Emir dissolves parliament as government resigns



The Kuwaiti government resigned shortly before the prime-minister was due to be questioned by parliament. The Emir accepted the government’s resignation and afterwards dissolved parliament. The Emir appointed his half-brother, Crown Prince Sheikh Nawaf al-Ahmad al-Sabah as prime-minister.


Although no election date was announced, parliamentary elections must be held within two months of the dissolution of parliament. This is the second time parliament has been dissolved in Kuwait in less than a year and the fifth time in the country’s 46-year post-independence history.


(18-20 March 2009)



Analysis and forecast (↑ increasing risk)


The dissolved parliament, which was controlled by Islamist MP’s has insisted to question the prime minister, Sheikh Nasser, over various subjects. To avoid what is perceived in Kuwait as a humiliation, the 2-month old government resigned. Arguments have been reported within the ruling family on how to address the continuing crisis with some calling for a 2-year suspension of parliament and others for its dissolution. Although no election date has been set-up, the constitution says elections must be held within 2 months. The new parliament is expected to be similar in terms of its composition to the dissolved one.


The Emir has appointed his half-brother and Crown Prince, Sheikh Nawaf al-Ahmad al-Sabah, as prime minister. As Crown Prince, Sheikh Nawaf is immune from parliamentary questioning. However, opposition MP’s in any new parliament will be expected to question other cabinet members, and therefore the crisis have not been resolved, but merely postponed, becoming almost endemic.


However, the fact that there is no sitting parliament will allow the government to pass the economic stimulus package that was strongly criticized by MP’s of the dissolved assembly, as an emergency law. The misgivings about the stimulus package was the way failing entities would be bailed out. As the bill will now be passed with little parliamentary scrutiny, it is likely that its effects and implementation will be the source of future tensions both between a new parliament and government as well as between the government and the Kuwaiti society in general. The opposition that was once practiced by parliament will be now expressed by ordinary citizens, increasing the likelihood of civil unrest. This risk is likely to remain until a new parliament is elected which is then expected to grill government ministers on measures taken during the dissolution of parliament.


The crisis are also expected to have increased tensions within the ruling family, both within the ruling Jabber branch and also between the Jabber and the Salem branches, who have traditionally alternated in presiding over the state.



Kuwait cabinet wants to pass stimulus bill as emergency law



Kuwait’s Cabinet wants to pass its US $5.15 billion stimulus bill as an emergency decree, bypassing parliament according to the finance minister. The finance minister said the package, the 2009-2010 budget and a capital market authority bill, will be on the agenda at the Cabinet’s meeting this week. The country’s 1962 constitution gives the emir the right to legislate by decree on “necessary” matters when parliament is not in session or dissolved. When the house comes back, however, it can vote down these laws.


The Central Bank unveiled its stimulus plan in February 2009, but it had been held up in a parliamentary committee with some lawmakers complaining it did not abide by Islamic law. Others have threatened not to approve it unless the government buys or reschedules billions in private debts owed by citizens.


The plan aims at helping struggling investment companies and offers bank loan guarantees.


The economy, which is solely based on oil revenues, has been struggling with fallout from the global crisis. The equity market has seen a drop of around 13 percent year-to-date, and two major financial institutions have defaulted on billions in debts.


Lawmakers have since December helped put the brakes on a US $17 billion deal with U.S. giant Dow Chemical and a project to build an oil refinery.


The 2009-2010 budget which starts on 1 April 2009, foresees a 4.25 billion Kuwaiti dinars, or $14.72 billion, deficit and cuts on capital spending.


(26 March 2009)



Analysis and forecast (↑ increasing risk)


Although from a purely economical perspective, the passing of the bill is seen as a move in the right direction, the manner in which it will be passed will likely be faced with serious political opposition. The dissolved parliament has already expressed reservations on the bill. Besides the political and economic reservations, there were questions on the practical implementation of the bill. In its present form, there is significant vagueness on who would benefit from the bill and how the help will be provided.


If the bill is passed as an emergency measure, it is likely that several entities would benefit from it before a new parliament is elected. It is equally likely that if a new parliament is elected, it would question both the legality of its passing as well as its provisions. Its passing under such political circumstances is constitutionally dubious and procedurally improper. If the new parliament decides to cancel the bill, undoing some of its provisions would then put the government in a political quagmire and will lead to another more serious clash between the government and parliament.


Although postponing the passing of the bill until a new parliament is elected may result in the short-term erosion of confidence in the economy, such postponement will result in more stable and solid grounds on which the stimulus bill will be implemented. However, the indications are that the government will proceed with passing the bill as an emergency measure and this will therefore increase the risk of political instability as well as potentially long-term economic problems.