for employment. To any astute observer of economics or the Kuwaiti economy, these ideas are at best half-baked, which why the government and Diwan Amiri has largely ignored them.
To put it bluntly the potential outcomes of pressuring expatriates out of the income, either by eviction or by increasing costs would not be good for anyone. Increased taxes and costs on expatriates would negatively impact the very private sector economic transformation that the government is planning. As Vice-President of the Money Exchange Association Talal Bahman noted, increasing revenues from expats “will result in less returns and will not represent an actual added value in the national economic balance, or even stimulate the economic situation with a new activity that qualifies to be an income diversification source. Instead, it will end up becoming a new burden”. Bahman correctly warns that increased costs will lead to the increase in black market activity and money laundering. Not only would the economy lose a fair share of consumers, the cost of enforcing and controlling new taxes would add more costs in terms of developing an institutional capacity that Kuwait’s government does not currently have. Only a few days ago the National Assembly’s legal committee and Central Bank of Kuwait rejected calls to tax expats, stating that to do so would be “unconstitutional” and “not in line with Kuwaiti laws”.
Furthermore, there are serious institutional issues that the government is already dealing with that would be complicated by these measures. The two government bodies that manage and oversee manpower, the Manpower and the Government Restructuring Program (MGRP) which oversees and manages Kuwaiti manpower, and Public Authority for Manpower which governs labour in general, are in the midst of merging into a new body. The merger will have many advantages including unification of the bodies to handle manpower affairs but during the merger, which should take a year or more to take full effect, its capacity to manage manpower will be weaker.
There are significant challenges in both the public and private sector to increasing the number of Kuwaitis. According to the MGRP over three-quarters of Kuwaiti workforce are employed in the government. In the public sector there are approximately 341,000 citizens and 100,000 expatriates. There are approximately 186, 000 citizens in the private sector and millions of expatriates. There are also approximately 12,000 citizens waiting to get a job in the government according to recent reports, although this number is actually far smaller than the reality. In 2016 it was reported that more than half of Kuwaiti’s are unemployed, while receiving government salaries, and unwilling to join the private sector. Kuwaiti economic expert Mohamad Ramadhan was quoted as saying, “The disguised unemployment phenomenon plagues Kuwait’s public sector because welfare distribution is still connected to employment.”
Should the government simply lay-off the wide variety of expatriates in the public sector to make way for these waiting citizens? Based on these figures, the Kuwaitization of around 96,000 jobs in the public sector will cost around KD 80 million per month, meaning the country will spend approximately KD one billion for the implementation of the Kuwaitization policy. As MP Saleh Ashour stated recently “it was not possible to lay off expatriates in a number of sectors especially in healthcare and education ministries”. Simply put there are no nationals to replace the doctors, engineers, judges, and other professionals who staff numerous agencies, like the Kuwait Fund for Arab Economic Development whose technical staff is only 61% Kuwait. In fact the Central Statistics Bureau revealed that the number expatriate employment has been steadily increasing (from 26.4 to 30 percent from 2012 to 2016). Ironically, in a press statement, MP Khalil Al-Saleh urged the ministers not to depend on expatriate consultants in laying down employment strategies which are not in favor of the Kuwaitization policy in the governmental sector.
It seems pretty obvious that the Kuwaitization programme will not work, in either sectors. Ramadhan argues that this is especially true of the private sector. Private sector businesses cannot compete in terms of salaries for Kuwaitis. “It is very expensive to hire Kuwaitis in the private sector as there is a large gap between salaries of expatriates and Kuwaitis,” he argues. Furthermore, there are many professions which can never be filled by Kuwaitis whether in the short-term or the long-term, such as nursing, courier, secretary, or tradesman, etc. The average salary of citizens employed in government institutions is approximately 1,500 dinars, while the average salary of a Kuwaiti in a private sector is 1,093 dinars respectively. The few notable successes, the 6Talabat and Carriage food delivery applications, while somewhat unsurprising, “given Kuwait’s cosmopolitan taste for fine dining from around the world” are also outliers and can’t yet be generalized from until we have more successes or failures.
So where do we go from here?
In the long term, the government is making the right decisions. The establishment of the National Fund for SME Development in 2013 will support young entrepreneurs. As an independent corporation, with a capital of 2 billion KD, it will “finance up to 80% of capital for feasible small and medium projects submitted by Kuwaiti Citizens.” Beyond capital expenditures, organizations like the Kuwaiti Foundation for the Advancement of the Sciences (KFAS) are promoting research commercialization and private enterprise through a wide variety of funding opportunities for scientists, academics, and the wider business community. The key to the success of KFAS will be collaboration between expats and citizens, something that has been quite limited at this juncture.
Yet, it is clear that at least in the short term the main issue will not be about money and structural reforms. These initiatives will not change the economy any time soon. Kuwait ranked 77th on the Global Innovation Index (GII) ranking last among GCC states. Saudi Arabia ranked 43, the UAE 47, Qatar 50, Bahrain 59, and Oman 69. The source of potential change lies somewhere else, beyond structure and towards agency. The first step is for the government, civil society groups, businesses, and individuals to address the major obstacle to private sector development and Kuwaiti employment. Bahman said better than I can. He states that “Kuwait, instead of punishing expatriates, should focus on fostering an attractive environment for them that will encourage them to invest in Kuwait and save their money here. This means providing real investment opportunities which could raise levels of liquidity in the market and will lift up the Kuwaiti economy as a whole”.
To replicate the successes of other privatizers, like Dubai, entrepreneurs in Kuwait need to view the large immigrant populations from Southeast Asia (which comprise 75% of Kuwait’s total population) as part of their objective consumer market for goods and services. We need to move past the buzzword of “entrepreneurship” and the coffee shop/laptop millionaire. The Silicon Valley, that bastion of global entrepreneurial spirit, is founded on the idea that “anyone, from any background or any part of the world, can come there and build a company”. Until Kuwaitis address this critical requirement, innovation will stagnate, at least in the short-term.
Laziness is more complex than we think. Laziness is mostly about “the decision of whether or not to pursue a goal as an effort-motivation balance…As a result, what influences the effort-motivation balance, and thus the decision of whether to engage in goal pursuit or remain lazy, is how effortful the goal pursuit is and how motivated individuals are to achieve their goal.” In Kuwait’s case, not only do we need to rectify an imbalance in employment, in an ethical, equitable, and realistic fashion, but we need to change the mindset of why we work and who profits from it.
*Geoffrey Martin is a PhD student in Political Science at the University of Toronto in Canada. He studies Kuwaiti politics, focusing on the historical development of social and political power in the cooperative societies since the 1940s. Geoffrey is also a freelance write for Zenith Magazine in Germany and an Advisor at Gulf State Analytics in Washington, DC.