By Hassan Jivraj
January 10, 2017
Kuwaiti MPs are set to discuss the government’s economic reforms package, which are aimed at addressing the country’s budget deficit. Opposition MPs, however, have vowed to oppose reforms, which raise charges on public services and taxes on citizens to generate non-oil income.
The re-emergence of the opposition in Kuwait’s parliament, the National Assembly, follows elections held in November 2016 after the country’s ruler Emir Sabah Ahmad Al Jaber Al Sabah dissolved parliament the previous month, citing the regional “security challenges.” Yet many point to the underlying tensions between parliamentarians and the government, which has pushed for austerity measures amid an era of cheap oil.
The new government, formed last month, has the same Speaker of the Parliament and ministers from the previous government, including several members from Kuwait’s ruling Al Sabah family. This raises the question as to whether the new parliament will result in a showdown between the government and opposition MPs, particularly over economic, fiscal, and security reforms which could lead to the parliament’s dissolution again this year.
If history is a guide, the signs are not encouraging.
Compared to other Gulf Cooperation Council (GCC) members, Kuwait has a long history of parliamentary life. Established by the country’s constitution in 1962, the National Assembly has provided a platform for Kuwait’s political players, like secularists and Islamists (both Sunni and Shi’ite). The National Assembly contains 50 seats and up to 15 members serve in the government’s cabinet.
Although in principle Kuwait is a semi-parliamentary democracy, the Arab Gulf country’s rulers have dissolved its national legislature nine times in the last 54 years (in 1976, 1986, 1999, 2006, 2008, 2009, 2011, 2012, and 2016). In fact, only six parliaments have ever lasted their full mandated term. These dissolutions were attributed to different events at their specific times, but there remain underlying issues: Limitations on the parliament.
Most notably the emir appoints the Prime Minister, who has always belonged to the ruling Al Sabah family, acts as the head of the government, and forms the cabinet. The emir also appoints all judges and he holds the constitutional authority to suspend the Assembly. Furthermore, Kuwait’s ruler commands the Armed Forces and can suspend the Parliament. The fact in that Parliament does not confirm the cabinet nominees, and a member of Kuwait’s royal family usually leads most of the top posts such as minister of finance, defense, and foreign affairs, further constraining the legislative body.
More importantly, the Assembly does not have the constitutional authority to pass new reforms or even improve existing ones. However, despite these limitations, the National Assembly has the ability to grill ministers, policies as well as block policies and can remove ministers as well as the prime minster in the form of a vote of no confidence, making it far more powerful and influential than any democratically-elected legislature in the other GCC states.
In addition, Kuwait’s parliament also has various internal factions, which the Al Sabah family members use as proxies in the Arab Gulf sheikdom’s political arena. Observers have accused the past the parliament of being friendly towards government’s policies, most notably since the 2011-2012 “Arab Spring”. For example, in 2013 a pro-government Assembly passed an ambitious USD 130 billion five-year development plan (2015-2020), including various infrastructure projects and other commercial opportunities for the merchant class which is a key support base for the government.
In 2012, the emir decreed a voting law that gave each citizen one vote (rather than four, as previously) in each district. Many interpreted this as giving an unfair advantage to independents over established political and tribal blocs (primarily comprised of Islamists, liberals, and tribal elements), creating discontent and election boycotts within the wider opposition. This led to Kuwait’s Muslim Brotherhood – the Islamic Constitutional Movement (ICM) – boycotting parliamentary elections in 2013, and resulted in mainly pro-government parliaments.
Fast forward to 2016, the ICM decided to participate in the elections after nearly four years of boycotts. November’s parliamentary elections saw a 70 percent voter turnout, and opposition groups secured roughly 60 percent of the contested seats. Leading the way for the opposition was the ICM, as well Salafists, the youth, and smaller tribes, which have traditionally protested against the monarchy on different grounds. Larger tribes and Shi’ites, traditionally allied with the government, lost seats.
Despite these opposition gains, however, the new government led by Jaber Al Mubarak Al Sabah (who was reappointed as Prime Minister), formed a cabinet with several familiar faces, including five members from Kuwait’s royal family. Perhaps most tellingly, Marzooq al-Ghanem, who served as Speaker of the previous parliament and hails from a well-known merchant family, won re-election as Speaker of the Parliament, defeating two opposition candidates by a sizeable margin.
Anas al-Saleh, who has received ample criticism for his handling of economic reforms, particularly reducing subsidies and hiking petrol prices, maintained his key post. MPs who vowed to question him if he kept his cabinet post will likely do so this year. The opposition MPs also lost out on key policy making bodies including financial and economic affairs committee, and the interior and defence committees. Nonetheless, the majority of the newly elected parliament have expressed strong opposition to the government’s plans for fiscal and subsidy reforms, as voiced during their campaigns last year.
During the first session of new parliament, Kuwait’s ruler declared that austerity is inevitable and cutting public spending remains a top priority. Indeed, since mid-2014, Kuwait has had to cope with low oil prices, which hit government coffers with oil accounts for around 90 percent of the government’s income. Despite being one of the more prosperous Gulf Arab monarchies, and having one of the largest GDPs per capita in the world, Kuwait is estimated to run an official budget deficit of USD 31 billion during the current fiscal year (March 2016-2017). In response, authorities proposed several reforms including indirect taxation, increasing charges for public services and eliminating subsidies such as water and electricity. The government has directed the burden of these reforms towards non-Kuwaiti citizens to minimize the impact on Kuwaiti nationals. However, MPs argue that any increase in electricity and petrol prices will negatively impact the cost of living and inflation, thereby making life more difficult for citizens.
Last year, the government proposed a ten percent corporate income tax for all companies in the country. At present, there is a flat 15 percent rate on all foreign companies operating in Kuwait. However, the new tax would include Kuwaiti and GCC-owned firms, which are currently exempt from corporation taxation. Officials have yet to announce an implementation date, and they are unlikely to take place until at least 2019. Additionally, Kuwait is set to implement a GCC-wide 5 percent valued added tax (VAT) on goods by 2018 or 2019.
In addition to taxation, MPs are set to contest reforms to public sector pay, which employs around 90 percent of Kuwaiti citizens, as well as further petrol price hikes and subsidy reductions to safeguard incomes and generous welfare packages enjoyed by the citizens. Last April, the Assembly agreed to introduce electricity tariffs gradually from May 2017, these price increases will be applied to commercial shops, government offices, and foreigners’ homes, but excludes Kuwaiti citizens. Furthermore, last September, authorities (without parliament’s consent) increased petrol prices by up to 80 percent.
Opposition MPs have called for a draft law to abolish the hikes in fuel and power prices and have said that they will grill the Prime Minister if the government rejects their demands. MPs are also calling for an amendment to add petrol and other fuels to a 1995 law, which prohibits the government increasing raising charges on public services without the Assembly’s approval.
One key trend from the November elections was the victory of the Salafist bloc, which includes groups such as the Islamic Salafi Alliance and Umma Party within the opposition, which could signal a shift in the Kuwaiti political landscape. For example, the Salafist bloc and the ICM have called for the government the Prime Minister to be elected and legislation to introduce formal political parties in Kuwait.
If the ICM and Salafists align themselves with other elements within the opposition, such as secularists, other small tribes and the youth, who also fared well during the elections, could pressurize the government. During the elections, opposition MPs campaigned against abolishing price increases
This year there is a possibility of a showdown between the government and MPs over economic reforms, which could result in the National Assembly being dissolved again. Only two-thirds of MPs’ votes are needed to challenge the government and opposition MPs have previously stated that they will grill ministers if the government carries out these reforms. This makes the prospect of another dissolution more likely.
Several regional security challenges, including the threat of Daesh cells in the Gulf, the war in Yemen, and the expansion of Iran’s regional influence, along with domestic economic challenges, will likely exert new pressure on Kuwait’s government.
*Hassan Jivraj is a Middle East and North Africa reporter for a financial publication in London. He previously served as a GCC political risk analyst for IHS Markit, as well as a reporter and researcher for Islamic Finance Information Service (IFIS), part of GlobalCapital.