The Kuwaiti economy is characterized by two major structural imbalances—heavy
dependence on oil production and dominance of the public ownership. Kuwait has
struggled over the years to implement a two-pronged development strategy —diversifying
the country’s economic base away from the oil sector and promoting private
sector development. This paper explores the economic impact of some policy reform
options currently being considered. It employs a unique set of input–output tables,
derived from supply–use tables, that distinguishes transactions made by private and
public enterprises as well as providing a matrix of imports by industry. The public–private
sector interdependence analysis revealed interesting results regarding sectoral
differences in strengths of forward and backward linkages. For instance, the findings
indicated that the strength of the publicly owned oil sectors lie in their forward linkages,
supplying other sectors with their outputs, but their backward linkages is weak.
On the other hand, the chemicals industry is identified as one of a few sectors with balanced
and relatively strong forward and backward linkages in both public and private
sector. The policy analyses conducted in this paper are highly relevant to the ongoing
policy debate in Kuwait over the design of the economic reform programs. The public–
private linkage analysis has revealed insights into policy synergies through which one
instrument can affect more than one policy target.

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