THE reason we keep bringing up the subject of the Public Institution for Social Security is that it serves nearly 150,000 citizens, along with an additional 88,000 heirs of retirees who receive benefits. This constitutes a sizable population. As more retirees exit the workforce each year, it is imperative to consider ways to sustain this institution effectively to meet the needs of a growing demographic. About 238,000 people are currently receiving pensions from the Public Institution for Social Security. Despite the state reporting an actuarial deficit exceeding KD 24 billion, the institution relies heavily on investments and earnings from its high-risk overseas ventures.
Experience has shown that these investments are often shrouded in ambiguity. You might hear about profitability one day, only to read about an anticipated deficit the next. As a result, it is impossible to trust the released figures, as they seem influenced by the official’s mood and lack sufficient transparency. They were constrained by a rigid government policy that limits accountability to the National Assembly.
Meanwhile, the numerous failures reveal how inflexible financial laws have failed to prevent deficits. However, when we examine the structure, management style, and investment portfolios of comparable institutions worldwide, we find that they have never experienced a deficit since their inception due to their careful handling of finances to support both the government and society. Institutions like the French Retirement Authority, Germany’s social security institution, and the Swedish National Retirement Fund operate under specific requirements and advanced laws that are continuously updated to avoid costly mistakes.
In contrast, the Public Institution for Social Security last year recorded negative investment returns in five funds. The losses were particularly evident in Lebanon, where its banks seized deposited funds in 2019, and the status of those funds remains unclear to this day. This highlights the urgent need to invest the institution’s funds domestically, at reasonable rates, to mitigate losses recorded in some countries while also diversifying income sources, as similar institutions do globally.
In those countries, there are skilled individuals capable of devising innovative investment solutions. They do not work based on the opportunistic practices of favoritism and nepotism that we often see here. The issues stemming from these practices have been evident in some of the institution’s offices overseas. Addressing the institution’s deficit undoubtedly enhances its flexibility, but to start investing with guaranteed returns requires the right tools.
The physical assets allocated to it are insufficient unless accompanied by updated and flexible capital movement laws. The areas approved for it amount to only about ten percent of the deficit, which is insufficient. The institution has the potential to invest in various areas in the country, including real estate, industry, power stations, and city development, but this requires modern legislation. Such initiatives would undoubtedly enhance the country’s ability to attract foreign investments, whether in developing islands, transforming them into recreational areas, or establishing transformation industries.
These efforts align with the state’s current direction to advance the national economy and benefit from the available regional and international opportunities, even amidst the unrest in the region. Based on this, I wrote about six months ago: “When you hear the roar of cannons, you should start planning for construction, and when you hear the chirping of birds, you should start making profits.” I reiterate this today, urging decision-makers to focus on construction and strengthening the economic front. The region will require all industries and services, and Kuwait’s strategic location enables it to fulfill this role. We are entering a new phase today. It is therefore essential to foster collaboration at all levels, especially as His Highness the Amir has encouraged everyone to contribute according to their capabilities. If His Highness has called for a review of the Constitution for the benefit of Kuwait’s future, wouldn’t it be more beneficial for the Council of Ministers to prioritize amending the social security and investment laws, and address other important needs as the country seeks to emerge from its three-decade slumber?
By Ahmed Al-Jarallah
Editor-in-Chief, the Arab Times
