Published October 18th, 2000 - 02:00 GMT





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Political Outlook 


Kuwait’s Oil Minister resigned in late June, following an explosion at this Gulf state’s main oil refinery that killed five people. Sheikh Saud Nasser al-Sabah, a member of the ruling family, denied any criminal liability for the blast but accepted political responsibility for it. The refinery, which produces 440,000 barrels per day, suffered 80 percent damage in the explosion.  


Kuwait’s government and Parliament continue to battle over economic issues. At stake is a new procedure delivered by the Emir that would allow foreign companies to develop the country’s northern oil fields, which are believed to contain 10 billion barrels valued at more than $200 billion. The government claims that this move would generate $7 billion in foreign investment, create jobs, bring in new technologies and enable the country to augment its oil production capacity by 900,000 barrels per day.  


A group of 30 Kuwaiti Islamist and liberal Members of Parliament who contest the oil policy demanded a comprehensive and prompt debate. Opposition leaders insisted upon full disclosure of the selection process of foreign firms, having become wary after the recent history of fraud and embezzlement by Kuwait's state-owned enterprises. These parliamentarians were also concerned with the manner in which the government unilaterally implemented legislation. Their resistance to oil policy -- as with the legislation that would have allowed women to vote -- is perhaps as much a means to protest the government’s legislative stiff-arming as it is objection to the policy itself. Many opposition politicians want to act as a body that balances the government's power. They object to the Emiri decrees, issued while Parliament was dissolved, and not necessarily to the principles behind these laws. 


Economic Outlook 


Kuwait’s new energy policy is consistent with the government’s overall plan of privatizing state-owned enterprises and economic liberalization. Other recent measures in this direction include a decree by Emir Sheikh Jaber al-Ahmad al-Sabah, issued while Parliament was dissolved in June 1999, allowing foreigners to own 100 percent of Kuwaiti firms and permitting them to invest directly in the Kuwaiti Stock Exchange. Kuwaiti officials hoped that foreign participation in the local bourse would attract fund managers and improve its performance, which dropped 40 percent last year because of low investor confidence and weak oil prices.  


In April 2000, Kuwait introduced a new health insurance scheme obliging the Gulf state’s expatriate workers and their families to have medical insurance. Economists believe the new plan will hit small companies hard and reduce consumer spending. This new insurance scheme is one of several steps aimed at slashing state expenditure and is part of a comprehensive economic reform package, not yet approved by parliament, which would fight the mounting budget deficit. However, the recent destruction of oil refineries may strangle the government’s projected oil revenues. 




Domestic political divisions in Kuwait are focused more upon the legislative process than on the nature of the policy itself. Parliament and the government must soon agree on a more balanced legislative process. Still, the increased liberalization promoted by the government will probably improve the country’s investment climate and present significant investment opportunities to multinationals in a cross-section of sectors, especially in the lucrative energy domain. 

© 2000 Mena Report (www.menareport.com)

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