Challenges ahead for Kuwait's revived five-year plan

The good news is that Kuwait has decided to return to the traditional practice of developing five-year plans. The last plan dates back to 1986, which was interrupted following the Iraqi invasion in August 1990. The authorities hope to commence the plan in April 2009 marking the start of fiscal year. Kuwait's fiscal year runs from April to March.

The trouble is that the plan seems to be over-ambitious, taking into account its seven broad objectives. These are expanding value of gross domestic product (GDP), diversifying sources of national income, providing a sufficient room for the private sector to play a leading role in the economy, creating the means to help private sector firms generating job opportunities, boosting technology and research, upgrading bureaucracy and laying a firm foundation for a prosperous society.

Clearly, the scheme envisages private sector firms assuming a primary role in the economy. For its part, the government likes to play a supportive role through provision of an efficient bureaucracy besides putting in place a modern infrastructure. This arrangement should help Kuwait placing its economy on the most logical path, namely that of government being supportive to investors rather than itself being the investor.

Kuwait' treasury is uniquely dependent on the hydrocarbons sector, which accounted for 92 per cent of actual budgetary revenues in 2007-08. To be sure, fellow Gulf Co-operation Council (GCC) members - Saudi Arabia, the UAE, Qatar, Oman and Bahrain - are less dependent on oil compared to Kuwait. The petroleum industry contributes about 80 per cent of Bahrain's treasury income. Undoubtedly, the extraordinary reliance on the petroleum industry places Kuwait's economy at the mercy of developments in global oil markets. Clearly, the argument of diversifying the economy away from oil is a logical one.

Options

One such primary strategic goal of the proposed five-year plan calls for turning Kuwait into a regional base for financial services. In fact, the authorities are thinking big by virtue of committing a hefty $131 billion (Dh481.8 billion) for the project. The amount covers developing the infrastructure including training the required personnel.

The new move would put Kuwait into direct competition with Dubai, Bahrain, Doha and Riyadh in vying for regional supremacy in financial services. More superficially, the unnamed Kuwaiti financial project would compete head-on with the Dubai International Fin-ancial Centre (DIFC), Bahrain Financial Harbour (BFH), Qatar Financial Centre and the King Abdullah Financial District (KAFD) in Riyadh.

In order to become law, the Kuwaiti National Assembly (or Majlis Al Umma) must approve the five-year plan. The assembly is due to resume its meetings on October 21.

Heated exchanges are likely once the members of parliament get to the part that requires shifting job opportunities to the private sector. More than 90 per cent of Kuwaiti nationals work for governmental departments. Lawmakers would stress for guarantees for the state remaining a primary source of employment of locals.

Kuwait stands out amongst GCC countries by setting aside 10 per cent of annual treasury income to the Reserve Fund for Future Generations. The plan aims at ensuring sustainable means for quality of life for upcoming Kuwaiti nationals. It is all too logical for Kuwait to be distinguished further by putting into effect a viable five-year development plan.

The author is a member ofparliament in Bahrain.

Reliance on the petroleum industry places Kuwait's economy at the mercy of developments in global oil markets.