Despite the government’s best attempts to encourage privatization of public sector entities and the push for public-private-partnership in mega infrastructure projects, the skepticism towards privatization among Kuwaitis is high, and is widely shared among those working in both the private and public sector.
Over the past month, discussions in the local economic arena, be it in parliamentary or in union settings or through various communication channels, have centered around government ownership and management of various sectors. These discussions often center around questions of the ability and capacity of the private sector to effectively manage and enhance the services currently provided by sectors that could potentially be privatized.
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 prevailing 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.
Economic analysts and industry experts say that this lack of confidence in the private sector and privatization can be attributed mainly to two primary factors — Predominance of the public sector in the economy, and the lack of positive private sector models.
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 sector. Even when these services deteriorate, there is reluctance to change providers, or encourage privatization of these sectors, for fear of monopolistic practices that have tainted the image of privatization.
Moreover, the very few examples of successful privatization processes have contributed 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 also 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.
These factors undermine the goal of fostering public support for the private sector and improving the business environment. Additionally, the private sector also 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 is 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.
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.