Kuwait’s four-year plan seen crucial for economy

The approval of the largest four-year development plan in Kuwait’s history is a turning point in the Gulf country’s economy as it will give a fresh impetus to growth and sharply expand the private sector, a key Kuwaiti bank has said.
 
National Bank of Kuwait (NBK) said the private sector could pump nearly half the targeted investments of KD31 billion (Dh387 billion) in the plan, which was approved by the Emirate’s parliament early this year.

“The year 2010 may prove to be a major turning point for the Kuwaiti economy….the trigger is the Kuwaiti Parliament’s approval of one of the most ambitious development plans in the region,” NBK said in a study.

“Following years of sub-par government spending on infrastructure and development projects, which slowed growth in the past and put Kuwait’s economy behind other Gulf countries, there are improved signs of Kuwait’s commitment to implementing vital reforms and development programmes.”

Besides the plan, new initiatives with the greatest impact on the economy in the near term include the award of a number of big projects, with many others in the pipeline or planned in accordance with the recently approved development plan.
 
“Although there are some concerns regarding the capacity of the country to fully implement the development plan, we expect the impact of the plan on Kuwait’s economy to be quite positive,” the study said.

Kuwait’s Parliament ratified the plan in February, the first of six consecutive development blueprints which Kuwait hopes will achieve its vision of becoming the region’s financial and trade center by 2035.

One of the main elements of this ambitious development strategy is to restore the leading role of the private sector, primarily through the introduction of various reforms and incentives to stimulate private investment.

Accordingly, half of the envisioned investment outlays under the four-year plan are anticipated to come from the private sector either as direct investments or in the form of “Build, Operate and Transfer” or “Public Private Partnerships (PPP).”

“The timing and the size of this plan are considered very crucial.

Since late 2008, Kuwait has been suffering from the negative repercussions of the global financial crisis.

In order to ride out the crisis and stimulate the domestic economy, as well as to prepare for the long term, the government pledged to adopt an ambitious development program that will help restructure the Kuwaiti economy, boost private sector activity, and reduce dependence on oil,” NBK said.

“The plan introduces ideas and laws to fund the development projects and to provide support to various sectors, including contractors, small and medium enterprises (SMEs), and low income entrepreneurs.

NBK noted that the Kuwait Vision 2035, one of the most ambitious Arab development plans, proposes reforms covering five areas: economy, people, political system, cultural environment, and Kuwait’s international positioning.

It said the Vision aims to achieve the following:

- Reducing red tape: reduce requirements for starting and operating a business, improve convenience and efficiency (one-stop-shop), increase access to land and capital for startups and small businesses, open up international trade.

- Improving access to land: Auction government land, engage the private sector in the development of land and infrastructure, and set up a central land authority.

- Creating fair and equal opportunities in the market: Fight corruption and unequal treatment, develop an anti-trust law and competition commission, level the playing field for large and small enterprises, reduce government intervention in the market, lift restrictions on foreign investors, and promote FDI.

- Promoting a sound and sustainable fiscal position: Stop rapid increase in public sector employment and salaries, reduce expenditures through privatization, reduce government spending on infrastructure and development projects (through PPP), and diversify government income.

- Expanding and empowering the energy sector: Insulate industry from politics,become more open to international expertise, transform the electricity sector,
optimize exploitation of available resources, explore the petrochemical option, and build a regional energy hub.

- Regional transport center: Upgrade the capacity of existing infrastructure, introduce alternative management arrangements for infrastructure, build a first class multimodal logistic hub that can become a gateway to the north, improve the regulatory environment for trade, and develop the trade and logistic sector.

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