There seems to be nothing to worry about, economically speaking, in the countries of the Gulf Cooperation Council (GCC), the world’s most important oil-exporting region. Oil prices are at all-time highs, with more than USD 100 per barrel. The six member states’ Gross Domestic Product (GDP) has jumped to USD 1.5 trillion. According to each state’s size, balance of payments and current account, all six countries are producing surplus, allowing around USD 1.9 trillion in domestic and foreign assets which are expected—according to the International Monetary Fund (IMF) figures—to rise to USD 3 trillion in 2017.
On top of that, the financial crises that has been gripping the world since 2009—which is today affecting the countries of the Eurozone—had limited impact on the region which remains to be one of the few regions in the world that is truly achieving high rates of growth.
Bearing this in mind, what led the Kuwaiti government—when presenting its program for the next four years to the parliament—to warn that, without reform, the if welfare state that Kuwaitis have grown accustomed to continues in its present form, there will be a budget deficit in 2021. Moreover, the government warned that the deficit may accumulate, reaching USD 1.4 trillion by 2035. Therefore, it suggested that subsidies on goods and services be reformed and a system of taxation be adopted.
The answer is that every good government should do the same. Politics is not just about provoking the public’s emotions, or adopting short-term measures and slogans without regard for the future.
Planning for 20 years ahead begins today. Nothing can be better than starting to undertake economic reforms at the time of surplus. By doing so, any painful side effects will be possible to contain, thus avoiding pressure and crises in the future. There are many examples of the latter. The latest of these is Greece, which spent unthinkingly for years, spending without truly considering the future until the crisis struck. As a result, the EU country was forced to adopt painful austerity measures, causing social unrest as well as opening the door for some creditors to ask Athens to sell some of its islands in order to repay its debts. Reforms strengthen any economy during the time of global setbacks and crises which arise when least expected.
What the Kuwaiti government has done is both wise and responsible. The role of the government is not about using honeyed words, but rather increasing awareness and educating the public, as well as providing them with facts to make them aware of the reasons behind any unpopular decisions relating to subsidies or increases in service charges. Some politicians and officials are wrong when they think that explaining facts to the public is difficult. In the end, people understand all that is logical, even if it is difficult to grasp.
Someone may say: “It is too early to plan for 2035, who knows what will happen in a decade, let alone in two decades?” The best way to answer this question is that those who are born today will be 22 years old in 2035, a whole generation looking forward to starting their careers.
In this article, Kuwait serves just as an example of a good government preparing the public for the rigors of the future. It is an example that needs to be followed in many Arab economies—according to the circumstances of each—fueled by oil or otherwise. Most Arab economies suffer from the same structural problems particularly, the ones relating to subsidies which impose great burdens on budgets. As a result, this leaves no adequate resources for the investment needed to expand the economy and create genuine job opportunities. These imbalances shackle any economy and hinder its ability to breathe normally.