Privatization

Introduction

Privatization of public sector enterprises has been viewed as an alternative solution for relieving the burden on the state budget.  Losses and stagnation of the public sector entities are a universal phenomenon, and privatization appears as the logical answer to their plight.

The practice followed by the State is that of disinvestment in the public sector companies rather than privatization in the true sense of the term.  The legal entity of such public sector companies does not change and the companies continue under the same corporate structure.  The change is only with respect to the shareholding of the State and changes in management and control of such companies.

Kuwait has divested itself of many public sector companies, thereby enhancing the revenues for the state.  The Kuwait Investment Authority (KIA) sold 80% of its stake in Alafco, the financing and leasing arm of Kuwait Airways Corporation (KAC).  Privatization of KAC is also on the cards, together with some other state owned companies in the oil sector, namely the Kuwait Oil Tanker Company (KOTC) and the Petrochemical Industries Company (PIC).  The telecommunications network, water and electricity, presently under state control, are expected to follow soon.  Kuwait has sold its stake in nearly 24 companies, since 1994, resulting in an income of about US$ 3 billion.  The rapid pace of privatization undertaken by the State, places it ahead of other states in the Arabian Gulf.

Unemployment is the undesired and inevitable outcome of privatization.  This, coupled with the gradual decline in state subsidies and financial concessions, has made parliamentarians apprehensive of reform and resist change.  Kuwait has a welfare system envied by other countries, what is popularly known as the “cradle-to-grave” welfare system.  Though privatization cannot be at the expense of Kuwaiti jobs, the financial benefits accruing to the state will ultimately override the concerns shared by some regarding unemployment.