By Rania El Gamal
Further diversification needed in Gulf state to weather current global financial crisis.
Kuwait's ruler urged parliament and the government on Tuesday to cooperate to install further reforms and diversify the economy away from heavy reliance on oil amid a global financial crisis.
In a speech to the house coming back from a summer recess, Sheikh Sabah al-Ahmad al-Sabah, said the economy of the Gulf Arab states was strong but not insulated from global woes.
"We have to diversify our income and give the private sector a bigger role," Sheikh Sabah said, adding that budget surpluses were only temporary and should be used to diversify the economy.
"We need to combine efforts to avoid any negative impact of this (global) crisis," the emir said, referring to the global credit crisis.
OPEC member Kuwait wants to reduce its reliance on oil income to emulate the success of Gulf neighbours Dubai and Bahrain, which have become regional financial centres and popular tourist destinations.
But key plans such as a law to set up a financial regulator and another to allow help foreign firms to help develop oil fields have been stalled due to a political stalemate.
The emir, who has the last say in politics, had dissolved the previous parliament in March after a standoff with the government paralysed legislation.
But cooperation between the two wings of the legislature has not improved much with many deputies pressing the government to increase spending to offset the impact of soaring inflation which hit a near-record of 11.35 percent in June, the latest data.
Heeding calls from deputies, the cabinet increased salaries for citizens twice this year and raised subsidies for basic goods.
With a global credit crisis battering the bourse of the Gulf Arab states, MPs are calling on the government to help small investors cope with losses through state aid.
The central bank of the world's seventh-largest oil exporter, cut interest rates earlier this month to ensure liquidity and stop a slide on the bourse. (Reuters)