Kuwait's Status in the World Today - Term Paper Example

Introduction Kuwait is a state situated on the coast of the Persian Gulf, and it boarders Saudi Arabia in the south, and Iraq in the North and west. It is a sovereign state with an estimated population of 3.1 million people that live on an area of approximately 18, 000 square kilometers almost the size of New Jersey state in America (Keay, 2012). It has a constitutional monarchy with a government that embraces parliamentary system. It is noteworthy that it is found in the list of the top five largest proven oil reserves the world over. This paper explores the country by focusing on its economy, population and labor analysis as well as its political risk to determine its probable status in the world today. Economy Kuwait may be a geographically small country, but this does not come any close to its economy. The country is wealthy with a comparatively liberated economy as well as having approximately 105 billion barrels reserves of crude oil that are well supported, and they are estimated to make eight percent of the total oil world reserves (Britannica Educational Publishing, 2011). It is this petroleum that accounts for nearly half of the state’s GDP. This is because almost 95 percent of all export revenues and government income comes from petroleum trade. It is estimated that nominal GDP increased by 17% in 2010 as compared to the 23% decline that has been observed in 2009, and a further 29% growth in 2011(Keay, 2012). This translates to a four percent growth rate which is low as compared to that of the US .The current inflation rate of Kuwait stands at four percent as compared to 2008, a year during which there was a global recession, and the inflation rates stood at approximately ten percent (US Department of State, 2012). This compares on the lower side of economy to the US whose inflation rates have not gone past the six percent mark in the last five years. This is because by march this year the US inflation rates were approximated at 2.7 percent as compared to the 2008 inflation rate of averagely 4percent (Keay, 2012). This increasing rates of inflation in Kuwait has been due to the substantial spending of its government on food due to the increase in commodity prices especially food. However, this is to remain high for the next month due the rising international prices of fuel as well as food prices. This means that Kuwait is managing, but its economic status is low as compared t that of the US in regard to sustainable economic development. The unemployment rate of Kuwait stands at 2.2 percent, and this is an improvement from the yester years (Keay, 2012). It is noteworthy that Kuwait survived the economic crisis that has been ongoing since 2008 majorly because of budget surplus that was generated from the increased oil prices on a global level. However, Kuwait has not been quick to diversify and reform its economy which mainly depends on oil. Therefore, in as much as it enjoys the strong financial position the fluctuation of oil prices is a sure threat to its economy. This means that something has to be done to steady the economy, and attract more investments. Even though the unemployment rate is on the decrease with a promising future in the increasing GDP and reducing inflation rates, they should strive to diversify the economy. This is because it is only this diversification that will improve its economic stability Political and labor analysis The population statistics of Kuwait by 2007 stood at around 3.5 million people with an approximate population of two million who were foreigners. The migration rate to this country is rated to be the third highest in the whole world, and is s argued that the lucrative oil business seems to the attraction for foreigners who are in search for wealth. Arab people form the ethnic majority at 57%, and are closely followed by south and East Asians at 39%. This explains why the representative language of Kuwait is the Modern Standard Arabic (MSA) with English being widely used in business deals (US Department of State, 2012). The literacy levels of Kuwait people is a sure indication of the availability of employees that companies would need to execute their duties. This is because the literacy levels stand at 93.3 percent for persons from the age of 15 and over as of the year 2009, but there is a usual imbalance in literacy levels when it comes to gender where males literacy levels are at 94.4 % compared to the 91% of females (Keay, 2012). These literacy levels stems from the fact that education is enforced for ages ranging from six to 14 years which is free to all Kuwaitis at all levels to higher education. This means that the required technical skills, literacy and level of education is on the high side, and this is a major factor in the growth of any country’s economy. Kuwait is one of those countries that have an authorized minimum wage, and it has been established that no worker can be paid less than this mandatory pay. The least amount an employee gets monthly is 217 Kuwaiti dinars for those citizens working in public sector, and 97 for non citizen employees (Keay, 2012). However, there is no limit for private sector employees but at least 40 dinars for those employees in the domestic service. This minimum wage is on the higher side as compared to most gulf countries, but on the lower side when compared to the US. This law was introduced in April 2010 and this is among other labor laws that are regulated by the Ministry of social affairs and labor (Keay, 2012). They therefore regulate working hours, termination, holidays, and rights for women workers. The work force composition is alarming with almost eighty percent of Kuwaitis working in the government sector as opposed to the lesser percentage in the public sector which is dominated by foreigners (O’Shea and Spilling, 2009). This overcrowding of the Kuwaitis in the government sector is contributed by the fact that when in a government sector, they are guaranteed a job for life with high salaries. This has led to the government enacting a policy called Kuwatization (Keay, 2012). This is a processes meant to encourage more Kuwaitis join the private sector so that they can get to be exposed to the world of international commerce. This is through an obligation that all companies by sector have a fixed number of positions preserved for Kuwaitis, and the government volunteering to pay a fixed amount of the salary to the employee (O’Shea and Spilling, 2009). Therefore, despite this legislation the expatriates have no other underlying tensions in the work force given the fact that language cannot be a barrier either. This stems from the fact that, even though, Arabic is the standard language, English has been recognized as the widely used language in the business arena. Political risk Kuwait has a constitutional and hereditary government that is ruled by princess. Its constitution entrenches the mandates of an elected national assembly, but this assembly has limited control of what Amirs says because he is the final authority on most of the polices. This Quasi democratic system seems to be unstable, and this is having consequences on the economy (Britannica Educational Publishing, 2011). This is because all contracts have to be approved by parliament leading to shelving of many projects. This is, in addition to, political disturbances that seem to scare away potential investors. Crime rates are on the high due to the many immigrants that find a way into the country through private companies’ other than the government. The issue of terrorism risk is still at large, and it is a danger sign for political stability that is still fragile due to its system of governance and security details (Britannica Educational Publishing, 2011). These are a sure turn off for any multinational who would wish to setup base in Kuwait. Unless these are addressed Kuwait will not realize the potential it has from foreign direct investment. Ethics The economic freedom has been ranked position 71 in the 2012 list of freest economies in the world. However, this is a 2.4 points ranking as compared to the score last year. According to Britannica Educational Publishing (2011) this emanates from the fact that there has been increased mismanagement of government spending, freedom of labor as well as freedom of business that have outweighed the gain experienced in the freedom from corruption. This was enough to put Kuwait on the 20 largest declines in the 2012 index. Corruption is so rampant especially in the judicial system which has constantly undermined economic development of the country. This is in addition to work ethics where the working atmosphere is not as robust as compared to other wealthy nations who are on toes to develop economy; everything seems to be slowed (Al-Wugayan and Rao, 2008). This is sure to cause dilemmas to any business ventures in the country. This is further fueled by ethics of business registration that is known to drag like forever. Conclusion Kuwaitis growing economy is a sure opportunity for any business venture except for some challenges to do with the stability of the economy which majorly depends on oil. On matters of political and labor analysis, politics is dragging many business ventures, but if in a position to pass this obstacle, there is surety for success given the literate and abundant labor. Political atmosphere of the region is the greatest challenge to any business venture, for the government is biased towards foreign investment. This is, in addition to the terrorism risks and corruption that is so rampant. According to my analysis, I would recommend a company selling luxury cars products such as cars, expensive jewels and cosmetics. This is because of the high financial freedom the people experience,, and their lifestyle that is not really involving especially at work. This country is thus a good place for a company who wants to take risks head on, for in case the company gets past all the obstacles, it will command good revenue. References Al-Wugayan, A. and Rao, C. (2008). An empirical investigation of consumer ethics in Kuwait: A dydadic interaction approach. Journal of Transnational Management.13 (4): 262-286. Britannica Educational Publishing (2011). Persian Gulf States: Kuwait, Qatar, Bahrain, Oman, and the United Arab Emirates. New York: The Rosen Publishing Group. Keay, J. (2012).Country report: Kuwait. Retrieved on 19th April 2012. From < http://www.gfmag.com/archives/146-january-2012/11563-country-report-kuwait.html#axzz1sSwSgHmT > O’Shea, M and Spilling, Michael. (2009). Kuwait. Singapore, Marshall Cavendish. US Department of State (2012). Background note: Kuwait. Retrieved on 19th April, 2012. from: < http://www.state.gov/r/pa/ei/bgn/35876.htm >. Read More