Interview: Faisal Awwad Al Khaldi
What opportunities exist for the private sector to invest in value-added activities in downstream that enhance steel’s contribution to the economy?
FAISAL AWWAD AL KHALDI: In downstream production, there are many potential investment opportunities in both long and flat-finished products. Flat products such as steel sheets, plates and strips are used in several industries including the automotive industry, whereas long products, such as wire rod, deformed bars and structural steel, are used principally in construction. In particular, these two areas are interesting opportunities for small investors. Investment in these two areas would also provide raw materials as well as semi-finished products for downstream projects. Furthermore, all investment in industry contributes to Kuwait’s economic diversification strategy away from oil, which is a primary goal for the government, as stated in the vision for New Kuwait 2035. However, increased investment is needed for Kuwaiti products to have high standards and internationally competitive prices. Beyond increasing export opportunities, investment in downstream production would also create job opportunities. From a regulatory standpoint, easing banking facilities and the process of creating small businesses should be prioritised, which would aid private sector investment.
In what ways do new standards for the distribution of industrial land facilitate new industrial projects?
AL KHALDI: The most challenging factor for industries in Kuwait is allocating industrial land for projects from the government. The new standards and the evaluation of industrial projects will be based on three basic criteria. First, industrial capital – which comprises the size of capital used in technology, machinery and equipment, in addition to the volume of energy used to operate the plant – will form 20% of the total standards. Second, industrial priority of the quality of investment and products will make up 30%. Lastly, the value added to the national economy – which includes profit volume achieved, in addition to the size of the population national working on the project and its service to other local projects, as well as the actual production volume – will form 50% of distribution standards.
Following the new standards, the distribution of 1036 industrial blocks will be located in the Al Shadadiya Industrial Zone (SIZ). New industrial projects such as this one enhance the role of the industrial sector in the economy and help diversify Kuwait’s sources of income, while also increasing total domestic output. New projects also encourage the upgrading of the quality of existing and future factories. The blocks in the SIZ will be distributed to entrepreneurs who end up meeting the new settlement criteria so that industrial products from Kuwait can compete worldwide. It is not enough for Kuwait’s industries to serve domestic consumption. Without exports, the industry sector will not work for the economy.
How have the US tariffs on steel and consequent trade war speculation affected the Kuwaiti steel market and its export opportunities?
AL KHALDI: The US’ recent implementation of the 25% tariff on steel imports will have a negative impact on steel producers around the world, including Kuwait. For example, since some exporting countries, such as Turkey, lost the US as one of their preferred export markets, they are now shifting their exports to other potential markets, such as Kuwait. This will exert negative pressure on Kuwait’s steel market as many local companies in turn will lose market share and profit margins due to imports coming in at lower prices. This knock-on effect will force local companies to revise prices accordingly in order to maintain market share and minimise imported products or materials. Additionally, steel consumption is rising annually at a fast rate within Kuwait due to increased construction and infrastructure projects as well as awarded projects that are upcoming which will benefit local producers.
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