TIMES KUWAIT REPORT
Inaugurating the first session of the 17th legislative term of the National Assembly on 18 October, His Highness the Deputy Amir and Crown Prince Sheikh Mishal Al-Ahmad Al-Jaber Al-Sabah urged the executive and legislative arms of government to open a new chapter in their relations and to work together, with their focus on the country’s development and the well-being of its citizens.
Advising the parliament members to put aside their disputes and to “abstain from wasting the assembly sessions with bickering and quarrels … and raising their voices in breach of norms of dialogue”, the Crown Prince noted that “the people and the ruling family were partners and bear responsibility for the welfare and prosperity of the nation”.
Addressing lawmakers, he stated: “It was the will of the people that brought you to Parliament without any intervention from our side. Our speech today before your Parliament is a new covenant, which is an address of guidance and a message from the political leadership to the children of my nation, and to the authorities, about how work should be done during the coming period.”
A day earlier, in his speech to the new Cabinet following their constitutional oath-taking, the Crown Prince declared: “You have before you major issues and many files which are of great importance to us. Each one of you has to apply the law in a fair and equal manner, boost integrity and transparency, execute issues of priority for the political leaders, and the faithful people of Kuwait.”
He added that loyalty for the nation and His Highness the Amir, respect of the constitution and application of laws, protecting freedoms and interests, and the funds of people should be the foundation of the government’s action. He urged the new Cabinet to work out a strategy to protect and preserve the security of the nation, implement development projects, improve healthcare and education, provide housing units, as well as tackle corruption and pursue the corrupt”.
In his speech on the occasion, His Highness the Prime Minister Sheikh Ahmad Nawaf Al-Ahmad Al-Sabah expressed deep and sincere gratitude to His HIghness the Crown Prince for the confidence vested in the Cabinet. He promised to exert all efforts and place all available resources so as to attain the aspirations of citizens, and to implement full-scale reform programs in all domains. The prime minister also underlined that the aspired reforms would entail positive and constructive cooperation with the National Assembly, all segments of the society and the civil society associations.
Following the opening, the new session of parliament got underway on a subdued note, with legislators and ministers evidently imbibing the reconciliatory spirit embedded in the Crown Prince’s speech. A new sense of cooperation, consensus and understanding appeared to prevail in the hallowed Abdullah Al Salem Hall of parliament,
as the two arms of government pledged their commitment to assume their national responsibility and work together for the betterment of the citizens and the development of Kuwait.
The conviviality appeared to continue throughout the first day of parliament. Shortly before the election of the National Assembly Speaker, the Minister of State for National Assembly Affairs and Minister of State for Housing Affairs Ammar Al-Ajmi announced that on the directives of the political leadership, the government would leave the hall to allow MPs elect their speaker “in a transparent and fair manner”.
Election of the speaker was a divisive and acrimonious issue in the previous parliament, with legislators accusing the then government of interfering in the election process to favor their candidate, former Speaker Marzouq Al-Ghanim. Lawmakers then unanimously named veteran lawmaker MP Ahmad Al-Saadoun as speaker for the 17th legislative term, and MP Muhammad Al-Mutair was elected as deputy-speaker.
The prevailing affability in parliament could provide the government with a window of opportunity to pass a slew of legislations and bills, including the annual budget for fiscal year 2022/23 that needs to be passed before November, and the long pending public debt bill. Many of these legislations have remained unresolved over the years due to the contentious atmosphere that persisted in parliament between the elected legislators and various appointed governments.
Among the priority files that need parliamentary cooperation are several vital reforms and policies critical to improving the economic and investment climate in the country. Although there is general consensus among all sides in parliament on the importance of economic and financial sector reforms to the country’s future, the challenge has been in finding agreement on designing and implementing policies and programs that cater to the interests of all stakeholders, while ensuring sustainable, inclusive and equitable economic growth and productivity.
A report in September by Al Shall Consultancy, a leading business and financial advisory firm in Kuwait, noted that although public expenditures have multiplied 5.75 times from over the past 20 years, there has been no concomitant progress in productivity. Calling for proactive policies aimed at sustaining public finance, the consultancy noted that education, health services, infrastructure, housing and even the country’s cleanliness and environmental pollution are all worse today than they were when public expenditures were far less.
In Kuwait, while decline in oil prices lead to sharp budget deficits, rise in prices do not result in a corresponding surge in surpluses. This is largely because increase in oil prices compels the government to spend more on non-productive expenditure, including raising wages and subsidies so as to placate citizens. Almost half of all subsidy allocations in the budget are currently directed toward energy subsidies.
Higher oil revenues also invariably lead to lowering the government’s appetite to introduce unpopular fiscal reforms, such as realigning the public sector wage bill or introducing revenue boosting measures such as the 5 percent value added tax (VAT), agreed to by the six Gulf Cooperation Council (GCC) states. Most other GCC states have introduced VAT and have begun benefiting from its revenue benefits, Kuwait continues to prevaricate.
Kuwait forever seems to be in a ‘catch-up’ mode; enacting legislations, introducing reforms and policies long after others in the immediate neighborhood have already enacted and profited from such measures. Over the years, local economists, as well as specialists at international institutions such as the World Bank and the International Monetary Fund (IMF), have repeatedly been calling for economic and fiscal reforms, and policy measures that could help boost economic growth, provide employment to nationals, and in general improve Kuwait’s long-term economic and financial outlook.
Among the many reforms suggested by the IMF and others are: Improving macroeconomic stability by de-linking government expenditure from volatile oil revenue, so as to help avoid the large fluctuations in spending caused by sharp rises and falls in global oil prices. Enhancing tax revenue, which currently accounts for only a negligent portion of the total revenue, by implementing VAT and excise taxes and other tax reform. This could help build a stronger non-oil revenue base that then reduces the country’s vulnerability to oil price fluctuations.
Additional fiscal reforms include rationalizing government expenditure and curtailing wasteful and unproductive spending, while leaving room for growth-enhancing investments, especially those that reduce the economy’s dependence on oil. Savings realized by curtailing wasteful expenditure could be redirected to develop infrastructure, provide support for vulnerable sections of society, and improve quality and outcome of education.
Education reforms in particular should aim to improve educational standards so that the level of academic achievements are in line with regional and global standards. There is also the need to provide training to youth so as to better match the skills they possess with the actual needs of the labor market. Current unemployment, and the potential for it to increase in future, largely stems from a mismatch between job offers and the jobs sought by the national workforce, as well as the lack of skill-sets to effectively meet labor market demands.
On graduating, most young nationals seek work in the public sector. Currently the public sector accounts for over 80 percent of the employed nationals, but this situation is increasingly becoming untenable. Around 58 percent of total government spending is currently allocated towards public sector wages and salaries. Attempts to encourage youth to seek employment in the private sector by paying allowances to increment the salaries provided by companies, as well as compelling private companies to employ nationals through a quota system have both failed to realize desired results.
One reason behind the continued preference among nationals for a job in the public sector, and their reluctance to join private companies, is the large difference in compensation between the two sectors. In addition, the job security and fringe benefits provided attract youth to the government sector. Sinecure jobs that do not entail any serious effort on the part of the employee is also an added bonus that attracts nationals to this sector.
Rather than continue to pursue ineffectual policies such as paying allowances to bring salaries close to par between public and private entities, a better option would be to realign the sky-high public sector wages and benefits, and make them compatible with that offered by the private sector. This would also have the added benefit of reducing the public sector wage bill, while mitigating the wage costs incurred by the private sector from employing nationals.
Policy reforms aimed at greater privatization, more public-private-partnership projects (PPP), and improvements in business climate, could further enhance competitiveness, encourage productivity gains, and increase investment in the country. Though some progress has been achieved in improving the business conditions in recent years, more needs to be done, as other countries in the region are making even more rapid progress in enhancing their business environment to attract foreign investments.
The current harmony in parliament could provide a rare opportunity to also pass the contentious debt law that has now been revised by the authorities. The bill would allow government to tap into global debt markets and provide flexibility for its debt management. In the absence of a debt law, financing budget deficits have relied on liquid assets of the state treasury, the General Reserve Fund. While this policy leads to the country having a low level of debt, it becomes unviable under sustained low oil price scenarios.
Unless the government and parliament heed the sagacious words of His Highness the Crown Prince, and recalibrate their past political strategies to work together to confront the many prevailing challenges in a cohesive and cooperative manner, the reforms and policy changes that are so direly needed will continue to languish, to the detriment of the country and its people. Is this what we want from parliament?