What reform is needed to more effectively implement the National Development Plan (NDP)?
ABDULSALAM: There are many areas that need improvement, including encouraging new businesses and a more secure economic environment. The government has been very aggressive in implementing its economic plan, beginning with infrastructure and energy. Despite the sudden drop in oil prices, it plans to move forward, as it knows these are investments in the future. However, the plan needs careful study and planning, and a clear vision and strategy on how Kuwait will best benefit from it in the future.
The NDP includes heavy construction work. This is mainly done by international companies, with a more limited role for Kuwaiti firms. However, there is still a very clear benefit, and we can be assured that most of the economy can enjoy the rewards of the NDP, including the banking, insurance, health care, services and real estate sectors.
To take full advantage of the NDP, we need to overcome the current shortfall in planning. I hope the authorities work seriously towards improving preparation for expansion, including updating laws and reducing bureaucracy. The government is addressing these weaknesses with slow but steady progress.
Why is Kuwait’s real estate market acting as an alternative to the stock market for investors?
ABDULSALAM: Real estate development is a very important avenue in Kuwait for deploying individual investments because it is very straightforward and is continuously growing. Kuwait is a small country with a limited quantity of land, and people will always need houses. Furthermore, people in Kuwait are well paid by the government, which keeps prices high. In the last couple of years real estate prices jumped sharply but are now settling down. Kuwaitis know the demand for housing will remain constant, which is why they prefer to have investments in real estate than in the equity market, which tends to have more volatility.
What measures should be considered by the authorities to enhance investor confidence?
ABDULSALAM: Investor confidence is weak, and as a country we must acknowledge this problem in order to move forward and remedy it. We tend to have difficulty encouraging new private investments and fostering investor confidence. While we have excellent investment laws, they are 60 years old and are therefore outdated and not in line with international standards. Authority credibility is also very important, and it is derived from those in charge. Lack of credibility and capability are major weaknesses amongst decision makers, as is the lack of qualifications in those in charge of planning strategies. These are major drawbacks for investors which need to be changed.
Kuwait’s economy is only 50 years old and was initially framed around laws passed by local authorities and supported by foreign expertise, which helped a lot. Unfortunately the government shifted to local management too quickly, instead of opting for a gradual change, and this has affected the quality of activity. As such, Kuwait could greatly benefit from foreign investment, especially in terms of skills and knowledge transfer. This is one of the major issues being addressed by the government today, though it will take time.
How will city expansion affect Kuwait’s economy?
ABDULSALAM: Kuwait’s infrastructure from 50 years ago is still in place and continues to support economic activities; however, greater investment is needed to further improve this. That is why we are pleased to see the government taking this matter seriously. It now understands that the country needs these kinds of investments, and there is now a clear strategy in place. This includes long-overdue plans to expand Kuwait City, which will contribute heavily to the economy. Building new cities will serve to get people and activities outside the city limits, while also helping all sectors expand their base. It will have long-term added value for both the economy and society as a whole.
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