Kuwait - Overview of economy

Kuwait is a small, open economy that depends to a large extent on oil. Worldwide, Kuwait's oil reserves are second only to those of Saudi Arabia, representing about 10 percent of total global reserves. Oil accounts for nearly half of the gross domestic product (GDP), more than 90 percent of exports, and 75 percent of government income. Over the last 20 years, the government has tried to broaden the country's importance as a player at all levels of the oil industry by purchasing petroleum distribution networks and gas stations in other parts of the world.

In 1990, Iraq invaded and annexed Kuwait and was then driven out by United Nations (UN) forces under the leadership of the United States. A decade later, Kuwait has fully recovered: the economy is on the upswing and the infrastructure has been restored. Kuwait operates the world's most generous state welfare system for its indigenous population. Nationals enjoy access to a free (local) telephone service, electricity at 10 percent of production cost, and water supplies at a third of cost. In addition, as the constitution stipulates, nationals are provided with lifetime guaranteed employment in the civil service, with subsidized housing for married employees.

Like many other Gulf states, Kuwait is heavily dependent on international oil prices. Therefore, it needs to develop a viable non-oil related industrial base and is pressed hard to create jobs for the growing number of young nationals entering the job market every year. The government is, in principle, committed to economic reform. It presented a package of structural reforms to the National Assembly in 1999, which are designed to

enhance overall efficiency and growth potential. However, implementation has been slow, and privatization programs have met stiff resistance because of fears over job losses between nationals and the possible elimination of consumer subsidies .