KUWAIT’S $600-BN WEALTH FUND CAUGHT IN POLITICAL SLUGFEST

Disagreements hold up approval of new term for nine-member board

A $600 billion sovereign wealth fund is caught in the cross-hairs of a political power struggle that’s roiling one of the world’s richest countries.

The Kuwait Investment Authority, the world’s oldest state investment vehicle, has been in limbo since its board’s tenure expired two months ago. A new term has yet to be approved as political differences spill over into a disagreement over the makeup of the nine-member board, according to a person familiar with the matter.

The uncertainty now hanging over the KIA, which manages Kuwait’s vast oil wealth through two key funds, is emblematic of a broader malaise that’s paralysed policy making, prompted ratings agencies to warn of downgrades and perversely left the government of a major OPEC crude exporter scrabbling for cash. KIA officials were not immediately available for comment.

It’s all part of a deep standoff between members of the only elected parliament in the Gulf and a government whose leader is appointed by the ruling Emir, a deadlock that’s blocked the state from borrowing and left it with barely enough to pay public sector salaries. The dispute’s also delaying investment and economic reforms, including an overhaul of the welfare state the government says is needed to end eight consecutive years of budget deficits.

“The signals this sends are very negative,” said Kuwaiti businessman and economist Abdullah Al-shami, who owns two companies specialised in medical and financial services. “It is a new low and I can justify that by saying we have two political agendas and so two economic agendas. The first is going toward new liberal policies adopted by the West and the other wants to maintain the welfare system as it is.”

Once a booming economy at the forefront of Gulf Arab affairs, Kuwait has long since been eclipsed by neighbours unshackled by elected institutions and bent on securing their seat on the international stage. Dubai established itself as the region’s business capital, while in Saudi Arabia, Crown Prince Mohammed bin Salman has embarked on an ambitious plan to remake the economy.