In Kuwait, the absence of clear mechanisms for gauging public sentiment poses a challenge. Notably, the prevailing skepticism among most Kuwaitis towards the private sector remains resilient, irrespective of whether it could effectively address specific issues within its domain.
This skepticism persists, even with the presence of state-regulated controls, reports Al-Jarida daily.
Over the past month, discussions in the local economic arena, be it in parliamentary or union settings or through various communication channels, have centered around government ownership and management of various sectors.
These discussions often contrast with inquiries into the efficiency of the private sector and its capacity to potentially manage these sectors more effectively or otherwise enhance service provision.
Three key topics have dominated these conversations — firstly, the concerns of several National Assembly representatives regarding the privatization of Kuwait Airways Company; secondly, Oil Minister Saad Al-Barrak’s acknowledgment of the challenges associated with involving the private sector as a strategic partner in the petrochemical refining project at the Al-Zour complex; and thirdly, the establishment of the Kuwait Warehousing Company by the state (through the Public Authority for Investment) as a competitor to privately-owned and managed warehouse and logistics services companies specializing in the same areas of business.
The reasons for this distrust in the private sector cannot be attributed to an analysis of each individual project or deal mentioned above, as determining the preference for private sector ownership or management varies depending on the sector. Instead, this skepticism serves as a starting point to analyze why most Kuwaitis lack confidence in the private sector and resist privatizing government-owned entities, despite ongoing complaints about government administration. This is particularly noteworthy since successful models worldwide often involve private, non-governmental companies and projects.
This lack of confidence in the private sector can be attributed to two primary factors:
Dominance of the Public Sector: Official data from the Central Bureau of Statistics reveals that the public sector employs 83.9 percent of Kuwaiti workers, while Kuwaitis in the private sector make up only 16.1 percent. Essential services such as healthcare, education, housing, infrastructure, and even food services are largely provided by the government. The familiar adage, “Better the devil you know than the devil you don’t,” aptly captures the sentiment. Even when government services deteriorate, there is hesitance to change providers due to apprehension about an uncertain future. Monopolistic practices, including trading in state property and residency and labor-related contracts, have further tainted the image of privatization.
Lack of Positive Private Sector Models: Successful models of private sector involvement have been scarce, and this absence contributes to public skepticism. The failure of specialized state institutions like the Public-Private Partnership Authority and the technical body for privatization projects to establish effective privatization models in less complex sectors has hindered confidence-building. Furthermore, the National Fund for Small and Medium Enterprises, despite its substantial capital, has failed to create a thriving market for youth projects. This has led to a lack of trust among Kuwaiti youth in private work and the private sector. This undermines the goal of fostering public support for the private sector and improving the business environment.
The private sector itself bears some responsibility for these issues. It has not been actively encouraged to serve as a viable alternative to government ownership or administration, particularly in terms of its fiscal contributions to the state. Tax revenues from the private sector are minimal, and only a small percentage of the Kuwaiti workforce is employed therein. To change this, there’s a need to enhance the business environment, promote opportunities based on transparent governance standards, and reduce the sector’s reliance on government spending and tenders. Currently, the private sector is heavily dependent on state contracts, making it appear rentier and overly reliant on public funds.
In conclusion, addressing these challenges requires a multi-faceted approach that involves both the public and private sectors. Building trust in the private sector, improving its contribution to the economy, and encouraging its independence from government spending are essential steps towards fostering a more balanced and vibrant economic landscape in Kuwait.