PRIME MINISTER REITERATES ECONOMY IS TOP PRIORITY

C O N F I D E N T I A L KUWAIT 003682

SIPDIS

STATE FOR NEA/ARP

E.O. 12958: DECL: 10/26/2014
TAGS: PREL ETRD EPET KU
SUBJECT: PRIME MINISTER REITERATES ECONOMY IS TOP PRIORITY

REF: KUWAIT 3657

Classified By: Ambassador Richard LeBaron for reason 1.4 (b) and (d)


1. (U) Prime Minister Shaykh Sabah al-Ahmed al-Sabah summoned
cabinet members, their deputies and key economic figures to
Bayan Palace on October 23 to impress upon them his intent to
move forward with economic reforms during the current
legislative session, which was inaugurated on October 26.
Local dailies and Embassy contacts confirmed the Prime
Minister aims to see Kuwait regain its status -- enjoyed in
the 1960s and 1970s -- as a regional financial hub for Gulf
countries.


2. (U) Noting that an era of focus on security concerns had
now passed (Note: Presumably with the elimination of Saddam
Hussein as a direct threat to Kuwait. End Note),Shaykh
Sabah said Kuwait should now focus on diversifying its
economy, attracting foreign investment and creating new jobs
for Kuwaiti nationals in the private sector. To this end, he
said, the GOK has already taken initiatives to ease business
and tourist travel procedures, will be expanding its airport
to serve as a regional cargo hub and will develop its ports
(including Bubiyan Island) to take advantage of Kuwait's
political stability and advantageous geographic location.
(Note: The PM cited Singapore as a model for airport and
port management in an October 25 meeting with the Ambassador
(reftel). End Note.)


3. (C) Comment: While post has no reason to doubt the
seriousness of the Prime Minister's intent to reform Kuwait's
economy and restore its position in Gulf financial circles,
we estimate that real reform is not likely any time soon. In
failing to invest in economic reform during the past decade,
Kuwait has effectively ceded its role as a financial hub to
states such as the U.A.E., and is unlikely to ever catch up.
Furthermore, high oil prices and a relatively activist and
populist National Assembly will combine to ensure that
difficult reforms are pushed into the future. Although the
Prime Minister deserves credit for recognizing the problems
that will emerge when Kuwait's rising population and
corresponding financial subsidies outstrip oil revenues, he
will have a difficult time pushing reform while oil prices
hover at $50-60 per barrel.
LeBaron