10955 J/~~~~K Public Disclosure Authorized eve' Reor of, a..I e Reot/fa Misio ze Public Disclosure Authorized 'I7 Reosrcton t Ec ,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-g- - - Public Disclosure Authorized Reconstructionand-0 nT --- (I-tXX I ReotoI is $zd) byte¼'raioaa / J Reconstruction and_E________X__,g ,," ______1,__'i________________ ,1 am ____________________ Public Disclosure Authorized THE ECONOMIC DEVELOPMENT OF KUWAIT Report of a Mission Organized by the International Bank for Reconstruction and Development Possessing an estimated 20 per cent of the world's oil reserves, Kuwait is the fourth largest oil producer in the world, and second only to Venezuela as an oil exporter. This gives the country a much larger role in the economic affairs of the Middle East than its modest geographical dimensions and population might in- dicate. Seeking consultation and advice on its internal goals and programs, particularly economic ones, the Government of Ku- wait invited the International Bank for Reconstruction and Development to send an economic mission to the country. This book contains the findings and recom- mendations of two missions to Kuwait. The results of the 1961 mission are sum- marized and brought up to date in this new report, which is the work of the second mission in 1963. Kuwait's many unique characteristics are described in detail. The country's 350,000 inhabitants, almost half of whom are expatriates, live in an area about the size of New Jersey or Wales. Per capita gross national product is one of the high- est in the world, while savings, in both the public and private sectors, equal 45 per cent of national income. Almost 70 continued on back flap 52s. net in U.K. only ""5 FILE Copy -to'i nt, _b Sa2 n- THE ECONOMIC DEVELOPMENT OF Kuwait Report of Missions Organized by the InternationalBank for Reconstruction and Development at the Request of the Government of Kuwait THE ECONOMIC DEVELOPMENT OF KUWAIT PUBLISHED FOR The International Bank for Reconstruction and Development By The Johns Hopkins Press, Baltimore © 1965 by The Johns Hopkins Press, Baltimore, Maryland 21218 Printed in the United States of America Library pf Congress Catalog Card Number 65-11664 THE MISSIONS 1961 Syed Amjad Ali, Chief of Mission 0. J. McDiarmid, Chief Economist Glen Brown, Water Resources John Derrick, Industry Harold Holtz, Public Works Abdul H. Kadhim, Education J. H. Van Mook, Public Administration Carl Murray, Budget and Fiscal Accounting Anders 0lgaard, Industrial Economist George Ponghis, Public Health 1963 0. J. McDiarmid, Chief of Mission Jean Baneth, Economist John Derrick, Industrial Adviser PREFA CE The oil resources of Kuwait, about one-fifth of the world total, give the Sheikhdom a much larger role in the economic affairs of the Middle East than its modest geographical dimensions and population might indicate. Alone among countries of the region,. Kuwait has been able to pursue vigorous internal development while exporting capital in important amounts. Through the Kuwait Fund for Arab Economic Development and a grant aid program to neighboring countries, Kuwait is beginning to make a significant contribution toward meeting the capital needs of the Arab World, including several North African countries. The lack of physical resources other than oil, and particularly the great scarcity of water, presents a real challenge to the Government in its endeavor to use its oil revenues more productively at home as well as abroad. It is now endeavoring to broaden the pattern of internal investment beyond the construction of social capital assets, private housing and commercial structures on which most past capital expenditures have concentrated. The need for further consideration of its internal goals and pro-, grams prompted the Government to ask the Bank to send an Economic Mission to Kuwait in March 1961 to prepare a report for the Govern- ment. The Mission had comprehensive terms of reference. The Gov- ernment desired assistance in improving public administration as well as help in formulating its future health, education and investment programs. The social services of the State, particularly in education and health, are on a par with those in well developed countries. The use of hydrocarbon resources required special investigation, since any broadening of the pattern of internal investments is likely to involve industries based on these resources. The examination of water prospects also was given close attention. The Bank was fortunate in receiving the cooperation of the United Nations and the specialized agencies in recruiting the Mission. WHO and UNESCO made staff members available as public health and education advisers, and the United Nations also was instrumental in helping the Bank obtain the services of public administration, and budget and accounting experts. The United States Government lent the Mission an adviser on water resources. vii Viii PREFACE The Mission received excellent support from the government per- sonnel assigned to work with it in Kuwait. The Presidents of the various government departments, the Directors General and other responsible officials were generous in giving their time and advice and in complying with the Mission's requests for information. His Ex- cellency Sheikh Jabir Al-Ahmad Al-Sabah, President of the then Department of Finance and Economy, who initiated the request for the Mission, gave it especially valuable guidance and support. The Kuwait Chamber of Commerce, officials of the private banks and other leaders of the business community provided significant data and advice. The thanks of the Mission are also due to the Political Agency of the United Kingdom and to the American Consulate, the two foreign government missions in Kuwait at the time of the Mission's visit. In 1963, at the invitation of the Government, a small Mission visited Kuwait to bring up to date the 1961 report. The following report was prepared by that Mission. At the request of the Government, wherever possible this report contains the recommendations that were made by the 1961 Mission and refers to the action that has since been taken to carry them out. The members of the 1961 Mission have not reviewed this report, however, and are not responsible for its content. CONTENTS The Missions ........ v Preface ........ vii 1. SUMMARY OF TIIE REPORT ............ ......................... I The Economy . ............................................. 1 Investment in the Public Sector ........ ...................... 3 Development of the Private Sector ....... .................... 5 Allocation of Financial Resources ....... ..................... 8 Other Economic Policies ........... .......................... 9 Tax Policy . ............................................. 9 Central Bank . ........................................... 10 Statistics .11 Foreign Participation .11 Naturalization Policy .11 Public Administration .12 Public Health .13 Education .16 2. THE STATE .18 Geographical and Historical Settings .18 Physical Features . ........................................... 20 Petroleum . ................................................. 21 The People . ............................................... 24 The Economy . ............................................. 27 Evolution of Kuwait City ......... ........................... 28 3. THE GOVERNMENT ............................................ 31 The Ministries . ............................................. 35 Municipality . ........................................... 35 Ministerial Organization ........ ......................... 37 Civil Service . ............................................... 37 Number, Qualifications and Training of Civil Servants .... 40 Salaries and Wages, Allowances, Retirement Pay ..... ....... 43 Recruitment, Promotion, Periodic Reports ..... ............ 44 Efficiency of Work .......... ............................ 44 Budget .................................................... 45 Disbursement ............... ........................... 47 Accounting ................. ........................... 48 Audit . ................................................. 48 Statistics . ............................................... 49 Delegation of Authority .......... .......................... 49 ix x CONTENTS 4. THE ECONOMY ............................ 51 National Product and Labor Force .51 The Oil Sector. 53 Natural Gas and Refinery Products .54 Refinery Operation .55 General Role of the Government .56 The Private and Quasi-Private Sector .58 New Share Companies .62 Marine Products ........................................ 64 Agriculture .65 Water and Electric Power .......... .......................... 66 Transportation and Communications ....... .................. 70 Air Transport .............. ............................ 70 Kuwait Port . ........................................... 70 Telephone and Telegraph ........ ....................... 70 5. FINANCE AND TRADE .......................................... 71 Public Finance . ............................................ 71 Revenue ............................................... 71 Expenditures . .......................................... 72 Monetary Developments .... I ................................ 74 The Currency . .......................................... 74 Financial Institutions ........... ........................ 75 Money Supply ................ ......................... 76 Prices ................................................. 78 Balance of Payments, Foreign Investments and Foreign Trade . 79 Foreign