The Economic Development Experience of Kuwait: Some Useful Lessons

Kuwait is a typical example of an oil‐based economy. The oil sector contributes over one‐third of GDP and over 90 per cent of exports. Economic diversification for Kuwait means reducing the heavy dependency on the oil sector. It also implicitly includes reducing the direct role of the public sector while increasing private sector activities and hence the private sector’s size and role in the economy. The study shows that although Kuwait has tried to lessen its dependence on oil through the development of the nonoil sectors, its success so far has been, at best, very modest. Furthermore, it is expected that Kuwait will continue to rely heavily on oil, at least for the next two decades. The crux of the matter is that government policies were mainly in reaction to certain situations and thus no actual diversification took place. The necessity of economic reform and structural adjustment come up to the top of the policy action agenda only when oil prices are down and the government is faced with budgetary pressure.