Time for Kuwait to move forward

08 October 2009

Kuwait’s new parliament faces the first serious test of its ability to help the development of the economy

Kuwait’s National Assembly reconvenes on 27 October after its summer break. For the members of parliament and the government, it will be the start of a crucial period for the country’s political system and the development of its economy.

When the National Assembly broke up for its summer vacation in mid July, just two months after it was elected, MPs were given a draft of the government’s latest five-year plan, which contains radical proposals for the development of the private sector.

The recent history of the country, with a series of governments resigning after clashes with parliament, means there can be little confidence that such ambitious plans will be approved. But there are fears that any further political inertia could lead to a longer-term suspension of parliament.

The government’s five-year plan includes a proposal to create five publicly listed companies, which will be given start-up capital by the government or the state’s sovereign wealth fund, the Kuwait Investment Authority (KIA).

The companies will develop much-needed public infrastructure in the housing, real estate, ports, power generation and healthcare sectors, and at least 50 per cent of their shares will be granted as bonus shares and distributed among the general population.

Renewed optimism

The companies will be based on the model used to create a new Islamic bank, Warba Bank, which the government announced on 15 September. In this case, the KIA is providing start-up capital of KD100m ($348m) for the bank. The authority will retain a 24 per cent stake and the remaining 76 per cent will be evenly distributed among Kuwait’s 1.1 million citizens.

Rola Dashti, an MP who chairs the Kuwait Economic Society, says she is optimistic about parliament’s ability to pass “sensible” legislation, and that the government’s five-year plan has received widespread approval for its radical reform proposals.

“There is a lot of hope that we can move ahead without the political deadlock we have seen in recent years,” she says. “The five-year plan deals with a lot of issues to do with reform, economic activity, moving the people from consumption of wealth to the creation of investors and producers of wealth, and increasing the role of the private sector. This is what the people want. It is a huge transformation of the country.”

With an 11th consecutive multi-billion-dollar budget surplus forecast for 2009, on paper Kuwait is in good shape, hosting the most advanced democracy in the Gulf and one of the most robust economies.

Yet Kuwait’s Emir Sheikh Sabah al-Ahmad al-Jaber al-Sabah, and his nephew Prime Minister Sheikh Nasser Mohammed al-Ahmad al-Sabah, have had a torrid three years at the reins of the small, oil-rich state. Within months of being sworn in as emir in January 2006, Sheikh Sabah dissolved the country’s National Assembly to avoid parliamentary questioning of Sheikh Nasser. It is a pattern that has been repeated many times since.

In March 2009, the emir dissolved the National Assembly for the third time in as many years after Sheikh Nasser’s fifth government chose to resign rather than face up to parliamentary scrutiny, this time over accusations regarding the misuse of public funds and poor governance.

The lack of sustained political momentum means that the country has failed to diversify its economy. Kuwait may be expecting a KD6bn budget surplus this year, but its economy is still almost totally reliant on oil.

“If you take away the earnings the country makes from oil each year, and the employment it provides [for more than 90 per cent of the Kuwaiti population], then you see a country in total crisis,” says one MP who asked not to be named. “We are in a massive deficit.”

Of the KD21.1bn of government revenues generated in 2008-9, 94 per cent came from oil sales. Political infighting and a succession of parliaments and governments stalled the estimated $320bn worth of government projects planned in the country, effectively cutting off the potential for private sector growth.

“The government is now giving a lot more importance to infrastructure and to citizen investment through privatisation,” says Waleed Mohammed, an economic analyst at the local Gulf Investment House, before adding a note of scepticism over the cabinet’s ability to push its plans through. “What is planned here is not usually seen through,” he says. “Most of what happens here in terms of economic development is linked to the price of oil.”

The result of the election on 16 May this year, which returned the current National Assembly, suggests that the public is now keen for a new approach.

The previously Islamist and nationalist-dominated parliament was replaced with a more liberal legislature, with 20 new MPs, including the country’s first four female MPs.

The poll was held under a reformed electoral system, with just five multi-member constituencies covering the whole country.

“There is hope that we can move ahead without the political deadlock we have seen in recent years”

Rola Dashti, chairwoman, Kuwait Economic Society

“The challenge now is for the government to take it from here,” Kamel al-Harami, a local independent economic analyst and former KPC executive, told MEED at the time of the election. “We need a prime minister who can pick ministers who are experts in their field and have a genuine vision.”

But change at the executive level has not been forthcoming. Sheikh Nasser returned as prime minister and his hand-picked cabinet was little changed from the embattled government that had resigned prior to the parliamentary election.

Within weeks, the government’s chief tormentors, MPs Ahmad al-Sadoun and Musallam al-Barak of the nationalist Popular Action Bloc, had called for grillings of the prime minister and Finance Minister Mustafa Jassem al-Shimali.

And despite the more liberal make-up of the parliament, there were also some sharp differences between MPs – nine walked out of the inaugural session of the National Assembly in response to the presence of female MPs who had not covered their heads.

“It was pretty much business as usual,” one senior civil servant tells MEED. “We got to pat ourselves on the back for electing a new parliament and then it was back to the way it was before.”

“In the past four years we have had three elections, we have switched from 25 constituencies to five,” says Al-Harami.

“There were many changes to parliament and government posts. But one constant remained: the prime minister and several members of his cabinet.”

But the familiar situation of a parliament and government at odds with each other may not be allowed to continue for much longer. Sheikh Sabah’s tone has become increasingly forceful this year, and there is speculation that he might suspend parliament for even longer than in the past to allow the government to push through its agenda.

“I will closely monitor the performance of both the National Assembly and the government and follow up their work, hoping that each will abide by its role in fulfilment of its oath,” the emir said in a 31 May speech at the opening of the parliament.

Common ground

The subtext, the civil servant says, is that the emir is ready to act if the new government and parliament cannot find common ground. “The message was: you had better get it right this time or I will make use of my powers,” he says. “Kuwait is possibly the only country in the world where any one parliamentarian can request a grilling of the government. That means they have to be ready for grillings.”

“Everything is on the table,” says Dashti, referring to the potential for further resignations, dissolutions, or even progress. “People will keep on hijacking the parliament. Grillings are part of the democratic process. In the UK the prime minister gets grilled every week. We need to move forward.”

As things are, if the government is not prepared to stand up to parliamentary scrutiny, then it will not be able to push through its agenda. “The Al-Sadouns of this world will not go away and will not stop asking for grillings,” says Al-Harami.

But if the government does not submit itself to questioning, or if parliamentary blocs can get the majority they need to block legislation, the deadlock of recent years is likely to return. Beyond this, says Al-Harami, there are two options: a suspension of parliament, or further stagnation of the country’s economy.

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