Private Sector Development in Kuwait: A Product Space Approach

Abstract

The advent of oil in the GCC countries has led their governments to assume an ever-increasing role in the economy and to build comprehensive welfare states, based largely on the provision of employment in the public sector and the generous supply of social services and heavily subsidized utilities, to their citizens. Moreover, an intricate web of regulatory and restrictive rules and regulations has come into existence over time, resulting in a private sector that is not competitive, is not outward-looking and is generally rent-seeking. The aim of this paper is to investigate the challenges that are preventing Kuwait from succeeding in diversifying its economy and developing a competitive private sector and the pre-requisite enabling environment, thereby reducing its dependence on the oil sector. Results of the analysis carried out in this study reveal that developing the role of private sector in the economic transformation of Kuwait could be achieved through a three interconnected strategies: improving the enabling environment for business to free private sector investors from existing regulations and red tape, developing new markets and opportunities through the creation of new investment opportunities, and ensuring competitiveness and integration with the regional and world economies.