Leaders' False Assurances Doom Kuwaiti Investors

KUWAIT CITY -- When Arab leaders assured their citizens that the financial troubles of the West would hit only lightly here, electronics dealer Mishal al-Fadli took Kuwait's government at its word.

As the global crisis built in September, Fadli sold his two electronics stores and mortgaged his house. He invested everything, $800,000, in futures contracts. "The minister of finance advised us investors to get involved. He said the economy is strong, it'll go up," Fadli recounted.

This week, Fadli wandered the floor of the Kuwait Stock Exchange with just 24 Kuwaiti dinars, or about $90, left to his name, he said. He has five children younger than 10 and mortgage payments coming due.

"Within a month, if I don't pay, I'm out on the streets," Fadli said. Behind him, a man who had lost $80,000 in savings in the stock market shouted grievances against Kuwait's leaders. Investors with equally devastating losses surrounded the man, applauding.

"It was all a joke," Fadli said. "What they told us on the TV, in the newspapers. All a joke."

Across the Arab world, the statements of leaders and officials in recent weeks often have appeared designed to prop up markets and financial institutions rather than to inform citizens. Most governments in the region have yet to demand adequate financial disclosure by companies. Few tolerate the kind of critical reporting by local news media that could have warned residents. For Fadli and many other investors, the lack of information has meant steeper losses.

"This comes from our culture," said Rola Dashti, one of Kuwait's leading economists. "We try to calm people: 'Things are OK, don't worry.' That doesn't work in a financial crisis, when you affect people's savings."

From Dubai to Cairo, many newspapers, wary of the state, have done little more than repeat the encouraging economic statements of leaders. On some days last month, electronic tickers on buildings in Dubai stopped showing discouraging stock quotes and instead displayed the emir's upbeat declarations about the economy.

The government in Cairo ran television ads urging Egyptians to buy stock -- and hang on to it no matter what. The stock certificates were their proof of ownership in the country's businesses, the ads said.

Since then, Egypt's stock market has experienced one of the worst falls in the Middle East. The main stock index has lost more than half of its value this year, most of that in recent weeks. At least two small investors in Egypt committed suicide over recent losses, one after killing his wife and child, according to news reports.

The market declines in the Middle East, when they began in earnest, were more acute than those in the United States. Kuwait's main stock index has fallen about 40 percent since July compared with less than 30 percent for the U.S. Dow Jones index.

Kuwaiti investors have been vocal about their losses, in part because the country's leaders allow greater freedom of expression than do their counterparts in many other states. On Monday, stock traders marched on the palace of Kuwait's emir, imploring the ruler to close the stock market temporarily.