Economic Development in Kuwait Introduction Al

Although the Gulf War destroyed much of Kuwait's infrastructure, the country continues to be quite a wealthy one because of the oil resource. Nonetheless, the Kuwaiti government, like many of the Middle Eastern governments, has focused on diversifying the economy in order to reduce dependence on this one resource. The intent in the following pages is to look at economic development in Kuwait, beginning with the historical background.

Before the Kuwait economy depended on the oil resource, it depended upon pearldiving for much of its income. Crystal (1994) noted that during the nineteenth and early twentieth centuries, Kuwait exploited its natural pearl banks, which were some of the world's richest. Kuwait had a fleet of over 700 boats and the pearldiving industry employed almost 15,000 people. In addition to pearldiving, which was an occupation for the summer, Kuwaitis concentrated on trade.

This was the primary occupation of early Kuwaitis. Kuwait was a trade center, serving as a commercial entrypoint and middleman for India, Africa, and Europe. Essentially, the thing that drew Saddam Hussein to Kuwait its access to the Gulf and harbor facilities was what drew the Bani Utub tribal peoples to the region. In addition, Kuwaiti people became known for their shipbuilding and seafaring, while fishing was a peripheral, but important, industry (Crystal, 1994).

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rld, in possession of over 20 percent of the world's known oil resources. The Sheikh, member of the ruling alSabah family, received 50 percent of all profits from the oil resource, although much of this is used for the development and social welfare of the country (Information Please Almanac, 1996). Still, much of it simply goes to the royal family for its enjoyment. After the War Hussein destroyed much of the infrastructure in Kuwait, and attempted to destroy much of the oilproduction capacity of the country by setting fire to the oil fields. Despite this, Weinberger (1995) indicated that by February of 1995, the country's petroleum industry was actually back to prewar levels and all infrastructure was rebuilt. This was largely accomplished through the use of Kuwaiti reserves, which had been at $100 billion before the war, but have been reduced to $30 billion with the reconstruction. There has been some assistance from private investors, but most of what has been accomplished has been done by Kuwait itself. There continue to be considerable restrictions against the involvement of foreigners, although during the war effort Kuwait promised to open up opportunities specifically for American business. Lief and Pastern

Category: Economics - E