Kuwait's economic strategy aims to deliver

 

A far-reaching vision for New Kuwait 2035 was unveiled in 2017, the aim of which is to develop the country into a cultural centre, a financial hub, a world-leading manufacturer of petrochemicals, a focal point for foreign investment, and a place for knowledge transfer in renewable energy and IT by 2035. Sheikh Mohammad Abdullah Al Mubarak Al Sabah, the minister of state for Cabinet Affairs, launched the plan, which includes 164 development programmes, five themes, and seven pillars for investment and improvement. Included in the vision of the Kuwait National Development Plan are housing projects, such as master-planned communities, and economic schemes tailored to the young, women and the elderly. The plan also includes 20 global indicators so that the progress of implementation can be more effectively measured and, at the same time, compared to other parts of the world.

Emir’s Vision

On New Kuwait’s dedicated website, Emir Sheikh Sabah Al Ahmad Al Jaber Al Sabah said the vision is to “transform Kuwait into a financial and trade centre, attractive to investors, where the private sector leads the economy, creating competition and promoting production efficiency, under the umbrella of enabling government institutions, which accentuates values, safeguards social identity and achieves human resource development, as well as balanced development, providing adequate infrastructure, advanced legislation and an inspiring business environment.”

Seven Pillars

The National Vision has five goals and is based on seven pillars: public administration; economy; infrastructure; living environment; health care; human capital; and global position. Each pillar has associated objectives, and collectively the aim is to reduce red tape; broaden the economy beyond reliance on oil revenues; improve infrastructure; build more homes for citizens; invest in developing skilled Kuwaiti health workers, as well as improved medical facilities; reform schools to give children the skills to thrive in competitive private sector roles; and enhance Kuwait’s position as a regional leader in culture, diplomacy, trade and philanthropy. In addition to these broad initiatives, there is also an emphasis on setting objectives, deadlines and progressing with performance indicators included in the presentation of the New Kuwait development plan.

Long-Term Aims

Although New Kuwait sets out a long-term strategy, some of the initiatives included within the framework have already been mooted in previous five-year development plans. The National Development Plan for 2010-14 included 421 projects that were partially executed under the initial timeframe and were subsequently transferred to the KD34.15bn ($113bn) 2015-20 national plan, along with 92 new projects. Among the mega-projects in the original 2010 plan were the Silk City business hub, the Sheikh Jaber Causeway, and a railway and metro system.

Seven years later, progress is being made on some of these projects and is being monitored as part of the rebranded New Kuwait plan. The estimated year of completion for the rail network is given as 2017, with progress given as being at 11% in early 2017, while Sheikh Jaber Al Ahmad Bridge is said to be 60% complete and due to be finished in 2018, the same year in which the Kuwait metro is due be delivered, although progress there is at 11%. Plans for a Kuwait City metro were first announced in 2006, and in 2015 procurement for the project was planned to start in the first quarter of 2016. In the first half of 2017 there have been no further announcements. The challenge for policymakers in implementing the new plan is to demonstrate that Kuwait has become more amenable to the business community and investors, both local and foreign.

New Kuwait’s communications campaign is certainly sending appropriate messages by showcasing the targeted indicators, which include increasing foreign direct investment (FDI) by 300%, developing petrochemical facilities and attracting KD400m ($1.3bn) in investment in IT and renewable energy, increasing the latter’s share in the energy mix to 15% by 2035.

New Impetus

However, there is evidence that in the years since the 2014 oil price decline a new impetus has been seen in work on major projects, enabled in part by legal and bureaucratic reform around public-private partnership schemes. In December 2016 the Al Zour North One power and desalination plant was completed on budget and on time as an independent water and power project with foreign partners. The scheme has injected confidence into the wider economy. “I believe it is a good time in Kuwait at the moment, and that 2017 could be the year when we start to see the government moving on projects and we start to see the economy picking up,” Rani Selwanes, managing director of investment banking at NBK Capital, told OBG.

Reaven D’Souza, managing editor of The Times Kuwait, also sees signs of a new resolve to move forward with major infrastructure projects. However, he is concerned that the new political balance in Parliament, where 24 of the 50 parliamentary seats were won by opposition politicians in November 2016, may delay the decision-making process. “If you look at the projects that have been given the green light in 2017, including the airport expansion, then prospects are improving, but we need to see more political stability internally in Kuwait to support this development,” D’Souza told OBG.

Parliamentarians in Kuwait have the right to block legislation and to call government ministers to account, although most cabinet posts are held by members of the ruling family. Many new MPs campaigned on a ticket to oppose austerity measures, including plans to reduce or remove subsidies on utilities. “We have had some good years with a government that wanted to get things done because the low oil price prompted them to act, and as a result the subsidy on fuel was reduced, but with the recent increase in oil prices, even these reforms are being reconsidered,” D’Souza told OBG.

Changing Minds

Many elements of the New Kuwait vision go beyond the realm of infrastructure mega-projects and challenge new generations of Kuwaitis to re-evaluate their role in the economy and society. For the emir’s vision to be achieved, Kuwaiti citizens in 2035 will have to regard work in the private sector as equal to, if not preferable to, government jobs. This requires a revolution in the perception of workplace roles. Employment data from the Public Authority for Civil Information (PACI) shows that in 2016 more than 343,000 Kuwaitis worked for the government, while 89,152 had private sector jobs and a further 14,628 Kuwaiti citizens were out of work.

Public sector jobs are regarded as safe, prestigious and often better paid than work in the private sector. A government job is also one of the main channels through which Kuwaiti citizens receive their individual reward for the country’s collective hydrocarbons wealth. However, the country’s rulers have long since recognised that a model that may have been feasible when Kuwaitis numbered fewer than 170,000 in 1965 is much less sustainable with a Kuwaiti population of 1.34m in 2016, let alone the larger population in 2035.

Golden Era

Although such a profound shift in both societal attitudes and the labour market may seem like a radical change for Kuwaitis used to working for the government in an economy dominated by oil, older generations may find it easier to envisage and remember. The 1946-82 period is recalled in academic literature – such as “Acquiring Modernity” by the American University of Kuwait’s Farah Al Nakib – as the Golden Era in Kuwait when buzzwords included nahda (awakening), taqaddum (progress) and al mustaqbal (the future), and when Kuwait was regarded as a regional leader in higher education, publishing, art, sports and theatre.

In 2017 there is a renewed focus on culture more generally, with $1bn being spent on a district dedicated to theatre, the arts and museums. The Sheikh Jaber Al Ahmad Cultural Centre opened in 2016, and the Sheikh Abdullah Al Salem Cultural Centre is under construction. “Suddenly we have so many museums and cultural centres, and this is inspiring for young Kuwaitis interested in working in the creative industries, and in terms of FDI we are interested in companies who can bring value-added expertise into this and other sectors,” Mona Salim Bseiso, economic consultant at the Kuwait Direct Investment Promotion Authority, told OBG.

New Horizons

In addition to new cultural developments in Kuwait, the 2035 vision also emphasises drawing in FDI in ICT. Among the global technology leaders already established in Kuwait is the multinational Chinese telecommunications and technology company Huawei. In March 2017 Huawei’s Kuwait Innovation and Training Centre was officially inaugurated at the Al Hamra Tower, located in Kuwait City. The centre has offered short courses to hundreds of Kuwaiti students, and the company has also sponsored 10 Kuwaiti students, enabling them to attend universities in China. Although Kuwait’s immediate past record in achieving the objectives set out in its development plans may appear to be lower than expected, the fall in the price of oil and the prospect of prices remaining low for some time may well give greater impetus to the objectives described in the optimistic vision of New Kuwait.

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The Report: Kuwait 2017

Economy chapter from The Report: Kuwait 2017