The merchant elite and parliamentary politics in Kuwait

315 Pages·2017·4.26 MB·English

by  Anastasia Nosova

The merchant elite and parliamentary politics in Kuwait:
The dynamics of business political participation in a rentier state

Anastasia Nosova

A thesis submitted to the Department of Government of the London
School of Economics for the degree of Doctor of Philosophy,
London, September 2016
Declaration
I certify that the thesis I have presented for examination for the PhD degree of the London
School of Economics and Political Science is solely my own work other than where I have
clearly indicated that it is the work of others (in which case the extent of any work carried out
jointly by me and any other person is clearly identified in it).
The copyright of this thesis rests with the author. Quotation from it is permitted, provided that full
acknowledgement is made. This thesis may not be reproduced without my prior written consent.
I warrant that this authorisation does not, to the best of my belief, infringe the rights of any third
party.
I declare that my thesis consists of 86,376 words.

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Abstract
When applied to the Gulf region in general and Kuwait more specifically, the rentier state theory
stipulates that the political relations between state and business are determined by the rent.
Thus, business essentially ceases to represent a strong political force and withdraws from the
formal political field in exchange for wealth provided by the state. However, the evidence from
Kuwait’s recent history suggests that there is great variation between the patterns of political
engagement in Kuwait’s merchant families. Some families have been continuously active in the
country’s parliamentary politics and political field more broadly; their political action has not
always been pro-government and, in general, the merchant community in Kuwait still possesses
powerful means to negotiate government distribution patterns and to influence political decision-
making. Thus, the main research question posed in the Thesis is the following: why do we
observe merchants’ active political engagement in Kuwait counter to the prediction of the rentier
state theory, and what can explain the variation of merchants’ political activity? The Thesis will
analyse and compare Kuwait business politics along the dichotomies of passive versus active
engagement and voice versus loyalty towards the government. Through this analysis I will
define the factors which explain why some merchant families engage in parliamentary politics,
while others do not, and why at times the merchant community allies with the opposition, and at
others with the government. I will further examine what impact this political engagement by
business has on the country’s economic reform policies. The analysis will establish that,
although rent matters, the political action of business in Kuwait and its variation is defined by the
country’s semi-parliamentary political system, while factors such as rent-seeking, ascriptive
features, relations with the ruling powers and the changing nature of the country’s political field
are essential intervening variables.

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Table of contents
List of tables and graphs ............................................................................................................... 7
Acknowledgements ....................................................................................................................... 8
Note on transliteration and translation ........................................................................................ 10
List of Acronyms .......................................................................................................................... 11
Introduction.................................................................................................................................. 13
Literature review and the evolution of rentier state theory ..................................................... 17
Research question .................................................................................................................. 32
Argument ................................................................................................................................ 33
Overview of methodology and sources .................................................................................. 37
Structure ................................................................................................................................. 42
Part I: The historical background and the major features of the business sector in Kuwait ....... 44
Introduction ............................................................................................................................. 44
Chapter I: The evolution of the merchant community in Kuwait from the pre-oil times to the
establishment of the modern political system ............................................................................. 44
1.1 Introduction ....................................................................................................................... 44
1.2 The history of Kuwait’s merchant community and ruler-merchant relations before oil ..... 45
1.2.1 The emergence of the merchant elite and the political system in pre-oil Kuwait ...... 45
1.2.2 Merchant opposition and contentious events in the beginning of the 20th century ... 48
1.3 The formation of the oil economy and political system ..................................................... 53
1.3.1 The rivalry for oil revenues: merchants, Sheikhs and Britain in the 1950s ............... 53
1.3.2 The political development in the 1950s-1960s: merchants and the Movement of Arab
Nationalists ......................................................................................................................... 58
1.4 Conclusion ........................................................................................................................ 64
Chapter II: The major features of the business sector in Kuwait ................................................ 65
2.1 Introduction ....................................................................................................................... 65
2.2 The development of private capital and its relations with the state after oil: the
establishment of state-dependency and vulnerability ............................................................. 66
2.3 Social structure of business: elitism and monopolistic nature .......................................... 74
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2.4 Merchants vis-à-vis the broader population: structural autonomy and socio-economic
conflict ..................................................................................................................................... 82
2.5 Conclusion ........................................................................................................................ 91
Conclusion to Part I ................................................................................................................ 91
Part II. Chapter III: The active vs. passive variation of business political participation............... 93
3.1 Introduction ....................................................................................................................... 93
3.2 Explaining political action .................................................................................................. 94
3.3 Outlining the explanandum ............................................................................................... 98
3.4 Analysing explanatory factors through comparison ........................................................ 116
3.4.1 The ascriptive factors of origin and sect .................................................................. 132
3.4.2 The factor of business sector and competition ........................................................ 134
3.4.3 The factor of availability of other means ................................................................. 138
3.4.4. The factor of availability of constituency and social capital .................................... 142
3.4.5 The factor of political affiliation and ideology .......................................................... 149
3.5 Conclusion ...................................................................................................................... 152
Part III: The “voice” vs. “loyalty” variation of business political action: merchant politics in times
of contention .............................................................................................................................. 155
Introduction ........................................................................................................................... 155
Chapter IV: Merchants in the 1989 constitutional movement ................................................... 158
4.1 Introduction ..................................................................................................................... 158
4.2 The continuity of contentious patterns and the role of the parliament ............................ 159
4.3 The 1985 parliament and the reasons behind the constitutional crisis .......................... 162
4.3.1 Structural economic factor ....................................................................................... 162
4.3.2 The ruling family fight .............................................................................................. 163
4.4 Merchants throughout the 1980s prior to the beginning of the pro-democracy
movement ............................................................................................................................. 166
4.5 Contentious development after the Assembly dissolution and the merchants’ role in it 167
4.6 Analytical conclusion ...................................................................................................... 172
Chapter V: Merchants in the 2011 protest movement .............................................................. 175
5.1 Introduction ..................................................................................................................... 175
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5.2 The background of 2011 contentious events .................................................................. 176
5.2.1 Institutional strengthening of the National Assembly .............................................. 176
5.2.2 Economic factors ..................................................................................................... 178
5.2.3 Conflicting relations between major political players............................................... 180
5.2.4 Merchants in post-invasion politics ......................................................................... 182
5.3 The 2011 movement and merchants .............................................................................. 184
5.4 Analytical conclusion ...................................................................................................... 192
Conclusion to Part III ............................................................................................................ 194
Part IV. Chapter VI: Business sector and the politics of economic reforms ............................. 197
6.1 Introduction ..................................................................................................................... 197
6.2 Economic policies and anti-merchant stance of opposition-leaning parliaments
(2008-2012) .......................................................................................................................... 199
6.2.1 National Assemblies of 2006 and 2008 ................................................................... 200
6.2.2 National Assembly of 2009 ...................................................................................... 203
6.2.3 National Assembly of February 2012 ...................................................................... 204
6.3 The change of political power balance in 2012/2013 and the return of pro-business
economic policies ................................................................................................................. 205
6.4 The case studies of contentious economic policies ....................................................... 215
6.4.1 Privatisation ............................................................................................................. 215
6.4.1.1 Kuwait Airways Company privatisation case ................................................... 219
6.4.2 Build-Operate-Transfer ............................................................................................ 221
6.4.2.1 Shimal al-Zour IWPP ....................................................................................... 223
6.4.3 Foreign business, investments and market regulation policies ............................... 224
6.4.3.1 Capital Market Authority ................................................................................... 228
6.5 Conclusion ...................................................................................................................... 235
Conclusion................................................................................................................................. 237
Appendix A: Composition of 1921, 1938 and 1962 Assemblies ............................................... 243
Appendix B: Business families in Tables 5 and 6 of Chapter III ............................................... 245
Bibliography .............................................................................................................................. 295
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List of tables and graphs
Table 1: Government investments in the Kuwait Stock Exchange .............................................. 73
Graph 1: Concentration of board membership in the KSE.. ........................................................ 76
Table 2: Families that occupy six and more board membership positions in KSE ...................... 77
Table 3: Comparison between al-Naqeeb’s list of old merchant aristocracy and their current
ownership in KSE. ....................................................................................................................... 79
Table 4: Comparison between al-Naqeeb’s list of families that rose to business prominence
from the middle class and their current ownership in KSE .......................................................... 80
Table 5: Participation in parliamentary elections and cabinet appointments of business
families. ..................................................................................................................................... 101
Table 6: Characteristics of Kuwait merchant families ............................................................... 116
Table 7: List of MPs who were part of al-Aghlabiya in the parliament elected in
February 2012 ........................................................................................................................... 186
Table 8: Kuwait’s on-going projects and their contractors ........................................................ 208
Acknowledgements
During my work on this research project I was very lucky to receive abundant support and
help from the School, my colleagues, friends and family. The research project was generously
supported by LSE Kuwait Programme on Development, Governance and Globalisation in the
Gulf States, which provided my doctoral scholarship and assisted me with my fieldwork trips to
Kuwait. I also express my deep gratitude to LSE Middle East Centre and LSE Government
Department for financial and organisational support.
I woulld like to thank my supervisor Dr John Chalcraft for his thorough guidance, advice
and attention throughout the past four years. My second supervisor Dr Steffen Hertog was of
invaluable help, particularly in the early, formative period of my research.
I am further greatly thankful to the research project on GCC State-Business Relations in
Exeter University and Georgetown University Qatar, which I was part of as an Associate
Research Fellow. My own PhD research benefited greatly from this engagement. I would
particularly like to thank Dr Marc Valeri for his research advice and all the dedicated time. I
further thank Prof. Gerd Nonneman and Prof. Mehran Kamrava for the very pleasant and fruitful
cooperation during my work in the project.
My PhD research would never succeed and would never take the shape it did without the
immense help I received from countless colleagues and friends in Kuwait and UK. My very deep
gratitude goes to ‘Abdurrahman al-Ibrahim for helping me with shaping my very research project
and arguments through numerous intellectually stimulating conversations. I thank him for
sharing his great knowledge with me, for assisting me with my fieldwork trips and for becoming
my good friend. I am further grateful and happy that I met Dalal Ma‘rafie and her family, who
supported and helped me during my research both in Kuwait and in UK. I thank Dalal for
becoming my Kuwaiti sister, and for always being there for me.
I was lucky to be surrounded by pleasant and helpful PhD colleagues in LSE and Exeter
throughout all four years of my research work. I thank all of them for making this difficult journey
a bit more bearable and joyful. I would particularly like to thank Gertjan Hoetjes for being a kind
and thoughtful friend and cheering me up at difficult times.
I am further grateful to my friends in Russia – Alexandra and Dina – for staying my faithful
and supportive friends despite the distance and time apart.
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My ultimate thanks goes to Michael for being my source of joy and inspiration. I am
grateful for his encouragement, wise advice, kindness and care, for dedicating time to read my
work cover to cover, and for his infinite patience with my ups and downs during the last and
most difficult period of my research.

I dedicate this work to my family, without whose endless love and support, none of this
would ever see light. No thanks would be adequate to express my gratitude to them.

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Note on transliteration and translation
Transliteration of Arabic words and names in the present work is rendered so that it adheres to
consistency and most common spelling in English sources. The Arabic letter ‘ayn is indicated in
most cases complying with the spelling and pronunciation rules of the Arabic language.
However, some names of private companies are given as they appear on companies’ websites.
Transliteration of Arabic sources in the bibliography is given with full diacritics.
All translations from Arabic into English have been done by the author.

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