Introduction
Kuwait is situated in southwestern Asia neighboring Iraq and Saudi Arabia and bound by the Persian Gulf. It’s a small Arab country believed to be among the fifteen states that brought about the cradle of humanity in early civilizations. Geographic positioning of Kuwait is found along the coordinates 290 30’ North, 450 45’ East. Geographical area is 17821 square kilometers. Most of the area is located on land despite owning 9 islands in the Persian Gulf. This paper intends to tackle upcoming issues on major export of Kuwait distribution and hindrances that the nation encounters and in general all possible aspects that relate to this sensitized field (IMF country report 2012:2).
Abstract
Oil in Kuwait has transformed the country within decades from a trade-based desert into one of the most advanced modern city. The country has also elevated the living standards of the citizens and sufficiently managed to offer social security free health care and education that relies on an extensive distributive system made possible by the welfare state. Kuwait nevertheless has not been spared of short comings this are evident especially on policies of rent distribution seen in subsidizing utilities and provision of public employment that result in distortion and the institution in deficiencies thus leaving a great room for improvement.
Oil was discovered in Kuwait for the first time in 1938 the discovery was made following an agreement between the state of Kuwait and Britain that gave Britain the mandate to explore oil in Kuwait and produce from the fields. Production commenced in 1948, as Kuwait’s oil revenue began a substantial growth in the decades that followed after the oil discovered there was a great increase in revenue generated, in 1946 the total revenue was US$760 thousand and in 1946 it increased to US$567. 5 million. In mid 1970s total oil generated revenue was US$9. 8billion at 2.3 times the non-oil GDP (Crystal 1995:24).
Soon after discovery of oil the state being the owner and distributor of the commodity had to create effective means of ensuring maximum profitability from the great discovery, this meant the country had to modify its approach towards the economy as a whole. A five year plan was adopted in 1967 that served to define some of the states objectives particularly long term. First there was a need for diversification of Kuwait towards a self sustaining independent growth of oil revenues. The second objective was ensuring equitable distribution of income amongst Kuwaitis and lastly intensive training of Kuwait human resource and development of necessary special skills (Ismael 1993:135)
The total population in Kuwait had barely hit 200,000 in the mid 1950s and by 2005 had grown to an estimated 2.2 million. The increase in population was attributed to natural growth but a large part of it was as a result of migrant labor to Kuwait, with most immigrants arriving on temporal work permits and visas. The total population of Kuwait’s nationals has been on a steady decline both in the total population and the work force as well at the present times, over 1.3 million people living in Kuwait which is over 60 percent of the general population comprise primarily of expatriates from Asia and fellow Arab countries, while 81 percent is of non-Kuwait’s dominate the workforce. Subsequently Kuwaits national constitute a minority in their own country (El-Katiri 2011: 45).
Question on how the Kuwait government would utilize the income generated by oil revenues is an aspect of concern. There lies a challenge in the distribution of government oil rents that results from the fact no final consumer to whom they would accrue is well defined (Segal forthcoming). The majority of the value added is distributed in the form of wages and profits of which is channeled to the private sector, this happens for most economic activities , contrary in Kuwait the revenues generated from the oil flow directly to the treasury and distribution debated via political means. Resource rent in Kuwait acts as a substitute for taxation especially to the private sector. Various channels are used in Kuwait to distribute rents to the wider economy and they include subsidies, public employment, private sector interventions, land purchases, the regulation of Kuwait FDI environs and investments abroad (Husain 1995: 56).
Government expenditure (KD million), 2007/8–2008/9
Type of expenditure 2007/8% Total 2008/9 % the total
Wages and salaries 2,477 25.5 3,039 16.6
Goods and services 1,768 18.2 3,002 16.4
Vehicles and equipment 90 0.9 122 0.7
Projects, maintenance and land
Purchase 1,206 12.4 1,358 7.4
Miscellaneous expenditure and
Transfers 4,157 42.9 10,741 58.8
Miscellaneous expenditure 1,283 1,286
Transfers (domestic) 2,509 8,920
Transfers (external) 365 535
Total expenditure 9,698 100 18,262 100
Sourcee ministry of finance of Kuwai (2008/2009)
Conservation of wealth for the future of Kuwait is key for future generations , staff estimates that the government will exhaust all oil revenues by 2017 and this indicate no portion whatsoever will be saved for future generations there is a need for the intergenerational equity in distributing oil resources areas that require improvement namely are; re-allocation of government expenditure toward capital expenditure, revisiting general energy subsidies electricity, water and fuel. Improvement of business environment and basic governance indicators of which at the moment it ranks low.
In the event of the Persian Gulf War 1990 to early 1991, Iraq commenced to launching an attack that targeted solely on the destruction of Kuwait’s oil industry setting fire to over 780 individual Kuwaiti oil wells, this resulted in catastrophic detriments both from an economic and ecologic standpoint perspective. Kuwait’s economy suffered an immediate drop in export revenues after he was caused by the inability to cater for the production differences on the damaged wells. The ecological landscape of the Persian Gulf and Kuwait was extensively damaged due to destructions resulting from the burning oil and will take a very long time for restoration of the environs to its pre-war status (Hertog 2013: 12).
It was estimated in 1991 that over six million oil barrels of oil were burning per day in Kuwait this led to an environmental disaster due to the amount of soot generated that blocked sunlight rays from reaching the earth's surface.
The fishing industry in the Gulf was affected to a great extent due to the oil spillage; Kuwait was hard hit given that fishing was one of the most vibrant activities in the region after oil production. Prior to the invasion the Gulf had yielded harvest of marine life totaling to over 120,000 tons in a year, following the spillage, the number dropped significantly (Casey 2007: 102).
Conclusion
Works cited
Casey, Michael. The History of Kuwait, New Jersey: Greenwood Publishing Group, 2007. Print
Crystal, Jill. Oil and politics in the Gulf: Rulers and Merchants in Kuwait and Qatar, New York: Cambridge University Press, 1995. Print.
El-Katiri, Laura. Anatomy of an oil-based welfare state: Rent distribution in Kuwait, University of London: LSE, 2011.
Hertog, Stefen. The private sector and reforms in the Gulf, London: LSE, 2013
Husain, Tahir. Kuwaiti Oil Fires: Regional Environmental perspectives, Oxford: Elsevier, 1995. Print.
IMF country report N012/150: KUWAIT 2012 ARTICLE IV CONSULTATION
Ismail, Ibrahim A.H., "Capital limitations, environmental movements may interfere with expansion plans." Oil & Gas Journal, May 9, 1994, p. 60-68
W.CORBETT Dabbs (December 1996)
