Tuesday, May 21, 2019 | ePaper

The Economy of Kuwait

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Kuwait is a country located strategically in the Arabian Gulf and has a petroleum based economy with oil reserves of about 102 billion barrels that is 9% of the world reserve.
The World Bank in one of its recent country report ranks Kuwait as the fourth richest country in the world per capita. Its GDP per capita was $69,700 (as per 2017 est). His Highness Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah, Amir of the State of Kuwait stressed on focusing Kuwait's energy and efforts on economic development.
Kuwait's economic strength is derived from its oil reserves that have fuelled development in Kuwait since the Second World War and oil production took on a central role in the economy after the industry was nationalized in 1975. Accounting for more than 60% of the GDP and 90% of the exports revenue, it has ensured strong public finances, facilitated consecutive annual budget surpluses and funded the development of a generous welfare system.
Historically a centre of trade and commerce, it served as a hub of trade between India, the Horn of Africa, the Western Middle East and the Eastern Mediterranean rim countries. Early trading consisted mainly of pearls, wood, spices and dates. Since the discovery and development of oil and as a consequence of the Government's egalitarian approach, Kuwait has been transformed into a modern state with a strong and stable economy, high standard of living and a thriving and progressive-looking population.
The historical pre-eminence of Kuwait in finance dates back to 1952 with the founding of Kuwait National Bank. The Bank was the first local public trading corporation in the Gulf region.
In the late 1970s, Souk Al-Manakh was established as an alternative stock market that started trading in shares of the Gulf Companies. In its peak period, the market capitalization of the Souk Al-Manakh was the third highest in the World, ranking behind the US and Japan.
Despite Kuwait's dependence on oil, the government has cushioned itself against the impact of fluctuating oil prices by saving annually 10% of government revenue into a 'Future Generation Fund' managed by Kuwait investment authority which is the world's largest sovereign wealth with a net worth of over 550 billion (2015 estimate). With the wealth management industry that stands out in the region, Kuwaiti investment companies administer huge assets. According to Kuwait Financial Centre, Kuwait firms account for over one-third of the total assets under management in the GCC. In recent years, Kuwaiti investment companies have invested large percentages of their assets overseas and subsequently their overseas assets have become substantially larger than their domestic assets.
Kuwait's economy is fully integrated with the world economy. Consequently, any major development in the world's economy impacts the Kuwaiti economy particularly in relation to shift in demand for oil or fluctuations in exchange rates.
Despite the historically minor role of the private sector, Kuwait is pursuing a programme of economic diversification that is set to boost the private sector. The 20 year KD 30 billion (US $ 103.36 billion) National Development Plan, also known as Vision 2035, initiated in 2010, is the country's blueprint for economic development as it strives to become a banking, trade and service hub for the Gulf region. Vision 2035 priorities in infrastructure, upgradation, new transport networks, increased oil production and improved services.
These will be a catalyst to economic diversification by reducing dependence on oil revenue and increase industrial output by 25%. With new package of investment incentives for attracting foreign direct investment and encouraging private sector investors locally, the government is focusing on industrial growth. Pharmaceuticals, petrochemicals, plastics and food stuff are areas with significant production and export potentialities.
Kuwait's economic stride complements the hopes and aspirations of its people and the Government has incorporated the demands of the people in enjoying better services, state of the art health system and a more advanced education system that will address the demand of the employment opportunities to catapult Kuwait as a developed country in the forthcoming decade.

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