Business | Analysis

Promising prospects for Kuwait’s economy

Fresh signs point out to authorities committing themselves to sustained development projects

  • Dr Jasim Ali
  • Published: 13:11 March 2, 2013
  • Gulf News

Evidence is abounding to support the argument that Kuwait’s economy has performed notably well in 2012. And prospects for 2013 are equally promising.

To begin with, the index of Kuwait Stock Exchange (KSE) increased by 2 per cent in 2012, certainly not in parallel with outstanding performance of key stock markets of Gulf Cooperation Council (GCC) countries. To be sure, the indexes for bourses of Dubai, Abu Dhabi and Saudi Arabia grew by 20 per cent, 9.5 per cent and 6 per cent in 2012, respectively.

However, the performance of KSE Price Index in 2012 compares favourably with that of 2011. The index dropped by a whopping 16 per cent in 2011. The awkward performance last year reflected the mood elsewhere in GCC, as all regional bourses except for Qatar posted negative growth rates.

What’s more, the year 2013 started off on a positive note, with the index steadily continuing its upward trend, growing by almost 3.5 per cent in January.

In addition, market capitalisation amounted to $104 billion (Dh381.7 billion) in 2012, up from $101 billion in 2011. And as of end-February, KSE boasted market capitalisation of $106 billion, thereby confirming the positive tendency.

Understandably, the government is taking the lead for targeted economic developments. Rightly or wrongly, the public sector provides economic directions in Kuwait. In reality, the government initiated the culture of making investments abroad, a policy proved useful when the country became in need of financing the liberation war.

International outlook

Undoubtedly, Kuwaiti investors are noted for embracing international outlook in their investment decisions, seeking the best possible returns for their investments. Investors from Kuwait are essentials for viability of a number of investment banks and industrial undertakings within the GCC, notably Bahrain.

And fresh signs point out to authorities committing themselves to sustained development projects, with positive implications for the economy as a whole. Amongst others, the authorities seem determined to go ahead with a new modern, environmentally friendly terminal for Kuwait International Airport at the estimated cost of $3.2 billion. As a sign of seriousness on the part of the authorities, a hired consultant has reportedly completed design works, thereby paving the way for attracting bids for the main construction work.

Happily, there is considerable interest in the project, as some 18 firms preparing to submit bids for the works. Arguably, officials are pressing the interested companies to consolidate into several groups and submit bids as packages.

On the assumption of completion by 2020, the new airport would boast a throughput of 25 million per annum, compared to merely 7 million passengers at the moment. The existing terminal can then be used for other purposes like catering for the needs of budget carriers.

This airport scheme fits another governmental effort, namely that of sustaining development of tourism projects. The plan calls for spending some $13 billion on the transport infrastructure of the tourism sector.

Currency

Infrastructure development should help compensating for critical constraints when it comes to attracting tourists and visitors into Kuwait, namely value of Kuwaiti dinar. Undeniably, the Kuwaiti currency is regarded as the most expensive in the world, second to none. A single dinar translates into an astonishing 3.5 dollars.

Joyfully, inflation is not eroding the economic gains, standing at 3.5 per cent in 2012, according to a recent report by Bank of America Merrill Lynch. The same report expects real gross domestic product hovering around 3 per cent in each of 2012 and 2013.

Locally-viable development projects can help convincing Kuwaiti investors to consider inbound business or at least shift part of their funds for home-projects.

The writer is a member of parliament in Bahrain.

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