Sadly the Kuwaiti economy lags behind the economies of fellow Gulf Cooperation Council (GCC) countries in numerous international indexes. However, the five-year development with its massive spending capacity stands the chance of enhancing the country’s ranking.
It is not unfair to relate the problem at least partially to non-stop wrangling between the elected legislative body and appointed executive branch. Recently, the London-based International Court of Arbitration ruled that Kuwait must pay Dow Chemical Co. of the US some $2.16 billion in damages. The ruling concerns cancellation of a 2008 agreement to acquire a stake in the firm’s plastic business.
At the time, Kuwaiti MPs forced cancellation of the proposed business on the grounds of overpricing and possible financial practices. Certainly, the development was the last of a series of negative news and reports regarding the country’s economy.
Amongst others, all GCC countries have outperformed Kuwait in a key report dealing with information and communication technologies (ICT). More specifically, Kuwait was ranked No. 62 in the 2012 Global Information Technology Report, in turn issued by the World Economic Forum issues the annual report in partnership with the renowned business school of INSEAD.
By comparison, the report ranks Bahrain No. 27 globally, the best within the GCC entity. In short, the report ranks reviewed countries on the basis of their achievement on the Network Readiness Index (NRI), which is derived from performance of ranked countries on 10 pillars including infrastructure and affordability.
Still, Kuwait is the least regional recipient of foreign direct investments (FDI). According to the World Investment Report 2011, issued by the World Conference on Trade and Development (Unctad), Kuwait merely attracted US$81 million worth of FDI in 2010. By comparison, Saudi Arabia enticed some $28 billion in the same year.
In addition, Kuwait lacks impressive ranking at the Global Competitiveness Index (GCI). The index is an integral part of the Global Competitiveness Report, in turn published by the World Economic Forum. The 2011-2012 version of the report ranks Kuwait number 35 globally, only better than Bahrain with regards to GCC countries. In contrast, the report ranks Qatar number 17 globally, the best amongst all Arab countries.
Last but not least, the 2012 Index of Economic Freedom ranks Kuwait number 71 worldwide, merely ahead of Saudi Arabia in the GCC context. By comparison, Bahrain achieved ranking number 12 in the same report, the best amongst Arab countries at large.
Publishers of the report, namely the Heritage Foundation and the Wall Street Journal of the US, are known for adopting conservative ideologies and embracing private sector at the expense of public sector initiatives. Rightly, the report regards governmental involvement in the economy as something negative on the basis of causing displacement of scare resources. Suffice to say that the petroleum sector, in turn controlled by the state, accounts for 90 per cent of treasury income, 85 per cent of exports and 40 per cent of the gross domestic product (GDP).
Nevertheless, the country has a golden opportunity to make up for lost opportunities via the five-year US$105 billion development programme commencing in 2011. The challenge now relates to making good on the promise of spending this sizable amount.
Also, Kuwaiti investors can do their share by engaging in local investments. Happily, the recently-released 2012 report by the Boston Consulting Group has high marks for high net-worth households in Kuwait. According to the report entitled, “The Battle to Regain Strength: Global Wealth 2012,” Kuwait enjoys the third wealthiest households in the world. Some 11.8 per cent of households are regarded as millionaires and possibly more in the future.
The writer is a Member of Parliament in Bahrain.