Kuwait: Market realignment

Once again signalling the government’s intent to realign the local labour market, officials announced on February 8 that the Kuwaiti Manpower Restructuring Programme has targeted the placement of 20,000 citizens in private sector jobs over the next two years. The announcement comes at a time of growth, when the country and wider region are beginning to shrug off the effects of the global economic crisis.

While the global recession certainly had an impact on the Kuwaiti economy, with GDP contracting by 4.6% in 2009, the steady climb back to growth has provided the government with an opportunity to embark on bold new development plans. This has included not only an ambitious $106bn five-year spending plan unveiled in February 2010, but also measures to further the diversification of the economy and rein in some aspects of the country’s wide-ranging welfare system.

Private sector job creation will be critical to this policy shift. While Moody’s has predicted that GDP will grow by 4.5% in 2011, unemployment, particularly among nationals, remains a concern. The official unemployment rate currently stands at 4.4%. Perhaps more importantly than this standard indicator, which compares favourably with much of the region and the developed world, Kuwaitis remain disproportionately reliant on the government.

Only 6.2% of the private sector workforce is made up of Kuwaiti nationals, while the majority of citizens are dependent on public sector jobs or government support. The potential consequences of this dynamic were made clear at the height of the economic crisis when the government had to stave off calls for a $23.3bn bailout of consumer loans. Perhaps the most surprising part of this, however, was the government’s ability to withstand parliamentary calls for a bailout, backed as they were by the precedent of the write-off of domestic debt in the wake of the 1990-91 Gulf War.

Cutting its recurring expenditure bill is now a central government priority. Indeed, in announcing plans for 20,000 new private sector jobs, Walid Al Weheib, the secretary- general of the Kuwait Manpower Restructuring Programme, made this perfectly clear. According to Al Weheib, the programme is designed to alleviate the financial burden on the state by encouraging Kuwaitis to join the private sector workforce.

This is not the first time the government has focused on increasing the employment of Kuwaitis in the private sector. National employment has been a key priority throughout the region for some time and certainly since a 2003 World Bank report, which stated that the Middle East would need to create 100m jobs by 2020 to deal with its increasingly young population. In Kuwait specifically, the Manpower Restructuring Programme has already placed 70,000 citizens in private sector positions over the last decade.

However, the latest developments suggest a new strategy in terms of the country’s employment policies. Similar to elsewhere in the region, the mantra of job quotas and Kuwaitiisation is fading. As with Saudi Arabia and its Human Resources Development Fund, Kuwait is now turning its attention to training and incentives. According to Al Weheib, “Since 2010, the programme has been trying to create a quantum shift by means of finding a fresh system based on the provision of technical, material and moral support for citizens wishing to join the private sector.”

As a part of the scheme the government has established training programmes, a national labour development centre and an incubator for small and medium-sized enterprises. It is also focusing on female employment, developing employment centres, creating guidance services and implementing public awareness campaigns specifically for women.

This approach signals a shift from mandating private sector job growth among nationals through quotas to providing the environment for a natural migration of citizens to the private sector as the economy grows. Allaying the concerns of nationals worried about reductions in the state safety net will be central to the success of this effort. A key development in this regard was the passage of a new private sector labour law in February 2010, which safeguards workers’ rights and protects them against arbitrary redundancies. The law also enshrines equal employment rights for women and protects certain benefits, such as public holidays, for private sector employees.

This legislative foundation should help the government as it moves ahead with efforts to overhaul the labour market. While there is still a way to go, the government appears to be on the right track in its mission to place nationals at the centre of its economic development and diversification strategy.