Interpreting Middle East Economic News and Analyzing Market Trends

Category: Kuwait

Kuwait’s lawmakers propose raising minimum wage to highest in the world

Kuwait’s National Assembly Building – Source: Arabian Gazette

Kuwait’s dysfunctional parliament is at it again.  This time they are working on a new bill to raise the minimum wage of Kuwaitis to three times higher than the world’s current highest; Luxembourg.


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Here’s another sign of the unsustainable welfare system in the GCC

The welfare systems in the GCC are well-known for their generous benefits and subsidies offered to their citizens and expats alike.  In addition to offering a tax-free environment, they offer subsidizes on a wide range of staples including gas and utilities.  For their citizens, they also offer free education through university, free healthcare, subsidized housing (in many cases, free housing or land), a guaranteed public sector job and a generous pension.


Citizens of these countries assume this welfare system can go on forever, and expect it to do so.  However, high birth rates over the past few decades are causing severe strain on governments’ budgets.  This cannot go on forever and sooner or later, citizens will have to adjust (it will be painful).  Cracks are already emerging to reveal that this system is unsustainable, albeit small cracks, so governments are working on the painless adjustments first… targeting the expats and having them pay higher rates than citizens.


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Bailouts of bad debts do more harm than good

Kuwait’s dysfunctional parliament recently approved bailouts of bad consumer loans dating back as early as 2002.  The UAE and Saudi Arabia have both came up with similar solutions to bailout their citizens of their piles of bad debts, but is this good?  Who really benefits from bailouts and what is likely to happen down the road?  We’ve reported on this topic several times over the past few months, here, here, here and here.  Now it seems that a major ratings agency has come out against these bailouts due to their longer term effects on the economy.


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Abu Dhabi set to become largest foreign investor in Malaysia

Gulf countries have invested billions of dollars in Malaysia over the past decade.  Kuwait and Saudi Arabia were the earliest to invest, followed by Dubai.  The two most recent investors in Malaysia have been Qatar and Abu Dhabi. Up until now, Qatar was expected to be the largest foreign investor in the country, but now it looks as if Abu Dhabi might take that title.


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Earthquakes in Iran shake Gulf country leaders into discussing nuclear safety

Source: BBC News


Two earthquakes one week apart near Iran’s Bushehr nuclear power plant not only shook buildings across the Gulf, but also shook the leaders of Gulf countries.  They are now rushing to take a close look at nuclear safety.  The Bushehr power plant sits right across the Gulf from Kuwait and Saudi Arabia’s main oil export terminals.  Any Fukushima-type event in Bushehr will affect millions of people in the region and will surely hit world markets as the Gulf’s main oil export routes are only a short distance away.


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