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Volume :31 Issue : 118 2005      Add To Cart                                                                    Download

Appropriate Investment of Kuwaits Natural Capital for Sustainable Development

Auther : Ramadan A. AL-Sharrah

     The study holds the view that Kuwait should be looking to have sustainable development.  Both the current and future generations have a right to the natural resources of the country and as such it is imperative to find out whether the substantial development achieved by Kuwait during the period of study 1970-1997 was achieved through sustainable development by investing Kuwaits Natural Capital, mainly Oil.
     The study looks critically at the current system adopted for national accounting, which does not include the cost of the depleting natural resources.  The criticality of the natural resources for a country like Kuwait, whose GDP is dependant on oil, means that the cost of depleting natural capital has to be incorporated in the national accounts system so that to put things in the proper perspective.  This ensures that the economic costs of the policies that may affect the environment are not ignored.
     Two major methods, 1) the user cost approach and 2) the domestic product approach, are used in the study to estimate the depletion of petroleum and gas, as well as in the calculation of the permanent income in Kuwait.
     The researcher has created a Development Framework for measuring Kuwaits Sustainable Development. 
     A new National Accounting system, which includes the cost of utilized environmental capital, is suggested for Kuwait.  Apart from this, environmental amendment is made to both the net domestic product and the net domestic investment.
     The study clearly shows that regardless of the method used, the adjusted net domestic product measures indicate that a significant percentage of Kuwaits income actually represented a consumption of natural capital and as such a review of the way the natural capital is invested is called for.  Kuwaits economy has been on an unsustainable path for the major part of the period of study.  There is a steady depletion of natural capital in Kuwait.  The erosion of natural resources of Kuwait is to the tune of KD 7837 billions during the period from 1970 to 1997.  This amounts to more that half of the average domestic product of one year during the period. An analysis reveals that there is a capital loss representing 3.85% of the gross domestic product in one year.  During the period of study, the average natural capital depletion was 23% of the total capital components.  There is a clear trend of low domestic capital formulation during the period of study.  The study also shows that the total wealth is declining. 
     An overhaul of the Current National Accounting is overdue and a new system incorporating the green factors has been implemented so that the plans based on it are more realistic.  This will ensure that Kuwaits economy is on a sustainable path and the future generations interests are protected.   

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May 18, 2017

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