Instead of Helping Citizens, Kuwaiti MPs and Ministries Target Expats

Recently a number of measures have been considered in Kuwait that target the country’s substantial population of expatriates. It is important before this issue is examined in more detail that the background be discussed. It is estimated that out of a total population of about three million, two thirds are expatriates while the remaining one million are citizens. There is, essentially, a dichotomy in the economy between these two groups. The state provides essentially guaranteed employment to its citizens in the public sector that comes with generous benefits, and citizens have taken advantage, with more than 90 percent of them holding jobs in the public sector. Meanwhile, the private sector is dominated by expatriates, who hold over 98 percent of the jobs.

The expense of employing approximately 91 percent of its citizens is a substantial one for the Kuwaiti government, but it is one that it is currently able to afford due to the current high price of oil. Kuwait export crude is projected to be $107 per barrel with one month remaining in the fiscal year, which leads to a major surplus. However, the official budget projections, which are included in this economic report by the National Bank of Kuwait, are calculated with a projected oil price of $65 for 2012/2013 and a projected oil price of $70 for 2013/2014. According to these figures, if the oil prices were at that level, Kuwait would have large budget deficits, totaling approximately KD7.3 billion ($25 billion) for 2012/2013 and KD3.05 billion ($10.7 billion) for 2013.

Since the Arab Spring began at the beginning of 2011, the regime has done two things – first, it has reacted to clamp down on dissent, and second, it has boosted government spending substantially. These spending increases could include granting interest relief to Kuwaiti citizens who overspent their income and obtained personal loans to do so, or having the government purchase the loans. The issue, beyond that of equity or fairness, is that financial institutions are likely to continue extending such loans if they believe that the state would continue to bail them out by repaying them.

This increased spending has happened to a degree that the World Bank reported in 2012 that it would be unable to sustain it over the long term. The IMF projected in 2012 that at the current rate Kuwait would run out of extra oil revenue by 2017 and would no longer be able to save funds for its future generations fund. At the time that report was written it estimated that the breakeven point was $44 per barrel, but the recent budget projections show that the breakeven point is now substantially higher.

It is impossible to predict the direction of oil prices, and a decline to $70 a barrel is not unforeseeable. It might not be likely, but it is not impossible either, and would, as the statistics above show, put a serious strain on Kuwait’s budget (and could lead to subsidy reductions as well). It is therefore necessary to increase the private sector employment opportunities for Kuwait’s citizens so that they do not need to rely on government employment, which over the long term could be affected by fluctuations in the price of oil. There was recently a plan passed by the National Assembly to help finance small business projects that employ citizens but it has been criticized as having many of the same flaws as previous efforts, which helped establish some businesses but these did not employ substantial numbers of Kuwait’s citizens. There is, then, a pressing need for employment for the substantial young population, but currently a lack of adequate steps being taken. A recent $111 billion development plan that included contributions from the private sector was blocked by parliament last year. The danger is that Kuwait will, even with recent measures to attract foreign investment, lose out on business to other states in the region such as the UAE.

It is in this context then, that recent measures have been taken targeting Kuwait’s substantial population of expatriate workers. The Ministry of Social Affairs and Labor announced a plan to reduce the number of expats by 100,000 annually to reach 1 million in ten years. The Kuwaiti Ministry of Health recently implemented a measure intended to segregate the hours that Kuwaitis and expatriates receive non-emergency medical care. They have also been blamed even for traffic jams and accidents. However, the measures to restrict expatriates have two flaws – first, they are attempting to scapegoat a population of workers for issues beyond their control. Expats only recently (in 2010) received a degree of protection that included a minimum wage, and have suffered abuse from employers in the past. Second, it could under present economic conditions lead to a loss of valuable skilled workers, as a recent survey of Kuwaiti citizens showed.

What, then, is the solution? The exclusion of citizens from meaningful economic (and increasingly political) participation is a long-term issue that need to be addressed. What is required is careful study and well-studied and implemented plans, not measures intended to target a class of workers for long-term problems that are not of their creation.

Jordan and the United States Under Obama: A Complex Alliance

King Abdullah and President Obama appeared at a news conference following their meeting on Friday. The King welcomed Obama to Jordan and mentioned the subjects they discussed in their meeting, which included Syria and the influx of refugees, the Israeli/Palestinian conflict, political reform, and , and thanked the United States for its continued support which he said “has allowed us to get Jordan where we are today,” and discussed the reform measures that the government has introduced, and said Jordan could be an example of peaceful reform. He said “This is the Jordanian moment.  What we’re seeing is the third way in the Middle East — we are seeing that the Arab Spring is behind us; we in Jordan are looking now at the Arab Summer for us all, which means that we all have to roll our sleeves”

President Obama reciprocated the King’s praise, saying that “Jordan is an invaluable ally. It is a great friend,” Obama praised King Abdullah and and said that the reform process in Jordan  and said that the United States was committed to Jordan’s security, including from the dangers of a spillover from the conflict in Syria. He pledged to seek support for $200 million in additional budget support from congress in addition to loan guarantees, with this aid intended to help with economic reform and offset the impact of the conflict in Syria and the influx of refugees. He praised the reform process and said that the economic reforms were necessary and that Jordan had an opportunity to be an example of peaceful change.

King Abdullah and President Obama had much praise for each other at the press conference, and Jordan-US relations are indeed strong, but the relationship is much more complex than this. Obama alluded to this when he said that “Our cooperation on Syria is an example of how the partnership between the United States and Jordan improves the lives not only of the Jordanian people, but peoples across the region.” What Obama meant was that Jordan’s actions in keeping its borders open have produced benefits for other states in the region. However, these benefits – to others – have come at a substantial cost to Jordan that has not always been reciprocated. Even now, President Obama alone does not have the ability to provide the additional $200 million in budget support to Jordan, as he actually said that he would work with congress to provide it. Given the recent history of American politics that is not necessarily a sure thing. Meanwhile, the expenses that Jordan is incurring are happening right now.

Jordan has done a lot for numerous other states in the region, and the hosting of refugees from Syria is only the most recent thing, and yet the promises that have been made to Jordan in return have not always been met. This is not to say that the $200 million in assistance or the loan guarantees will not be provided, but it is important to note that it is not a certainty, and it is worth noting that most of the money totalling $1.5 billion pledged at a conference in Kuwait in January has not materialized. Pledged assistance from several of the Gulf states has also been late in arriving.

It is important, in the future, to ensure that Jordan’s reliance on aid is reduced even as it is needed at present for the short term. This would ensure that the present situation – in which Jordan does things for others in the region and elsewhere that are very costly – and for which it is not supported to the degree that it should be, despite the expenses and difficulties it has encountered on the issue of Syria and numerous other issues that have emerged in recent years.

King Abdullah’s Post-Interview Damage Control Begins

Image by Troy Carter (@CarterTroy)

Image by Troy Carter (@CarterTroy)

The damage control effort following King Abdullah’s interview with The Atlantic has begun. Today, the Turkish Foreign Ministry sought clarification regarding comments King Abdullah was said to have made regarding Prime Minister Erdogan. In the interview, King Abdullah said “I see a Muslim Brotherhood crescent developing in Egypt and Turkey.” Regarding Prime Minister Erdogan, King Abdullah said that “Erdogan once stated that democracy for him is a bus ride…Once I get to my stop, I’m getting off.” He also compared Erdogan to Egyptian President Mohamed Morsi, saying “Instead of the Turkish model, taking six or seven years, [instead of] being an Erdoğan, Morsi wanted to do it overnight” He also had more critical comments to say about Morsi, saying that “There is no depth there” and gave the example of Morsi’s attitude towards reconciliation between Hamas and Fatah. The interview also contained criticism of King Abdullah’s family, who he said behaved more like royalty the further they were from the throne (and said he would punish them sometimes to send a message), the Islamic Action Front (who he said wants to overthrow the government), the National Current Party headed by conservative and loyalist former Speaker Abdul Hadi al-Majali (which he said lacks a political platform), and the GID, which he criticized as well, as well as an anecdote about Bashar al-Assad being unfamiliar with jet lag, as well as comments about his relatively strong relationship with Israeli Prime Minister Netanyahu.

From a PR standpoint it was a disaster. After Turkish diplomats complained about his comments regarding Ergogan, the regime has moved into full damage control mode. King Abdullah posted on his facebook page that the interview was “inaccurate and dishonest.” Jordanian officials have said they will give a “public general explanation” regarding the interview. What could such an explanation entail? Either King Abdullah made these remarks about the leaders of neigboring or nearby countries such as Egypt or Turkey or he did not. Either Jeffrey Goldberg is a fabricator (which would require a substantial amount of evidence to back up) or perhasp, as might be more likely, King Abdullah thought his comments were off the record. Even if this is the case it overlooks a larger point – even if King Abdullah did not expect these comments to be published, they were still what he said and still what he thought.

There is a larger danger here, not just for King Abdullah but for any leader who speaks off the record in a manner that is substantially different from when they are on the record. What do these comments achieve? They hurt Jordan’s relations with several countries and caused potential internal strife without achieving any gains. Turkey, like Jordan, borders Syria and is heavily involved in addressing the conflict in that country. Egypt is a major supplier of gas to Jordan, and yet both of those countries are not likely to take kindly to these comments. The damage control has begun.

What is clear from this interview is this: even if some of the things that King Abdullah said are arguably true, they should not have been said by someone who has stated he aspires to be a constitutional monarch. It is also, regardless, imprudent to damage Jordan’s relations with states in the region and damage its diplomatic position without any corresponding gains.

Update 1: Protesters Rally Against “Theatrial Plays” on Reform

**Update**More protests were held on Friday, March 15th in Amman. There were two rallies on Friday: an Islamist rally in downtown Amman with about 1000 participants and a leftist rally that attracted about 200 in Ashrafiye. The protests in Amman focused on both political and economic griefances. They criticized Prime Minister Ensour’s economic policies for seeking to raise prices, and called for his resignation. The protests also focused on the issue of corruption, as demonstrators chanted “We demand freedom from corruption.” The dissolution of parliament was another demand, and this may indicate that some of the demonstrators may have been affiliated with parties or movements supporting the boycott in January, including the Islamic Action Front. Protesters said they would hold a sit-in on the airport road beginning March 21st to commemorate the two-year anniversary of the March 24th rally that was broken up by security forces. Protests were not convinced to Amman alone, as rallies were also held elsewhere including in Irbid, Tafileh, Kafak, and Maan.

These protests and their persistence around Jordan indicate the sentiment that reform measures have been inadequate is widely held. To try and dismiss protests such as these as organized by parties such as the Islamic Action Front seeking to gain power misses the point entirely. If a group of people gathers to demonstrate they do so because of their grievances, not their party affiliation. These demands – for electoral reform, for an end to corruption, and against higher prices are widely held, even if watching events in nearby countries such as Syria, Egypt, or Tunisia may have made some Jordanians wary of similar events happening in Jordan. The higher turnout in January’s election over the previous one is perhaps best interpreted as a desire for a different type of change from that in other regional states, not an endorsement of the status quo. If the regime does not need these calls then future protests, and greater frustration with the political process are inevitable.

**Original Post**Another large protest attended by hundreds of people was held in Amman on Friday in front of the Al-Husseini Mosque. There was a diverse crowd or participants including Islamists, youth movements, and other reformists, and the rally used the slogan “Crisis of Governance, Not Governments.” The protesters chanted that the regime was not genuine in implementing reform efforts, saying that it was engaged in a “mere theatrical play.” They also called for reforms to the electoral law and for amending the constitution. There were also criticisms made of the government’s efforts to free Khaled Natour, who was detained in Saudi Arabia about two months ago. He had taken part in protests outside of the Saudi Embassy in Jordan against the crackdown in Bahrain.

The criticism that the regime’s reforms are a “mere theatrical play” have a significant amount of validity when one examines issues such as, for example, corruption. Perhaps the definition of a theatrical play is something that puts on a spectacle but is not actually real, or in this case not actually achieving change. In Amman Criminal Court right now, Walid Kurdi, former Chairman of the Jordan Phosphate Mining Company  (and husband of Princess Basma, aunt of King Abdullah) is on trial for corruption. He was indicted on January 2nd, and his assets have been seized. Witnesses have been called, evidence has been examined, and charges have been made that outline Kurdi’s alleged conduct, including involvement in overpriced shipping contracts signed shortly after the company’s privatization with a firm that he controlled along with his relatives. Putting an uncle of the King on trial for corruption is intended make it seem as though change is happening, and that no one is above the law.

There is, however, a problem: Kurdi left Jordan on a flight to London January 6, 2012 and has not returned since then. There’s a major corruption trial being held, but the defendant is missing. He is thought by some sources to still be in the UK, but the government has not filed an Interpol arrest warrant, and little progress if any seems to have been made on his extradition to face the charges.

If there were an example of a theatrical play on the issue of corruption, Kurdi’s trial would be one. This issue is just one example of how reform measures often seem to be oriented more towards making it appear action is being taken rather than taking the difficult measures needed to bring about change. This is true not just on corruption but on other issues as well such as elections, where improvements in process have been made but the electoral law remains unfair. This is why protests such as this continue to happen. People do not feel that the political process is capable of bring about substantive change.

Violence Spreads to Jordan’s Parliament

**Update** Here is a YouTube video with the footage of the fight from Telegraph TV.

Violence has spread to Jordan’s parliament. During a speech by Prime Minister Ensour defending his government’s fuel price increase last week, he was interrupted by MP Zaid Shawabkah from Madaba, who started yelling at him before his colleagues intervened and convinced him to calm down. Soon after, an altercation began.

Ensour continued his speech and argued that the government had no choice due to Jordan’s budgetary situation, when Shawabkah interrupted him again, standing up and accusing him of corruption. Deputy Speaker Khalil Atiyeh apologized to the Prime Minister on behalf of the house for any disrepectful behavior from its members, and Ensour, though angered, continued his speech.

Shawabkah started interrupting Ensour again, and MP Shadi Odwan – whom Jordan Times reported seemed to have a firearm, though he did not pull it out – to move towards him, and colleagues intervened to separate the two of them. As more MPs started to become involved the situation escalated, Atiyeh ended the session.

The participants in this altercation were not protesters who stormed parliament, they were MPs, elected officials. A key element of political reform is having institutions such as parliament where policies are debated, and where those who are upset with the government can both work within parliament and outside of it to gain political support to either change policies or win future elections. This incident shows that it takes more than just changing laws to change a political culture.

Energy Costs: The Challenge Jordan Faces

Last week, the government announced that the price of several fuel products would rise:

  • 90 octane gas: increased from JD0.800 to JD0.835/liter
  • 95 octane gas: increased from JD0.990 to JD1.030/liter
  • diesel: increased from JD0.685 to JD0.710/liter
  • kerosene: increased from JD0.685 to JD0.710/liter
  • cooking gas cylinders: maintained at JD10/cylinder

The increase triggered protests in several cities, especially in Karak and Tafileh governorates in the southern part of Jordan. Several professional associations opposed the price increase, as did the Muslim Brotherhood and a major politica bloc, the Democratic Gathering Bloc (though it is backing IEC Chairman Abdallah al-Khatib for PM rather than Ensour) said it would not support a government that maintained this increase. The National Union bloc opposed it although it was sympathetic to the circumstances, while the Islamic Centrist Party said it would meet with Ensour before making a decision.

The recent price hike is part of the closely-linked challenges of a poor fiscal situation and a troubled economy are a key challenge that the next government and its successors will have to address over the long term. These challenges are inextricably linked – a stronger economy does not just generate more employment for the population, but it also improves the country’s fiscal situation. As private sector employment becomes more attractive it reduces the burden on the state to provide employment for the population. Meanwhile, the employees and businesses in the private sector would pay taxes and generate more revenue. So its beneficial in two ways.

One of the most difficult economic challenges for Jordan’s next government is energy, and specifically Jordan’s reliance on imported energy for 98 percent of its needs. This means that with energy prices high, Jordan pays 20 percent of GDP for energy imports. On the surface, the relationship seems to be a direct one: when energy prices rise, its bad for Jordan’s fiscal situation, and vice versa, but a report by the IMF indicates a slightly more complex situation. According to this report, increases in oil prices have two opposite effects – it is immediately negative because of the higher cost of imports, but Jordan does benefit from increases in remittances and aid over the longer term, as well as higher phosphate prices and demand for other Jordanian exports.

What this means is that in a normal situation an increase in energy prices would actually be a net positive when all factors were taken into account and the external inflows from the oil-producing economies are maintained. But what’s different now, and who, if anyone, is to blame for it? The answer ultimately is that the regime is to blame for leaving Jordan in a position where events such as the attacks on the gas pipeline in Egypt, not for the events that have occurred in the region themselves, but for leaving Jordan as unprepared as it is to cope with them, and for not addressing the imbalances in the Jordanian economy before it became a crisis.

With regards to fuel, Jordan is left with a single outdated refinery that has a legal monopoly on the refining business, and no immediate prospects for investment to either upgrade it or replace it with a more modern refinery. There is also the issue of electricity, where the regime has been providing power to households for 60 percent less than it costs to generate it, causing power consumption to rise rapidly. When disruptions occur, such as the attacks on the pipeline from Egypt, it raises the cost of power considerably, but with the indirect effects that rising oil prices bring (increased remittances and aid) that help offset the impact. It means that the cost of subsidies rose considerably, and the government had little choice but to lift the subsidies at the worst possible time, when people were most vulnerable.

Events in neighboring states, such as attacks on the pipeline in Egypt, the war in Syria, and continued instability in Iraq (and accompanying potential threats to the future pipeline to Aqaba) are outside Jordanian control, but they nonetheless should not be sufficient to harm the economy to the extent that they have. Some difficulties were inevitable, but it was the regime that allowed the country to get into its current position by neglecting needed reforms and using measures like patronage and subsidies to compensate.