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May 31, 2016 | 17:04 GMT

2 mins read

Kuwait Faces Resistance to Economic Reform

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Kuwait Faces Resistance to Economic Reform

Kuwait has always played a unique role in the Gulf. Too small to defend itself from neighboring Iraq, it has had to rely on powerful allies for security, namely Saudi Arabia and the United States. But it has also managed to maintain a high degree of independence, remaining neutral enough, for example, to host peace talks on the contentious conflict in Yemen. Unlike its neighbors, it has a relatively strong parliamentary system and a healthy economy. This independence has put Kuwait at the vanguard of the critical economic reforms that all Gulf states will eventually need to implement to make their governments more fiscally solvent and less reliant on oil revenues in this period of low oil prices.

But to reform the economy, Kuwait must first cut public sector wages, especially in the state-run oil industry. This has been a predictably contentious process, since the governments of all Gulf nations employ a huge portion of the population. In late April, Kuwaiti oil workers began a strike that lasted three days, building upon labor unrest among customs workers in 2011 and among downstream oil workers in 2013. After several weeks of negotiations, the government bowed to union pressure and partially exempted them from wage reform. The outcome of the Kuwaiti strike will have ramifications across the Gulf, where other governments face similarly thorny issues. Regardless of the urgent need to enact sweeping economic reforms in response to budget shortfalls, these governments will find themselves compromising under social pressure.

Kuwait's citizens also have the greatest amount of freedom of speech in the region, partly because Kuwait does not have the same ethnic or sectarian splits as nearby Bahrain or Saudi Arabia. This less authoritarian system of government has meant that economic reform efforts have come early, but it has also made those reforms susceptible to populist disruption. And Kuwait's citizens have taken advantage of this freedom by being vocal about what they expect from the government, particularly when it comes to economic reform. Demand among Kuwaiti youth for high-paying public sector employment is higher than in other Gulf countries, and more women participate in the workforce than in neighboring countries. This puts a great deal of pressure on the government to absorb these workers.

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