World Bank advises Kuwait to ''energize'' private sector

Published October 24th, 2000 - 02:00 GMT

A World Bank team is visiting Kuwait to advise the oil-rich emirate on ways to "energize" a private sector that contributes just 25 percent of gross domestic product (GDP), economists said Monday. 

 

The team will study obstacles to real economic reform and make proposals to transfer state-run public services to the private sector, Mahdi al-Jazzaf of Kuwait University told AFP. 

 

The team has already held meetings with ministers, senior government officials, economists and representatives from the private sector. 

 

"This is not the first visit. World Bank and International Monetary Fund (IMF) teams have been visiting Kuwait since 1992 to advise on liberalizing the economy," said Jazzaf, an economics professor who attended some of the meetings. 

 

A field survey is being conducted on around 600 private firms to identify major obstacles hampering the private sector from playing its natural role, he said. 

"The focus is on the best means to stimulate the private sector. Privatization is one way, but there are several other factors influencing the process," said Jazzaf, who has been involved in privatization efforts since 1992. 

 

Other factors include economic reforms, attracting foreign investors and employing advanced technology, he said. 

The first visit by the World Bank team resulted in several studies and a number of recommendations calling on the state to privatize public services. 

The project began in 1995 with a disinvestment plan by selling part of the government stocks in local companies. The program had to be halted when shares prices plunged. 

 

Privatization of public services has been restricted to a small number of construction projects, mainly due to stiff opposition from parliament and lack of well-defined plans to privatize public services. 

The World Bank team of a dozen experts this time will also focus on obstacles facing the entry of foreign investors into Kuwait, especially a 1955 taxation law which stipulates up to 55 percent tax on profits of foreign firms. 

 

"Kuwait needs technology and capital to be invested in strategic sectors. This can be brought by foreign firms," Jazzaf said. 

But the team's visit comes at a time when Kuwait, which sits on 10 percent of the world's proven oil reserves, is experiencing the best financial results in two decades, with a surplus of more than $3.9 billion posted last year, thanks to skyrocketing oil prices. 

 

Although the government insists it will press on with reforms, local economists point out the surplus will inevitably slow reforms and liberalization, citing past examples of when high oil income rolls in. 

The government submitted a reform action plan to parliament in June, but major economic legislation, including a privatization bill, has been put on hold until October. 

 

All Kuwaiti citizens — only a third of the 2.2 million population — enjoy a cradle-to-grave welfare system. 

They pay no income tax, enjoy free medical care and education, have guaranteed employment, and receive heavily-subsidised housing and low-priced utilities and fuel. 

 

More than 93 percent of the Kuwaiti workforce of 221,000 have taken up their constitutional right to work in the state sector.— (AFP)  

 

© Agence France Presse 2000  

 

 

 

 

 

 

 

 

© 2000 Mena Report (www.menareport.com)

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