Kuwait wrestles with insecurity as oil-based economy

At the gas pump in this desert city, almost every other car that pulls up is an eight-seat jumbo jeep.

Local lore has it that every family now counts among their automobiles at least one road-rugged four-wheel-drive as a getaway vehicle should the Iraqis roll their tanks back into town.

Ten years after Iraq's invasion, an air of insecurity still rides close to the surface of Kuwaiti life.

But with US troops stationed in this oil-rich emirate, it is obsolescence, not the threat of invasion, that most worries Kuwaitis. The looming threat of cleaner, cheaper energy sources, a gargantuan public sector, and a burgeoning populace - over 60 percent of it under 18 and expecting government jobs upon graduation - is summoning calls for reform.

"There are worries that high prices may encourage investment in alternative energy sources, and for us, that's the only incentive for preventing prices from going too high," says Abdalla al-Nibari, a left-wing member of parliament.

Today, with the Clinton administration pressing OPEC members meeting in Vienna to boost production by about 2 million barrels a day in order to force prices lower, Kuwaitis are growing increasingly concerned that their oil wealth could eventually tap itself out.

While Americans may be grimacing at gas prices each time the needle hovers near "E", Kuwaitis say they are yet to recover from the last year's low revenues when a barrel of oil sold for $10, compared to $34 two weeks ago. In this tiny Gulf state, oil is the largest source of state revenue and higher oil prices are good news for sustaining the public sector, which employs 97 percent of the Kuwaiti workforce.

Indeed, in the halls of the Gulf's only elected parliament there's increasingly sharp criticism of its one-commodity economy and its munificent welfare state.

"We are very lucky that oil prices are going up. We were saved by this rise in oil prices," says Hamed al-Jasr, an economic advisor to the parliament's finance committee for the Islamic bloc, one of several groups critical of the government.

"This government used to solve all its problems by signing checks. They just bury mistakes with money, but that won't work forever," says Mr. Jasr. "We don't feel confident about what will happen to Kuwait five years from now."

Electric cars, though slow to catch on, run shivers up the spines of all but the most environmentally correct Kuwaitis. "Even if it replaces only 10 percent of the market, it will probably push prices down tremendously," says Mr. al-Nibari. "That could be disastrous for us."

Last year, in fact, the government found itself running a deficit of about 50 percent when dwindling oil revenues could not compete with massive government spending on salaries. While oil revenue was $ 5.2 billion, the government had to spend $7.8 billion on wages alone. About 75 percent of Kuwait's gross domestic product (GDP) comes from government companies, while only 25 percent comes from the private sector.

One proposed solution for that imbalance was the subject of heated debate among lawmakers here last week. The bill aims to lure Kuwaitis into the private sector - currently staffed almost entirely by foreign laborers - by allowing them to collect the same benefits they do in government jobs, such as higher salaries, more vacation time, and shorter work days.

Among the more controversial expenditures that reformers want to scale back is the $150-a-month stipend for each child of a government employee - a costly subsidy in a country with a birthrate between 3.5 and 3.7. The bill also seeks to raise the age for a woman's retirement and pension collection, currently set at 35.

Government jobs are still viewed as the most prestigious and lucrative - and, economists complain, a birthright. "Every Kuwaiti graduate looks for his guaranteed job in the public sector, and the government is just getting fatter and fatter," says Dr. Naser al-Sane, a parliament member.

But those who argue that Kuwait has to restructure its brand of socialized capitalism say the legislation merely aims to shift workers from one sector to another.

"I think there has to be a campaign to say things have changed. With the passage of years, we somehow got used to this government shield, which is very protective," says economist Suleiman Mutawa, a former minister of planning, who describes himself as a "full-time" government critic.

"We have been pampering ourselves to such an extent that we forgot that this commodity called oil is subject to prices. What oil has done to the population of the Gulf is that the attitude towards work has changed, and the initiative to produce isn't there," he says.

Last year, the government began selling some of its foreign-owned assets to raise cash. Oil prices that are higher than $20 a barrel, as they are now, Mr. Mutawa says, will bring Kuwait back into a state of surplus, but without an accompanying drive to cut government spending.

"The austerity didn't last, and they soon forgot all the reforms, privatization and everything that doesn't fit in this day and age," Mutawa adds. "If we want a real cushion, we have to change our archaic policies in the welfare state."

(c) Copyright 2000. The Christian Science Publishing Society