New Kuwait finance minister slams bloated administration, red tape


By Martin Dokoupil

DUBAI, Oct 8 (Reuters) - Kuwait's new finance minister hasissued a stinging criticism of the country's bloatedadministration and bureaucratic red tape, saying the economycannot continue growing robustly in the long term if they arenot reformed.

The comments by Sheikh Salem Abdulaziz al-Sabah, carried bystate news agency KUNA on Monday, were his first extensivepublic policy statement since he took his job in August.

Sheikh Salem left the central bank last year after 25 yearsas its governor, protesting against a rapid rise in governmentspending. It is not clear whether he will have more success inshaping Kuwait's fiscal policy in his new role.

His remarks echoed criticism by the International MonetaryFund, which said last week that despite its huge oil wealth,Kuwait needed to rein in public spending, especially on wages,and find new sources of income to protect its budgetposition.

Sheikh Salem, a member of Kuwait's ruling Al-Sabah family,said structural imbalances in the state budget, inefficienciesin the labour market and the limited role of the private sectorwere the most prominent challenges facing the OPEC member'seconomy.

These imbalances are partially or wholly linked to "the roleplayed by the government in economic activity, which hasresulted in the oversized growth of its administrative sectorand the complication of procedures, thus hindering sustainablegrowth," KUNA quoted him as saying.

He acknowledged that Kuwait's fiscal and current accountsurpluses were strong at present but added that they werefundamentally linked to the performance of the global oilmarket, which meant it was important to find a sustainable modelfor economic growth.

Kuwait's budget surplus fell to 12.7 billion dinars ($44.8billion) - equivalent to 24.7 percent of gross domestic product,still one of the highest levels in the world - for the fiscalyear that ended in March, he said. Its current account surplusstood at 22.2 billion dinars in 2012.

The IMF has forecast Kuwait's fiscal surplus will come in at27.4 percent of GDP in 2013/14 after 33.4 percent in 2012/13,higher than the finance ministry's estimates.

But in view of recent sharp rises in the government'scurrent spending and relatively small non-oil revenues, stateexpenditure could exceed oil revenues by 2017/18, raising therisk from any sustained drop in oil prices, the IMF said.

Analysts in a Reuters poll in September predicted the budgetsurplus was likely to shrink to 23.7 percent of GDP in 2013/14and 18.5 percent in the following fiscal year.

Like other wealthy Gulf Arab states, Kuwait provides agenerous welfare system and does not collect income tax, but ithas lagged peers such as the United Arab Emirates and Qatar inraising competitiveness and foreign investment.

It has the most open political system in the Gulf Arabregion but infighting and bureaucracy have slowed tens ofbillions of dollars worth of economic development plans thatwere originally announced in 2010. Parliament has pressured thecabinet into boosting spending on social welfare handouts.

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