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Volume :14 Issue : 55 1988      Add To Cart                                                                    Download

THE MUTUAL EFFECT BETWEEN ECONOMY AND EXTERNAL TREADE IN KUWAIT(1970 – 1985)

Auther : By: Dr. Zahra Abbas and Dr. Mohammed M. Dagher

 

              The economies of petroleum countries faced a great and quick change in their economic structure during the seventies and the first half of the eighties, which represented the great effect of the oil sector on the aggregate economic activity, it also showed the importance of the crude oil export revenue due to successive positive price correction followed by a decrease of the price per gallon later.

           The importance of the oil sector to the aggregate dynamic economies show that at a time when the economic structure is not yet completed, the economic infrastructure is still inadequate unbalanced with increased crude oil export revenues and this implies a short-sighted economic strategy for growth, so the result is increasing, dependency on the mining sector.

           The study of Kuwaiti economy is an appropriate case study for the purpose of comparison as well as generalization.  The study emphasizes Kuwait’s external trade with the main economic factors, which are related to external trade such as GDP, C and I.

           Such studies assess the effect of oil revenue through external trade on the structure of the economy, where the economic theory of external trade presents the basis through which the role of external trade to developing economics can be presented.

           The researchers adopted the idea of the correction of economic structure as an indicator of the development that actually happened in the Kuwaiti economy in order to discover the effect of the change in the structure of the economy due to dependency on external trade.  This can provide answers the following questions:

-          Does economic growth increase the dependency of the external sector or not? 

-          Is there any trend to substitute domestic products instead of foreign ones? 

-          Is the increase in the level of income due to oil revenue accompanied with an increase in expenditure on imports?

   The basic hypothesis of the study is that external trade (exports & imports) did not play a great role in affecting or changing the role of some economic variables through the period 1970-1985 in Kuwaiti economy.  This hypothesis is tested by descriptive as well as quantitative analysis.

           The study concludes that the economic growth in Kuwait did not help effectively in reducing the demand of imports and then the conditions of international change remained unfavorable to Kuwait.  The other conclusion is that the changes in the structure of GDP during the period of study were based in favor of imports and the growth in GDP increased the volume of imports and so the economic policy for a decade and a half shows that there was a lack in constructing and developing domestic activities which would have reduced imports.  The imports structure did not support economic dependence in its social and economic development.  On the other hand, the effect of GDP on export is very small and both of them were affected by the following external factors:

 1.     Decrease in quota of Kuwait due to OPEC decisions.

2.     Nominal change in export values due to price decrease with fixed export volume.

 

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