Kuwait

Eye on building SME base<!--top1-->

A plant of Kuwait petrochemicals manufacturer Equate

Affluent Kuwait has many things going for the country. There’s oil and high wages for its nationals at work and liberal pension benefits, for example. But while Kuwait is still one of the top producers in Opec, and oil revenues are not likely to dry up anytime soon, it is the spectre of an expanding wage and pension bill that is causing concern, many believing it will not be sustainable for too long without hitting the economy hard.

Kuwait still garners around 95 per cent of its total revenues from oil but has possibly the poorest record in the Gulf region at diversification of income sources. Not that the state is oblivious of that need, but political bickering and procrastination have hurt initiatives to have a strong multi-industry economy, observers say.

Kuwait’s population of 2.6 million includes 1.2 million who are not citizens and none of its nationals know what it is like to live in on the brink. But increasingly questions are asked whether the state couldn’t do better.

The government is encouraging its population, particularly youths, to set up small and medium enterprises (SMEs) and lately launched a KD1 billion ($ 3.5 billion) fund to support those interested in such businesses. If successful, Kuwait will have in time a wide underbelly of small-time entrepreneurs who together could make a meaningful contribution to the economy, generate jobs and inspire some to move beyond their group to a higher level.

The special fund has incited some comment. Dr Amani Bourseli, a former Kuwaiti minister, told the state news agency Kuna there should be an authority to oversee the launch of SMEs plus a research centre to create a database and training for prospective entrants to the field.

Gulf Cryo’s Kuwait Gases plant

Dr Adel Al Wugayyan, secretary-general of the Supreme Development and Planning Centre, said more government efforts should be exerted to entice the young to start their own ventures and to diversify income sources.

An establishment already helping small entrepreneurs is the Kuwait Small Projects Development Company whose general manager Hassan Al Ginaee said it offers KD400,000 free of interest for an entrepreneur and had 125 projects approved between 2007 and 2012.

SMEs and the wider private sector stand to gain from high-pitch investments the government is making not only to build up its national infrastructure and economy but also to catch up to some degree on the mega projects and booming spending witnessed in the fellow GCC states of the UAE, Saudi Arabia and Qatar.

In 2010 the state rolled out a $108 billion National Development Plan detailing more than 300 projects including a $7 billion metro system for Kuwait City and expansions at the country’s international airport, highways and ports as well as a housing programme and other social uplift schemes. But Kuwaitis are wondering how many of these projects will be concluded as planned. Earlier this year, the state awarded a consortium comprising Japan’s Sumitomo Corpn, GDF Suez and the Kuwaiti partner Abdullah Hamad Al Sagar & Brothers the Az Zour North contract for creating the first independent water and power plant. It will be a gas-fired, combined cycle power plant with capacity of 1,500 MW while the water desalination plant will have capability to produce 107 million gallons per day when the complex is completed for commercial operations to begin in 2015.

Kuwait Oil Company (KOC) recently awarded a $486 million contract to Turkey-based contractor STFA to construct a port adjacent to the Mina Al Ahmadi refinery, upgrade the existing harbour nearby and build other small harbours along the coast as part of KOC’s plans to increase shipping capacity for the refinery which is to be expanded to handle capacity of around 4 million barrels of oil per day by 2020.

Work has begun on a much-delayed $2.6 billion causeway project that will link Kuwati City with the northern Subiya area, the site of the Silk City Project which aims to revive the ancient Silk Road trade route and become a free trade zone linking Central Asia with Europe. Subiya city, near the Iraqi border, is to have a tower of mega size, a population of 700,000 and generate 450,000 jobs when completed in 2030, so it is said. Near Subiya is a container harbour being built on Boubyan Island, the access passage to which is being built by the China Communications Construction Company (CCCC) Ltd under a $408 million contract from the Kuwaiti government.

Another port under construction is Mubarak Al Kabir Port, whose completion the government hopes will be accomplished at the hands of the private sector. Recently, during a visit to China, Kuwait’s Minister of State for Cabinet Affairs and Minister of State for Planning and Development Rola Dashti discussed both the Boubyan and Al Kabir port projects and other planned developments including a link to the GCC rail system and invited Chinese investors to partner in Kuwait’s infrastructure development. CCCC’s executive director and chairman Zhou Jichang talked about the obstacles facing foreign investors in Kuwait and urged the government to tackle them to create a more investment-friendly environment, Kuna reported.

Greater determination to implement large-scale industrial projects will contribute to what the National Bank of Kuwait has said is its forecasted growth of 5 per cent in the non-oil sector of the economy in 2013, up from 4 per cent in the prior year. Still, that growth would be a great improvement as a 2012 study by the market research firm Timetric  showed annual average growth of just 1 per cent for the five years to 2011. Timetric also predicted year on year expansion of 7.5 per cent through to 2016 on the back of state-backed infrastructure developments.

National Bank of Kuwait visualises that the overall economy will expand by 3.1 per cent in 2013, down from the 6.1 per cent of 2012.