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Kuwait investing heavily into new industries & infrastructure

Tuesday, 19 January 2010 15:44

Having moved out of the "noughties", Kuwait is looking to mark the coming decade by investing heavily into new industries and supporting infrastructure.
The government has announced it intends to spend at least $121bn on major projects between now and the end of the 2013-14 financial year, with funds to be ploughed into the all-important energy sector, health and educational services, transport and utilities infrastructure.

Among the big-ticket items expected to be launched in 2010 are at least $2bn worth of housing developments and the building of up to eight new hospitals. The port on Boubyan Island will receive particular focus, with the expansion of cargo-handling capacity, increasing the number of docks from 24 to 60, and linking the port by both rail and road to the mainland.

The government has established a special team of ministers - led by Sheikh Ahmed Al Fahad Al Sabah, who is the deputy prime minister, the assistant for economic affairs, and also minister for development and housing affairs - to coordinate the implementation of the plan. The ministers of finance, commerce and industry, communications, public works, social affairs and labour, are also all included, along with representatives of the Kuwait Chamber of Commerce and Industry.

Announcing the move on January 10, the minister of state for cabinet affairs, Roudhan Al Roudhan, said the team will explore all means to push the development process through the execution of projects, and by boosting efficiency of the national economy and services.

However, the government has to get the legislators of the National Assembly on side, and defuse the political tensions that were bubbling throughout 2009. Consensus between the elected parliament and the appointed cabinet will be essential if Kuwait is to push through the development plan both on time and within budget.

Kuwait's ruler, Sheikh Sabah Al Ahmad Al Jaber Al Sabah, has stepped in to smooth the passage of the crucial legislation, and to bridge the gap between the assembly and the cabinet.

During a meeting with parliamentary deputies on January 11, His Highness called on the members of the assembly to work with the government to put the development plan in place, setting aside any differences that have in the past slowed or derailed major projects.

Central to the government's plans is the health of the economy itself, or at least the hydrocarbons sector. Oil has rebounded from its lows of early 2009, when prices fell as low as $30 per barrel, to a far stronger level of around $80. With a solid budgetary surplus on the cards, and some predictions suggesting Kuwait will finish the year up to $17bn or more in the black, the government is in the fortunate position of being able to make investments without having to draw on its accumulated reserves. Though analysts do not expect any dramatic retreat in oil prices in the short or medium term, prompt action in implementing projects will allow Kuwait to make the most of its present revenue windfall.

The timing of the state's investment programme could also take advantage of broader economic dynamics stemming from the global financial crisis. With much of the heat taken out of the Gulf region's construction boom, in line with a similar slowdown in the building industry worldwide, materials costs have fallen sharply. In particular, steel and cement prices are well down on their early 2008 levels, while many major contractors have empty order books, meaning clients are well placed to cut an attractive deal for large-scale developments such as those planned by Kuwait.

It is not just the government that has big plans to invest in the economy. Hydrocarbons giant Kuwait Gulf Oil Company (KGOC) also intends to spend money to make money. Late last year, KGOC's managing director, Bader Al Khashti, announced the company would outlay $1.14bn on oil and gas projects in 2010, the first stage of $11bn worth of investments in the pipeline over the coming two decades aimed at increasing production and maximising resources.

There is no question that Kuwait has the liquidity to carry though its ambitious investment plans, its just a question of doing it in a timely manner. While it is essential that due process is followed, and the greatest benefit derived from the massive investments, the iron is suitably hot, so now is the time for Kuwaitis to rally behind the state's plan and strike a blow for the future.

Global Arab Network

This article is published in partnership with Oxford Business Group

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