On September 29, 2020, the head of state of Kuwait, Sa** Ahmad Al-Jaber Al-Sa**, passed away at the age of 91. The news of the death of this Arab leader of the older generation has aroused widespread concern and heated discussions.
During his administration, taking advantage of Kuwait's abundant oil resources, he successfully boosted Kuwait's economic development to new heights.
Kuwait's economic situation has become the focus of global attention, with two of the world's top three rating agencies downgrading its sovereign credit rating in succession due to Kuwait's higher liquidity risk.
Although Kuwait was once contested for its rich oil resources, its currency was once worth several times more than the US dollar, and was known as the most expensive currency in the world. So why is it so strapped these days?
Kuwait is located on the northwest shore of the Persian Gulf in western Asia, adjacent to Saudi Arabia and Arabia, and across the sea from Iran. Kuwait was an important part of the Arab Empire since the 7th century AD.
In the 19th century, Kuwait was in danger of being annexed in the wars between the Ottoman Empire and the British Empire, and eventually became an independent sovereign state under the protection of the British.
Kuwait did not start out on oil resources, but attracted many merchants for its excellent natural harbor and high-quality pearls. At that time, Kuwait's main mode of livelihood was to go to sea to collect pearls.
Kuwait is strategically located and was once an important ** port. However, the rise of cultured pearls in Japan has challenged the competitiveness of Kuwaiti natural pearls. In search of a new way out, the king of Kuwait noted the success of his neighbors in oil exploration and believed that his own country might also contain precious resources.
However, due to its limited financial resources, Kuwait decided to cooperate with the major powers in the exploitation of this precious resource.
Kuwait was once a small, obscure country, but from 1937 to early 1938 a revolution in oil extraction brought the country to prominence.
The Kuwait Oil Company, a joint venture between the United States and the United Kingdom, has carried out geological surveys and oil well drilling in the Bulgan area of Kuwait and has discovered rich oil resources. Since 1946, Kuwait's oil production has reached annually.
8 to 90 million tons, second only to the United States and Venezuela, accounting for the third place in the world.
The abundance of oil resources has changed the Kuwaiti state dramatically, and it is desperate to get the oil exploitation rights back in order to better manage and utilize these precious resources.
In 1971, Kuwait** signed a contract with a local company, stipulating that half of the profits from oil exploitation would be owned by **. This decision has led to an unprecedented increase in income, which in turn has greatly improved the lives of the Kuwaiti people.
With the rapid development of the economy, Kuwait successfully escaped colonial rule and achieved true independence and freedom. Although Kuwait's economy has been affected by war and other factors since 1970, it has been resolved with the positive response of **.
From the end of the nineteenth century to the present, the image of Kuwait has been stuck in the image of Kuwait as a small, wealthy country, which can be seen in their daily lives.
Kuwait's welfare policy is extremely superior, and local residents are responsible for tuition, medical expenses, food, and even housing and water bills, without additional costs.
In terms of employment, the monthly salary of college students after graduation is about 440,000 RMB, ** will arrange work; Whereas, professors are paid more, with a monthly salary of about 1320,000 yuan is a very generous salary in the world.
In addition, most families have more than two jobs and are staffed with foreign domestic servants. Such living conditions are easily achievable at the local wage level. So, what is the current state of Kuwait?
Kuwait's increasingly tight financial situation is due to a variety of reasons. For a long time, Kuwait's monolithic economic development model has made its economy very fragile and extremely sensitive to changes in the external environment.
Since 2014, global oil prices have continued to fall, with the lowest level falling to $40 per barrel, which has undoubtedly had a huge impact on Kuwait's revenue.
Faced with the double whammy of oil prices** and the coronavirus pandemic, oil exporter Kuwait is facing significant economic pressure. In 2020, Kuwait's oil and gas exports amounted to only one-third of what they were in 2014, and revenues continued to decline.
In addition, Kuwait's oil export industry has also been hit hard by the ongoing impact of the pandemic, with a sharp reduction in the world's ** leading to a significant reduction in the number of flights and ships, and oil consumption declining day after day.
To make matters worse, Kuwait's extremely arid climate and soil and water conditions make it impossible to grow crops in the country, and it has always relied on imports for pure water resources, which are hundreds of millions of dollars a year spent on agricultural products and pure water.
Kuwait** announced that, as of November 2019, there may be a situation where staff members may not receive their salaries. Kuwait's high spending, including public spending, has left the local population almost entirely dependent on support for food, clothing, shelter and transportation.
At present, the problem of high public spending in Kuwait has reached a point where it cannot be easily solved.
Ever since the discovery of its abundant oil resources, Kuwait has relied on this wealth to bind its citizens in an invisible way. ** Provide people with good living conditions, as long as they live in peace and avoid acts that may cause social unrest, such as demonstrations, elections, etc.
In Kuwait, there is a state of mutual checks and balances with the people, and the stability of the people comes from the compromise of the people, and the people's good life comes from the support of the people.
However, after many wars with Iraq, the authorities began to wonder whether this extremely wealthy society was a blessing or a curse for Kuwait.
Kuwait's unique way of life has led to its weak defense capability in wars and contingencies. While such an attitude to life can maintain social stability in normal times, it can have serious consequences in emergency situations.
On the day of the outbreak of the Gulf War, Iraq occupied the entire territory of Kuwait, and this incident sounded the alarm for Kuwait** and made them realize the significance of wealth to society.
Although there are many expatriate workers in Kuwait, the locals are accustomed to being supported and are reluctant to work, which is a common phenomenon in the Gulf countries.
Kuwait is located in the United Arab Emirates, where 90% of the population is expatriate and the remaining 10% are local residents. The fact that 90 per cent of the population serves the remaining 10 per cent makes the situation in Kuwait very similar to theirs.
This accustomed way of life, although it seems calm, actually hides many hidden dangers and risks. Most of the grassroots population are foreigners, which is difficult to manage in a unified manner, and there are problems such as smuggling and illegal stay, which poses a great threat to the security of the entire country.
Given the current situation in Kuwait, the search for an effective solution has been sought.
Kuwait had faced the problem of depletion of oil resources, in order to protect the people's livelihood, they set up a savings plan called "future generations", and every year a certain percentage of the income was taken from the ** income and stored for the use of its own people.
At present, the total amount of future generations** is about $550 billion, enough to feed the 1 million people of Kuwait, but this is only a temporary solution and does not lead to problems.
As future generations lose balance and resources are depleted, Kuwait's population will face a dilemma.
Kuwait** is not helpless in the face of a fiscal deficit. On the contrary, it still has the world's fourth-largest sovereign wealth, with a whopping $592 billion.
Among them, offspring** is also one of its assets, although it cannot be used at will, but **has reached a consensus with the parliament that offspring can be used by borrowing or temporarily transferring**.
This shows Kuwait's pragmatic approach to resolving the issue.
Kuwait has great potential for capital utilization, and becoming a creditor country through borrowing is a viable option. To date, however, the Kuwaiti Parliament has not passed the relevant bill.
At the same time, Kuwait is undergoing a structural transformation of the economy across the country, which is not an easy task. After all, Kuwait's economic structure has been entrenched for hundreds of years, and successive leaders have seen the problems and tried to make changes, but can solutions be found now to problems that predecessors could not solve?
Since the local resources and natural climate cannot be changed, Kuwait** has set its sights on the world and actively used foreign capital.
While Kuwait is expanding its cooperation with the United States, it is also looking for new cooperation opportunities in East Asian countries. They found that the private sector in East Asian countries is the best choice to mobilize the enthusiasm of local young people and reduce the burden of **.
Therefore, the Prime Minister of Kuwait decided to change the deformed structure of the country based on a single industry, following the example of the enterprise of East Asian countries. Kuwait's privatization law also contains a number of provisions to encourage Kuwaitis to seek employment in private enterprises.
Kuwait** unveiled a plan in 2018 called "Vision 2035" to diversify the economy, reduce dependence on oil revenues, and reduce public spending.
In December of that year, the Special Envoy of the Emir of Kuwait visited Beijing to share the country's national development strategy with Chinese representatives from all walks of life, and expressed his desire to cooperate with China on the Belt and Road Initiative and Vision 2035.
While the outreach component is well under way, how to deal with internal cooperation is the focus of the Kuwait** plan. Since the Kuwaiti people have become accustomed to a privileged life, it is a difficult task to get them to lower their living requirements.
Kuwait's finance minister, Anas Al Saleh, warned his citizens in 2016 that they must be prepared to cut spending for the country's financial stability.
Although the public ridiculed it at the time, this necessary measure could not be ignored. Sweet** has embarked on a reform of the existing administrative structure to improve efficiency by streamlining and eliminating unnecessary departments and reducing redundant staff.
At the same time, several departments have been set up to oversee the implementation of large-scale projects, such as the Regime Monitoring Committee and the Communications Committee, to ensure transparency in the flow of funds. In addition, Kuwait is actively learning from the experience of its "neighbors" in transition, because the homogeneous economic structure is arguably a common problem to almost all Gulf countries.
Kuwait: Diversifying its economy and becoming one of the world's best financial performers As one of the Gulf countries, Kuwait has been actively diversifying its economy to get rid of its over-reliance on oil.
After years of hard work, Kuwait's economic transformation has achieved remarkable results. According to a report by Arab Times on November 21, 2022, ** revenue was 18.6 billion kodi, a year-on-year increase of 769%, and the expenditure was 21.6 billion kodi, a year-on-year increase of 15%, with a fiscal deficit of 3 billion kodi, achieving a fiscal balance and even a slight surplus, it can be called one of the best performing countries in the world, and it is also one of the countries with the lowest debt ratio.
Kuwait's economic development model includes, but is not limited to, the development of tourism, services, aviation, etc., while also actively developing consumer products related to local culture.
In addition, Kuwait has established a financial centre and is striving to diversify. These efforts have led to significant results in Kuwait's economic transformation, which have had a positive impact on the country's development.
Kuwait's experience in economic transformation provides us with a success story that shows us the great potential of diversifying our economy.