Interview: Ghosson Ghassan Al Khaled
How successful have the government’s investments been in broadening the downstream and wider industrial base of the country?
GHOSSON GHASSAN AL KHALED: The government has been relatively successful in this endeavour, though not at the desired pace. With oil accounting for over 50% of GDP, 94% of exports and 89% of government income, it is obvious that industry in Kuwait is bent towards hydrocarbons and petrochemicals. However, the government is continuously reviewing its strategic goal of economic diversification, which has become even more urgent given the fall in oil prices and other external shocks.
The sharp decline in oil prices has been a reality check for all in the public and private sectors, and while we don’t expect to see a knee-jerk reaction, the reality is that reforms must be made in order to enhance the long-term viability and sustainability of the Kuwaiti economy. It is the hope of many that 2016 will witness more non-oil-related growth. The IMF projects non-oil GDP growth at roughly double the pace of overall GDP expansion over the medium term, as recent investments begin to bear fruit.
We have witnessed concrete action towards diversification, namely the five-year development plan released earlier this month, which projects KD34.15bn ($113bn) in infrastructure spending, regulatory reform and streamlined investment laws to attract more foreign investors.
To what extent can the government reassure investors that large-scale infrastructure projects will proceed in light of low oil prices?
AL KHALED: We are confident that large-scale infrastructure projects will proceed as planned despite the drop in oil prices. This has been made possible given the financial cushion we have because of past fiscal prudence and higher savings levels. This cushion was a result of years of sustained high oil prices which led to budget surpluses over the past decade. At this stage, more transparency and reassurances are needed to encourage the private sector to play its part in the 2.5% GDP growth projected for 2016. On top of this, while the government has released its five-year economic development plan, we are still awaiting the release of its detailed implementation strategy.
How can construction firms benefit from lower raw materials prices given that the effects of a downturn are felt across all sectors?
AL KHALED: Raw materials are only cheaper in this case if they can be sourced locally, but practically construction companies are suffering greatly as a result of lower oil prices which have devalued the Kuwaiti dinar on the international marketplace. Foreign exchanges are necessary for purchases from non-regional suppliers, effectively offsetting any apparent drop in raw material prices.
In terms of actual realised costs, we see a decline in the price of raw materials and commodities as a potential boost to increase infrastructure projects and also as a stimulant for investors, local or foreign, to invest in the construction sector and in ancillary sectors such as industry and manufacturing.
Where do the greatest opportunities lie for international engineering, procurement and construction contractors and firms?
AL KHALED: Many sectors in Kuwait are saturated, but there are still opportunities in some, such as non-hydrocarbons industry, manufacturing and construction, which have not yet reached full maturity and can provide enough room for new players to have an overall impact on the growth and development within the sector.
In particular, the best opportunities lie in infrastructure development and mega-projects.
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