Kuwait’s economy continues to make gains across various levels, reflecting in part the steady force of increased investments in infrastructure and enhanced confidence among private sector investors. An example of this is the assumption of an inflation-adjusted GDP growth of 2.3 per cent in 2018 and then ticking up to 4.1 per cent next year. Both would represent a marked improvement from 2017.
But the acceleration in growth does leave an impact on inflation, which could reach 3 per cent in 2019 and twice as much as in 2017. However, a 3 per cent inflation is normal by global levels but anything beyond that poses harm to the various domestic interest groups.
Kuwaiti authorities are aiming high via numerous mega-projects, most notably the development of several islands into commercial entities as part of efforts to diversify the economy. Of all the Gulf countries, Kuwait is the most dependent on oil, which accounts for 88 per cent of treasury revenues and 85 per cent of export earnings, as well as 40 per cent of GDP.
Yet, implementation of Kuwait’s 2035 plan could reduce its relative importance. The strategy involves development of five islands — Boubyan, Warbah, Failaka, Maskan and Oaha — into economic zones with an investment value of up to $160 billion. They would also double up as tourist and recreational areas, in turn requiring investments in commercial and residential complexes as well as infrastructure.
If all goes according to plan, the national redevelopment strategy would transform the country into a new Hong Kong. Not surprisingly, China is being enticed to commit investments into the islands. China, the world’s second largest economy, has taken up mega-projects in Asia and Africa.
But there is no plan to lease the islands to China as some had rumoured on social media. Generally, Kuwait has been supportive of China’s “Silk Road” initiative.
Turning to other areas, work is in progress for the development of building No. 2 at Kuwait International Airport. A Turkish company has a $4.2 billion contract to carry out the project. Construction had started last year.
Kuwait feels the urge to develop an aviation industry for itself, as it represents an economic advantage for GCC economies. This is the case in the UAE via Dubai International Airport and Emirates airline. A new terminal is to be opened in Abu Dhabi in 2019, while the $1.8 billion revamped Muscat International Airport opened last March. Work is in progress to expanding Bahrain International Airport, with the UAE providing funding.
It is hoped these measures would boost prospects for the Kuwaiti economy, which lags other GCC countries in many comparative indexes such as ease in doing business and competitiveness.
Dr Jasim Ali is a Member of Parliament in Bahrain.