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Country reportsMarch 22 2011

Kuwait: a calm presence in an unsettled region

As political and social unrest spreads across many countries in the Middle East and north Africa, Kuwait – the Gulf region's only democracy – is making progress across many fields in a quiet and efficient manner.
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Kuwait: a calm presence in an unsettled regionKuwaiti voters head to the polls.

Located in a turbulent part of the world with Iraq to the north and Iran to the east, Kuwait is the Gulf Co-operation Council’s only democracy with a fully fledged parliament and regular elections, and it has made significant political progress over the past few years.

In May 2005, the Kuwaiti parliament gave women the right to vote and stand as candidates in elections for the 50-seat National Assembly. However, the growing assertiveness of parliament has led to frequent confrontations with the government. In the past three years, three cabinets resigned amid disputes with the National Assembly. Kuwait has faced a recent spate of militant violence, though it remains relatively stable despite recent upheavals across the Middle East and north Africa (MENA) region.

Fast growing

Kuwait has a gross domestic product (GDP) of $167.9bn and a per capita income of $81,000 making it the fifth richest country in the world. With a GDP growth rate of 5.7%, the oil-rich Gulf state has one of the fastest growing economies in the MENA region.

The Kuwait Stock Exchange (KSE), which has about 200 firms listed, is the second largest stock exchange in the Arab world, with a total market capitalisation of $235bn, though trading has slowed down considerably as a result of the global financial crisis.

Kuwait is believed to have 10% of the world’s crude oil reserves, estimated at about 104 billion barrels. As a result, oil and oil-related activities account for nearly half of the country’s GDP and 95% of export revenues. The government is hoping to increase production from 2.8 million barrels per day to 4 million and is looking to spend some $50bn over a five-year period to upgrade the country’s existing refineries. Part of this upgrade will be carried out under the development plan approved by parliament in 2010, and which aims to spend more than $100bn improving the country’s infrastructure systems.

Kuwait boasts other major industries, such as shipping and construction, as well as a well-developed financial services industry. Its banking system pre-dates oil discovery. Founded in 1952, the National Bank of Kuwait (NBK) is the largest bank in the country and one of the largest in the Arab world. Other notable financial institutions based in Kuwait include the Gulf Bank of Kuwait and Burgan Bank.

Food import dependence

Kuwait's harsh climate limits agricultural development and is therefore highly dependant on food imports, and 75% of potable water must be desalinated or imported. Due to the volatile nature of oil trading, the government is keen on decreasing Kuwait's dependence on oil to fuel its economy by transforming it into a regional trading hub as well as a tourism destination. It is devoting $77bn to the construction of the Silk City project, the largest real estate development in the Middle East, which should attract businesses and holidaymakers from across the globe. The country’s most important trading partners are Japan and the US.

Kuwait's economy can be volatile due to its dependence on oil and suffers from big movements in oil prices as a result of political conditions in the Middle East. But the country also has significant investment revenues as a cushion. The political process can be slow and cumbersome but as many in the country point out – that's the price of democracy.

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