Interview: Mustafa Al Shamali
What are the priorities of the National Development Plan? What progress has been made?
MUSTAFA AL SHAMALI: The National Development Plan aims to decrease Kuwait’s dependence on oil and develop non-hydrocarbons sectors like trade and finance. Implementation of the plan is progressing at a steady pace. There is also a mechanism in place for monitoring the phases of implementation. For example, as recently as February 2011 the government approved the formation of three committees to oversee the establishment of public shareholding companies for the Al Zour North power station, warehousing and border crossing companies, and health insurance hospitals.
How is foreign direct investment (FDI) in non-hydrocarbons sectors being encouraged?
AL SHAMALI: Kuwait has been active in improving the investment environment for the past few years. The Kuwait Foreign Investment Bureau was established in 2001 with the mission of promoting investment opportunities in Kuwait and facilitating the procedures for any investment project. The aim of increasing investments is to attract expertise and innovation, which can spur job creation for Kuwaitis. Attracting FDI also leads to fundamental changes in Kuwait’s business environment and quality of life. Having a diverse economy is key to ensuring long-term prosperity. Economic diversification can reduce a country’s economic volatility and improve overall economic performance. Kuwait is taking many steps towards diversification. Naturally, it is a long-term project. Increasing foreign investment will be critical to driving this process.
How are small and medium-sized enterprises (SMEs) being encouraged locally?
AL SHAMALI: SMEs play a pivotal role in any economy. Kuwait is working continuously to encourage local entrepreneurs. There are many business incubators to help SMEs with establishing, marketing and sustaining their business in order to effectively contribute to the local economy. For example, the Kuwait Small Projects Development Company, which manages the KD100m ($360.5m) National Investment Fund, is tasked with investing in and nurturing SMEs. The role of the private sector and SMEs is expected to increase and strengthen with the implementation of the National Development Plan. The banking sector will also be given opportunities to invest in such projects, providing a healthy environment to support entrepreneurship.
Is the government encouraging the consolidation of Kuwait’s financial sector?
AL SHAMALI: The Central Bank of Kuwait has stated, on various occasions, that a consolidation in the financial sector would be preferable. A more consolidated system could create institutions that are better able to provide services to their clients and compete globally.
In addition, there is an opportunity for consolidation among investment companies so that the services and products offered by this sector could improve.
What measures have been taken to buffer Kuwait’s financial sector from external shocks?
AL SHAMALI: The Financial Stability Law includes several measures designed to strengthen the banking sector. For example, it provides incentives to encourage banks to finance local economic sectors through a state guarantee of up to 50% of new funding. In addition, steps have been taken to encourage the flow of credit, thereby preventing any potential credit crunch.
In 2009 credit extended by local banks to national economic sectors recorded an annual growth of 6%, indicating that the financial sector has remained active.
The National Development Plan could also be considered as a measure to support the financial sector. It will stimulate economic activity and give banks an opportunity to finance domestic projects. There are also plans for future measures including risk management in financial institutions as well as implementing early warning systems to counter any systemic risks.
