By Geoffrey Martin
Rai Insights Contributor
Kuwait: How does one develop Kuwait’s private sector? How can Kuwait alleviate its historic dependence on unstable oil prices? These questions have been thrown around a lot in recent years. It’s a difficult pair of questions and leads to all sorts of problems of implementing short, medium and long-term strategies that can be achieved in a realistic amount of time and with the complicity of the citizen population.
The official government strategy, announced in 2010, announced as “Kuwait 2035” revolves around Kuwait ranking in the top 30 countries in over 100 different cultural, social, economic, and political indicators by 2035.
The theme of the vision has two components: One, is to become a regional hub for finance, commerce, and cultural identity. The second component is just as important as the first in the Kuwaiti context: it “is to restore the regional pioneering role” looking back to the pre-oil period when Kuwait dominated the Gulf in terms of trade, education, and culture. Much of Kuwait’s development project stems from a need to once again become the “pearl” of the Gulf and take back its rightful place as the hub of the region. This is not merely a pipe dream. Kuwait for many reasons has the real capacity to achieve a more diversified economy. Kuwait’s potential is there; its national population is become more savvy with increased education levels at the university level (especially in the Bedouin population) and a relatively untouched sovereign wealth fund means that there are plenty of opportunities to target specific institutions and sectors of the economy for growth.
This plan envisions transforming Kuwait into a financial and cultural hub through 164 strategic development programs. Much of the funding will come from direct foreign investment, which Kuwait plans to increase by 300% in the next decade.
The “Five Pillars” of Kuwait 2035 outline such a plan. Pillar 1 targets government institutions to make them more effective. Pillar 2 seeks to diversify the economy and reduce dependency on oil revenues by increasing tourism and other tech related industries. Pillar 3 focuses on infrastructure development while the last two pillars address domestic living standards, health care, and the domestic labour market. In basic terms, capital investment in mega-projects, development of education and transport, and increasing the size of the private sector are key to this plan.
But what policies are best for the short-term? Most of the infrastructure projects – such as Silk City, Bubiyan Port, among other projects – are a decade (at least) away if not longer from becoming fully operational and we cannot consider in the short-term any sorts of rapid effects. This is keenly felt by nationals and expatriates who have lived in Kuwait their whole lives and consider it to be their home too. Both groups are anxious about the future and skeptical of infrastructure development programs, which historically have gone at a very slow pace (although as anyone who lives in the country over the last five years will tell you there has been a massive upswing in infrastructure projects across the country with a radical improvement in government services, policing, administrative efficiency, and technological innovation).
In the short term, I tend to agree with Kamel Al Harami of the Arab Times, who argued recently that it was better to focus on foreign direct investment, instead of government funded infrastructure projects now, as this will help provide the alternative sources of income aside from oil that are needed now to deal with the current budget deficits. As Andrew Voight at Gulf State Analytics noted “Government funding is not sufficient to finance these ambitious projects and public-private partnerships are necessary”. Unstable oil prices and rising budgetary costs attributed to healthcare for an aging population in Kuwait and an increasing number of adolescents entering primary and secondary schools are taxing the governments coffers enough that external funding would be extremely beneficial.
Building a successful tourist economy now is probably a better idea for the short-term. Pillar 2 for the plan targets investment in tourism and infrastructure to facilitate it, and for foreign investors these is likely the major short-term opportunity. But the problem with the current plan is the strategy envisions expanding massively the hotel spaces in the country before the demand is there. The Four Seasons opened its first Kuwaiti hotel at the Burj Alshaya Centre this year. By 2020 the Mercure Kuwait, Hilton Olympia Kuwait, and a Grand Hyatt are expected to be in Kuwait.
These infrastructure projects in the long term will be finished but the Kuwaiti government doesn’t really seem to have a vision on the type of tourist they are looking to gain.
Because of Kuwait’s strict laws regarding public displays of affection, the ban on alcohol, and conservatism in general, Kuwait should expand and encourage ‘halal tourism’ from various Muslim neighbours, not the Western ones. Better government sponsored tourist visas, airline deals, hotel deals for people from the wider Muslim world – especially Southeast Asia, India, Indonesia, and West Africa could facilitate a rapid increase in tourist arrivals and would fit into the current infrastructure Kuwait has to facilitate tourism and lead to the revenues that are needed now.
While the sense of uneasiness about the safety of Kuwait are in general terms completely unfounded, in the short term Western travelers are not heading to the Gulf in anywhere near the large numbers they were before because of the instability in the wider region. Furthermore, the fact that it is in close proximity to some of the most unstable countries in the world it shouldn’t be looking in the short term to attract visitors from Western countries like Dubai does.
Regardless, in my opinion Kuwait should not look like or aspire to look like any of the other Gulf countries. I am going to say that again. Kuwait should not try to be like Dubai. Unlike Dubai or Abu Dhabi, which are modern constructs of Western futurism, Kuwait has a much more distinguished and cultured history, and the town of Old Kuwayt brought with it a very unique way of living and the earlier development of Kuwait gives it a much more Arab nationalist and socialist feel than the glass and steel monstrosities of the more recently developed members of the region. Kuwait’s museums and buildings are some of the oldest in the region and have their own character that is worth sharing.
It also has a very unique and precious set of Ancient Greek architectural and archeological marvels on Failaka island, that at this point have not been promoted or developed as the tourist attraction that they are. The town of Failaka, abandoned by its inhabitants during the Occupation is in itself a tourist destination that could be promoted. Developing this site would not be difficult. The island would merely need its road infrastructure to be improved and the harbour would need to be dredged so that ferries could arrive and leave the island at times that are more reasonable than currently exist (sometimes you can only go to the island for a few hours because of the tides coming into the harbour).
In the short term, appraising what Kuwait already has and using it for the country’s benefit is what is beneficial for a long-term without oil. The other projects will eventually start, but progress is needed now, and the first step to that progress is gathering investment money now. This is the only way the circle closes and real progress can be attained.
* Geoffrey Martin is a PhD student at the University of Toronto and currently is a visiting researcher at the American University in Kuwait. He currently resides in Kuwait.