Diversifying a Resource-dependent Economy: Private–public Relationships in the Kuwaiti Economy

The Kuwaiti economy is characterized by two major structural imbalances—heavy dependence on oil production and dominance of the public ownership. Kuwait has struggled over the years to implement a two-pronged development strategy —diversifying the country’s economic base away from the oil sector and promoting private sector development. This paper explores the economic impact of some policy reform options currently being considered. It employs a unique set of input–output tables, derived from supply–use tables, that distinguishes transactions made by private and public enterprises as well as providing a matrix of imports by industry. The public–private sector interdependence analysis revealed interesting results regarding sectoral differences in strengths of forward and backward linkages. For instance, the findings indicated that the strength of the publicly owned oil sectors lie in their forward linkages, supplying other sectors with their outputs, but their backward linkages is weak. On the other hand, the chemicals industry is identified as one of a few sectors with balanced and relatively strong forward and backward linkages in both public and private sector. The policy analyses conducted in this paper are highly relevant to the ongoing policy debate in Kuwait over the design of the economic reform programs. The public–private linkage analysis has revealed insights into policy synergies through which one instrument can affect more than one policy target.