Friday, 20 January 2012

Visiting Kuwait, an unusual economy!

Earlier this week I was in Kuwait for a few days, doing some work for the Kuwait Institute for Scientific Research (KISR). The Institute is huge, occupying several buildings on a large campus beside Kuwait University, and within KISR there is a small economics division. That's where I was working. The first picture below shows the entrance area of the main KISR building, and the second shows me standing outside, waiting for the car to take me back to my hotel on the other side of town.



The work I was doing for the economics division involved writing a report about their planned research on private sector development, advising how best to develop this area and implement various projects. I presented my thoughts about all this and then had extensive discussions, partly in a group setting, partly with individual researchers from the division. Everyone was very open and friendly, so the whole visit was enormously interesting. My revised report needs to be completed by early next month, not too hard to manage.

What really struck me, though, is just how much fresh thinking - and some tough decisions - is needed to get Kuwait's private sector into better shape. At present the private sector accounts for under a third of the economy, and although privatization is under active discussion, it's not easy to implement because so many state sector prices are heavily subsidised. For the moment this is feasible as the country has huge trade and budget surpluses, so the government can afford the subsidies. But in the longer term, it wants the private sector to expand to provide jobs for more and more Kuwaitis (most of whom are currently employed in the public sector). At the moment, the private sector is not investing enough to generate the required number of new jobs, and privatization, when it eventually happens, will probably result in some job losses.

Hence although the current position seems pretty comfortable, it's not expected to last, and no one has quite figured out how to bring about the needed changes to ensure that lots more jobs are indeed created. I'm not sure I can do that either, though I guess I'm expected to provide some helpful pointers. That's what I shall try to do, anyway!

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