Third Development Plan Raises Alarm, Continuation Of Current Financial Plan May Lead To Economic Stumbling

The third development plan for Kuwait 2020-2025 issued by the General Secretariat of the Supreme Council for Planning and Development stipulated that to support the development of high skills in the labor market, Kuwait needs to attract a greater number of high-skilled foreign workers, pointing out that only 15 percent of those workers have a university education, Al Jarida reported.

It affirmed its endeavor to restructure the government apparatus to simplify the structures, powers, and governance and to implement a tax system on selective and value-added goods.

The plan focused on the establishment of the Northern Economic Zone Corporation of companies, and the development and inauguration of Mubarak Port in 2025, noting that the establishment of this zone will stimulate the flow of foreign direct investment, which decreased by 17 percent in 2016 and currently stands at 105 million dinars.

The development of the region will reduce Kuwait’s dependence on oil by 50 percent.

230,000 jobs in 2035

The plan revealed that the required job rate by 2035 will reach 230,000 jobs. The privatization program would achieve sustainable economic development in partnership with the citizens and the public sector. Improving the business environment to encourage foreign direct investment and the development of small and medium enterprises.

Hamada: Enhancing the role of the private sector in growth

Minister of Finance and Minister of State for Economic Affairs and Investment Khalifa Hamadeh revealed that to achieve the objectives of Kuwait Vision 2035, Kuwait is proud to launch the third development plan 2020-2025 to strengthen the private sector as an engine of economic growth, take into account the lessons learned from the implementation of previous plans.

He stated that to strengthen the economy and create job opportunities for all, the development plan will enable the creation of opportunities to expand the role of the private sector in providing services.

Budget financing

The plan said that oil represented 90 percent of state revenue, 90 percent of exports, and 50 percent of GDP and that Kuwait still relies on oil as a major source of financing for the state’s general budget.

With the low cost of extracting oil, compared to other countries and the high oil prices, Kuwait has enjoyed an excellent financial position since the 1950s.

The cost of oil production is rising, and it is expected to continue to rise, but the recent drop in oil prices was a reminder of the volatile nature of oil markets. The oil price fell from $100 a barrel to less than 40 in less than two years. Kuwait lost 60 percent of its revenues, and the state’s general budget in the 2014/2015 fiscal year recorded a fiscal deficit for the first time in 15 years, and the budget is still facing a fiscal deficit since then and an increase in the expenditure item.

The Kuwaiti citizen’s income is still highly dependent on the state’s oil revenues, especially since nearly 80 percent of citizens work in the government sector, and the budgets, wages, and subsidies account for about 70 percent of the state’s general budget.

Regarding the challenges that Kuwait should address by 2035, the plan said that in 2018, Kuwait ranked 72nd out of 193 countries in the e-participation index, and is ranked 111th out of 157 countries in 2019 in the human capital index.

By 2035, the proportion of the national workforce in the private sector is expected to increase to 69 percent.

The report stated-

• Non-communicable diseases such as diabetes and cancer cause the death of approximately 72 percent of Kuwaitis, which reduces the life expectancy of Kuwaitis compared to the average for developed countries.

• 72 percent of deaths are due to non-communicable diseases.

• Kuwaiti youth seeking work represents 27 percent of the workforce within their age group (15-24 years), which is four times higher than the overall unemployment rate among citizens.

• Because of the current spending rates and the drop in oil prices, Kuwait could lose the assets of the Future Generations Fund and the State’s General Reserve Fund by 2035.

• An additional 250,000 housing units will need to be built over the next 15 years to accommodate the increase in housing demands, but at the current rate of implementation, only 180,000 units will be built by 2035.

• In 2018, Kuwait ranked 78th out of 180 countries on the Corruption Perceptions Index.

• In 2019, Kuwait ranked 46th out of 141 countries on the Global Competitiveness Index.

• The cost of financial and economic reform will increase the longer we delay in addressing this dilemma. In fact, addressing it may become very difficult, with severe and painful consequences.

• The incompatibility of the average growth of oil prices with the growth of the gross domestic product during the period 2000-2020 indicates structural imbalances in the national economy.

• In light of the state of oil prices, and due to the total dependence of public finances on a single source of income, Kuwait today faces an exceptional and serious challenge that threatens its ability to continue providing a decent life for citizens and their basic needs, and the inability to fulfill local and international obligations.

• The state’s general budget deficit during the next five years without proceeding with economic and financial reform is expected to reach between 45 and 60 billion dinars.

• It is no longer possible or available for the state to postpone the entitlement to address its financial and economic situation and develop programs to diversify sources of income and stop waste in public expenditures.

By 2035, the third development plan is targeted at-

• Reaching 35 percent and better in all global competitiveness indicators.

• Making further progress on the indicators of the sustainable development goals.

• Increasing the percentage of Kuwaitis employed in the private sector to 69 percent of the total Kuwaiti workforce.

• Accelerating the private sector’s GDP growth rate to 3.5 percent.

• Increasing the private sector’s share of GDP to 35 percent.

 

SOURCE   :   TIMES KUWAIT

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