the The Kuwait Investment Authority, the world’s oldest public investment vehicle, has been in limbo since the term of its board of directors expired two months ago. A new term has not yet been approved as political differences degenerate into disagreement over the composition of the nine-member board, according to a person familiar with the matter.
The uncertainty now hanging over the KIA, which manages Kuwait’s immense oil wealth through two key funds, is emblematic of a wider malaise that is paralyzing policy-making, has prompted rating agencies to point out. guard against demotion and perversely left the government of a great An OPEC crude exporter looking for cash. KIA officials were not immediately available for comment.
This is all part of a deep standoff between members of the Gulf’s only elected parliament and a government whose leader is appointed by the ruling emir, a standoff that has kept the state from borrowing and barely left him enough to pay public sector wages. The conflict is also delaying investment and economic reforms, including an overhaul of the welfare state which the government says is needed to end eight consecutive years of budget deficits.
“The signals this sends are very negative,” said Kuwaiti businessman and economist Abdullah Al-Shami, owner of two companies specializing in medical and financial services. “It’s a new low and I can justify it by saying that we have two political agendas and therefore two economic agendas. The first goes towards new liberal policies adopted by the West and the other wants to maintain the social protection system as it is.
Parliament Speaker Marzouq Alghanim on Sunday called for an extraordinary session this week to approve the budget, an urgent item currently on the assembly’s agenda. In a post that appeared to be aimed at warring politicians, he said the interests of citizens should take precedence over all political differences.
One of the richest nations in the world calls for wealth fund as liquidity dries up
Once a booming economy at the forefront of Arab Gulf affairs, Kuwait has long been eclipsed by neighbors unhindered by elected institutions and determined to secure their seat on the international stage. Dubai has established itself as the business capital of the region, while in Saudi Arabia, Crown Prince Mohammed bin Salman has embarked on an ambitious plan to rebuild the economy.
In contrast, the new Emir of Kuwait is already 80 years old and faces an outspoken 50-member National Assembly dominated since the December elections by independent and opposition lawmakers representing increasingly angry voters. against the status quo and pushing a populist agenda.
Kuwait’s death the former emir in September left a void in a decision-making machine that looks to the ruler to set the national trajectory, dashing early hopes that a change at the top would imbue the country with a new sense of purpose.
“People are trying to survive in the private sector but the government has no strategy,” said Khaled Al-Ansari, a partner in a law firm and involved in three family businesses. “The future is unimaginable. We see Dubai and Saudi Arabia trying to attract business and grow. They might survive better than us, based on what they’re doing now.
Suppression of corruption
Allegations of corruption, money laundering and influence peddling by judges and high-ranking officials have dominated social media in recent months, as the government embarks on an unprecedented and very public cleansing that, He hopes will appease criticism and pave the way for tax reforms that can get the economy back on track.
A former prime minister and other senior officials have been arrested as part of the anti-corruption campaign, but it has been dismissed as a facade by many Kuwaitis as parliamentarians are engrossed in a tug-of-war unfolding in the House.
Opposition lawmakers have focused their attention on the attempt to oust the president and overturn a government-backed vote that prevents them from questioning the prime minister until the end of 2022. They have pledged to block regular sessions until their demands are met, thus crippling decision making.
“We are asking the emir to intervene because we refuse to deal with a prime minister who violates the constitution and a president who won by government votes,” said opposition MP Mubarak Al-Hajraf. “Now we have the former Prime Minister and his Home Secretary in prison for embezzlement. People are more convinced by our rhetoric.
One of the richest Petrostats in the world is strapped for cash
Amid the bickering, parliament paid little attention to a bill that would allow the government to issue international bonds to finance the deficit, and opposed any reallocation of government grants. State, although almost three-quarters of expenditure is absorbed by salaries. and subsidies.
The government needs parliamentary approval for most of the major initiatives of its economic program, including the introduction of a value added tax and an excise tax to increase non-oil revenue as well as a plan to rethink state subsidies and privatize some of the state-owned assets of Kuwait. . All have been stranded in the past decade.
With a deficit of $ 3.3 billion per month, the government resorted to swift action to meet financial commitments last year when oil prices fell and the pandemic struck. If the situation continues as it is, Kuwait will build a cumulative budget deficit of $ 184 billion over the next five years.
“There is a real lack of leadership. The transition to power as well as the pandemic test offered the opportunity to build national unity and a common goal, but that moment was lost, ”said Kristin Diwan, senior resident researcher at the Arab Gulf States Institute. in Washington. “There is no escape from politics in Kuwait. Leaders must build coalitions for change by engaging the public and parliament. It is an arduous test, but with potential gains inaccessible to more autocratic leaders. “
A backward trajectory
Saving Grace of the Economy, the $ 600 billion KIA-run Fund for Future Generations designed as a savings bank for life after oil, is also largely unbreakable without parliamentary approval. . The General Reserve, used for government spending and also managed by the KIA, is now only supported by rising oil prices.
The result is a country which, despite its enormous wealth, is ill-prepared to withstand external shocks such as Covid-19. The economy contracted by nearly 10% in 2020, worse than any of its Gulf counterparts except for neighboring Iraq, a country plagued by decades of war and sanctions.
Dream of “Silk City” Stifled in Only Gulf State Where Voters Matter
Because Kuwait has not experienced the generational transition in leadership seen elsewhere in the Gulf, there is a failure to connect with young Kuwaitis and realize their full potential, according to Diwan. It’s a disconnect that leaves younger generations feeling that change is coming.
“We are worried about the future, but young Kuwaitis are now more self-sufficient, many are trying to create their own wealth and are less tolerant of corruption,” said Anan Al-Subaihi, holder of a doctorate in banking and investment. She said Kuwaitis now have many ways to voice their grievances, especially through social media, where they can criticize more freely.
“The balance of power is changing, even if the strategic direction is not clear.
(Add the speaker of parliament calling an extraordinary session in paragraph 6)