In January, the Kuwaiti government unveiled its blueprint for the future, New Kuwait Vision 2035, which aims to build a sustainable, knowledge-based economy driven by the private sector. Dr. Khaled A. Mahdi, Secretary General of the Supreme Council for Planning and Development, sat down with The Worldfolio to discuss the Vision 2035 plan and how government measures to support the growth of the private sector, and particularly SMEs.
One of the targets of New Kuwait Vision 2035 is to increase the GDP share of the private sector that now represents only 30 percent of the Kuwaiti GDP. What are the most urgent reforms, in your opinion, required to diversify the Kuwaiti economy and put the private sector as leader of the process?
The most urgent and important issue in this regard is to shrink the public sector in order to allow for the private sector to have better access to the labor market. Currently, the public sector in Kuwait acts as a competitor for the private sector in the labor market. The plan is to work towards shrinking the public sector and allow more labor flow from the public to the private sector. This is done through several mechanisms:
Firstly, through small and medium enterprises (SMEs) as the country actually introduced commercial sabbatical to the public employees: their job is secured for three years while they are allowed to establish, lead or work for a SMEs.
Secondly, through privatization: we have started a 25-year plan where several state-owned enterprises are being corporatized to entice the private sector to step in and look for profits and value. This privatization will place a maximum Government ownership limit of 24 percent of the shares. IPOs will be issued where 50 percent of the shares will be in hands of Kuwaiti citizens. Finally, a minimum of 26 percent of the shares of the privatized companies will be in hands of the private sector in general (both Kuwaiti and foreign companies). One of the first successful examples of this plan is the Shamal Az-Zour One, a power station, where through a unique “PPPP” model, the “Public-Private-People Partnership”, where Kuwaiti citizens are involved and have a stake and shares in companies running an important energy infrastructure.
And thirdly, through the expansion of the PPPP (being the fourth P for People) model together with a quota of Kuwaiti citizens that must be employed: the so-called ‘Kuwaitization’. This quota varies through the different sectors. It also affects new foreign direct investment (FDI) that arrived through Kuwait Direct Investment Promotion Authority, as one of the requirements for the support of the agency is the employment of a quota of Kuwaitis and the creation of new employment for our citizens.
As you have just mentioned, SMEs are a key part of the Government strategy to place the private sector as the leader of Kuwait economy. In addition to the time-off allowed to civil servants to work in SMEs, how is the Government boosting SMEs in Kuwait, especially those within the knowledge-based economy?
The Supreme Council for Planning and Development has assumed the leading role to promote the knowledge-based economy in Kuwait, with the objective of creating and eco-system for it. We started by establishing the National Knowledge Economy Center which is running several projects. One of the most important is the Knowledge Economy Forum, that was celebrated for the first time in 2016 and that will have a second edition in February the 7th and the 8th, 2018.
We have also proposed a new law: the Economic Activity Law, that if approved will boost the application of the knowledge-based economy in Kuwait, focusing on public entities and allowing the private sector to increase the revenue.
With the support of international investors, we founded the Kuwait Knowledge Economy Chair, which is responsible for sending Kuwaitis abroad to obtain their Masters or PHDs on matters regarding the knowledge-based economy. This is a key measure to enhance our human capital in this area.
We are exploring further partnerships with regional and international organizations on the matter of the knowledge-based economy. We have also set up a “knowledge center”, which is a free-of-charge virtual library with books, articles and documents on the knowledge-based economy.
Finally, we created the national and regional “knowledge-based economy” report with knowledge economy KPIs in order to measure the position of Kuwait within the different indicators and help policy-makers to take better decisions on this regard.
How is the New Kuwait Vision 2035 supporting Kuwaiti SMEs in their internationalization efforts to further diversify your national economy?
The Kuwait Expo 2018 that we are organizing will act as a platform to connect between Kuwaiti entrepreneurs, the National Fund for SMEs and a global community of start-ups. It will take place between the 6th and the 10th of February 2018. We are offering a platform where to share knowledge across borders providing the required funds to start new projects or partnerships based in Kuwait. The areas that Expo 2018 is focusing on are energy, ICT, public health, cosmetics and manufacturing.
Kuwait’s geographical location is a natural connecting point between the maritime Silk road and the land Silk road, being the only country in Asia connecting this corridor from the sea and the land at the same time. The Kuwait Expo 2018 is another step towards our goal of becoming a knowledge-based economy hub.
As the Emir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah has said, the Vision 2035 plan aims to “transform Kuwait into a financial and trade center, attractive to investors, where the private sector leads the economy, creating competition and promoting production efficiency, under the umbrella of enabling government institutions, which accentuates values, safeguards social identity, and achieves human resource development as well as balanced development, providing adequate infrastructure, advanced legislation, and an inspiring business environment.” What are the main challenges that Kuwait faces as a country, in your opinion, to achieve the goals inside Vision 2035?
Our main challenges are on capacities. Vision 2035 is very ambitious so we need to build increased human, knowledge and infrastructure capacities in the country. From my point of view, the most urgent is to increase our current human capacity by reforming the education system to satisfy the needs of jobs market associated to the Fourth Industrial Revolution and allow Kuwait to become a global player.
Coming back to my first point in this interview, we have to re-structure our labor market and visa regime by easing the hiring of highly qualified expatriated professionals and investors to add value to our economy.
Dr. Khaled, you have authored or co-authored more than 65 journals, articles, papers and books; you are senior member of several professional association; you are associate professor at the Kuwait University. As Secretary-General of the Supreme Council, what are your biggest ambitions, regarding the New Kuwait Vision 2035?
My biggest ambition in the short term is to help and support the required reform on the education system that Kuwait needs. This is crucial to achieve the Vision 2035. In the long term, my ambition is to see Kuwait in the top 35 countries in the world regarding all important international KPIs and to see my country sustaining this position on the top. I want Kuwait to be a global player with a diversified economy, strong human capital and an environment that promotes wealth creation to ensures Kuwait’s sustainable future.