THE TIMES KUWAIT REPORT
The Global Manufacturing and Industrialization Summit (GMIS-2021) that was held in Dubai from 22 to 27 November brought together leaders and industry experts to discuss and debate the best ways to prepare for the post-COVID-19 recovery and help determine the role of the industrial sector in accelerating this recovery.
The summit, held under the theme ‘Rewiring Societies: Repurposing Digitalisation for Prosperity’, underlined the role of technology in shaping the future of industries. Speakers also explored the best ways to leverage the opportunities and solutions presented by the Fourth Industrial Revolution (4thIR) to address various challenges faced by industries.
Kuwait was late to the first and second industrial revolutions that enveloped the world from the mid-eighteenth century to early twentieth century. During this period, the country was for the most part a quasi-state with ill-defined borders that resulted in frequent border incursions by neighboring tribes and states. The ensuing political instability along with the lack of any well-established governance structures meant that the authorities in power were in no position to indulge in setting up long-term plans, let alone designing an industrial policy for the country.
However, when the third industrial revolution emerged in the mid-1900s, Kuwait was well-positioned to seize the opportunities presented by the new technological innovations. The country had just discovered a seemingly limitless source of wealth in the form of oil in 1938. This, along with the country’s independence that came along in 1961, allowed policymakers plenty of leeway to adopt 3rdIR technologies.
The period following independence was marked by a rapid modernization drive that saw the construction of large infrastructure projects, including new residential areas, the production and supply of electricity and desalinated water around the country, and major road networks connecting the capital to its outlying districts. The new developments taking place were also accompanied by the sprouting of several modern industries that used efficient 3rdIR technologies to enhance the manufacturing of products that largely catered to the booming construction sector.
In addition to rudimentary industries related to construction material, and those linked to the production of food and beverages, the only other successful industries were those that relied on the behemoth oil sector for the supply of raw materials, such as the mega petrochemical and refining industries that developed in the country. But this overbearance of the oil industry and its impact on the economy, — estimated to account for nearly half of the country’s GDP, 95 percent of its exports and roughly four-fifths of state revenues — had the unintended consequence of curtailing the development of, and precluding the need for, a wider non-oil industrial base in the country.
Despite the importance of enhancing industrial development to diversify the economy, provide employment opportunities to young nationals, and attract greater participation of the private sector in the country’s economic growth and progress, there has been very little progress in non-oil industrialization of the country.
For instance, though Kuwait has been a large purchaser of defense ware from abroad, especially since the ill-fated Iraqi aggression in 1990, the country has failed to introduce any offset programs that would have allowed the development of defense industry in the country. In addition, many restrictions and impediments hinder the implementation of effective industrial policies and processes in the state.
Although the country introduced and enacted an Industrial Law in 1965, that laid the prerequisites for developing the industrial sector in the country, it has not been effectively implemented over the decades since then. Even a public authority mandated to oversee industrial development in the country, the Public Authority for Industries (PAI) came into existence only in 1996. Discussions on the need to organize a strategic role for the industrial sector in the economy, and to amend the industrial law of 1965 and recalibrate it to make it in line with the prevailing needs of the country and its people, have so far reached nowhere.
The only change in recent years is that the PAI is now in charge of developing the country’s national industrial strategy, encouraging participation of local industries, expanding the production base and allocating industrial land sites. Notwithstanding the measures initiated by the authorities to revive the industrial sector, the share of this sector in the country’s economy has continued to decline, from the 12 percent of GDP in 1998 to 9.8 percent in 2019.
This figure drops even further, to around 4 percent of GDP, if oil refining and associated petroleum industries are reduced from this contribution. Experts point out that huge petroleum reserves and an opulent sovereign wealth fund that garners lucrative returns from its mainly foreign investments, have enabled the state to withstand and overcome past financial strangleholds on its economy.
However, there is also consensus among investors and industry experts that it is dangerous to depend on this one income source as a safety net in case of financial emergencies. The nearly US$600 billion that is estimated to lie in the country’s Future Generations Fund are based on currently stable investment yields. But as any investor could vouchsafe, investment yields are anything but stable. Kuwait’s main income sources, its earnings from oil exports and its returns on FGF investments are subject to the vagaries of foreign variables over which the government has no say.
The prevailing lack-luster industrial situation and recurring policies in the past that ignored the development of a robust non-oil industrial sector, are now hindering the government’s efforts to diversify the economy, away from its overreliance on hydrocarbon resources, and to support a viable non-oil private sector that could provide employment opportunities to national cadres. It would certainly be sad and shameful if 4IR were to suffer the same fate as its predecessor, especially considering the several comparative and competitive advantages that the country currently enjoys in this domain.
There is no denying the importance of 4thIR to the growth and development of Kuwait in the years going forward. It has the potential to raise income levels and improve the quality of life for citizens and residents. In his keynote address to the World Economic Forum (WEF) meeting in Davos, Switzerland in 2016, Founder and Executive Chairman of WEF, Klaus Schwab, pointing to the emergence of 4thIR said that the world stood on the threshold of a technological revolution that would “fundamentally alter the way we live, work, and relate to one another”. He added that the 4thIR was not merely a prolongation of the one that preceded it, but rather a distinct one in terms of its velocity, scope, and impact on existing systems.
He stressed that the speed of current breakthroughs has no historical precedent. “When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace. Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance,” said Mr. Schwab.
He noted that the possibilities of billions of people connected by mobile devices, with unprecedented processing power, storage capacity, and access to knowledge, were unlimited. And these possibilities will be multiplied by emerging technology breakthroughs in fields such as artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing.
In Kuwait, though many of those who have gained access to and derived the most from technologies associated with 4thIR so far are consumers able to afford it, over time this is expected to trickle down to the wider population, as has been the case witnessed with other technologies and devices. With more users being able to afford and access the digital world, technologies linked to 4thIR will make it possible to cater to both demand and supply side aspects. It will allow businesses to provide products and services in a more efficient manner, while it will give consumers the ability to further enhance and enjoy their personal lives.
Many of the technologies made available by a fusion of digital hardware and software on handheld devices are already available to mobile users in Kuwait. This includes the ability to download music, watch a film or play a game online; it allows us to order and pay for products online; to book a taxi ride or a flight ticket, or a table at a local restaurant. It permits us to present our valid identification and health details to authorities, and to continue a chat with our friends while doing all of the above, with the possible exception of when presenting ID to security personnel.
Technological innovation linked to 4thIR will also lead to supply-side benefits for businesses, allowing them to make long-term gains in efficiency and productivity. Transportation and communication costs could drop significantly, while logistics and global supply chains will become more effective, and the cost of trade is expected to diminish substantially. All of these augur well for the state and its people as it will open new markets and drive economic growth in the country.
Among the advantages that Kuwait enjoys to leverage the full potential of 4thIR are its access to abundant financial and human capital. A national youth force, the majority of whom are well-versed in the use of digital media and its applications on myriad platforms, is certainly an enviable asset for the country, as it prepares to transition to 4thIR. Also, the IT infrastructure backbone in the country is well developed, with broadband wireless covering the entire country and fiber optic fixed connections becoming increasingly widespread. The country, which has also rolled out the latest 5G services to many areas, has one of the lowest internet charges in the world.
Latest data on data and device usage in Kuwait show that the use of Smart TVs in homes registered a phenomenal jump in the last five years, going from less than 4 percent in 2015 to over 74 percent in 2020. And, with over 5.6 million subscriptions to mobile broadband communication, in a country with a population of less than 4.6 million, the penetration rate also exceeds 100 percent. With qualified human capital readily available, and the needed infrastructure in place, all that remains is for the state to support the rollout and growth of industries that can leverage 4thIR to the fullest, in an efficient and effective manner.
In a speech delivered at the GMIS held last week in Dubai, Director-General of Kuwait Public Authority for Industry (PAI) Abdul-Karim Taqi, said that Kuwait will harness the full potential of 4thIR and promote the usage of digital technology and artificial intelligence (AI) applications across the industrial sector. He also underscored that the adoption of cutting-edge digital and AI-powered systems will require skilled human cadres, which in turn, will lead to the emergence of a new labor market and employment opportunities for nationals.
Though the PAI chief was effusive in his welcome of the 4thIR and highlighted its potential to revolutionize manufacturing and supply networks in the industrial sector, he was scant on details on how the PAI planned to achieve this transformation. There was nothing in his speech on implementation plans or timeframes for rolling out this leading edge of innovation, nor on the investments needed to transform the industrial sector to make it receptive to the 4thIR. But this lack of concrete details is not surprising.
Immediately following its independence, Kuwait notched a storied reputation for being in the vanguard in introducing avant garde reforms to the region, including in the fields of health, education, women’s emancipation, global investment, humanitarian aid and assistance, as well as in developing a welfare state for the benefit of its citizens. Unfortunately, the country also has a more recent, not-so-reputable history of rolling back early reforms, and for drawing up grandiose schemes and innovative projects that remain unrealized, or implemented in an untimely manner. The broad strokes that policymakers in Kuwait employ to paint the country’s future plans and policies, often end up shrivelling in the scorching sun.
As with its other economic and social developments, Kuwait’s path of progress in the industrial sector is littered with torn roadmaps, abandoned policies and stalled reforms. Unless urgently heeded to, this situation could lead to the country once again missing the development boat. The lack of concerted efforts to develop a cohesive and coherent industrial policy could result in the country being unable to leverage the full potential presented by the 4thIR, despite being endowed with all the prerequisites needed for successfully unrolling these technologies in the country.
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