The research topic of this paper is the study of the confidence level of the local and international Islamic business entities operating inside Kuwait towards the country’s capability to be economically stable in all trade and industry fronts consistently, identifying in the process the factors that affect such economic phenomena. The research to be conducted serves many different aims.
The researcher, through this research, hopes to identify through survey and response measurement the level of confidence Kuwait Islamic business has for the local economy despite the previous years wherein long term business stability cannot be guaranteed by the government leading to very short show of confidence from local and foreign investors that created an impasse particularly between those who are expecting Kuwait to cross the threshold of economic development and those who are uncertain if they can invest in Kuwait and be the propulsion system of the country towards that particular direction .
Another aim of the research is to ascertain which particular local and international socio-economic and socio-political factors directly and gravely affect the state of confidence of local and international Islamic business investors with regards to putting up long term business relationship with the country. The study also aims to pinpoint what the target respondents consider as the low economic times for Kuwait as well the reasons for the occurrence of such predicament.
Lastly, the research aims to identify what the target respondents consider as missing factors that can enable the sustainability of Kuwait’s economy. Kuwait has been known for a long time as one of the many Middle East Asia international trading country particularly because of the presence of oil there. What many might have failed to notice is that Kuwait as a country is also experiencing periods of fluctuating economy in the past years. This was noticeable during Kuwait’s war torn years especially during its involvement in armed conflict with Iraq.
But even during peacetime in the country, Kuwait’s economy is consistently hounded by instability in the economy. it is because of that consistent instability that the world is seriously noticing how Kuwait has been consistent in improving economic and trade power en route to stabilizing the country and its role in international trade. A pre-dominantly Islamic country, Islamic business is seen as key movers in Kuwait’s full frontal attack towards economic stability.
Last year, Kuwait showed that Islamic business is not limited to oil and oil-based industries, making a mark for itself by being acknowledged as a dominant force in the Islamic financial services sector (Nash, 2007). Nash was not alone in that observation as Commercial Bank of Kuwait Secretary to the Board and Head of Investments Fowzi Abdul Mohseen Al Al-Ateeqi said that the reason why the Commercial Bank of Kuwait has been making and launching many different programs is because of the boom that has resounded positively well around and because of Islamic financial and investment business transactions.
Banking and financial investment institutions maybe the most recent Kuwait power player when it comes to economics, but the world should wait and see what happens to other industries that the country seemed to be keen on exploring as well. Reuters reported about the negotiation that involved a Kuwaiti company about the financing for aircrafts and while the deal seemed to have fizzled out at the last minute since it was reported that it was in the advance stage of negotiations, it is not far off the radar that Kuwait will soon open its doors to this kind of business ventures, and more.
Yes, Kuwait still considers oil as an important economic linchpin; they are after all a middle east country blessed with such resource, and they would not exert efforts to lure the oil giants back inside their backyard after expelling them more than 30 years ago (Mouawad, 2005) if they are not aware of the significance of oil in their economy. The point is that maybe this time they found another integral business that can help oil in stabilizing the economy.
Islam and Islamic businesses are indeed taking the lead and taking control of Kuwait and its economic future. Nash noted how KFH signaled the growth in a sharia-compliant financial market in Kuwait as well as the sharia-compliant services sector. The regulation of the sukuk demonstrated by the push toward the regulation of the sukuk or the Islamic bonds and the increased presence of more and more Islamic investment firms in the country all contribute to the growth in Islamic business in Kuwait.
Business specialists in the country should now take the time and the opportunity to assess the factors involved in this growing economic trust and confidence so that the formula for a longer economic stability can be created by the primary movers of Kuwait’s economy. As a country which is heavily active in international trade relations, it is clear that Kuwait’s state of economy is also affected by the political atmosphere in its neighboring countries, particularly those find in the Middle East Asia region who has expressed hostility against the country in the past like Iraq.
In a February 2004 business article, the review of the very visible economic strengthening of Kuwait was attributed to the change of regime in Iraq (Cooper, 2004). Cooper reported that the 2004 business atmosphere is indicative that the confidence to the local economy given by investors in Kuwait ‘is going to last for a longer time than it has in the past’ (2004). If this was the case before in Kuwait, then it is relevant in the study to see why the confidence in the local economy was poor and short-lived in the past.
II Preliminary literature research – Reviewing media reports as well as other related readings and literature is one of the ways wherein probable factors in the rise or fall of confidence level of investors towards Kuwait economy can be gauged. This can also provide the researcher with a way on plotting Kuwait’s relevant economic history which is pertinent to the study. Referring to published works can also provide insightful analytical business and economic theories which can be used in interpreting and understanding the data that is gathered, collected and collated.
Reading published news articles about the state of economy in Kuwait over the years can lead towards the formulation of questions the answer of which is important in the research. Example of which is the identifying of possible factors based on trends appearing on related literature that refers to the economic situation of Kuwait. Is it political stability? If it is, then how much of a factor is that? Does political stability as a factor as big 10 years ago as it is today?
Cooper (2004) said in an article that ‘stable political and economic environments’ is one of the primary reasons that attract the presence of investors from around the world. In the case of Kuwait, Cooper considers the improvement in Iraq’s political administration and ruling circle as a possible factor when Cooper reported about the strong stock exchange performance and solid KSE potential in future trading in a 2004 article, stating plainly that it ‘has made a difference to Kuwait’s economy and its stock markets’.
The research should also add into the equation the fact that there are still many Kuwaiti-based multi-national firms who are forced to move out of Kuwait and do business elsewhere because of existing local business culture that modern business individuals consider as negatively affecting their business operation and hampering the growth of the business.
The research should be able to identify the reason why there are still such feelings inside Kuwait when there are those who trumpet the agreeable state of growth and stability the country’s economy is experiencing currently. Kuwait, and the role of oil not just in local economy but in its social operation, is important to consider. Tetreault (1995) explains how much oil-dependent the country was, and still is.
But it was much different before when oil was the main and solitary economic driving force of the country and the economics dependent on the performance of oil sales in the international market and how local politics and social considerations are controlled, subjugated and addressed by the collective need to put out a better economic performance. To thresh out the needed answers to pressing questions put in by the research, it is important to see trends in Kuwait economics, say for example, the impact of the absence of a bank in Kuwait until 1942 and the fact that there are no Kuwaiti bank until the year 1952 (Tetreault, 1995 p4).
This is pretty much interesting since the 21st century Kuwait flexes economic muscle through the push not just of its oil producing firms but as well as because of the participation of its financial sector, particularly the business and banking. And more interesting is the fact that the initiatives and the moves that propel the local banking inside Kuwait came from Islamic business entities and not from European or American foreign investment companies.
And more than the exertion of muscle by those involved in bank and financial institutions in Kuwait, some of the country’s Islamic business entities are expanding outward and connecting with the international arena like the reported venture of Adeem Investment, which was reported to have been actively pursuing the setting up of an investment bank in the European shores, particularly in the United Kingdom where the company’s owner is no stranger since it was there where the Aston Martin cars, which the firm now owns, are made and based, as well as the real estate agent and development investor namely Park Lane Properties to which Adeem Investment holds 32 percent stake.
Indeed, banking now has become just as important in Kuwait as the operation of the country’s oil production. And more than the growth of the system of commercialized and modernized banking inside the still highly conservative country of Kuwait, the focus on making banking work for Islam through the Islamic features of banking is certainly a proof of how Islamic business as a whole has been growing through the stable economics of the country. The Commercial Bank of Kuwait on December 2007 launched the “Tijari Islamic Money Market Fund”, the bank’s latest investment fund which, according to news reports, will ‘operate in accordance with the provisions of Islamic Sharia’ (Kuwait Times).
Understanding the pattern by which Kuwait economic moves can be very confusing, that is why economic theories and concepts should also be put in play in the analysis of Kuwait’s economic situation and the specific research problem that the paper wishes to tackle. Kuwait’s performance, through its Islamic business entities, is seen as reactionary at times to global happenings. To support the pursuit in understanding the factors that contribute to the growth of both the confidence of investors in local economy and the resulting growth of the economy in the country, and whether or not it is an oligopolistic reaction should be carefully assessed to see if Kuwait has fallen under the follow-the-leader global economic behavior and if so, analyze whether this course of action and behavior is part of the many factors that contribute to the improvement in Kuwait’s economic consistency.
III Methodology – The research will be made through survey through the use of questionnaires using the Model Assisted Sampling or MAS. This style, according to Berzofsky et al (2006) is ideal for survey situations wherein the target population or prospective respondents are hard to find, or if the sample size proved to be too small for the study. The MAS features traditional probability sampling as well as quota sampling, making it similar to model-based sampling. This particular sampling style is suitable for the nature and design of the study of this particular research. In incorporating positivist methodology, the study will limit itself in what truth or fact can be proven based from the outcome of the research and nothing more.
This is because the ideals of positivism as a scientific research belief revolves around the dogma that makes the researcher focus solely on what the current study can observe and measure. Empirical analysis, cause and effect analysis and anticipating and predicting how the measurable aspects of life would turn out depending on previous known data on action and reaction of particular subjects is the personality of positivism. Using positivism and integrating it in the research’s methodology requires the researchers to just focus on what can be measured, calculated, and observed and use this newfound information to predict in the future. Integrating the use of interpretative methods in the overall methodology means that the observed output and result would be interpreted based on existing, factual or scientifically proven data.