Kuwait's Strength Is Also Its Weakness

6 MINS READNov 25, 2016 | 09:00 GMT
Kuwait’s Strength Is Also Its Weakness
Unlike most countries of the Middle East, and particularly of the Gulf Cooperation Council, Kuwait has a legislative body that can affect reform, one way or another.


Like most countries of the Middle East, Kuwait has struggled to diversify its economy away from oil. After prices fell so famously in 2014, petrostates of the Gulf were unable to implement the reforms needed to cushion their economies from all the revenue they lost.

Unlike most countries of the Middle East, and particularly of the Gulf Cooperation Council, however, Kuwait has a legislative body that can affect reform, one way or another. Its parliament is one of the more powerful institutions in the country, one that often obstructs the ruling class instead of rubber-stamping its proposals. It is little wonder, then, that the ruling al-Sabah family dissolved the parliament in mid-October over what it called "security challenges" in the region. Kuwaiti citizens will head to the polls on Nov. 26 to elect a new parliament, which will be uniquely positioned to take its time as it enacts reform. That the parliament will obstruct reform is essentially a good thing, but in the long term, it will do little to remodel the Kuwaiti economy.

The parliament's outsized influence predates oil. When oil was discovered in Kuwait in the 1930s, the al-Sabah family had monopolized political power but had not yet monopolized economic power. Prominent merchant families quickly demanded more representation that, once granted, was difficult to take away. And so Kuwait is not quite an absolute monarchy; in stark contrast to some other Gulf states, its legislature has a few constitutional checks on its ruling family. For example, it can call no-confidence votes on the prime minister, block or propose legislation on its own volition and interrogate Cabinet ministers over policy. (In fact, it was this issue that prompted the parliament's most recent dissolution.) The parliament even plays a role in the country's succession process. It must approve the crown prince, and if approval is withheld, it will select one from a list given to it by the emir.

This is precisely what makes the upcoming vote so important. In the first few years after Sheikh Sabah al-Ahmad al-Jaber al-Sabah became emir, parliamentary disputes were often a result of infighting among the branches of the al-Sabah family. But that is no longer the case: Recent conflict has more often been a result of fighting between the political opposition and the al-Sabah family. 

Kuwait's legislature is also relatively diverse, an expression of its measured tolerance to opposition and minority groups. It has, at various times, represented Salafist groups, the Muslim Brotherhood, tribal parties and liberal groups that oppose the ruling family's primacy.

Following a change to electoral law in 2012 that meant to weaken the political opposition, many such groups — the Popular Action Bloc, Kuwait's Muslim Brotherhood, known as the Islamic Constitutional Movement, and various Salafist groups — boycotted the subsequent election in 2013. Many, however, have already pledged to compete in the upcoming elections (currently, the Popular Action Bloc is the most notable holdout). And though the holdout may be detrimental to some degree in the next elections, Islamists and other groups are expected to gain more than they had in the last election in which they participated.

A Testament

When the legislature convenes, its members will have their work cut out for them. Kuwait's economy has been relatively bleak lately. The value of its energy exports has declined sharply since 2013, falling from $108.6 billion in 2013 to around $45 billion this year. Its nominal gross domestic product has shrunk from $174 billion to around $111 billion accordingly. And for the first time since 1999 it posted a budget deficit of roughly $15 billion in 2015-16. That number will roughly double next year.

Despite the stakes, Kuwait's parliament has forced the government's hands, tabling several proposed reforms meant to reduce the budget deficit and cover expenses. One such proposal called for unifying the payment scale of all public employees into one public wage system, a proposal that the ruling class argued could save $10 billion. But the reform stalled after it further proposed to add oil sector workers to the list of eligible employees. Other proposals, notably, have been implemented, including increased energy prices that offset the financial damage of an expensive subsidy scheme.

Most of these kinds of proposals make their way to the floor of the parliament, widely considered an arena in which elected representatives can argue and negotiate ideas put forth by the ruling class. Sometimes, of course, the conflict of interests leads to the parliament's dissolution, but that is merely a testament to the strength, not the weakness, of the legislative body. (No parliament has lasted its full four-year term. The upcoming elections will be the sixth in eight years.)

An Unviable Model

The elections themselves come at a time when the ruling class has been proposing even more economic reform. Some, such as a 5 percent tax on remittances, will not be particularly divisive. Others — such as the partial privatization of the health care and education sectors, subsidy reform, a 10 percent tax on companies and eventually a value-added tax — will be much more controversial.

These issues will, of course, be debated; the government will most likely accede to some of the demands of the opposition as it stands firm on others. But Kuwait can afford to takes its time. The country has the financial luxury of taking a long-term view on reform. Even if it continues to draw down its sovereign wealth fund by $30 billion a year for 10 years, it would still have roughly half the fund left.

This does not, however, mean that the parliament can stop all reform measures in their tracks. If it stands in the way of what the emir considers the most crucial and necessary reforms, he could simply dissolve parliament once again, well before the end of its four-year mandate.

This illustrates Kuwait's fundamental challenge. It has built an economic model completely funded by oil and natural gas revenue to support its workforce, but with its empowered parliament it has less flexibility than any other state in the region to abandon that model. Even discussing the issue of reduced spending on wages proved too incendiary. Other members of the Gulf Cooperation Council are modeling their economic reforms after Dubai's financial, investment and real estate-led model, but Kuwait cannot easily follow suit. For example, unlike the United Arab Emirates, it cannot accept a foreign workforce that takes the key private sector jobs like Dubai has. In Kuwait, most foreign workers perform the jobs that Kuwaitis do not want to perform.

Moreover, adopting a similar economic model necessitates a complete re-engineering of the social order, something the al-Sabahs cannot permit. In the United Arab Emirates, these models were constructed under the guidance of families that simply dominate their political systems more than Kuwait's does. Rival families there can use the legislature as a foil to the al-Sabahs, channeling their challenge to the family's economic monopoly accordingly. 

So while Kuwait may have time on its side, its long-term prospects for reform are bleak. In the absence of the UAE model, the al-Sabahs and the rest of Kuwaiti society will spend the next decade trying to figure out what exactly they should adopt.

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