Corona and Kuwait

Boursa Kuwait worked only for a day corresponding with major stock markets in the week ending 28/02/2020, due to the National and Liberation holiday. Therefore, it was expected that the panic would affect it on the first working day on March 1st 2020. A huge and unjustified panic occurred which caused the Premier Market Index and the All-Share Market Index to lose about 10% on the first trading day after the holiday as shown in the accompanying chart, but this panic was a panic characteristic of human nature. The Boursa Kuwait management’s behavior was preemptive and correct when it applied the “Index Trading Break” system, which comes at predetermined loss levels. This system is applied by 17 stock exchanges in the world, including the New York Stock Exchange. It is an unjustified panic because stock prices at Boursa Kuwait did not match the rise of the main stock indexes after the 2008 crisis was contained. In fact, most of the local securities are still being sold with a big discount on their book values, which is unjustified because the fall in stock prices does not threaten the safety and solvency of the banking sector. In other words, it is unlikely that a large correction in the financial assets’ prices will lead to failure in repaying bank loans. It is unjustified because the relationship of listed companies with the macroeconomic performance in terms of growth and the labor market is weak. This means that falling prices do not threaten the transition of the crisis to the second or third stage; its impact will be limited to a loss in the wealth of individuals, and pressures on the profitability of companies and institutions.

The crisis revealed two extremely important and dangerous indicators and if they were read correctly and were benefited from, the results could turn to the positive side because they act as an early warning bell. However, this warrants the presence of a special sensor in the public administration, though its availability chance is weak. The first indicator is the fragility of the country’s economic and financial situation as a result of the overwhelming dependence of the local economy on a single source of income that makes the public sector contribute two-thirds of the gross domestic product (GDP), and it finances 90% of the public budget of its revenues. Oil, in the aforementioned week, lost about 13.3% of its price level and Kuwaiti oil barrel was sold at about US$ 50.78, less by 7.7% of the conservative estimated budget price of oil at US$ 55. Oil prices may compensate some of its losses like stock exchanges but the pressure will continue on prices and production in the medium to long term due to technical developments and environmental concerns. The country will enter the dark indebtedness tunnel or the consumption of the savings of oil market boom era unless it moves early in its development project and settles its matter about its two contradictory projects: the first reinforces dependence on oil and the other calls for diversification away from it. The two projects are dormant.

The other fortunate indicator is what has the repercussions of confronting the disease revealed, namely, the fragility of the social and political fabric of the country. Instead of the crisis leading to the cohesion of the components of the society under a comprehensive umbrella of their homeland, it led to its disintegration in a hateful sectarian conflict on both sides. We are certain that history has not witnessed the success of any development and reform project that is not based on the inclusivity of citizenship, and what has been shown by actors in the public administration wings-the government and the parliament-is acceptance of what happened or the alignment of small fanatics at the account of the country. This is an inevitable consequence of the quota approach in public administration for what is achieved by family, regional, sectarian or tribal support, does not embrace priority of loyalty to the homeland, but rather to its small kinship underlying his/her position, with or without right. There is no need to cite examples of the conditions of nearby countries that adopted the quota approach in the distribution of state positions. Perhaps a transient crisis like “Corona” gave a conclusive indication of the failure of the approach and its seriousness in Kuwait, and perhaps it is time that we understood its seriousness and began a very late reform of the forming of public administration approach.