Al-Shal: "Economic Circles" – The Beginning of Addressing the Repulsive Environmental Diseases

A report by the Al-Shal Economic Center addressed the issuance of Law-Decree No. 88 of 2026 concerning the establishment of Economic Judicial Circuits, describing it as a “long-overdue law” that expands their commercial, financial, and investment jurisdiction to encompass all these areas, replacing the narrow jurisdiction that previously covered only disputes related to the Capital Markets Authority. The decree also authorized the Authority to continue operating until the final resolution of cases pending before it, in accordance with Law-Decree No. 91 of 2026, before its eventual cessation.

Al-Shal noted that the law’s significance lies in the unique nature of financial and commercial disputes, which require specialized expertise. In these cases, the speed of adjudication is of paramount importance; if the resolution process in ordinary courts is prolonged, the judgment may lose its relevance.

In detail, financial and commercial disputes are highly sensitive to fluctuations in asset prices. Time can fundamentally alter the value of disputed assets, either increasing or decreasing it due to commercial reasons, or due to broader economic, political, or geopolitical factors. Consequently, even if a judgment by ordinary courts is legally correct and favors one party purely from a legal standpoint, its financial and commercial value may have changed significantly by the time it is issued.

The provisions of the law suggest an awareness of the importance of specialization, whether at the judicial body level through leveraging judges’ prior experience or by intensifying specialized training courses. Additionally, the circuits will be supported by specialists selected by the Technical Office, which should help them achieve their objectives.

In practice, success indicators will depend on two factors: the time taken to adjudicate disputes until a final judgment is reached, and the interval between the issuance of the final judgment and its full enforcement. The time factor between the initiation of a dispute and the enforcement of its judgment is the most critical element for the success of the Economic Circuits.

While this is a step in the right direction, its impact on creating an attractive business environment will be limited and contingent upon accurately diagnosing and treating the factors that currently repel investment. Kuwait has the highest outflow of local capital for direct foreign investment in its geographic region, and perhaps in the world, and the lowest inflow of foreign direct investment among countries seeking to invest directly in Kuwait.

We have frequently cited UNCTAD figures, which summarize that between 2021 and 2025, Kuwait received approximately $4.5 billion in foreign direct investment, while local capital flight from its market amounted to about $86.8 billion, resulting in a net deficit of $82.3 billion in favor of outflows during that period.

This is a highly significant issue. The Economic Circuits need to be supported by addressing many repelling public policies, such as sterile bureaucracy and the rapid changes in systems and laws, which negatively affect the sense of security and stability. Only then will their impact be maximized.

On another note, the report stated that there is no objection to regulating the management of government financing affairs, nor to establishing a special purpose vehicle to undertake this task, despite the high rate of disguised unemployment among Kuwaiti nationals in the government sector. The likely intention is to transfer specialized employees from their government workplaces to that company. The objection, rather, concerns the prioritization of public borrowing affairs.

He continued: “Following the approval of Law-Decree No. 60 of 2025 concerning Financing and Liquidity, and then Law-Decree No. 81 of 2026 concerning Borrowing from the Future Generations Fund, and with the significant expansion of government borrowing—whose volume more than quadrupled within two fiscal years and a quarter—the government’s focus has shifted toward securing additional borrowing channels and managing its debt portfolio, rather than prioritizing a government reform program or legislation that would mandate the use of financing proceeds to bridge the three structural economic gaps: the production gap, characterized by the underdevelopment of local economic engines; the fiscal gap, evidenced by a persistent rise in the budget deficit with current expenditures completely dominating the budget; and the unsustainable gap in the balance of national employment, with approximately 800,000 Kuwaiti nationals under the age of 24 entering the labor market.

During the 2020 coronavirus pandemic crisis, just a few months after its onset, indicators of weakened capacity to finance essential public expenditures began to surface publicly. The situation became so acute that the Ministers of Finance and Oil engaged in a public dispute on social media over which ministry had greater claim to $7 billion in liquidity held by the Kuwait Petroleum Corporation.

After that crisis subsided—primarily due to an exceptional, non-recurring factor, namely the outbreak of the Russian-Ukrainian war in February 2022—it was expected that the harsh lessons learned would be absorbed and avoided in the future. Instead, we find ourselves in a similar state of instability, with no hedging measures taken by leveraging the lessons from the pandemic.

While diversifying and regulating the government’s financing channels is acceptable if a significant portion of the proceeds were directed toward development and construction, all the terminology used to market financing laws or decisions as ensuring financial and economic sustainability is meaningless.

By way of comparison, Target 1 of the “Kuwait 2035” Vision stipulates achieving a “sustainable diversified economy.” Yet, ten years after adopting this vision, Kuwait’s economic engines are weaker and further from sustainability than before. The final accounts of the general budget recorded a growing fiscal deficit over nine fiscal years. Similarly, Vision Target 6, which calls for “creating creative human capital,” has not been realized.

In his latest statement, the Minister of Education noted that there are 32,268 surplus teachers—approximately 36% of the total teaching workforce—with around 13,000 surplus teachers in Islamic education and physical education. Teachers are the ones who create creative human capital, yet more than a third of them are deemed unnecessary. To save approximately KD 42 million annually in salaries, 7,701 non-Kuwaiti teachers were abruptly dismissed. We do not know the impact of this decision, positive or negative, on enhancing the level of creative human capital.

If the promotion of borrowing as a project for economic and financial sustainability continues, the same fate that befell the 2035 Vision targets will repeat itself. Kuwait will eventually awaken, forced to mortgage its assets to confront the consequences imposed by the debt trap.