Interview: Faisal Al Ayyar
To what extent is the economy dependent on the government’s National Development Plan (NDP)?
FAISAL AL AYYAR: Oil is still the most important contributor to Kuwait’s economy, and the government depends on it for most of its revenue. With the NDP, there is a great need to focus on the development of people, education and health care. Without these, there can be no real development of the country.
While the plan is currently assisting in the development of infrastructure, this will only help part of the economy and will not be the engine of growth. The driver goes back to oil prices and oil.
Regarding the timing, I do not think anyone is at fault for this. We are a small economy trying to achieve challenging goals, and we do not yet have the capabilities that allow these targets to be realised. However, after three to four years of delays, we are finally starting to see projects picking up.
With private sector demand rising and government projects ongoing, how are Kuwaiti investment groups preparing for future lending growth?
AL AYYAR: Many Kuwaiti investment companies are still recovering from the global financial crisis, and are therefore not in a strong position to benefit fully from government projects.
Those who have made it past the crisis, however, will reap great benefits from the NDP. Kuwaiti banks are ready to begin lending, and are trying to catch up with regional banks. I think there are a lot of opportunities and we have seen some flexibility from the central bank in the sense that they are willing to extend and increase limits in order to allow banks to finance the government’s NDP.
How would you rate the overall public acceptance of the need to diversify the economy?
AL AYYAR: The problems associated with the fact that the government currently employs 97% of the population are widely known. As such, strengthening the economy has to reach everyone, and slowly people are becoming aware of this.
There is, of course, a lot of activity in the oil and services sector, but aside from that only the construction and industry sectors have seen significant improvement. The services sector in general is doing well, along with media and retail, which have always been strong in Kuwait.
I think that if the government promotes new opportunities in the private sector, the level of general acceptance for these positions will increase, and the public sector cost burden can be alleviated. This means that the government needs to allow the private sector to participate in more projects, and hand over government-run institutions. By doing so, they can encourage the large youth population to look into growth opportunities within the private sector, which in turn could benefit the entire economy.
What else can be done to increase investment opportunities going forward?
AL AYYAR: First and foremost, the market needs to be appealing to Kuwaitis. Once this happens, then we can attract international investors. There are a good number of sophisticated Kuwaiti investors that have been active in the investment arena in Kuwait and internationally for the last 60 or so years. As soon as the market attracts these individuals, then the international community will follow.
In order for this to happen, we need, firstly, to address corruption throughout the country. Secondly, the amount of bureaucracy facing investors needs to be reduced. And thirdly, we must give fairer chances to the private sector to participate in this new economic environment.
We have the location, the resources and the money, and now we must focus on changing habits. We need to work with the new generation and establish a long-term plan to move the economy forward, focusing on efficiency, with less dependency on oil.
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