Box 2

Kuwait

1. Fiscal adjustment

Kuwait's draft Five-Year Development Plan (1995/96-1999/2000) aims at a fiscal balance by the year 2000. Revenue measures envisaged include the introduction of a sales tax, increases in customs duties, and corporate profit taxation. As regards expenditure, the aim is to control the growth of wages and salaries and maintain sustainable levels of capital expenditure.

2. Diversification and private sector participation

The annual real GDP growth over the plan period is projected at 1.3 percent. The Plan aims to promote the role of the private sector in production and investment through deregulation and human resource development. It is also intended to extend the privatization program to major entities and large corporations. Steps have been taken recently to allow some foreign investment and private sector participation in petrochemical activities. Consideration is also being given to liberalizing foreign participation in drilling and exploration activities in the oil sector.

3. Labor market

Employment policies will aim to absorb the growing number of Kuwaitis entering the labor market, while reducing employment in the public sector. The Plan aims to increase the ratio of Kuwaitis in the work force from 16 percent to 19 percent. The authorities intend to limit the immigration of low-skilled expatriates. Further, foreign firms that are awarded government contracts are required to invest 30 percent of the contract value in joint ventures with Kuwaiti-owned firms ("Offset Program").

Box 3

Oman

Oman's Five-Year Development Plan (1996-2000) targets a balanced budget by the end of the plan period. While oil revenue is expected to increase due to higher output, the revenue from gas and other sources during the plan period is also projected to be 25 percent higher compared to the 1991-95 period. At the same time, under the Plan, expenditure on defense and security will be reduced by about 10 percent and development expenditure will be lowered by 13 percent, compared to the 1991-95 period.

2. Diversification and private sector participation

The Plan projects a growth of 25 percent in GDP over the five years, and aims to raise the contribution of the non-oil sector to GDP from 65 percent in 1995 to 69 percent by the year 2000 through market-based policies. The Plan envisages that local and foreign private sector investment would account for more than one-half of total investment during 1996-2000.

3. Labor market

As part of the efforts to promote Omanization of the labor force, the authorities have established employment targets for nationals and have raised taxes related to employment of expatriates. Moreover, the Plan has allotted some 15 percent of the public investment budget toward human resource development.

Box 4

Saudi Arabia

1. Fiscal adjustment

Saudi Arabia's Sixth Development Plan (1995-2000) aims at eliminating the budget deficit by the year 2000. It is intended to raise non-oil revenue through adjustments in fees and charges for publicly supplied goods and services, and to improve revenue collection. Expenditures are to be curtailed without regard to oil price developments; specific measures include cuts in explicit and implicit subsidies, reprioritization of projects, and rationalization of expenditures.

2. Diversification and private sector participation

Real economic growth is targeted at 3.8 percent per annum during the plan period. The Plan calls for a restructuring and diversification of the economy to reduce dependence on the oil sector and increase private sector participation in the economy. To support the process, it is intended to complete ongoing infrastructural projects that could facilitate private sector activity. The divestiture program will focus on electricity, telecommunications, airlines, and the Saudi Arabian Basic Industries Corporation. Vulnerable social groups would be protected by direct income transfers and social security payments.

3. Labor market

The Plan calls for development of human resources to meet skill requirements of the economy and to facilitate Saudiization of the labor force. Education and training efforts will focus on the skill requirements of the private sector. The liberal policy toward expatriate labor will be maintained.