Kuwait’s new development plan

Published August 23rd, 2010 - 12:34 GMT

NBK’s latest GCC Brief stated: 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. Following years of sub-par government spending on infrastructure and development projects, which slowed economic growth in the past and put Kuwait’s economy behind other Gulf countries, there are improved signs of the government’s commitment to implement vital reforms and development programs. This note reviews and lists briefly the goals and reforms of the long term vision for Kuwait, of which the current 5-year plan should be the first phase.

New initiatives with the greatest impact on the economy 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 plan, we expect the impact of the plan on Kuwait’s economy to be quite positive. An additional source of benefits lies in the planned legislative reforms, with a number of new laws already passed (CMA, privatization…).

The approved plan
In February 2010, Kuwait’s Parliament approved a KD31 bn (USD108 bn) development plan. This 4-year plan is the first of six consecutive development plans that it is hoped will achieve Kuwait’s vision of becoming the region’s financial and trade center by 2035. One of the main elements of this vision 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” (BOT) 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.

The plan introduces ideas and laws to fund the development projects and to provide support to various sectors, including contractors, SMEs, and low income entrepreneurs. There are currently discussions on how to finance the whole plan.

Reform Agenda
The Kuwait Vision 2035 proposes reforms covering five areas: economy, people, political system, cultural environment, and Kuwait’s international positioning.
1. 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 start-ups and small businesses, open up international trade.
2. Improving access to land: Auction government land, engage the private sector in the development of public land and infrastructure, and establish a central land authority.
3. 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.
4. 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.
5. 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.
6. Regional transport center: Upgrade the capacity of existing infrastructure, introduce alternative management arrangements for existing 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.
7. Developing a niche financial center: Build a world-class financial sector, and develop a niche financial center focused on wealth management and capital markets.
8. Changing the dynamics of the labor market: Professionalize and tighten working conditions in the public sector, prepare Kuwaitis for the private sector through training and matching skills to needs, improve working conditions in the private sector.
9. Upgrading the education system: Strengthen the teaching profession, increase the performance of students and schools, improve and adapt vocational and university education, broaden the educational choices...
10. Building a stronger healthcare system: Promote healthy lifestyles and behavior, enhance the health infrastructure, join international prestige networks and increase profile in international health.
11. Protecting the environment and fostering green development: Use natural resources more effectively, enhance regulation and enforcement, and invest in green energy.
12. Building a cultural haven and a leisure, sport and media sanctuary: Develop an art center, build up the creative arts, create facilities that strengthen the national image…

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