Kuwaitis still don't trust Iraqi regime
Kuwaitis still don't trust Iraqi regime
KUWAIT (Reuter): Kuwaiti businessmen gave mixed reviews
yesterday to Iraq's formal recognition of the emirate, with some
foreseeing economic gains but others saying Baghdad cannot be
trusted.
"This is a very important move towards normalizing the
economic atmosphere," said former oil minister Ali al-Baghli.
"Of course we don't believe (Iraqi President) Saddam Hussein.
But it will be an embarrassment for him if he now revokes
recognition."
An investment official said the pledge announced by Saddam and
his government could not be trusted and Kuwait's main source of
security had to remain the military support of its allies.
"There will be no dramatic change in investor confidence
merely as a result of Iraq's statement," the official said.
"The factors behind investor confidence will continue to be
government economic policy -- principally its measures to attack
the budget deficit -- and profitability of the private sector."
All agreed there was no prospect of an early return of the
billions of dollars in private funds that left Kuwait for safe
havens abroad after the 1991 liberation from Iraqi occupation, or
of other funds sent abroad in early years. That depended on deep
and long-term economic and political change in the region.
They said the prospect of Iraq's return to the oil market
might depress the world price of Kuwait's single resource,
although few saw that happening before the end of 1995.
Reintegrating Iraq into the market was the collective
responsibility of the Organization of Petroleum Exporting
Countries and this would be a "difficult task", Baghli said.
Amer al-Tamimi, chairman of the Kuwait Economists' Society,
said Iraqi recognition combined with the reassurance created by
the rapid Western response to an Iraqi border buildup last month
was "good for the economy, good for the stock market and good for
the real estate market".
Turnover on the stock exchange doubled and prices crept higher
on Wednesday on news that Iraq might recognize Kuwait.
Kuwait's economy was hit hard by the 1990-91 Gulf crisis which
cost the treasury US$21 billion in direct war costs and cost both
private and public sectors over $100 billion in repairs and
outright losses due to destruction or theft of assets.
Aggressive
A boom that accompanied aggressive post-Gulf War oilfield
reconstruction quickly petered out as bad debts, worries about
Iraq, a population fall and low oil prices kept confidence low.
Kuwait's economy took a minor knock from Iraqi's buildup last
month, a move seen largely as a way of attracting attention to
Iraq's demand for a lifting of sanctions.
Business activity ground almost to a halt for several days as
foreign executives called off visits and Kuwaiti executives
turned attention to their families' security.
Top hotels reported only 40 percent occupancy in a period when
most expect at least 60 percent. Non-cash bank transfers overseas
jumped 373 percent in the first days of the episode.
The incident reminded analysts of the profound effect Iraqi
hostility can still have on confidence in the emirate.
"There has been a lot of uncertainty in the face of the
continuing Iraqi menace. Now (with recognition) the menace has
been eased," Baghli said.
"Allied military support was essential during that period, but
it was costly. Now some of the money spent on defense can go on
development."