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HONEY AND MONETARY POLICY IN A HIGH SURPLUS LOW POPULATION ECONOMY fKUWAIT 1962-^flfy

BY OMAR IS M A IL KASSEH

DISSERTATION FOR THE DEGREE OF PH.D. IN ECONOMICS, SCHOOL OF ORIENTAL AND AFRICAN STUDIES,

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ABSTRACT

T h i s t h e s i s e x a m i n e s money p r ob l e m s and p o l i c i e s i n K u w a i t , a c a p i t a l p l e n t y economy, d u r i n g t h e p e r i o d s t u d i e d .

K u w a i t ' s b al a n c e o f payments s u r p l u s has a l l o w e d i t t o c o n t i n u e t o co ve r t h e d om e st i c n o t e I s s u e by f o r e i g n r e s e r v e u n t i l t o d a y , whereas most d e v e l o p i n g economies have f ound t h i s a c o n s t r a i n i n g v e s t i g e o f m o n e t a r y a r r a n g e m e n t s 1n B r i t i s h c o l o n i a l days and have l e g i s l a t e d t o g i v e t h e i r c e n t r a l banks more f l e x i b i l i t y .

Due t o t h e c o u n t r y ' s s u r p l u s , t h e c o m m e r c i a l b an ks b u i l t up l a r g e h o l d i n g s o f f o r e i g n a s s e t s o v e r t h e p e r i o d 1 9 6 2 - 1 9 8 0 , c h i e f L y i n t h e form o f s h o r t - t e r m money market d e p o s i t s w i t h banks a b r oa d . Whereas t h e C e n t r a l B ank o f Kuwai t s t a r t e d i m pl em ent i ng monetary r ef or ms from 1973, t h e i n d e p e m d e n c e o f t h e c o m m e r c i a l b an ks due p r i n c i p a l l y t o t h e i r l i q u i d i t y , imeant t h e c e n t r a l bank had L i t t l e success 1n c o n t r o l l i n g t h e money s u p p l y u n t i l 1979, when i t e x p l o i t e d t h e gr owi ng Leek o f l i q u i d i t y among comme rci al banks t o s t r e n g t h e n i t s c o n t r o l o v e r t h e i r r e s e r v e s . The a n a l y s i s o f t h e d e t e r m i n a t i o n o f t h e gr owth o f t h e s t o c k o f money i n K u w a i t o v e r t h e p e r i o d 1962-BO needs t o t a ke account o f t h e roLe o f t h e c o m m e r c i a l ban k s and t h e i r f o r e i g n a s s e t s i n t h e r a p i d g r o w t h i n l e n d i n g , which began i n 1972. Whereas we f i n d h i g h - p o w e r e d money an i m p o r t a n t d e t e r m i n a n t o f t h e gr owt h o f t h e money s t o c k , t h e bank r e s e r v e r a t i o p l a y s a s i g n i f i c a n t r o l e .

The g r o w t h o f t h e s t o c k m a r k e t i n K u w a i t was t h e mai n c a u se o f t h e growth 1n l e n d i n g a f t e r 1 9 7 2 . The C e n t r a l Bank o f Kuwai t saw i t s main o b j e c t i v e s as c o n t r o l l i n g t h e s p e c u l a t i o n and c r e d i t e x p l o s i o n connected w i t h t h e s t o c k m a r k e t .

The K u w a i t i D i n a r was e s t a b l i s h e d by B r i t a i n a t t h e t i m e o f K u w a i t ' s p o l i t i c a l independence. The b e n e f i t t o a c o u n t r y l i k e Kuwai t o f h a v i n g a s e p a r a t e c u r r e n c y w o u l d a p p e a r t o be e x t r e m e l y L i m i t e d . The Kuwai t g o v e r n m e n t h av e f o l l o w e d a p o l i c y o f e x p l o r i n g p o s s i b l e m o n e t a r y i n t e g r a t i o n w i t h n e i g h b o u r i n g s t a t e s , a l t h o u g h we f i n d t h i S does n o t answer any s p e c i f i c enonomic p r o b l e m i n K u w a i t , Meanwhil e, t h e C e n t r a l Bank o f Kuwai t has pursued a p o l i c y o f maximum s t a b i l i t y o f t h e c u r r e n c y t h r o u g h o u t t h e p e r i o d under s t u d y , i n o r d e r t o m i n i m i z e t h e r i s k s o f c u r r e n c y Loss by t h e f i n a n c i e l c o m m u n i t y , i n c l u d i n g t h e c o m m e r c i a l banki ng syst em, which had s u b s t a n t i a l f o r e i g n a s s e t h o l d i n g s . T h i s i s o f c o n s i d e r a b l e i m por t anc e because t h e commercial banks do n o t appear t o behave i n such a way as t o hedge t h e i r f o r e i g n c u r r e n c y ex pos ur e.

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3 CHAPTER 1 Fi gure 1 T a b l e 1 :1 T a b l e 1 : 2 Tab l e 1 : 3 Tab le 1 : 4 F o o t n o t e s CHAPTER 2 F o o t n o t e s CHAPTER 3 T a b l e 3:1 T a b l e 3 : 2 T a b l e 3 : 3 T a b l e 3 : 4 T a b l e 3 : 5 Graph 3:1 TABLE OF CONTENTS A S h o r t Economic and P o l i t i c a l H i s t o r y o f Kuwai t 1600-1965. Map o f t h e P e r s i a n G u l f

The E x p o r t s o f t h e East I n d i a Company t o t h e P e r s i a n G u l f , I n d i a and China o f Wool len Manuf act ured Goods 1753-1778. E x p e n d i t u r e by t h e Kuwait Government on Land Purchases as a Percentage o f T o t a l Government E x p e n d i t u r e .

A n a l y s i s o f Government Land Purchases by S i z e o f T r a n s a c t i o n and D i s t r i b u t i o n ac r os s t h e P o p u l a t i o n 1971-1977. D i r e c t o r y o f D i r e c t o r s h i p s o f t h e Kuwait P u b l i c S h a r e h o l d i n g Companies as a t 3 1 . 1 2 . 7 8 . t o Ch apt er 1 . The Choice o f a C u r r e n c y . t o Ch apt er 2 .

The D e t er m i n a nt s o f t h e Suppl y and Demand f o r Money.

The P r ox i m at e D e t e r m i n a n t s o f t h e Money Suppl y 1963-1981 - The E s t i m a t e s and t h e E q u a t i o n s .

The Percentage C o n t r i b u t i o n o f t h e P ro xi m at e D e t e r m i n a n t s t o Annual

Movements i n t h e Money Suppl y 1963-1981 . Economic and Monetary Data on Kuwait 1973-81 .

The R e l a t i o n s h i p between t h e T ur n o v e r i n t h e Money St o c k and S t o ck Market Tu r n ov e r i n Shares 1973- 1980.

The V e l o c i t y o f Money i n Kuwai t 1963-1981 .

Movements i n t h e Monetary Base A d j u s t e d and Un adj us te d and i n t h e Net F o r e i g n A s se t s o f t h e Commercial Banks 1962-1980. Page 8 7 14 29 31 36 46 53 79 83 114 130 150 152 155 120

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4 Graph 3 : 2 Graph 3 : 3 Graph 3 : 4 Graph 3 : 5 Fo o t no t e s CHAPTER 4 T ab l e 4:1 T ab l e 4: 2 Ta b le 4 : 3 Ta b le 4 : 4 Tabl e 4 : 5 Table 4: 6 Tabl e 4: 7 Tab le 4 : 8 Ta b le 4: 9 Tab le 4:10 T ab l e 4:11 Ta b le 4:12

Movements i n t h e Money Suppl y and t h e Monetary Base 1962-1980.

Movements i n t h e Banks' Reserve R a t i o A d j u s t e d and Un ad j us te d 1962-1980. The P r ox i m at e D e t e r m i n a n t s o f t h e Money Suppl y 1964-1980. The R e l a t i o n s h i p between t h e T u r n o v e r i n t h e St o c k o f Money (M21 and t h e T u r no v e r i n t h e S t o c k Exchange 1973-1980. t o Ch apt er 3 . The F i n a n c i a l I n s t i t u t i o n s and t h e R e l a t i o n s h i p between t h e Banks and t h e S to ck M a r k e t .

The F i n a n c i a l I n s t i t u t i o n s i n Kuwai t as a t December 3 1 s t 1980.

The Money M u l t i p l i e r i n Kuwai t 1963-1981 . The Money M u l t i p l i e r (m) f o r S i x t y - E i g h t Less Developed C o u n t r i e s ( 1 9 7 6 ) .

The C o n s o l i d a t e d Balance Sheet o f t h e Commercial Banks 1965- 1980.

A n a l y s i s o f t h e F o r e i g n A s s e t s , F o r e i g n L i a b i l i t i e s and D e p o s i t s o f t h e

Commercial Banks 196 3- 1980.

The Compo si t ion o f t h e F o r e i g n A s se t s o f t h e Commercial Banks 1973- 1980.

A n a l y s i s o f t h e P o r t f o l i o Movements and t h e Funding Base o f t h e Commercial Banks 1971-1980.

The D e p o s i t S t r u c t u r e o f t h e Commercial Banking System by Type o f D e p o s i t and S e c t o r o f O r i g i n 1971- 1980.

C l a s s i f i c a t i o n o f Domestic Bank C r e d i t by Economic S e c t o r 1 9 7 0- 8 0.

Growth Rate o f Domestic Bank C r e d i t by Economic S e c t o r 1972-80

A s se t s and L i a b i l i t i e s o f B a h r a i n i O f f s h o r e Banking U n i t s 1975- 1980. New Bond I s s u e s Denominated i n K u w a i t i Di n ar s 1968-1980. 121 122 132 148 167 179 180 184 187 199 201 203 204 205 206 207 208 216

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5

Tabl e 4:13 C a p i t a l H i s t o r y o f t h e K u w ai t i Commercial Banks l i s t e d on t h e St oc k Exchange

1952-1979.

Tab le 4 : 1 4 Market C a p i t a l i z a t i o n o f t h e K u wa i ti Commercial Banks on t h e St oc k Exchange 1973-1978.

Ta b le 4:15 Kuwai t S t o ck Exchange A l l - S h a r e I ndex 1973-1979.

T ab l e 4:16 Weighted Average o f P u b l i s h e d I n t e r e s t Rates Pa id i n D e p o s i t s and Charged on D i s c o u n t s and Advances t o t h e P r i v a t e S e c t o r 1971-1979.

T a b l e 4:17 Net F i n a n c i a l P o s i t i o n o f t h e Commercial Banks w i t h t h e C e n t r a l Bank 1969-1981. Graph 4:1 The Money M u l t i p l i e r i n Kuwait 1963-1981 . Giraph 4 : 2 The R a t i o o f F o r e i g n A s s e t s o f Commercial

Banks t o T o t a l A s s e t s 1963-1980. Graph 4 : 3 The R a t i o o f Net F o r e i g n A s s e t s o f t h e

Commercial Banks t o D e p o s i t s 1963-1980. Graph 4 : 4 Co mpo si t ion o f t h e F o r e i g n As s et s o f t h e

Commercial Banks 1973- 1980.

Graph 4 : 5 D e p o s i t S t r u c t u r e o f t h e Commercial Banks by Type o f D e p o s i t 1971-1980.

Graph 4 : 6 I nd ex o f t h e Changes i n t h e P o r t f o l i o Be ha vi o ur o f t h e Commercial Banks 1971- 1980.

Graph 4 : 7 Kuwai t S t o c k Exchange A L l - S h a r e I nd ex 1973-1979.

Fo o t no t e s t o Ch apt er 4

CHAPTER 5 The E v o l u t i o n o f C e n t r a l Bank P o l i c y i n t h e C r e d i t Markets

T a b l e 5:1 Balance Sheet o f t h e C e n t r a l Bank o f Kuwai t 197 2- 80.

T a b l e 5 : 2 L i s t o f Major P o l i c y Measures Adopted by C e n t r a l Bank o f Kuwai t 197 2- 80.

Fo o t no t e s t o Chapt er 5

CHAPTER 6 The E v o l u t i o n o f C e n t r a l Bank P o l i c y i n t h e Cu r re nc y M a r k e t s . Ta b l e 6:1 I m p o r t Weights f o r K u w a i t ' s Maj or T r a d i n g P a r t n e r s i n Perc en tag es 1975-1982. 257 258 259 260 261 189 223 224 225 226 227 265 284 290 299 300 314 318 349

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Tabl e 6 : 2 T a b l e 6 : 3 T a b l e 6 : 4 T a b l e 6 : 5 T e b l e 6 : 6 Greph 6:1 Graph 6 : 2 F o o t n o t e s

Exp or t Weights f o r K u w a i t ' s Major T r a d i n g P a r t n e r s i n P e rcen tag es 1976-1982.

B i l a t e r a l Trade Weights f o r K u w a i t ' s Major T r a d i n g P a r t n e r s i n Percentages 1976- 1982.

B i l a t e r a l Trade Weights by Cu rr ency o f Denominati on i n Pe rc en t ag e s 1976-1982. Crude O i l Trade Weights ( I m p o r t s p l u s E x p o r t s ) o f t h e W o r l d ' s M aj or Economies i n Pe rc en tag es 1976-1982. Regres si on A n a l y s i s between t h e K u wa i t i D i n a r and t h e C u r r e n c i e s o f K u w a i t ' s Maj or T r a d i n g P a r t n e r s 1975- 1982. The E s t i m a t e s .

Index o f t h e Changes i n t h e Rate o f Exchange o f t h e K u w a i t i D i n a r and t h e W o r l d ' s Maj or C u r r e n c i e s a g a i n s t t h e U.S. D o l l a r 1975- 1982.

I n dex o f t h e Changes i n t h e Rate o f Exchange o f t h e SDR, t h e K u w a i t i D i n a r and t h e Saudi R i a l A g a i n s t t h e U.S. D o l l a r 1975-1982. t o Ch apt er 6 350 351 352 353 354 359 360 370 BIBLIOGRAPHY 376

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CHAPTER 1

A SHORT ECONOMIC AND PO LITIC A L HISTORY OF KUWAIT

i J THE EARLY PERIOD fPRE-17731

H i s t o r i c a l r e c o r d s on Kuwait on t h e p e r i o d b e f o r e t h e Second World War ar e u n s a t i s f a c t o r y , i n p a r t i c u l a r i n so f a r as t h e economy i s concerned. N e v e r t h e l e s s , a s h o r t d e s c r i p t i o n o f d e v e l o p m e n t s i n t h i s p e r i o d has been p i e c e d t o g e t h e r f r o m a c o m b i n a t i o n o f p r i m a r y a n d s e c o n d a r y s o u r c e s , w h i c h w i l l be u s e f u l background i n o u r d i s c u s s i o n s i n coming c h a p t e r s on t h e s o c i a l a n d i n s t i t u t i o n a l s t r u c t u r e o f K u w a i t . P a r t i c u l a r l y i m p o r t a n t i n t h i s c o n t e x t i s t h e l e r g e shar e o f t h e p r i v e t e s e c t o r i n t h e economy o f Kuwei t and i t s i m p l i c a t i o n s f o r t h e f i n a n c i e l system.

By t h e s e v e n t e e n t h c e n t u r y , t h e Port uguese dominated P e r s i a n G u l f t r a d e u n t i l 1622 when e j o i n t A n g l o - P e r s i a n a t t a c k s e i z e d t h e P o r t u g u e s e t r a d i n g base o f Hormuz as p a r t o f a g e n e r a l campaign by t h e E a s t I n d i a company o f London t o o u s t t h e P o r t u g u e s e f r o m t h e p r o f i t a b l e t r a d e between I n d i a and t h e P e r s i a n G u l f p o r t s . A t t h i s t i m e Kuwait was a summer r e s o r t o f t h e B a n i - K h a l i d who were t h e r u l e r s o f Hasa ( t h e a r e a f r o m p r e s e n t - d a y Abu Dhabi t o Umm Qasr - which l i e s between Kuwait and B a s r a ) .

U n t i l 1773 B a n d ar - A b ba s and Gombrun on t h e P e r s i a n l i t t o r a l were t h e main c e n t r e s o f t h e E a s t I n d i a Company i n t h e G u l f . I n t h i s p e r i o d t h e r e was a s i g n i f i c a n t amount o f t r a d e between Bandar Abbas, Bas ra, Abu S h a hr and M u s c at on t h e one hand, and B e ng al , Bombay, Madras and S u r a t on t h e o t h e r . (1)

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The s t r i k i n g f e a t u r e o f t r a d e b e t w e e n I n d i a and t h e G u l f was t h a t i n g e n e r a l I n d i a ' s b a l a nc e o f t r a d e was p o s i t i v e , and t h a t o n l y a few i tems reached I n d i a from t h e G u l f . Those i t e m s w er e a l l e x p o r t s f r o m B a s r a and t h e A r a b i a n l i t t o r a l , and c o n s i s t e d m a i n l y o f dat es and p e a r l s . I n 1790 r e c o r d s show t h a t i n f a c t , o f t h e t o t a l v a l u e o f d a t e e x p o r t s produced i n t h e P a s h a l i q o f Baghdad and e x p o r t e d f r o m B a s r a , e s t i m a t e d a t 1 , 0 0 0 , 0 0 0 Bombay Rupees, a l a r g e p a r t went t o I n d i a . MeanwhiLe t h e t o t a l v a l u e o f t h e p e a r l s e s t i m a t e d a t 5 0 0 , 0 0 0 Bombay Ru p e e s , and e x p o r t e d from Basrah, Kuwai t and B a h r a i n , most w e n t t o I n d i a ( 2 ) . Of t h e e x p o r t s from I n d i a t o Basra ( 3 ) , o n l y a L i m i t e d p a r t was consumed i n t h e P a s h a l i q o f Baghdad which was an e x t r e m e l y i m po ve r is he d a r e a , most o f t h e s e goods b e i n g d i s t r i b u t e d , v i a Baghdad t o t h e urban c e n t r e s o f t h e Ottoman Empire (4) and from t h e r e t o Europe. Basra a l s o r e - e x p o r t e d some goods t o P e r s i a , and p r o v i d e d an i m p o r t a n t c e n t r e f o r t h e c o l l e c t i o n o f numerous c ommodit ies from t h e G u l f , P e r s i a and Europe, f o r e x p o r t t o I n d i a ( 5 ) .

Whi Le B a s r a r e p r e s e n t e d an i m p o r t a n t t r a n s i t p o r t and had a f a v o u r a b l e b al anc e o f t r a d e w i t h t h e r e s t o f t h e w o r l d , P e r s i a and t h e P e r s i a n p o r t s on t h e o t h e r hand r e p r e s e n t e d an i m p o r t a n t c o n s u m i n g a r e a . The f a v o u r a b l e bal anc e o f t r a d e o f I n d i a w i t h t h e G u l f c o n s i s t e d m a i n l y o f a f a v o u r a b l e b a l a n c e w i t h P e r s i a ( 6 ) , and Less s i g n i f i c a n t l y o f a f a v o u r a b l e b al anc e w i t h t h e Ott oman E m p i r e and Europe t h r o ug h Basra and B a ghda d. A c e r t a i n C a p t a i n J . M a l c o l m p r o v i d e s us w i t h t h e o n l y e s t i m a t e s we hav e o f t h e G u l f T r a d e i n t h e e i g h t e e n t h c e n t u r y ( 7 ) . Malcolm e s t i m a t e d , i n 1800, t h e v a l u e o f t h e whole o f t h e G u l f t r a d e a t 16, 000,000 Bombay Rupees, t h e l e r g e s t p e r t o f w h i c h c o v e r e d t h e t r a d e be t we en I n d i a and t h e v a r i o u s p a r t s o f t h e G u l f . He e s t i m a t e d P e r s i a n i m p o r t s from I n d i a a t 2 , 0 0 0 , 0 0 0 Bombay Rupees w i t h e x p o r t s t o I n d i a a t

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1 , 2 0 0 , 0 0 0 Rupees i n m e r c h a n d i s e and 8 0 0 , 0 0 0 Rupees i n s p e c i e and b u l l i o n . He a l s o e s t i m a t e d t h e d e f i c i e n c y i n t h e bal ance o f t r a d e between Basra and I n d i a a t 1 , 0 0 0 , 0 0 0 Rupees, a l s o f i n a n c e d by shi pments o f s p e c i e and b u l l i o n . B a s r a ' s d e f i c i t was due l a r g e l y t o r e - e x p o r t s t o t h e Ottoman Empire and Europe r a t h e r than d om es t ic consumpti on i n B a s r a and t h e P a s h a l i q o f Baghdad i t s e l f .

The w or d ' K u w a i t ' o r i g i n a t e s from ' k u t ' o r l i t t l e f o r t and was p a r t o f Hasa, t h e lands o f t h e B a n i - K h a l i d . I n t h e h i n t e r l a n d o f Hasa, which r e p r e s e n t e d most o f t h e Eas ter n L i t t o r a l o f t h e P e r s i a n G u l f e x c e p t f o r Ras A I Khaimah and Muscat , was t h e Nejd from which most o f p r e s e n t - d a y K u w a i t i s o r i g i n a t e . I t a p p e a r s f r o m most o f t h e h i s t o r i e s o f t h i s r e g i o n (8) t h a t a c o m b in a t i on o f d r o ug h t and t r i b a l wars f o r c e d a s m a l l s e c t i o n o f t h e O n a i z a t r i b e o u t o f t h e Nejd t o p r e s e n t - d a y Q a t a r , then under t h e s u z e r a i n t y o f t h e B a n i - K h a l i d . T h i s can be s a i d t o be t he o r i g i n o f t h e K u w a i t i p o p u l a t i o n o f t o d a y . The Onaiza were n o t so much a t r i b e as a l o o s e ' n a t i o n ' o f Arabs s t r e t c h i n g from t h e empty q u a r t e r t o S y r i a and T r a n s - J o r d a n . The Dahamshah s e c t i o n o f t h e Amarat c l a n o f t h e Onaiza was an obscure b e d o u i n g r o u p when i t a r r i v e d i n Q a t a r and t h e n p r o c ee d e d t o Kuwai t t o ask t h e B a n i - K h a l i d f o r f i s h i n g and g r a z i n g r i g h t s i n t h a t a r e a . As e a r l y as 1720 f a m i l i a r names o f t h e w e l l - k n o w n K u w a i t i f a m i l i e s c r o p up i n t h e r e c o r d s . We h e a r o f A l - S a b a h s , A l - K h a l i f a s , A L - Z a y i d s [a g r o u p i n g i n c l u d i n g A l - G ha n i ms , AL-Saqrs and A l - D a b b o u s ] , A l - S a l e h s , A l - J a l a h i m a s ( w h i c h i n c l u d e s A l - N u s f as an independent f a m i l y ) , t h e Shamlan and t h e M a a w i d a s . The p e r i o d up t o 1773 s ee s t h i s g r o u p i n g o f bedoui n ( o r t h e Dahamshah], who l a t e r became known as t h e ' U t u b ' , s t i l l c a r r y i n g on i t s n o m a d i c f u n c t i o n o f s h e e p - g r a z i n g , b ut a l s o b e g i n n i n g t o s e t t l e on t h e c o a s t a r o u n d K u w a i t t o f i s h , and t o c o l l e c t p e a r l s . F i s h i n g was p u r e l y e s u b s i s t e n c e a c t i v i t y , but p e a r L i n g had many more i m p l i c a t i o n s . F i r s t o f a l l , p e a r l s

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were an e x p o r t commodity w h i c h meant t r a v e l l i n g f a r t o di spose o f t h e goods f o r cash, t he r eb y a l l o w i n g t he K u w a i t i s t h e a b i l i t y t o i m p o r t a v a r i e t y o f n e c e s s i t i e s and l u x u r i e s . S e c o n d l y , p e a r l i n g r e q u i r e d t he use o f s h i p s [ d h o w s ] and t h e r e f o r e e n c o u r a g e d t h e d e v e l o p m e n t o f s h i p b u i l d i n g as an i n d u s t r y . The t e a k a n d n a i l s n e e d e d f o r t h e c o n s t r u c t i o n o f s hi p s were i mp o r t e d w i t h t h e cash made i n t h e e x p o r t s o f p e a r l s . I t i s most p r o b a b l e t h a t i n t h i s p e r i o d t h e K u w a i t i s were h i g h l y d e p e n d e n t on B a s r a and t h a t t h e i r s h i p s w e r e s t i l l s m a l l and p r i m i t i ve.

i i ) THE FORMATIVE YEARS AND THE MIGRATION OF THE 'UTUB TRIBE TO KUWAIT

The y e a r s 1773-1819 a r e an e x t r e m e l y i n t e r e s t i n g and c o m p l e x p e r i o d i n t h e d e v e l o p m e n t o f K u w a i t . The f i r s t i m p o r t a n t s e t o f i n f l u e n c e s i n v o l v e d t h e e x p l o s i o n o f t h e W a h h a b i movement i n N e j d ( C e n t r a l A r a b i a ) . T h i s a r e a had a l w a y s been t r o u b l e s o m e a n d t h e t r o u b l e s c o n c e r n e d m a i n l y t h e e b b i n g f o r t u n e s o f t h e Saud t r i b e based i n t he o a s i s o f t h e A l - D a r i y y a ( 9 ) . The T u r k s , r u l i n g t h r o u g h t h e S h e r i f s o f Mecca, had Long been e s t a b l i s h e d i n Mecca, M e d i n a , and Jedd ah and had f o r some c o n s i d e r a b l e t i m e been i n v o l v e d i n wars w i t h t h e Saudi t r i b e , which we have seen were p a r t o f t h e r e a s o n f o r t h e e m i g r a t i o n o f t h e Dahamshah o r ' U t u b ' t r i b e t o Q a t a r and t h e n K u w a i t . Whenever t h e S h e r i f s o f Mecca we re n o t c o n c e r n e d w i t h t h e t h r e a t s from t he Yemeni Imams o r t h e Mamluk S u l t a n s o f C a i r o , t h e y a t t e m p t e d t o c o n s o l i d a t e t h e i r power o ve r Nejd.

The t u r n i n g p o i n t i n t hese Long wars was 17 44 ( 1 0 ) , t h e y e a r when t h e L i n k b et we e n Muhammad I b n Abd A l - W a h h a b and Muhammad I b n - S a u d was f o r m e d . Muhammad I b n Abd A l - W a h h a b f o u n d e d a f o r m o f I s l a m i c P u r i t a n i s m . The extreme form o f t he I s l a m i c p u r i t a n i s m t h a t Muhammad

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I b n Abd A l - W a h h a b p r e a c h e d s u i t e d t h e har d l i f e o f Nejd bedouin which compared m i s e r a b l y w i t h t h e l u x u r y o f l i f e i n t h e t o w n s o f Jeddah o r B a s r a h . The Sa udi t r i b e t h r o u g h t h e p e r s o n o f Muhammad I b n - S a u d , q u i c k l y formed an a l l i a n c e w i t h t h e r e l i g i o u s l e ad er o f t h i s p u r i t a n i c a l d o c t r i n e o f ' t a u h i d ' , who gave h i s name t o t h e wester n t erm ' Wahhabism'.

The Wahhabi movement began by f i g h t i n g a Long-drawn o u t war a g a i n s t t h e B a n i - K h a l i d o f Hasa an d s u c c e e d e d t o u n s e a t t h e l e a d e r s o f t h e B a n i - K h a l i d t r i b e . By t h e 1 7 9 0 ' s t h e Wah ha bi s were p o s i n g a s e r i o u s t h r e a t t o t h e M u n t a f i q t r i b e s o f B a s r a ( u n d e r t h e s u z e r a i n t y o f t h e Pasha o f Baghdad] and t o K u w a i t , t h e l a s t o u t p o s t o f t h e B a n i - K h a l i d c o n f e d e r a t i o n . By 1797 K u w a i t j o i n e d a M u n t a f i q - T u r k i s h a l l i a n c e a g a i n s t t h e W a h h a b i s , and by 1804 t h e Wahhabis had i n f l i c t e d s e r i o u s damage on t h e a l l i a n c e and i t looked as i f t h ey m i gh t become t h e v i c t o r s o f t h e w a r . T h i s w o u l d have been t h e c as e i f t h e emphasis o f Wahhabi expa ns io n had n ot then changed t owar ds t h e Hejaz i n Western A r a b i a , and i f t h e y had n ot encount er ed s e r i o u s Mamluk o p p o s i t i o n l a t e r on.

S e c u r i n g t h e S h e r i f i a n s t r o n g h o l d s i n t h e Hejaz was a p r i o r i t y o f t h e Wahhabis f o r r e l i g i o u s reas on s, and by 1800 Mecca and Medinah had opened t h e i r g at e s t o t h e marauding N e j d i w a r r i o r s o f Saud I bn A b d - E l - A z i z . By 1819 a c o u n t e r - o f f e n s i v e by t h e E g y p t i a n l e g i o n s o f t h e n e w l y - a p p o i n t e d S u l t a n o f Egy pt , Muhammad A l i , had d r i v e n t h e N e j d i s o u t o f Mecca (1813) and r a i s e d t h e i r home-town o f A l - D a r i y y a t o t h e g r o u n d ( 1 8 1 9 ) . T h i s d e f e a t had s a v ed K u w a i t from i n v a s i o n , w h i l e K u w a i t ' s p r o x i m i t y t o t h e M u n t a f i q t r i b e s and t h e p o s s i b i l i t y o f a l l y i n g w i t h them o r t h e T u r k s had hel ped t o keep Kuwai t i ndependent t h r o u g h o u t t h e Wahhabi r a i d s i n t h e l a t e e i g h t e e n t h c e n t u r y .

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t o t h e Wahhabi i n v a s i o n s a l t h o u g h i t was r a r e l y d i r e c t l y i n v o l v e d . The 'Ubub t r i b e o f Kuwai t prospered under t h e i r n e w l y f o u n d i n d e p e n d e n c e , a c k n o w l e d g i n g t h o u g h o u t t he n i n e t e e n t h c e n t u r y o n l y a l oose s u z e r a i n t y t o t h e P a s h l i q o f Ba ghda d. The A l - S a b a h emerged as t h e r u l e r s o f K u w a i t , e l e c t e d by t h e t r i b e on t r a d i t i o n a l Muslim g r o u n d s o f L e a r n i n g and a b i l i t y t o i n t e r p r e t t h e Holy Qur' an and a d m i n i s t e r I s l a m i c j u s t i c e . T h e s e c o n d s e t o f i n f l u e n c e s t o hav e an i m p o r t a n t i m p a c t on t h e development o f K u w a i t was t h e m i g r a t i o n o f t h e A L - K h a l i f a f a m i l y t o Zubara i n Qatar and t h e i r consequent i n v a s i o n o f B a h r a i n i n 1782 (11 ) . I t a p p e a r s t h a t c e r t a i n f a m i l i e s o f t h e ' Utub t r i b e were d i s s a t i s f i e d w i t h t h e i r a l l o c a t e d share o f t h e p e a r l i n g i n d u s t r y o f Kuwai t and l e f t t o s e a r c h f o r r i c h e r p e a r L b e d s . R e c o r d s show ( 1 2 ) t h a t t h e AL—J a l a h i m a , o r p a r t o f them, went w i t h t h e A L - K h a l i f a t o Z u b a r a . I n f a c t i n B a h r a i n t h e y d i s c o v e r e d p e a r l beds even r i c h e r than t h o s e o f K u w a i t . N e v e r t h e l e s s , d e s p i t e t h i s s p l i t i n t h e ' U t u b t r i b e , s t r o n g l i n k s between t h e f a m i l i e s r e m a i n e d ( 1 3 ) and A l - S a b a h and A l - K h a l i f a f a m i l i e s c r e a t e d a ' U t u b a l l i a n c e b e t w e en K u w a i t and B a h r a i n which a l l o w e d t h e ' Utub t o be s ec on d o n l y t o t h e M u s c a t i s i n t h e Arab t r a d e w i t h I n d i a .

i i i ) THE DECLINE OF EAST INDIA COMPANY TRADE IN THE GULF

East I n d i a Company ("Company") t r a d e between I n d i a and t h e P e r s i a n G u l f d e c l i n e d a f t e r 1773, a t which t i m e t h e y r e p r e s e n t e d t h e supreme European p o w e r i n t h e a r e a , and t h e m ai n t r a d e r s ( 1 4 ) . E a s t I n d i a Company i m p o r t s o f China tea i n t o E n g l a n d i n c r e a s e d w h i l e e x p o r t s o f opium t o Ch i n a , m a i n l y from Bengal , b r o u g h t l a r g e p r o f i t s bot h t o t h e Company and t o p r i v a t e t r a d e r s . I n f a c t , t h e Company n o t o n l y s u c c e e d e d i n i n c r e a s i n g i t s Chinese i m p o r t s and e x p o r t s , b u t i t aLso c r e a t e d a demand f o r B r i t i s h m a n u f a c t u r e s i n C h i n a . I n 1 76 4 t h e Company e x p o r t e d t o

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IABLJLJjlI

THE EXPORTS OF EAST INDIA COMPANY TO THE PERSIAN GULF. INDIA AND CHINA OF WOOLLEN MANUFACTURED GOODS

1753-1778

(Number o f 8 a l e s )

Year Pe r si a n GuLf ALL I n d i a and Ch

1753 600 2700 1754 800 2100 1755 890 2127 1756 1060 1234 1757 980 2536 1758 1130 2579 1759 1089 3657 1760 660 4438 1761 826 3368 1762 644 5965 1763 1805 5861 1764 1581 5653 1765 1581 4182 1766 1758 4513 1767 1308 4065 1768 681 5691 1769 127 5928 1770 26 5937 1771 655 4799 1772 200 5583 1773 - — 1774 259 4177 1775 200 3257 1776 201 3563 1777 - 3843 1778 - 4040

Source : Abdul Amir Amin, B r i t i s h I n t e r e s t s i n t h e P e r s i a n G u l f ( L e i d e n , The N e t h e r l a n d s , E . J . B r i l l , 1 9 6 7 ) , p p . 151.

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15

China 1,196 b a l e s o f w o o l l e n c l o t h , i n 1771 t h e f i g u r e was 2,359 b a l e s . T h i s amounted t o a bo ut h a l f o f a l l Company e x p o r t s o f t h i s c o m m o d i t y . By c o m p a r i s o n , b a l e s s o l d t o t h e G u l f dropped from an average o f 1,000 b a l e s i n t h e 1 7 5 0 ' s t o an a v e r a g e o f 200 b a l e s i n t h e 1 7 7 0 ' s , and n o t h i n g a t a l l by 1778. T h i s drop i n t h e s a l e o f B r i t i s h w o o l l e n goods t o t h e P e r s i a n G u l f was a l s o due p a r t l y t o i n c r e a s e d e x p o r t s o f w o o l l e n goods by bot h England and France t o t h e merchant community o f A l e pp o . A gt ance a t Tab l e 1 ; 1 . h o w e v e r , shows a r a t h e r e r r a t i c p a t t e r n i n t h e d e c l i n e o f t h e s a l e o f w o o l l e n goods by t h e E a s t I n d i a Company i n t h e P e r s i a n G u l f . Coin s h o r t a g e s , due t o t h e u n f a v o u r a b l e bal ance o f t r a d e o f t h e G u l f w i t h I n d i a were p r o b a b l y , t h e r e f o r e , t h e main reason f o r the u n f a v o u r a b l e t r a d i n g e n v i r o n m e n t i n t h e G u l f a t t h e t i m e . So s e r i o u s was t h e problem o f c u r r e n c y s h o r t a g e t h a t new c o n t r a c t s b et w e e n t h e B a s r a m e r c h a n t s and t h e Company p r o v i d e d f o r o n l y p a r t i a l payment i n c as h. U n t i l 1 7 7 3 , t h e Company e m p l o y e e s a t B a s r a r e c e i v e d payment m o s t l y i n s i l k , Ki rman w o o l , V e n e t i a n w ar e and p e a r l s , d e s p i t e t h e i r r e l u c t a n c e t o a c c e p t b a r t e r i n g . Cu rr enc y s h o r t a g e s were exac er bat ed by p o l i t i c a l i n s t a b i l i t y i n I r a n , due t o t h e A f g h a n i n v a s i o n s o f t h i s p e r i o d , which l e d t o h o a r d i n g o f s i l v e r and t o an even w o r se P e r s i a n b al anc e o f t r a d e .

By 1773 t h e B r i t i s h had moved o u t o f B a n d a r - A b b a s and Abu Shahr and c o n c e n t r a t e d t h e i r a c t i v i t i e s i n B a s r a , w h i c h had o n l y been a mi nor o u t p o s t f o r t h e E a s t I n d i a Company b e f o r e t h e n . B a s r a was m o r e l u c r a t i v e than t h e P e r s i a n l i t t o r a l f o r t r a d e r s , due t o t h e P a s h a l i q o f Baghdad's t r a n s i t t r a d e , and i t s low L e v e l o f c o n s u m p t i o n compared t o P e r s i a . These f a c t o r s meant t h a t t h e r e was a h i g h e r l e v e l o f l i q u i d i t y and a v a i l a b i l i t y o f c u r r e n c y i n Basra t han i n P e r s i a . The d e c i s i o n by t he E a s t I n d i a Company t o move wa s, h o w e v e r , f o l l o w e d by a P e r s i a n i n v a s i o n o f Basrah i n 1775 and c o n s e q u e n t l y by a f u r t h e r move by t h e

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East I n d i a Company t o K u w a i t . T h i s was t h e f i r s t d i r e c t c o n t a c t between B r i t a i n and t h e K u w a i t i s . The East I n d i a Company had f i r s t t r a n s f e r e d i t s d e s e r t m a i l r o u t e t hr o ug h K u w a i t , and t h e n , s u b s e q u e n t l y , i t s e n t i r e f a c t o r y [ o r o u t p o s t ) .

A l t h o u g h by 1800 t h e B r i t i s h had moved b a c k t o B a s r a , and had a l s o agreed w i t h t h e Shah o f I r a n t o s e r v i c e t h e P e r s i a n l i t t o r a l , t h i n g s were n e v e r q u i t e t h e same t h e r e a f t e r as f a r as Kuwai t was concerned. B r i t i s h i n v o l v e m e n t i n t r a d e d r o p p e d , and t he Arab merchants ( i n c l u d i n g t h e ' U t u b ) i n c r e a s e d t h e i r s h a r e o f t h e t r a d e , w h i l e K u w a i t became a p e r m a n e n t l i n k i n t he East I n d i a Company's d e s e r t m a i l r o u t e t o ALeppo. I n t h e 1 7 8 0' s agreements between Basra and K u w a i t i merchants led a l s o t o much cargo d e s t i n e d f o r B a s r a , t o be c h a n n e l l e d t o Al eppo v i a K u w a i t , t h e r e b y s a v i n g s u b s t a n t i a l O tt o ma n t a x e s on c a r g o ( 1 5 ) . The 1 7 7 6 e p i s o d e added t r a n s i t t r a d e t o t h e p e a r l i n d u s t r y as one o f t h e main a c t i v i t i e s o f t h e K u w a i t i mer ch ant s.

1 v ) THE DEVELOPMENT OF KUWAIT FROM A TRIBAL SOCIETY TO A PRINCIPALITY

The end o f Wahhabi i n c u r s i o n s i n t o N o r t h - E a s t Hasa, and s t a b l e T u r k i s h r u l e i n t h e P a s h a l i q o f Baghdad gave Kuwai t a b a c k g r o u n d o f s t a b i l i t y , w i t h i n w h i c h t o e x p l o i t t h e new advantageous p o s i t i o n i t had f ound f o r i t s e l f i n t h e a r e a ' s t r a d e . K u w a i t ' s l i n k w i t h Basra was c l o s e . I t was p a r t o f t h e m e r c a n t i l e and f i n a n c i a l s y s t e m o f Basra i n l a t e r p a r t o f t h e n i n e t e e n t h c e n t u r y . The r e l a t i o n s h i p s b e t w e e n K u w a i t i and B a s r a m e r c h a n t s i n r e s p e c t o f t r a n s i t t r a d e , w h i c h g r e w t o i n c l u d e s l a v e - t r a d i n g from Z a n z i b a r , were s t r o n g . When Sheikh Mubarrak d ec ided t o back t h e B r i t i s h i n t h e F i r s t W o r l d War and t h e p e r i o d i m m e d i a te l y pr e ce e di ng i t , a g a i n s t t h e T u r k s , whom t h e M u n t a f i q t r i b e o f B a s ra we re s u p p o r t i n g , a f u l l - s c a l e r e b e l l i o n o f t h e merchants i n Kuwai t t o o k p l a c e

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w h i c h e n d e d i n t h e i r L e a d e r (one o f t h e A l - G h a n i m f a m i l y ) b e i n g i m p r i s o n e d i n 1911. Many o f t h e o t h e r s L e f t f o r Basra i n t h i s p e r i o d Leading t o a s e r i o u s d e c l i n e i n c o m m e r c i a l a c t i v i t y i n K u w a i t i n t h e p e r i o d 1911-1919 ( 1 6 ) .

T h i s a c t i o n t a k e n by Sheikh Mubarrak demonstrated t h e gr owi ng power o f t h e r u l e r i n t he K u w a i t i c o m m u n i t y i n t h e n i n e t e e n t h c e n t u r y . Changes i n t h e mode o f p r o d u c t i o n o f t h e ' Utub t r i b e were s u p p o s e d t o have l e d t o a gr owi ng s t r a t i f i c a t i o n i n K u w a i t i s o c i e t y , which s t i l l e x i s t s t oday ( 1 7 ) . Muhammad Rumaihi d i sc u s s e d t h e e v o l u t i o n o f t h e p o l i t i c a l regime i n Kuwai t from a t r i b a l s o c i e t y t o a p r i n c e l y d i c t a t o r s h i p ( 1 8 ) . The t r i b a l s t r u c t u r e s which had e x i s t e d i n t h e e a r l y p e r i o d a f t e r t h e t r i b e s s e t t l e d i n Kuwai t i n v o l v e d c o n t i n u o u s c o n s u l t a t i o n between t h e r u l e r and t h e v a r i o u s t r i b a l s e c t i o n s . An economy w h i c h was s t i l l L a r g e l y p a s t o r a l n e c e s s i t a t e d wi des pr ea d c o n s u l t a t i o n , because t h e main economic r e s o u r c e ( sh ee p and g o a t h e r d s ] couLd n o t be b r o u g h t under t he d i r e c t c o n t r o l o f t h e r u l e r . The i n c r e a s i n g i m p o r t a n c e o f t h e p e a r l i n g i n d u s t r y a f t e r t h e 1 7 8 0 ' s i n v o l v e d e f f e c t i v e power b e i n g c o n c e n t r a t e d more and more i n t h e han d s o f t h e r u l e r . The r u l e r ' s a b i l i t y t o draw revenue from t h e p e a r l i n g i n d u s t r y a n d , t h r o u g h h i s c o n t r o l ov er t h e i n d u s t r y , t o a f f e c t t h e economic w e l l - b e i n g o f a l l t h o s e who w o r k e d i n i t e n s u r e d t h a t w i d e r c o n s u l t a t i o n was n o t n ec e s s a r y . Ha c ou l d o p e r a t e by f o r m i n g s h i f t i n g a l l i a n c e s w i t h d i f f e r e n t m e rc h an t s, never becoming d e p e n d e n t on any o n e . The dep e nd e nc e o f t h e t r a n s i t t r a d e on l o w customs charges a l s o r e q u i r e d t h e g o o d - w i l l o f t h e r u l e r . J .G. L o r r i m e r (19) shows t h a t t h e p r o p o r t i o n o f t h e w o r k f o r c e employed i n p e a r l i n g was f a r l e s s i n B a h ra i n and Kuwai t t han i n o t h e r p a r t o f t h e G u l f ( c i r c a 20% as opposed t o 40-50%) which p o i n t s t o t h e g r e a t e r i n v o l v e m e n t o f Ba hra in and K u w a i t i n t r a d e t h a n o t h e r a r e a s i n t h e G u l f . I f we t a k e i n t o account t h e 2, 00 0- o dd P e r s i a n w o r k f o r c e t h a t used t o m i g r a t e t o Kuwai t

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f o r t h e p e a r l i n g s e a s o n , t h e n c l e a r l y t h e K u w a i t p o p u l a t i o n w e r e r e l a t i v e l y more i n v o l v e d i n t h e bus i ne ss o f t r a n s i t t r a d e than B a h r a i n . A f t e r t he a g r e e m e n t s o f 1 8 9 9 , t h e r u l e r ' s L i n k w i t h B r i t a i n f u r t h e r r e i n f o r c e d h i s p o s i t i o n o v e r t h e Local t r a d i n g community. No d e m o c r a t i c movements were i n e vi denc e ex ce p t d u r i n g t h e merchant r e v o l t s o f 1 9 3 8 / 9 w h i c h we re d i r e c t l y connected w i t h t h e demise o f t he p e a r l i n g i n d u s t r y , and d u r i n g p e r i o d s o f e x t e r n a l p o l i t i c a l t h r e a t ( i n p a r t i c u l a r i n t h e p e r i o d i m m e d i a t e l y a f t e r 1 9 6 1 ) .

A s i d e from changing t h e power o f t h e r u l e r w i t h i n l o c a l s o c i e t y , Rumaihi s a y s t h e p e a r l i n g i n d u s t r y a l s o d e t e r m i n e d t h e o v e r a l l s o c i a l s t r a t i f i c a t i o n which i s i n e vi denc e u n t i l t oday ( 2 0 ) . The d i s t r i b u t i o n o f g a i n s from p e a r l - g a t h e r i n g was bas ed on a L o n g - e s t a b l i s h e d p r a c t i c e . T h i s p r a c t i c e gav e t h e m a i n p a r t o f t h e g a i n s t o t h e m e r c h a n t s who f i n a n c e d t h e p e a r l i n g t r i p s and t o t he owners o f t h e s h i p s . A l t h o u g h t h e d i v e r s pe r fo rm ed t h e most d i f f i c u l t work , t h e i r s har e i n t h e p r o d u c t was m i n i m a l . The boat i t s e l f w o u l d be owned by t h e c a p t a i n (nokhudah) o r by a m er ch ant . The merchant s who owned t h e b o a t s w o u l d a l s o be t h e d e a l e r s f o r t h e p e a r l s ( t a w w a s h ) . The nokhudah and tawwash were t h e dominant c l a s s o f s o c i e t y and c o n s i s t e d o f o n l y v er y f ew. D i v e r s were n o t p a i d wages, t h e y were g i v e n a c u t o f t h e p r o f i t s a t t h e end o f t h e season ( t i g s a m ) and pocket-money f o r t h e o f f - s e a s o n p e r i o d ( s a l a f i a h ) t o be d e d u c t e d f r o m n e x t y e a r ' s t i g s a m . A l l o f t hese cash advances were rec or ded a g a i n s t t h e d i v e r ' s name i n t h e n o k h u d a h ' s logbook but i t was o n l y v e r y r a r e l y t h a t a d i v e r would earn enough t o c a n c e l h i s d e b t t o t h e c a p t a i n . When a d i v e r d i d n o t e a r n s u f f i c i e n t t o c a n c e l t hese d e b t s , t h e amount o u t s t a n d i n g was c a r r i e d f o r w a r d t o t h e f o l l o w i n g year and i n t e r e s t charged upon i t . U n t i l r e f o r m s w e r e p u t t h r o u g h i n t h e 1 9 2 0 ' s , i f a d i v e r d i e d i n d e b t , h i s sons and b r o t h e r s would i n h e r i t t he debt and would be f o r c e d t o c l e a r t h e debt by d i v i n g .

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The nokhudes themselves were i n debt t o t h e tawwash, o b t a i n i n g f i n a n c i n g f o r t h e purchase o f v a r i o u s p r o v i s i o n s and s u p p l i e s a t t h e b e g i n n i n g o f t h e season, on which t hey were c h a r g e d i n t e r e s t . A l t h o u g h i n t e r e s t was c o n t r a r y t o I s l a m i c Law, t h e m e r c h a n t s c i r c u m v e n t e d t h i s by a s y s t e m known as " m u k a l a b a h " ( t u r n o v e r ) where t h e merchant s o l d t o t he nokhuda c e r t a i n goods and p r o v i s i o n s f o r a f i x e d sum and t h e goods would change hands aga in i n t h e same t r a n s a c t i o n , a t a s u b s t a n t i a l p r o f i t f o r t h e m e r c h a n t . The c a p t a i n s o r nokhudas were t hemsel ves a l mo st ensl aved by t h e mer ch ant s, j u s t as t h e y i n t u r n e n s l a v e d t h e i r d i v e r s and p u l l e r s . On t r a n s i t t r a d e b u s i n e s s , merchant s would g e n e r a l l y l e a s e t h e i r s h i p s t o t h e n o k h u d a s f o r s u b s t a n t i a l sums, r a t h e r than share p r o f i t s as i n t h e p e a r l i n g i n d u s t r y , and w o u l d c L a i m any damage o r l o s s e s from t h e no kh u da who c o u l d t h u s be i n d e b t f o r a l a r g e c a p i t a l sum t o t h e m e r c h a n t . O f t e n , however , t h e merchant s d i d have t h e i r own cargoes on t h e s h i p s . Thus i n t r a d e , i n p e a r l i n g and i n a g r i c u l t u r e , t h e w o r k e r was p a i d al mos t n o t h i n g and t h e Large p a r t o f t h e economic s u r p l u s w e n t t o t h e merchants and t h e r u l e r .

v) THE FIRST WORLD WAR AND THE INTER-WAR DEPRESSION

The B r i t i s h had l o s t i n t e r e s t i n t h e G u l f s i n c e t h e opening o f t h e Suez Canal i n 1869, and had d i v e r t e d t h e I n d i a and China t r a d e t h ro ugh E g y p t . But Germany's i n c r e a s e d a t t e m p t s t o b r e a k o u t o f B r i t a i n ' s commerci al g r i p on e a s t e r n t r a d e ( t h e s o - c a l l e d ' D r a n g Nach O s t e n ' ] c han ged t h i s a t t i t u d e . The Deutsche Bank formed t h e T u r k i s h Petr ol eum Company a f t e r t he d i s c o v e r y o f s e e p a g e s o f o i l i n I r a q and a g r e e d w i t h t h e Ottoman government t o b u i l d a r a i l w a y between B e r l i n and Baghdad. B r i t a i n f e l t i n c r e a s i n g l y t h r e a t e n e d by t h e development o f t h i s ' a l t e r n a t i v e r o u t e t o t h e E a s t ' by t h e G ermans , and by t h e i r o i l e x p l o r a t i o n programme i n

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I r a q . On 23rd J an u ar y 1 8 9 9 , a t r e a t y was s i g n e d w i t h Sheikh Mubarak, who was seeki ng p r o t e c t i o n from a p o t e n t i a l T u r k i s h m i l i t a r y t h r e a t .

The F i r s t World War, t h e t r i b a l w a r s b et we e n 1 9 2 0 - 1 9 3 0 i n v o l v i n g t h e r e - e s t a b l i s h m e n t o f t h e House o f Saud i n the Ne j d , t h e b o r d e r d i s p u t e s between t h e S a u d i s , t h e K u w a i t i s and t h e I r a q i s , and t h e demise o f t h e p e a r l i n d u s t r y i n t h e 1 9 2 0 ' s due t o t h e w o r l d d e p r e s s i o n an d t h e d e v e l o p m e n t o f c h e a p e r J a p a n e s e c u l t u r e d p e a r l s , a l l s p e l l e d a b l e a k p e r i o d f o r t he K u w ai t i economy. D e s p i t e t h e v i c t o r y o f t h e B r i t i s h o ve r t h e Germans and t h e T u r k s , t h e e s t a b l i s h m e n t o f t h e Hashemite dyna st y on t h e t h r o n e o f I r a q , and t h e i m p r o v e d r e l a t i o n s between Kuwai t and Basra i n 1919, a f t e r a l m o s t e i g h t y e a r s o f s e v e r a n c e b e t w e e n t h e r u l e r o f Kuwai t and t he M u n t a f i q t r i b e s o f Ba sr a, t r a d e d i d n o t i mpr ove. C l e a r l y t h e main reason f o r t h i s was t h e e x i s t e n c e o f t h e Suez-Canal which meant t h a t m os t I n d i a n and C h i n e s e t r a d e w i t h Europe no Longer came t hr o ug h t h e G u l f .

The f a l l i n t h e p r i c e o f s i l v e r r e l a t i v e t o g o l d d u r i n g t h e l a s t q u a r t e r o f t h e n i n e t e e n t h c e n t u r y l e d t o t h e d e p r e c i a t i o n o f t h e I n d i a n and P e r s i a n c u r r e n c i e s which were on t h e s i l v e r s t a n d a r d ( 2 1 ) . U n t i l t h e 1 8 9 0 ' s K u w a i t us ed t h e s i l v e r rupee which had been adopted i n 1806 by t h e E a s t I n d i a C ompa ny . P r i o r t o 1 8 0 6 , v a r i o u s d i f f e r e n t c o i n s c i r c u l a t e d , which were m i n t e d i n v a r i o u s p a r t s o f I n d i a . The d e c l i n e i n t h e p r i c e o f s i l v e r b et w e e n 1 8 7 0 - 1 9 2 0 was due m a i n l y t o s u b s t a n t i a l d i s c o v e r i e s o f s i l v e r i n t h e U . S. A. ( t h e Comstock Lode and t h e Bonanza Mine, bot h i n Nevada). The A u s t r o - H u n g a r i a n Empire adopted a f u l l g o l d s t a n d a r d i n 1873 and s t a r t e d s e l l i n g t h e i r o l d s i l v e r coi nage (which c o n s i s t e d m a i n l y o f t h e Mari a Theresa T h a l e r ] w h i c h t h e n became l e g a l t e n d e r i n t h e w e s t e r n and s o u t h e r n a r e a s o f t h e A r a b i a n P e n i n s u l a . Other European c o u n t r i e s a l s o w e n t on t h e G o l d S t a n d a r d and f u r t h e r

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a g g r a v a t e d t h e s i t u a t i o n ( 2 2 ) . The s i l v e r rupee d e c l i n e d from Rs.1 = 2 s h i l l i n g s ( 1 8 7 3 ) t o Rs.1 = 1 s h i l l i n g 3 pence ( 1 8 9 3 ) , wh er e Rs. = R u p e e ( s ) . The Ottoman c u r r e n c y , w h i c h was on a b i - m e t a l l i c s t a n d a r d based on t h e r a t i o i n i t i a l l y e s t a b l i s h e d between g o l d and s i l v e r i n 1844 o f 1 : 1 5 . 0 9 , was s u b j e c t t o s u b s t a n t i a l p r e s s u r e when t h e C o n s t a n t i n o p l e exchange based t h e i r f o r e i g n exchange r a t e s on g o l d p r i c e s ( 2 3 ) .

A no l e s s i m p o r t a n t f a c t o r i n t h e d e p r e c i a t i o n o f t h e c u r r e n c i e s i n area was t h e d e b a s e m e n t o f t h e T u r k i s h pound and t h e P e r s i a n k r a n by s u c c e s s i v e i s s u e s o f c o i n s o f l i g h t e r w e i g h t o r l ower f i n e n e s s due t o t h e enormous d e f i c i t s i n t h e budget s o f both governments ( 2 4 ) . S i m i l a r d e v e l o p m e n t s i n g o v e r n m e n t f i n a n c e s w h i c h i n E n g l a n d h a d Led h i s t o r i c a l l y t o t h e e s t a b l i s h m e n t o f l a r g e i n t e r n a l c a p i t a l markets ( 2 5 ) , led i n b o t h T u r k e y and P e r s i a t o t h e e s t a b l i s h m e n t o f f o r e i g n b a n k i n g g r ou p s, c h i e f l y B r i t i s h , a l t h o u g h t he R u ss ia n s became i n v o l v e d i n P e r s i a n b a n k i n g f o r a b r i e f p e r i o d ( 2 6 ) . The I m p e r i a l Ottoman Bank

(27) was f o u n d e d i n 1863 i n C o n s t a n t i n o p l e and t h e I m p e r i a l Bank o f P e r s i a i n 1889 i n Teheran. Q u i t e c l e a r l y one o f t h e p r i m a r y a c t i v i t i e s o f each o f t h e s e b a n k s was t o make a d v a n c e s t o t h e r e s p e c t i v e l o c a l g o v e r n m e n t s ( 2 8 ) . I n K u w a i t and B a s r a i n t h e p e r i o d 1 8 6 9 - 1 8 7 3 t he s a r r a f s were busy exchangi ng and t r a d i n g b et w e e n t h e c o m p l e x c o i n a g e s y s t e m s o f t h e O t t o m a n E m p i r e and P e r s i a and t h e r e l a t i v e l y s i m p l e r c o i n s o f I n d i a . The c o i n s o f I n d i a c i r c u l a t e d as p r e f e r a b l e c u r r e n c y due t o t h e i r s t a n d a r d i z a t i o n s i n c e 1806 and t h e f a c t t h a t t hey we re n o t d e b a s e d c ompar ed t o t h e o t h e r c o i n a g e a v a i l a b l e . From A p r i l 1916 onwards t h e B r i t i s h f o r c e s i n t h e G u l f , w h i c h w er e a d m i n i s t e r e d from I n d i a , b r o u g h t I n d i a n rupee n o t e s and s i l v e r c o i n s w i t h them and t h e s e r a p i d l y d i s p l a c e d Ottoman c u r r e n c y i n t h e r e g i o n s o f o c c u p a t i o n ( 2 9 ) .

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P r i o r t o t h e e s t a b l i s h m e n t o f t h e I m p e r i a l Ottoman Bank, the s a r r a f s were t h e o n l y f o r m o f b a n k i n g i n t h e n e a r - e a s t o u t s i d e I n d i a . The I m p e r i a l Ottoman Bank, t h e Ea s te r n Bank and t he I m p e r i a l Bank o f P e r s i a (and t h e b r a n c h o f t h e Banca d i Roma i n Baghdad which c l o s e d down i n 1 9 4 0 ) , even a f t e r t h e y had been e s t a b l i s h e d , were n o t r e a l l y concerned w i t h i n t e r n a l f i n a n c i n g , o n l y t h e f i n a n c i n g o f t h e f o r e i g n t r a d e s e c t o r i n T u r k e y , I r a n and I r a q ( 3 0 ) . T h i s i s a p o i n t o f impor t ance which we b r i n g up agai n i n o u r d i s c u s s i o n o f c u r r e n c y - b o a r d economies i n Chapt er 3 and w h i c h i s r e l e v a n t t o t h e a r g u m e n t t h a t t h e money s t o c k i n a c o l o n i a l e c o n o m y , an d i n p a r t i c u l a r i n p r e - 1 9 4 6 K u w a i t , was n o t i ndep e nd en t o f t r a d e and t h e b a l a n c e o f p a ym en t s. The l a c k o f ban ki ng f a c i l i t i e s f o r l o c a l merchants i n t h e area o f Basra l e d t o t h e expansion o f t h e b u s i ne ss o f t h e s a r r a f s (money changers) who a c c e p t e d d e p o s i t s , d i s c o u n t e d b i l l s , and gav e s h o r t - t e r m a d v a n c e s a g a i n s t p r o p e r t y and b u l l i o n ( 3 1 ) . M e r c h a n t s i n B a s r a and K u w a i t a l s o gave c r e d i t among t h e m s e l v e s base d on a s y s t e m o f " c o m b i a l a s " ( p r o m i s s o r y n o t e s ) . A l t h o u g h t h e s e f o r m s o f c r e d i t we re r u d i m e n t a r y and i n s i g n i f i c a n t by

comparison w i t h t h e b u si n e ss o f t h e b r a n c h e s o f t h e f o r e i g n banks, t hey per formed a u s e f u l f u n c t i o n o f money l e n d i n g w h i c h t h e l a r g e f o r e i g n banks d i d n ot o f f e r ( 3 2 ) .

v i ) THE GOLD EXCHANGE STANDARD IN INDIA

The " Gold Exchange S t a n d a r d " e s t a b l i s h e d by t h e I n d i a n government on t he r e c o m m e n d a t i o n o f t h e Fowl er Committee i n 1898 had s t r o n g i m p l i c a t i o n s f o r t h e t r a d e o f K u w a i t a n d B a s r a , an d i n so f a r a s K u w a i t was concerned, came a t a t i m e (as we have seen a b o v e ) when i t was s o r e l y needed t o boost t h e economy o f t h e P e r s i a n GuLf, a l t h o u g h t h e b e n e f i c i a l e f f e c t s o f t h e I n d i a n r e f o r m s , which we d e s c r i b e be l ow , were c l e a r l y not i n t e n t i ona L.

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The d e c l i n i n g p r i c e o f s i l v e r d u r i n g t h e l a t t e r h a l f o f t h e n i n e t e e n t h c e n t u r y , and I n d i a ' s s t r o n g t r a d e r e l a t i o n s w i t h B r i t a i n , which was on t h e Gold S t a n d a r d , meant t h a t I n d i a had i n c r e a s i n g p r o b l e m s i n f i n d i n g enough s i l v e r c u r r e n c y t o f i n a n c e t r a d e , and c o n s e q u e n t l y t h e exchange r a t e o f t h e I n d i a n Rupee a g a i n s t s t e r l i n g k e p t f a l l i n g . Gold, a l t h o u g h made a c c e p t a b l e i n I n d i a i n 1864 f o r t he pay men t o f g o v e r n m e n t b i l l s , was n o t a v a i l a b l e i n enough s up p ly t o put I n d i a on a f u l l Gold St a n d a r d . The i d e a o f t h e G o l d Exchange S t a n d a r d was t h a t g o l d w o u l d be made a v a i l a b l e f o r f o r e i g n r e m i t t a n c e s o n l y , w h i l e r u p e e n o t e s and s i l v e r c o i n s c i r c u l a t e d d o m e s t i c a l L y and were n ot c o n v e r t i b l e i n t o g o l d . T h i s a l L o w e d I n d i a t o b e n e f i t f r o m a s t a b l e exchange r a t e w i t h o t h e r go l d s t a n d a r d c o u n t r i e s w i t h o u t h a v i n g t o m a i n t a i n a l a r g e g o l d r e s e r v e t o back t h e d omes ti c c o n v e r t i b i l i t y o f i t s c u r r e n c y .

The f a c t t h a t t h e f o r e i g n r e s e r v e was t r a n s f e r e d t o London and t h a t t h e I n d i a n b a l a n c e o f payments was m o s t l y i n s u r p l u s u n t i l 190 7 - 8, and t h e f a c t a l s o t h a t t h e b i l l o f e x c h a n g e on London b a n k s became i t s main method o f i n t e r n a t i o n a l payments ( 3 3 ) , meant t h a t I n d i a was i n e f f e c t on a s t e r l i n g e x c h a n g e s t a n d a r d . The s u s p e n s i o n o f c o n v e r t i b i l i t y by B r i t a i n i n 1931 and t h e a d o p t i o n by I n d i a o f t h e f u l l s t e r l i n g exchange s t a n d a r d d i d n o t , t h e r e f o r e , change a n y t h i n g .

Si nce 1873, t h e normal a c t i v i t i e s o f t h e B a s r a and Kuwai t merchant s i n t h e f i e l d o f s p e c i e and b u l l i o n t r a d e had l i v e n e d up w i t h i n c r e a s i n g demand f o r g o l d c om i ng f r o m I n d i a . By t h e t i m e t h e G o l d Exchange St and ard was w o r k i n g , a s u b s t a n t i a l pr emi um was b e i n g p a i d by I n d i a n s f o r g o l d which t h e y c o u l d n ' t o b t a i n t h r o ug h t h e open m a r k e t ( 3 4 ) . The I n d i a n g o v e r n m e n t c o n t i n u e d t o m i n t s i l v e r c o i n s f o r normal i n t e r n a l t r a d e , and s i l v e r was purchased i n London w i t h t h e c o u n t r y ' s s u r p l u s i n

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24

t he bal anc e o f t r a d e t o be s hi pped t o I n d i a f o r m i n t i n g . I n 1862 t h e g o v e r n m e n t had t a k e n o v e r t h e not e i s s u e from t h e p r e s i d i n g banks and paper rupees were c i r c u l a t i n g a l o n g s i d e s i l v e r c o i n s , but due t o t he c o n s e r v a t i v e not e i s s u e c over and t h e d e c l i n i n g p r i c e o f s i l v e r , more a n d more c o i n s had t o be m i n t e d i n t h e f a c e o f e x p a n d i n g i n t e r n a l demand.

The f a c t t h a t g o l d was b e i n g demanded a t a pr emium and t h a t t h e rupee was f r e e l y c o n v e r t i b l e i n t o s t e r l i n g a t a f i x e d r a t e o f exchange c r e a t e d a p r o f i t a b l e a r b i t r a g e o p p o r t u n i t y f o r G u l f m e r c h a n t s i n K u w a i t and B a s r a who smuggLed g o l d i n t o I n d i a and P a k i s t a n a g a i n s t I n d i a n rupees which were c o n v e r t e d i n t o s t e r l i n g and used f o r g o l d p u rc ha s es . There began a n o t h e r t r a d i n g c y c l e . The b u l l i o n t r a d e r e p l a c e d p e a r l i n g as K u w a i t ' s mai n a c t i v i t y a f t e r t h e d e m i s e o f p e a r l i n g i n t h e 1 9 2 0 ' s . Between 1920 and 1947, t h e g o l d t r a d e i n f a c t c o u l d go e i t h e r way s i n c e t he p r i c e o f s i l v e r had s t a b i l i z e d and i n some p e r i o d s had s t r e n g t h e n e d c o n s i d e r a b l y . A f t e r 19 4 7 , h o w e v e r , t h e p r e m i u m on g o l d was r e - e s t a b l i s h e d and led t o Large c o n v e r s i o n s o f rupees f o r s t e r l i n g which by 1957 and 1958 c r e a t e d a b a l a n c e o f p a y m e n t s c r i s i s f o r t h e Reserve Bank o f I n d i a . On May 11, 1959, I n d i a i s s u e d a c u r r e n c y s p e c i f i c a l l y f o r use i n t h e G u l f - t h e G u L f Rupee ( a t p a r w i t h t h e I n d i a n Rupee Rs13.3 = STG.1 = 0.186621 grams o f g o l d ] was b l u e i n s t e a d o f t h e us ua l green and was an o b l i g a t i o n o f t h e Bombay b r a n c h o f t h e R e s e r v e Bank a l o n e . H o w e v e r , a l m o s t a y e a r l a t e r K u w a i t i s s u e d i t s own c u r r e n c y

( 3 5 ) .

v i i ) THE DISCOVERY OF OIL

A l t h o u g h t h e St andard O i l o f C a l i f o r n i a had s t a r t e d e x p l o i t i n g f i n d s i n S a u d i - A r a b i a d u r i n g t h e Second World War, and a l t h o u g h t h e K u w a i t O i l

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25

Company (a j o i n t v e n t u r e between t h e A n g l o - I r a n i a n O i l Company and G u l f O i l ] had s t r u c k o i l i n t h e Burgan i n 1938, no o i l e x p o r t s were made from Kuwait u n t i l 1946 . The Second W o r l d War saw a r e v i v a l i n commercial a c t i v i t y i n Kuwai t and Basra based on t h e smuggl ing o f e s s e n t i a l goods i n w a r t i m e and on m i l i t a r y e x p e n d i t u r e by t h e B r i t i s h f o r c e s i n t h e a r e a . There was no damagi ng m i l i t a r y a c t i v i t y i n t h e a r e a , a l t h o u g h much a n t i - B r i t i s h f e e l i n g developed and expl oded i n s p o r a d i c r i o t s f r o m t ime t o t im e i n t h e G u l f S t a t e s .

The I m p e r i a l Bank o f I r a n ( f o r m e r l y t h e I m p e r i a l Bank o f P e r s i a ) was t h e f i r s t bank t o open a branch and o p e r a t e i n Kuwai t ( 1 9 4 2 ) . The Eas ter n Bank w i t h b r a n c h e s i n B a s r a a n d B a h r a i n was t h e o n l y o t h e r bank o p e r a t i n g i n t he P e r s i a n G u l f p o r t s b e f o r e 1942. I n 1948 t h e I m p e r i a l Bank o f I r a n became t h e B r i t i s h Bank o f t h e M i d d l e East (BBME). The bank was managed i n London and was t h e b an ker t o t h e Kuwai t government. S i nc e t h e bank had begun by o p e r a t i n g i n B a s r a , i t i s pres umed t h e K u w a i t g o v e r n m e n t had d e v e l o p e d c l o s e r e l a t i o n s w i t h t h i s b r a n c h , because when t h e bank s u b s e q u e n t l y opened i n K u w a i t , i t q u i c k l y o b t a i n e d e x c l u s i v i t y o f b u s i n e s s w i t h t h e g o v e r n m e n t ( a t l e a s t f o r f o r e i g n b a n k s ) . G u l f O i l and A n g l o - I r a n i a n ( l a t e r BP) e a c h p a i d t h e i r c o n t r i b u t i o n s t o t h e government f o r t h e i r o i l p r o d u c t i o n i n t o t h e BBME London, and u n t i l t h e Finance D e p a r t m e n t o f Kuwai t was c r e a t e d i n 1959, t h e s e sums were b an ked d i r e c t l y i n t h e r u l e r ' s name ( 3 6 ) . T h e s e p a y m e n t s were made q u a r t e r l y , a n d , a p a r t f r o m t h e f e w l o c a l t a x e s r a i s e d , made up a l m o s t a l l t h e S t a t e b u d g e t . The r u l e r n o r m a l l y budgeted a s u r p l u s and t r a n s f e r e d t h i s t o a r e s e r v e a c c o u n t managed i n London by t h e Kuwai t I n v e s t me n t Board s e t up i n 1953, and c o n s i s t i n g o f f i v e London bankers whose names w e r e k e p t s e c r e t . The s ecr ecy i n t he management o f t h e c o u n t r y ' s f u n d s was l a t e r t o b e c o m e a b o n e o f c o n t e n t i o n between t h e r u l e r and t h e n e w l y - e l e c t e d assembly o f d e p u t i e s

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26

(1962) .

The 1943 company m e e t i n g o f t h e I m p e r i a l Bank o f I n d i a gave t h e f i r s t p u b l i c s ta te me n t by any bank on K u w a i t :

" O u r o f f i c e i n K u w a i t h a s j u s t i f i e d i t s e s t a b l i s h m e n t . T h i s p o i n t i s a v a l u a b l e emporium f o r t r a d e w i t h t h e h i n t e r l a n d o f N.E. A r a b i a , m a i n l y i n goods i m p o r t e d from I n d i a " (37)

Th e re i s as y e t no ment i on o f o i l o r p e a r l i n g which as we e x p l a i n e d had s u f f e r e d a r e l a p s e , mer el y o f t he c e n t u r i e s - o l d t r a d e w i t h I n d i a w h i c h had f o r so long k ep t Kuwai t on t h e Rupee o r S t e r l i n g S t a n d a r d . The 1947 m e e t i n g has a d i f f e r e n t t o n e :

"Our branches a t Kuwait and B a h ra i n and Dubai i n t h e P e r s i a n G u l f a r e p e r f o r m i n g a u s e f u l f u n c t i o n i n t r a d e w i t h I r a q , I n d i a , I r a n and Saudi A r a b i a . The o i l d e v e l o p m e n t s a t K u w a i t g i v e a s s u r a n c e o f i n c r e a s i n g a c t i v i t y a t t h a t p r os pe rou s p o r t " (38)

By comparison v e r y l i t t l e i s s a i d about B a h r a i n and Dubai a t a l l , 1950 t h e company m e e t i n g o f t h e Ea st er n Bank m e nt i on s something e f f e c t t h a t t h e i r new b r a n c h i n B a h r a i n was r e g a r d e d i n wonder L o c a l s as t h e y hed n e v e r seen s o m e t h i n g l i k e i t b e f o r e . A c o n t r a s t w i t h t h e s i t u a t i o n i n K u w a i t , which b e n e f i t e d from more t r a d i n g and p r o x i m i t y t o B a sr a .

By 1952 t h e growth i n t h e o i l economy had g i v e n t h e K u w ai t i merchant s enough reason f o r them t o f ound a bank o f t h e i r own, t h e N a t i o n a l Bank

and by t o t h e by t he s h a r p a c t i v e

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o f K u w a i t . The f a s t e s t i n c r e a s e s i n o i l p r o d u c t i o n made by t h e o i l companies were made b et w ee n 1946 and 1 9 5 2 , o i l p r o d u c t i o n more than d o u b l i n g i n some y e a r s . The merchants were q u i c k t o v i e f o r monopoly o f t h e a n c i l l a r y s e r v i c e s and i n d u s t r i e s c o n n e c t e d w i t h o i l , and t h e g o v e r n m e n t ' s c o n s t r u c t i o n pr ogr ammes i n c r e a s e d as a r e s u l t o f i t s n e w l y - f o u n d economic s u r p l u s . The N a t i o n a l Bank o f Kuwai t was founded ( 3 9 ) more o r l e s s i n t h e same s p i r i t , j u s t as some m e r c h a n t s ( 4 0 ) c o n v e r t e d a p p a r t m e n t b l o c k s w i t h u r g e n c y i n t o what was t o become the K u w a i t S h e r a t o n H o t e l . T h e y w e r e a l l m e a s u r e s u n d e r t a k e n by t h e merchant community t o g a i n f r o m t h e e c o n o m y ' s p o t e n t i a l g r o w t h . No s t a t i s t i c s o f any v a l u e a r e a v a i l a b l e t o d e m o n s t r a t e t h e economy' s gr owt h o v e r t h i s p e r i o d . S t a t i s t i c s o n l y o f f i c i a l l y s t a r t e d i n 1960 and i t was o n l y u n t i l 1973 t h a t r e a s o n a b l y a c c u r a t e f i g u r e s began t o be re co r de d i n t h e v a r i o u s s e c t o r s o f t h e economy. Some w r i t e r s ( 4 1 ) have e s t i m a t e d t h e o i l revenues o f t h e f i r s t ye ar s g i v i n g us an id ea o f t he gr owt h o f t h e economy i n t he p e r i o d 1940-1953:

Year Government Q i I Revenues

US$m % i n c r e a s e 1946 0. 76 -1947 2.07 172.3 1948 5. 9 5 1 8 7 .4 1949 11.52 93. 6 1950 16.09 39. 6 1951 18.00 11. 8 1952 57.00 216.6 1953 169.00 195.6 T h e r e a f t e r i n c r e a s e s st a ye d a t between 2.4% and 22.8% w i t h t he e x c e p t i o n o f 1955 (45%), 1972 (71.3%) and 1974 ( 2 9 5 . 2 % ) . The r a p i d i n c r e a s e s i n 1952 and 1953 were d i r e c t l y due t o t h e n a t i o n a l i z a t i o n o f I r a n ' s o i l i n d u s t r y by Mossadeq, which reduced I r a n ' s o u t p u t c o n s i d e r a b l y . I r a n ' s o u t p u t had been u n t i l then t h e h i g h e s t i n t h e w o r l d .

References

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