Kuwait, a member state of Opec and once the fastest growing economy of the Gulf, is taking measures to revamp its economy, reduce dependency on oil and attract foreign direct investment (FDI), government ministers said.
“FDI is still underdeveloped in [Kuwait], and we think it is the best thing for the country and the right time to invest,” Sheikh Jaber Al Mubarak Al Sabah, Prime Minister of Kuwait, told a conference in Kuwait City this week. “The problem is that the oil price has been low and it’s been [impacting] on investment - this has encouraged us to get income from more products other than oil.”
Though Kuwait had the first stock exchange in the region and oldest sovereign wealth fund, regaining its status as the fastest growing regional economy of the 1980s following Saddam Hussein's 1990 invasion has been challenging. Legacy elements post the 1991 liberation curtailed the modernisation of the country's infrastructure and reform measures have been held back by political bickering among lawmakers in the national assembly. Unlike other Arabian Gulf states, Kuwait which is Opec's fifth largest producer, has been relatively slow to diversify its economy, in part because of its $500 billion-plus fiscal reserves and also because it has the lowest breakeven oil price in the GCC. Hydrocarbon revenues continue to account for about 90 per cent of state revenues.
Kuwait fell into deficit in 2015 for the first time since 1999, prompting the government to launch a series of reforms, most notably its far-reaching Kuwait 2035 economic diversification strategy last January.
The strategy aims to increase private sector involvement in the national economy – government institutions implement around 90 per cent of development projects in Kuwait, ministers said – and attract higher levels of foreign investment across a range of sectors including ICT, renewable energy, housing, healthcare, transport and tourism.
“We are ushering in a new era of investment in Kuwait…to keep up with the competition,” said Sheikh Meshaal Al Sabah, director-general of the Kuwait Direct Investment Promotion Authority. during this week's Kuwait Investment Forum, the government outlined its vision to develop a 1,000-square kilometre opportunity zone in the north of the country.
The country has secured $2.5bn of FDI since 2015 - generating 1,000 jobs for local Kuwaitis, -when it began a drive to attract foreign investment, Sheikh Al Sabah added.
Now, the government wants to speed up activity, capitalising on an uptick in the global economy and positive growth forecasts for Kuwait. The national economy is expected to grow by 2.5 per cent this year after contracting 2.3 per cent in 2017, according to forecasts published last month by S&P Global Ratings.
Around $100bn of development projects are ripe for investment now, the Kuwait forum heard, while further billions of dollars will be needed over the coming years to develop the Northern Gateway opportunity zone, which encompasses five natural islands in northern Kuwait, close to the Iraqi border.
The project was announced in 2015, when ministers proposed creating a “comprehensive and multi-purpose free trade zone that would act as an economic and cultural gateway for the northern Gulf region and Kuwait”.
Under the plans, the five islands – Boubyan, Failaka, Warba, Miskan and Awha – will become a huge economic free zone called Silk City (Madinat Al Hareer). The zone will link the Arabian Gulf to central Asia and Europe through a 36-kilometre-long bridge - already under construction - extending north from Kuwait City.
“Even if we develop just 20 per cent of the [Northern Gateway area], we could attract $150bn-$200bn of FDI and boost Kuwait’s GDP by an additional $220bn,” said Noura Al Qabandi, director of international affairs at Kuwait’s Communication and Information Technology Regulatory Authority (Citra), citing an earlier study of the plans.
The area would also attract between 3-5 million visitors to Kuwait each year, Ms Al Qabandi said.