It is crucial, then, to identify and tackle these challenges and smartly manage oil wealth and revenues to ensure stronger immunity for the oil economy.
Naturally, the path to ending oil dependence will be fraught with challenges. But undertaking structural reforms of long-standing financial and economic policies and developing alternatives can smooth out some bumps in the road.
Economists and global economic history experts say that the countries that prioritised education and vocational training have been able to enjoy their natural resources in a more sustainable manner.
At the beginning of the oil age, Kuwait may not have had educated cadres or leaders that could grasp the requirements of economic development once oil revenues began flowing in.
To help bridge that gap, the country hired Arab and foreign experts across all sectors. In the 1950s, Arab and foreign consultants flocked in to advise on matters like the economy and urban planning. Shortly after, the Kuwaiti government also hired World Bank experts to develop insights for development plans in the subsequent years.
The specialists conducted extensive studies that examined the imbalances born out of the oil boom and how to overcome them, identifying the best ways to benefit from oil wealth. Plans were also made to allocate surplus funds to public expenditure needs — current and capital.
In 1953, the Kuwait Investment Office was established in London. The government also created companies that worked in both the oil and non-oil sectors following the the public-private partnership (PPP) model.
This helped to leverage state funds and the private sector's financial and administrative capabilities. The scope of these companies spanned many sectors, including oil refining, petrochemical industries, oil transportation, construction industries, air and land transport, and navigation — not to mention a number of banks that also worked on a PPP basis.
Challenges of populism
Economic policies are often held hostage to populist whims as the government has to answer to National Assembly members elected on sectarian, tribal, or constituent bases.
None of these members have serious intentions to restructure the economy and adopt a knowledge economy as a basis for sustainable development.
Economic policies are often held hostage to populist whims as the government has to answer to National Assembly members who do not have serious intentions to restructure the economy and adopt a knowledge economy as a basis for sustainable development.
Therefore, the government's fiscal policies continue to boost spending on salaries and subsidise goods and services — sometimes providing them for free.
As a result, state budget expenditures increase, as demonstrated by the proposed budget for FY 2023/2024, estimated at KWD 26 billion (USD 85 billion).
Reforming Kuwait's economy requires — first and foremost — a political will to implement the privatisation law, transfer ownership of service activities and facilities to the private sector, and strike partnerships with leading global companies specialised in vital activities such as electricity generation, water desalination, recycling, transport, and communications.
The state must also be willing to develop Kuwait's healthcare system and provide a comprehensive health insurance programme for citizens and residents.
Educational reform imperative
Kuwait needs to drastically reform its education sector. It must upgrade curricula and establish vocational education institutions that fulfill labour market needs and keep pace with modern technologies that are integral to the jobs and professions of today.
Read more: Kuwait's demographic predicament needs skills, not speed
These reforms may seem ordinary and easy to implement for those unfamiliar with the situation in Kuwait. In the last 70 years, Kuwaiti societal values have changed, as citizens became accustomed to government assistance. As a result, citizens' drive to work, innovate and achieve has dwindled.
In fact, education is no longer a requirement for professional advancement. Academic degrees have become mere shortcuts to obtaining senior positions — with many obtaining fake degrees.
These degrees from unrecognised universities have managed to secure their holders leading positions in ministries and government institutions.
When education is trivialised in such an insulting manner, the switch from a rentier oil-dependent economy to a knowledge economy becomes an unrealistic ambition.