February 2019 saw the government complete its selloff of a 44% stake in Boursa Kuwait, the country’s stock exchange, which is due to be followed by an initial public offering of a further 50% in late 2019. The sale followed a year of promising performance for the exchange, in addition to the June 2018 announcement that the bourse will soon be included in the main emerging markets index of global financial information provider MSCI – a move that is expected to bring approximately $2.8bn of passive fund inflows when the listing takes effect in May 2020.

Programme Push

The sale was a marker for a wider divestment programme undertaken by the government. The move will see 40 state assets privatised over the next 20-30 years, handing the private sector a considerably larger share of Kuwait’s business. In February 2019 Khaled Al Roudhan, minister of commerce and industry, and minister of state for services affairs, told local media that the Boursa Kuwait sale is “a reflection of the huge strides Kuwait is taking to raise its global competitive index, improve its business climate and develop its efficiency in attracting foreign capital”.

Pushing the privatisation programme through will require considerable political and administrative effort, as well as the application of sound business practices. Past sell-off plans have often stalled in Kuwait and elsewhere in the GCC. However, a new determination by the government to see the programme through is driven by the need for economic diversification away from hydrocarbons and the view that the private sector is vital to a more sustainable fiscal future.

Privatisation Cycles

The need to fuel economic diversification via privatisation has long been recognised in Kuwait. Indeed, the government first asked the World Bank to look into the benefits of a sell-off programme in 1996. At that time, oil prices were around $20 per barrel and had been low for approximately a decade. This created considerable fiscal pressure on the government, which in the past – as is still the case today – had a high dependency on oil revenue for its income. IMF figures show that while total government revenue amounted to an estimated 60.9% of GDP in 2018, 43.7 percentage points came from oil and gas.

Periods of sustained low oil prices put pressure on the state’s ability to fund projects and provide benefits to citizens. When prices rise, then, fiscal breakeven points are more easily reached and the need for diversification and privatisation eases. Thus, the initial interest in privatisation in the mid-1990s waned after 2003, when oil prices began to rise substantially, hitting a series of three-figure averages.

A similar trend was observed after 2014, when oil entered another period of sustained low prices. The “2019 BP Statistical Review of World Energy” report shows average annual spot Brent crude prices falling from $108.66 per barrel in 2013 to $98.95 in 2014 and $52.39 the following year, before bottoming out at $43.73 in 2016. This has negatively impacted the state’s finances, as a budget deficit was reported for four consecutive years leading up to FY 2018/19.

In this context, the diversification and privatisation programme was revived. In 2016 the government announced that some 60% of public sector companies were earmarked for privatisation, with the private sector allowed to acquire shares of up to $9bn. Adding to this renewed commitment are signs that even though oil prices have been rising since 2018 – when Brent crude reached $85.45 per barrel in October of that year – market disruptions such as large exports of shale gas from the US, along with sluggish global growth, are keeping the nation focused on its diversification goals. Kuwait is also applying lessons learned from previous privatisation efforts, such as the unsuccessful sale of Kuwait Airways in 2013. The high cost of existing employment arrangements was cited as one reason why a deal could not be reached, as Kuwaiti parliamentarians sought to protect jobs and working practices in future privatised entities. Other hurdles included national pride over the country’s flag carrier and the value of the asset proving contentious in the highly competitive Gulf aviation sector. Since then, the airline has restructured its business and purchased new aeroplanes. Political opposition has also been weakened by the need for fiscal tightening during the period of low oil prices. While the privatisation of Kuwait Airways is still some ways off, these steps have helped place it in a stronger position for a potential sale.


The New Kuwait 2035 vision, formulated in early 2017, sees privatisation as part of a wider strategy to boost the private sector’s role in the economy. Policies include creating more private sector jobs, mandating the share of public sector contracts that must be given to private small and medium-sized enterprises (SMEs), boosting the application of public-private partnerships (PPPs) and pursuing the sale of state industries. The government is a major employer and the preferred career choice for many young Kuwaitis, who see the private sector as a riskier alternative with fewer benefits. As a result, only 9.6% of private sector jobs were held by Kuwaitis as of 2017. Some opponents have associated privatisation with the loss of well-paying state jobs with lifetime contracts, thus leading the government to increase mandatory quotas of Kuwaiti citizens in private sector companies – a move known as Kuwaitisation.

In March 2019 the Public Authority of Manpower announced it was finalising a plan to increase the proportion of jobs for nationals in the private sector by around 70% in 2020. Some businesses and commentators have warned against this approach, however, fearing that it will initially lead to a lower-skilled workforce, as experienced expatriates will be obligated to leave.

At the same time, the government has been helping private businesses through initiatives such as the National Fund for SME Development, established in 2013 to support youth and ease unemployment by financing up to 80% of capital for feasible projects submitted by citizens. Creating a private sector where companies can take on tasks currently done by the state is crucial to the success of the economic shift outlined in the 2035 vision. “There has been a lot of success with this effort,” Salah Eyadah, director of the foreign relations department at the Kuwait Chamber of Commerce and Industry, told OBG. “Online food delivery service Talabat and mobile accessories retailer Cavaraty are successes in the region. They show the results of the state’s effort to support SMEs and move people from the public sector to the private.”

Enabling Environment

The PPP tenet of the 2035 plan is supported by the Kuwait Authority for Partnership Projects (KAPP), which was established in 2008. The KAPP has a variety of initiatives under its purview, from the proposed Kuwait National Rail Road (see Transport chapter) to the Umm Al Hayman wastewater treatment project (see Energy chapter).

The Supreme Council for Privatisation is another body key to the new economic model. “A major target of privatisation is to open the market to local and foreign business,” Eyadah told OBG. “Government-owned companies in the petroleum sector have also been asked to list.” Such an event would mark a major step forward in the privatisation strategy. Other government utilities, such as the North Shuaiba power plant and the fixed-line broadband network run by the Ministry of Services (formerly the Ministry of Communications, see ICT chapter), are also under review for future privatisation. Possible privatisations may also extend to the Ministry of Electricity and Water.

The coming years will see this programme continue to roll out, with a firm commitment to privatisation backed by a period of fiscal deficit and reminders of the volatility of the hydrocarbons sector. Kuwait has an entrepreneurial tradition, putting the country in a strong position to benefit from privatisation in the long term, particularly with the support of clearer strategy and partnerships with blue-chip oil and gas entities.