The major arguments or policy suggestions of this report are as follows.

1. Although the Kuwaiti economy currently cruises in the midst of an oil boom, the present situation may not be sustainable over the long run. Crisis may well be in the offing in Kuwait¡¯s primarily oil-driven political economy, and delaying a prompt, strategic and appropriate response of the state to meet the challenges of the future may blow the crisis and the underlying problems out of proportions. Furthermore, against the increasing level of developmental competition in the region as a backdrop, Kuwait may not afford to keep increasing the opportunity costs of not moving forward or putting its otherwise respectable developmental potential to good use.

Under the circumstances, the Kuwaiti government¡¯s current effort to design and implement a successful five-year development plan is encouraging. Although the traditional-style, comprehensive five-year planning practice has been in decline across the globe, the importance of strategic and effective five-year plans remains valid. Particularly as in the case of Kuwait, where the private sector remains feeble, and the nation¡¯s developmental challenges fundamentally require a structural and societal transformation, a well-designed five-year plan has a very important symbolic and practical value as a vehicle for mobilizing the people of Kuwait for positive, long-term change and reform. We believe that strategic implementation of a series of five-year plans would prove indispensable in helping Kuwait move closer to its vision at least for the next 10 to 15 years.

2. Although Kuwait faces serious long-term development challenges, the drastic reform and change may not be feasible in the current conditions of the Kuwaiti political economy. Kuwait needs to take a phased, gradual, step-by-step approach to reform and change, strategizing not only the sequence but the pace of the process so that the citizens can absorb and embrace the proposed changes in their hearts and minds. The key lies in controlling the status quo, making a series of small successes with the programs, winning the hearts and minds of the Kuwaiti citizens for reform and change, and spreading the reform agenda and implementation schedule over a relatively long period of time, so that the reform issues become ripe enough in the eyes of the elite and citizens for a more full-scale mobilization of national energy.

3. Kuwait¡¯s present technological and manpower capacities may fall short of the level required to realize its vision, and thus the degree of success in crafting and implementing its long-term development strategy would depend on how effectively Kuwait makes use of international talents at least over the short and medium run. In other words, Kuwait may have to expect to face various industrial, technological, or manpower bottlenecks in making the way to its vision. Hence, in order to effectively deal with the bottlenecks it needs to actively attract international human and corporate resources to Kuwait and put them to use, while continuing to improve its internal capacities through gradual and yet determined economic, educational, and labor market reforms.

 4. The key success to Kuwaiti developmental strategy would lie in the implementation of it, and for that purpose, Kuwait needs to establish developmental focus groups as its implementation agents both inside and outside of the government. In fact, Korea had virtually no resources during the 1960s, and yet it was the presence of developmentally-dedicated officials in the pilot ministry like the Economic Planning Board (EPB) that pulled off a successful implementation of its early developmental plans. Likewise, Kuwait needs a strong pilot ministry like EPB for long-term development planning and implementation. Also setting up a national policy think tank like Korea¡¯s Korea Development Institute, as an effective interface between the governing leadership and the society in general, may greatly facilitate an effective implementation of Kuwait¡¯s development policies.

 5. With respect to labor market reform, the core of Kuwait¡¯s task is to induce and empower its citizens to shift from low-productivity public sector jobs to high-productivity private sector jobs. The task is truly formidable, as it calls for nothing less than transformation of the current labor market structure and of the workers¡¯ attitudes and orientation. To start with, Kuwait needs to modify and strengthen such demand-side measures as ¡°wage subsidies¡± and ¡°employment quota¡± to encourage more Kuwaitis to seek jobs and gain work experience in the private sector. Such measures, however, need to be complemented by the supply-side policies to upgrade the quality of Kuwaiti workers, which would involve a heroic expansion and upgrading of vocational education and training programs. Otherwise, strengthened wage subsidies and employment quotas could end up aggravating the whole situation by making the distortions in the existing incentive structure actually worse. The basic objective is to help private firms willingly hire Kuwaiti workers even at high wages.

 6. Going beyond the existing reports, the policy objectives and agendas of the Kuwaiti educational reform needs to be broadened to encompass all four issue areas: quantity, quality, efficiency, and equity. More attention has to be paid to such pivotal issues as those of the high school education sector as well as pre-school education and life-long-learning of adults. Reform strategy itself needs to be reset. At present in Kuwait, the higher and pre-school education sectors appear more prone to the market mechanism. Thus, Kuwait may want to start its educational reforms first with those sectors and more gradually spread the ¡°small¡± successes to others, say, primary and secondary sectors. As for the higher education sector, we propose an active promotion of private universities so that they can make the backbone of Kuwait¡¯s higher education together with the Kuwait University. For secondary education, we suggest introduction of public ¡°magnet schools¡± which, together with newly emergent quality private schools, can set off and lead quality competitions among the schools.

 7. With regards to fiscal reform, based on the Korean experiences, we propose the following four measures or steps for the Kuwaiti government to adopt in a sequential manner: First, the government needs to increase the budget office¡¯s leadership and staff capacity to have a firm, top-down control over the budgetary process. Second, the government needs to combine its investment budget with operational budget which includes personnel expenses, monitoring them in a more integrated way. Third, gradually and over the longer run, the government may experiment with adopting a MTEF (Medium Term Expenditure Framework) system and budgetary process on an at least three-year basis. Fourth, the government may develop a more sophisticated and technically harder reforms at a later stage and also more gradually over the medium or long term as the system gets settled down.

 8. Lastly, the importance of such issue areas as privatization, FDI, and public-private partnership programs cannot be overemphasized. This is because the vibrant and dynamic private sectors are an indispensible part of the long-run sustainable and inclusive development of the Kuwaiti economy. Given that the current state of the private sectors in the Kuwaiti economy is too feeble and meager, we recommend a multi-staged approach to foster the private sectors.

  First, public-private partnership programs should play a key role in the development of private sector-led economy and market discipline in the Kuwaiti economy. Based on policy experiences of Korea, we provide some key recommendations on the legislative and institutional requirements, priorities in choosing target facilities, and the diversification of the available PPP schemes. At the actual implementation stage, it would be wise to try and learn from the best practices of leading PPP program countries periodically and establish a sound monitoring mechanism of the performance to refine the PPP policy. Furthermore more attention should be given to the training of public officials as their quality may determine the level of success.

  Second, we recommend a target-oriented FDI system for the Kuwaiti economy with a medium- or long-term perspective on the Kuwaiti industrial development. In this regard, the Irish example could serve as a benchmark. We provide a sketch of the Irish target-oriented FDI system.

  Third, we suggest some key recommendations with respect to privatization programs. Among other things, it is emphasized that the general privatization law (the general rules for privatization processes) should be first established and applied universally to all the to-beprivatized organizations. The general privatization law could include the establishment of ¡°Privatization Fund¡± or ¡°Kuwait Restructuring Fund¡± as a way of compensating the incumbent workers at the to-be-privatized organizations. We also suggest some guidelines about prioritizing the areas or targets of privatization.

  Lastly, we suggest some key guiding principles for restructuring the electricity power and healthcare sectors. The restructuring of these sectors should have a high priority. These sectors have been doing poorly to serve the basic needs of the Kuwaiti people although they demand an increasingly large amount of resources. It reflects structural inefficiencies.