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Kuwait

Politics:

  • Analysis

    Kuwait politics: Kuwait votes in a new parliament

    Kuwaitis went to the polls on December 1st in the country's second parliamentary election this year and its fifth since 2006. Lower voter turnout than usual, owing to a boycott by the opposition, raises questions about the legitimacy of the new legislature, however. Although the new National Assembly is likely to be more supportive of the government, the now extra-parliamentary opposition has vowed to continue its protests, with political instability likely to persist.

    Opposition calls for a boycott of the election appeared to have been largely successful, with voter turnout at its lowest in Kuwaiti history. Of 422,000 eligible voters, only 40.3% cast their ballots, according to the Information Ministry, while the opposition claimed that turnout was even lower, at 26.7%. In either case, the result compares poorly with turnout of around 60% at the last three elections.

    A total of 306 candidates-including just 23 former members of parliament (MPs), as others joined the boycott-contested the election. According to the final results released by the National Elections Commission, around 30 newcomers won seats in parliament owing to the opposition boycott.

    Victory for Shia Islamists

    Shia candidates made the largest gains, winning seats in all five voting districts and securing an unprecedented 17 seats in the 50-member parliament (up from seven in the dissolved National Assembly). Sunni Islamists and tribal candidates were the biggest losers, given that they formed the backbone of the opposition boycott campaign. This was reflected in the low turnout of 22% and 20% respectively in the largely tribal fourth and fifth election districts, and the higher turnout in the first constituency, which has a large Shia presence, according to the local daily newspaper, Kuwait Times.

    As a result of most Sunni Islamists boycotting the election, only four won seats in the new parliament, compared with 23 in the February 2012 election, while tribal candidates won 19 seats, losing six. According to the Kuwait Times, the Awazem, Mutair and Ajman tribes, which together number 400,000 people and usually account for around 17 seats, won only one seat, with smaller tribes and non-tribal candidates gaining representation. Women, including a former minister, Maasouma al-Mubarak, won three seats, having won no seats in the February 2012 elections and four in the 2009 polls.

    More protests ahead

    On the eve of the election, the opposition movement, which comprises an uneasy alliance of Islamists, nationalists and liberals, staged a major demonstration. Organisers estimated a turnout of 250,000 at the country's third large demonstration since October, although some reports put attendance at around 50,000. The march, which was licensed, was peaceful with a light security presence, in contrast to previous protests. Demonstrators called for the repeal of the emir's decree, which reduced the number of votes per voter from four to one, and for a boycott of the election.

    The opposition has stated that the political crisis is just beginning, and has vowed to continue protests in an effort to force the fall of the new legislature. It has announced a new demonstration for December 8th, and several former liberal MPs have submitted a challenge to the emir's decree to the Constitutional Court, which will keep questions over the constitutionality of the new assembly in focus over the coming months.

    Deeper rifts

    Although the new parliament is likely to be far more supportive of the government than its predecessor, the election outcome will deepen political rifts in the country, as the legitimacy of the new parliament and the constitutionality of the emir's unilateral change to the electoral system will continue to be questioned.

    Meanwhile, the emir has continued to defend his decision, with the new assembly set to convene in mid-December; the emir has ruled out any holidays for the body until the summer of 2013. The unprecedented showing for Shia candidates, given their refusal to join an opposition movement that is perceived to be dominated by Sunni Islamists, is likely to exacerbate sectarian divisions in the country. Former Salafi MPs have previously portrayed the changes to the electoral law as an Iranian plot, although they later denied this.

    The government, headed by the prime minister, Sheikh Jaber Mubarak al-Sabah, resigned on December 3rd in line with standard procedure following an election. Sheikh Jaber will continue to head a caretaker government until a new cabinet is appointed. However, given the lower than normal voter turnout and the opposition's determination to maintain pressure on the government, there is no sign of the political crisis abating in the near future.

    December 03, 2012

  • Background

    Kuwait: Political and institutional effectiveness

    Political outlook: Political and institutional effectiveness

    We expect the fractious nature of parliament to continue to undermine political effectiveness in 2012-16. Substantial progress was made on legislating important economic and social bills, including a privatisation bill, a new labour law, a bill to create a capital markets authority and the five-year development plan in the first half of 2010. However, since then political stalemate has returned, precipitating three cabinet resignations, in March 2011, November 2011 and most recently in June 2012. The latest resignation followed an unprecedented court ruling, which dissolved the sitting parliament and reinstated the previous legislature. A new election is likely to return a similar result to the previous one with opposition candidates performing well and possibly extending their hold on parliament. Decision-making capacity will continue to be crippled by acrimonious relations between the executive and parliament, which will continue to exert its authority by blocking government initiatives. A favourite method of stalling proposals is for parliament to insist on detailed scrutiny for potential mismanagement or to make allegations of corruption. Continued political bickering will hinder economic development. Traditionally, there have been strong ties between leading business families and politicians, and although these are waning, they can still come into play over economic issues where entrenched interests are at stake. The legal system is slow and often biased in favour of local firms.

    July 13, 2012

  • Structure

    Kuwait: Political structure

    Official name

    State of Kuwait

    Form of state

    Constitutional emirate

    Head of state

    The emir, chosen from the Al Sabah family; currently Sheikh Sabah al-Ahmed al-Jabr al-Sabah, who acceded in February 2006

    Legal system

    Based on the constitution of 1962, as amended or suspended by emiri decree

    Legislature

    Unicameral National Assembly of 50 elected members plus 15 unelected cabinet ministers. The assembly has been dissolved seven times by emiri decree, most recently in June 2012

    National elections

    A parliamentary election is due to be held in October or November. The previous election was held on February 2nd; 0pposition groups, led by Sunni Islamists, won 34 out of 50 seats.

    Political groupings

    Political parties are not allowed, but there are various groupings: the Sunni Islamist Islamic Salafi Alliance and Islamic Constitutional Movement (Muslim Brotherhood); the Shia Islamist National Islamic Alliance and Justice and Peace Alliance; and secular groupings such as the centrist Popular Action Bloc and the liberal National Democratic Alliance. Many members of parliament are loyal primarily to tribal interests

    Executive

    Power is exercised by the emir through the Council of Ministers (cabinet), which is headed by the prime minister, who is chosen by the emir.

    Council of Ministers

    Note. The cabinet resigned following the December election and a new one has yet to be appointed. Sheikh Jabr Mubarak al-Hamad al-Sabah remains prime minister

    Crown prince: Sheikh Nawaf al-Ahmed al-Jabr al-Sabah

    Prime minister: Sheikh Jabr Mubarak al-Hamad al-Sabah

    Deputy prime minister & defence minister: Sheikh Ahmed Khaled al-Sabah

    Deputy prime minister & foreign minister: Sheikh Sabah Khaled al-Sabah

    Deputy prime minister & interior minister: Sheikh Ahmed Hamoud al-Sabah

    Key ministers

    Commerce & industry: Anas Khaled al-Saleh

    Finance & Education: Nayef Falah al-Hajruf

    Electricity & Water: Abdel-Aziz al-Ibrahim

    Health: Ali Saad al-Obaidi

    Information: Mohammed al-Mubarak al-Sabah

    Justice: Jamal Ahmed al-Shihab

    Oil and awqaf & Islamic affairs: Hani Hussein

    Planning & development: Rola Dashti

    Public works : Fadhil Safar

    Transport and social affairs & labour: Salem Mutheeb al-Athniya

    Head of emiri diwan

    Sheikh Nasser Sabah al-Ahmed al-Sabah

    Central Bank governor

    Mohammed al-Hashel

    December 17, 2012

  • Outlook

    Kuwait: Key developments

    Outlook for 2013-17

    • The emir, Sheikh Sabah al-Ahmed al-Jabr al-Sabah, will remain the ultimate political authority but will face pressure to implement constitutional reforms from the opposition.
    • The opposition will step up its extra-parliamentary activity following an election on December 1st, which returned a heavily pro-government National Assembly, maintaining political instability.
    • The government will continue to run fiscal surpluses over the forecast period owing to high oil prices and consistent growth in oil output. Current spending will remain high as the government wage bill rises.
    • Kuwaiti interest rates will broadly track the trend in US rates, largely because the dinar is pegged to a dollar-dominated basket of currencies. The dinar will depreciate slightly against the dollar up to 2016.
    • Real GDP growth will slow to 4.6% in 2013 as growth in oil production and exports slows. Rising oil output and increasing public and private investment will support growth over the forecast period.
    • Inflation averaged 3% in the first ten months of 2012. We expect inflation to average 4% in 2013-17, accelerating from 2016 as global commodity prices and domestic consumption pick up.
    • The current account will record robust surpluses throughout the forecast period owing to strong oil export revenue, which will more than offset rising import costs and deficits on the non-merchandise account.

    Review

    • A parliamentary election took place on December 1st. A boycott by the opposition resulted in the lowest ever voter turnout, officially reported as 39.6%. The opposition claimed that turnout was even lower at just 26.7%.
    • Shia candidates made the largest electoral gains, winning seats in all five voting districts and securing an unprecedented 17 seats in the 50-member parliament.
    • The six member states of the Gulf Co-operation Council agreed a new security pact in mid-November.
    • Kuwait has introduced a new companies law aimed at encouraging investment. The legislation introduces greater clarity in terms of the powers of boards of directors and more stringent corporate governance rules.
    • Global Investment House has agreed with all its creditors to restructure US$1.7bn of debt after a UK court approved its plan. The company's non-core portfolios will be spun off into a special purpose vehicle.

    December 17, 2012

Economy:

  • Background

    Kuwait: Country fact sheet

    Fact sheet

    Annual data2011aHistorical averages (%)2007-11
    Population (m)3.7Population growth3.0
    GDP (US$ m; market exchange rate)160,928Real GDP growth4.5
    GDP (US$ m; purchasing power parity)168,568bReal domestic demand growth3.9
    GDP per head (US$; market exchange rate)43,526Inflation5.7
    GDP per head (US$; purchasing power parity)45,592Current-account balance (% of GDP)35.9
    Exchange rate (av) KD:US$0.276FDI inflows (% of GDP)0.3
    a Actual. b Economist Intelligence Unit estimates.

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    Background: Formerly a British protectorate, Kuwait gained independence in 1961 as an emirate under the hereditary rule of the Al Sabah family. The economy has come to be almost entirely dominated by oil, allowing the government to enjoy substantial powers of patronage, and drawing in expatriate workers. Kuwait has long had a troubled relationship with Iraq, which periodically contested the countries' shared border arrangements during the late 1960s. In 1990 Kuwait was temporarily annexed by Iraq under the regime of Saddam Hussein. A US-led military coalition ousted Iraq in the 1991 Gulf war, after which Kuwait became closely aligned with the US. Political tensions with Iraq have risen periodically since, but had improved in early 2012 with the two countries approaching the UN to help them delineate their borders.

    Political structure: Ultimate executive power is held by the emir, who appoints the prime minister and the government-in which the Al Sabah family usually holds key ministries. Kuwait also has a strong electoral tradition, with a vocal National Assembly, which can reject government legislation and cross-examine cabinet ministers. Previously kept in check by the ruling family's power of patronage, the elected legislature of 50 members of parliament (MPs) has grown in confidence in recent years, forcing the resignation of several ministers. Nevertheless, the emir retains the right to dissolve parliament. The opposition boycotted the parliamentary election in December following a move by the emir to amend the electoral law.

    Policy issues: Executive-legislative tensions have resulted in repeated early elections, but do not endanger Al Sabah dominance. Many of the political elite continue to reject foreign investment in the upstream oil sector to boost production capacity. Iran and Iraq are seen as potential security threats. Sunni-Shia relations are broadly good, but can be affected by regional developments, as demonstrated during the popular uprising in Bahrain in early 2011. Although poorly paid expatriate workers have sometimes rioted, they do not threaten political stability.

    Taxation: There is no individual income tax, and tax on nationals is limited to zakat (charitable) deductions. Long-standing proposals to introduce a 15% flat-rate income tax on Kuwaiti nationals are highly unlikely to be approved by parliament. There is no general consumption tax, and few indirect taxes. In 2008 taxes on foreign businesses, which formerly ranged up to 55% in the energy sector, were cut to a flat rate of 15%, and capital gains tax on stockmarket holdings was abolished.

    Foreign trade: The trade surplus will have widened to an estimated US$88.2bn in 2012, from US$82.3bn in 2011 as oil exports rose, more than offsetting an estimated 9.7% increase in the import bill.

    Major exports 2011% of totalMajor imports 2011% of total
    Crude oil92.7Intermediate goods39.0
    Non-oil7.3Consumer goods36.5
      Capital goods24.0
     
    Leading markets 2011% of totalLeading suppliers 2011% of total
    South Korea14.8US12.1
    Japan11.4India10.2
    India10.8China9.4
    China8.0Saudi Arabia8.1

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    December 17, 2012

  • Structure

    Kuwait: Economic structure

    Data and charts: Annual trends charts


    December 17, 2012

  • Outlook

    Kuwait: Country outlook

    Kuwait: Country outlook

    FROM THE ECONOMIST INTELLIGENCE UNIT

    POLITICAL STABILITY: Tensions between the government and opposition remain high following the election of a pro-government parliament on December 1st, which was made possible by an opposition boycott of the vote. The National Assembly was elected with the lowest turnout in Kuwait's history--official reports put it at 39.6% while the opposition claimed it was even lower at 26.7%--raising serious questions about its legitimacy. Given parliament's track record of obstructionism, this new configuration, while lacking credibility, may contribute to more efficient decision-making as it enables the government to push initiatives through the legislature. Despite pressure for constitutional reform from the opposition, the Economist Intelligence Unit expects the emir, Sheikh Sabah al-Ahmed al-Jabr al-Sabah, to remain the ultimate executive authority in 2013-17.

    ELECTION WATCH: A parliamentary election was held on December 1st under new electoral rules instituted by a controversial emiri decree. The opposition is now calling for the dissolution of the new National Assembly and the revocation of the emiri decree that amended the electoral system ahead of the election by reducing the number of votes per voter from four to one. We expect that the assembly will not serve a full four-year term and a new election will be held within the first half of the forecast period.

    INTERNATIONAL RELATIONS: Relations with Iraq soured in 2011 because of Kuwaiti plans to build the Mubarak al-Kabeer port, which would rival Iraq's own Fao Port project, but have improved since. In April the two neighbours agreed to resume direct flights for the first time since the Gulf war, and Iraq has asked Kuwait to write off its debt. The two countries have approached the UN for help in resolving a long-standing dispute over borders. In late October, Kuwait formally approved a US$500m settlement from Iraq of outstanding airline compensation claims dating back to the 1990 invasion.

    POLICY TRENDS: Structural economic reform, particularly liberalisation, is expected to proceed only gradually as political bickering and the unwieldy bureaucracy continue to lead to delays. With a pro-government parliament now in place, there is a chance that progress on economic development, including the US$104bn 2010-14 Kuwait Development Plan, which seeks to diversify the economy away from oil and to increase the role of the private sector, may pick up as a less obstructionist legislature allows government initiatives through. However, we expect that ongoing political turbulence and structural constraints will result in further delays.

    ECONOMIC GROWTH: We expect real GDP growth to decline to 4.6% in 2013 from an estimated 5% in 2012 as oil production and export growth slows after two years of sharp rises, owing to weak global growth and as Kuwaiti output approaches capacity. Kuwait has boosted oil production in 2012, to an average of 2.8m barrels/day (b/d) in the first ten months of the year, up from 2.5m b/d in 2011. Constrained by domestic political tensions and bureaucratic problems, growth will average 4.8% a year in 2013-17.

    INFLATION: Monthly inflation picked up steadily in the first quarter of 2012 owing to rising food prices (18.3% of the consumer price index) but has moderated since, averaging 3% for the first ten months of the year as food price inflation slowed. We estimate inflation at an average of 3% for the full year. Strikes by public-sector workers have forced the government to raise wages, exerting upward pressure on prices, and the dinar will depreciate slightly against the dollar up to 2016, but the government's extensive subsidy system will keep a lid on overall inflation, as will cautious credit growth. We expect inflation to average 4% in 2013-17, picking up from 2016 as global commodity prices rise and growth in private consumption strengthens.

    EXCHANGE RATES: The Kuwaiti dinar is pegged to an undisclosed basket of currencies dominated by the US dollar. We expect the dinar to depreciate slightly against the dollar to KD0.284:US$1 in 2015-16 from KD0.282:US$1 in 2013, but it will strengthen slightly in 2017 as the dollar weakens. The dinar will continue to be supported by large current-account surpluses, an extensive foreign asset base and the government's comfortable fiscal position. Furthermore, in the unlikely event of downward pressure building on the dinar, the authorities could manage interest rates or draw on the country's huge stock of foreign-currency assets to support it.

    EXTERNAL SECTOR: We expect the current-account surplus to narrow in 2013 as oil export earnings decline in line with lower prices. Oil export revenue will continue to account for the bulk (about 91%) of export earnings in 2013-17. Slowly rising investment, by both the government and the private sector, should lead to steady growth in the import bill. In contrast to the healthy trade surplus, the non-merchandise balance is forecast to remain in deficit in 2013-17. Despite this, income credits are expected to grow steadily, chiefly reflecting earnings on the country's large and growing stock of foreign assets. Higher income inflows will more than offset an increase in income debits (owing to rising profit repatriation by foreign firms), boosting the income surplus to US$17.4bn in 2017. However, the current transfers account will continue to show a large and growing deficit as outward remittances from Kuwait's many foreign workers increase.

    December 09, 2012

  • Forecast

    Kuwait: Country forecast summary

    Country forecast overview: Highlights

    • The Al Sabah family is expected to remain in power in 2013-17, with internal differences over the political succession expected to remain contained. Al Sabah dominance will be underpinned by the extensive use of patronage.
    • A pro-government National Assembly was elected in December following a decision by the opposition to boycott the race. With a supportive legislature in place, the government can no longer use parliamentary obstructionism as an excuse for slow economic development. Failure to demonstrate more effective decision-making under these favourable circumstances would result in growing popular antagonism to the government.
    • Unable to influence decision-making directly, the opposition will organise more popular protests, calling for the dissolution of the new assembly. The government may try to appease the public using populist measures, but is likely to eventually seek to draw the opposition back into official politics, offering some concessions. We expect that National Assembly will not serve a full term and new elections will be held early in the forecast period.
    • Kuwait will follow an expansionary fiscal policy, using its oil revenue to raise spending on infrastructure and redistribute wealth. Its ability to carry out capital investment may improve as a result of the election of a pro-government parliament, but the bureaucracy's limited capacity will remain an issue. The fiscal surplus is forecast to average 15.7% of GDP in 2013-17.
    • The oil sector will remain the key driver of economic activity. Real GDP growth is forecast to average 4.8% in 2013-17, as oil output rises and increased efforts to draw in foreign investment to boost production in the northern oilfields and investment in the gas sector start to bear fruit. Kuwait stands to benefit from high oil prices resulting from the geopolitical tension in the Middle East.
    • Consumer price inflation is expected to average 4% a year over the forecast period as global non-oil commodity prices stabilise. Inflation will begin to pick up from 2016 in line with rising commodity prices and as domestic private consumption growth accelerates. Extensive government subsidies will mitigate inflationary pressures.
    • The current-account surplus is expected to remain large throughout the forecast period, at an annual average of 36.7% of GDP. The non-merchandise account is forecast to remain in deficit in 2013-17, but this shortfall will only partly offset the trade surplus, which will continue to be supported by Kuwait's high oil revenue relative to its population size.

    Country forecast overview: Key indicators

    Key indicators201220132014201520162017
    Real GDP growth (%)5.04.65.24.54.94.8
    Consumer price inflation (av; %)3.04.13.73.54.14.6
    Budget balance (% of GDP)22.916.215.115.315.516.9
    Current-account balance (% of GDP)44.438.537.637.035.835.4
    Exchange rate KD:US$ (av)0.2800.2820.2830.2840.2840.283
    Exchange rate KD:€ (av)0.3600.3560.3540.3510.3580.357

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    December 17, 2012

Country Briefing

Land area

17,818 sq km, including 2,590 sq km in the Neutral Zone, sovereignty over which is shared by Saudi Arabia and Kuwait

Population

3.44m, comprising about 1.09m Kuwaitis and 2.35m expatriates (end-2008)

Main towns

The country is divided into five governorates. The Public Authority for Civil Information listed the following population breakdown at end-2007:

Kuwait City (capital): 499,269

Farwaniya: 913,692

Hawalli: 714,876

Ahmadi: 637,411

Jahra: 412,053

Mubarak al-Kabeer: 210,599

Climate

Hot for most of the year and generally dry

Weather in Kuwait City

Hottest months, June to September, 28-50°C (average daily minimum and maximum); coolest months, December to February, 8-18°C; rainfall erratic

Languages

Arabic; English is widely spoken and is the official second language

Weights and measures

Metric system and regional measures

Fiscal year

April 1st-March 31st

Currency

Kuwaiti dinar (KD) = 1,000 fils

Time

3 hours ahead of GMT

Public holidays

Since September 2007 Kuwait has had a Friday-Saturday weekend. Secular holidays include New Year's Day (January 1st), National Day (February 25th) and Liberation Day (February 26th). All Islamic holidays are observed in accordance with the lunar calendar. This may mean that the following dates are approximate: Mawlid al-Nabi (the birthday of the Prophet, February 4th 2012); Eid al-Fitr (end of Ramadan, August 19th); Eid al-Adha (Feast of the Sacrifice, October 26th); Islamic New Year (November 15th)

March 06, 2012

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