Surplus savings and the case for a regional financial market in Kuwait
This thesis argues the case for improved capital allocation through a regional financial market (RPM) in the context of the substantial imbalance existing between a surplus capital saving country, Kuwait, and the capital deficit countries in the region. The region embraces the twenty-one states known collectively as the "Arab World".The information available to the writer derived mainly from official and international sources in addition to fieldwork and interviews which were undertaken before and during the course of the research. The quality of statistical information available was generally satisfactory but data on intra-regional capital flows were either available only in fragmented form, or in certain cases proved impossible to compile. The information reported in this study terminates in 1980.The arguments for the case for an RFM are developed along the lines of the deductive method, i.e. from general to specific conclusions. These arguments are broadly presented in two premises, the recurrent surplus accumulation in Kuwait in the medium to long-term, on the supply side; and the demand for such savings in capital scarce Arab countries (CSACs).Chapter 2 presents a theoretical review of resource management in an open economy and contrasts it with Kuwait's current oil depletion policy. The chapter concludes with a prediction of the likely oil revenues in the 1980s. Chapter 3 investigates factors influencing the limited capital absorptive capacity in Kuwait. Against this background Chapter 4 estimates the absorptive capacity of oil revenue in Kuwait using a simple linear programme. It also combines the results of this exercise with the projections made in Chapter 2, of oil revenues toestablish the country as a major source-of-funds in the region. Chapter 5 assesses the financial constraint in CSACs and reviews the main features of their financial structures. Chapter 6 investigates the demand for the services of the proposed RPM by both savers - Kuwait - and investors - CSACs. It brings together the supply and demand side of the analysis, and throws into relief the elements of this market. Chapter 7 attempts to demonstrate that the financial structure in Kuwait is adequately equipped with the institutions and instruments needed for the establishment of an RPM. It also outlines some of the important initial conditions and foundation-requirements of the RFM. Chapter 8 provides a summary and general conclusions to the thesis.