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Kuwaitis trying to reestablish links to the past 15, August 2010

Posted by thegulfblog.com in Kuwait.
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Every summer since 1986 groups of young Kuwaitis have returned to the pearling beds for 10 days that were a mainstay of their country for more than a century. They dive looking for pearls in an effort to retain a link to their past. From the late 18th to the early 20th century pearling was one of the key drivers of the Kuwaiti economy. At its height it employed over half of all Kuwaitis and affected every aspect of life.

The introduction of the cultured pearl in Japan and the great depression in the 1920s and 1930s decimated this trade across the Gulf. Though other Gulf countries like Qatar suffered far worse, Kuwait too was adversely affected. The discovery of oil in 1934, whilst a sign of things to come did not actually help for the Second World War intervened. Oil was finally exported from Kuwait in 1946.

From then on Kuwait never looked back. The welfare state was rolled out from the 1950s onwards and the majority of Kuwaitis soon began working in the public sector which became more and more bloated and distended as the century progressed. Life for Kuwaitis became easy as they became richer and richer. Any links to the hard work of their past was lost.

The massive benefits that oil has brought Kuwait has also fostered concerns in older Kuwaitis. They fear younger generation growing up in AC and – essentially – luxury know neither about their past nor notions of ‘hard work’. Bluntly speaking, there is no real need for a Kuwaiti child to work hard in school. No matter what his qualification (or lack thereof) he will get a well paid job in some Ministry or other along with a whole raft of other subsidies. This is the modern Kuwaiti way. Whilst, of course, many Kuwaitis work diligently in school and progress to University, nevertheless, there is a pervasive fear or concern in Kuwait that a whole generation is being spoiled.

These ideas of entitlement are corrosive. Kuwait has the most responsive and democratic Parliament in the region. However, political parties are not allowed. This means that MPs must get elected ‘themselves’ without a party’s broad platform to fall back on. Many MPs get elected on a ‘service’ platform i.e. by promising the continuation and expansion of subsidies from the state. It is no coincidence, for example, that public sector pay has risen on average 22% for each of the last 10 years.

A population which grows up on a generous welfare state is, understandably, reluctant to let it go. MPs in Parliament reflect these wishes. Privatisation, which will cause redundancies, raise prices and force Kuwaitis to…well…work, is vehemently opposed. Agreements to work with foreign companies, to attract their investments and expertise are rejected for fear that Kuwaitis’ money will either simply go to foreigners or to a Kuwaiti elite. A telling sign of just how much Kuwait does not want foreign interference in their economy is in Foreign Direct Investment rates. The graph below shows the scale of the problem: Kuwait attracts a preposterously small amount of FDI.

(Hint: Kuwait is in Green; the flat line on the bottom).

Strictly speaking, this is not a problem at the moment. Oil is here for a century or more (how long such demand will last is a different question) and so Kuwait can continue to run its hideously inefficient public sector. However, a time will come when this will change; when foreign expertise is needed to forge new industries to replace oil and subsidies will need to be toned down.

On the former questions the key issue is that other GCC states, in similar predicaments but with different attitudes, have been forging such industries for, in some cases, decades. Airlines, petrochemicals, tourism, financial services and a raft of other ‘possibilities’ are being explored. By the time Kuwait realises that it needs to change or prepare the change for its economy, these other industries – the natural choices for Kuwait – will be highly advanced in neighboring countries fostering high barriers to entry: Kuwait will be decades behind their regional neighbors. On the latter matter, whilst it is just a matter of a population changing their attitudes, this is far easier said than done, particularly after generations of state handouts: who will vote for someone pledging to reduce those?

Kuwaitis are so concerned about their younger generation being lazy and having such an easy life that they are currently debating whether to introduce conscription to instill some kind of discipline. A relatively extreme measure such as this is needed. Attitudes towards money, work and foreign expertise need to change in Kuwait.

Hat tip: NTY Article, Abstract JK