By: Jon Nordenson
In a recent article in Kuwait Times, the headline read «KAC to be privatized by the end of the year». According to the article, KAC – the Kuwaiti Airways Corporation – would be privatized before we write 2010, in line with the time limit for the privatization process set by the cabinet. Two studies has been conducted to establish the value of the company, and a decree from the minister of commerce is set to establish a new company with «an estimated capital of KD 300 million». Sounds easy.
But it is not. Privatization and economic diversification is – and many would call this an understatement – a controversial issue in Kuwait. In a country where a vast majority of the population rely on a government funded by abundant oil incomes for their salary, status quo is the preferred alternative, a view also reflected in Parliament. And, as Micheal Herb points out in his brilliant article on the subject in The International Journal of Middle East Studies, «(..) the structure of the Kuwaiti political system tend to encourage political deadlock». Previous attempts by the government on privatization, encouraging foreign investments in Kuwait, investing in other countries etc have notoriously been met with hostility in Parliament, as for instance the infamous Dow Deal.
So what about the KAC? Of course, Kuwait Times may have reasons I do not know about to believe this time it will be different. Still, a well informed source in Kuwait told me that this issue has been going on for ten years, and that «it is all about politics and some unions wouldn`t allow it so they don`t get fired».
In a different article from the same newspaper, published six days later, we could read quite a different story on the issue of economic diversification, this time the view of the private sector in Kuwait: « (…) sources revealed that the private sector was growing less confident in working with the government for reasons that range from the government’s lack of seriousness in executing these projects to their recent action of withdrawing or cancelling projects without providing proper justifications».
In other words, with the prospects of economic diversification in Kuwait being rather slim, the privatization of the KAC may very well meet the same fate as other, previous projects. Nevertheless, the case will be interesting to follow as the struggle to meet the cabinet`s deadline goes on.