Kuwait takes steps to encourage industrial growth and export competitiveness

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A new GCC accreditation for Kuwait’s laboratories, coupled with the release of more than 1000 parcels of industrial land, should boost government plans to increase industrial output by 25% in the coming years.

In September the Kuwaiti Public Authority for Industry (PAI) announced that its laboratories had received accreditation from the GCC Accreditation Centre (GAC), the body responsible for ensuring exports comply with various Gulf and international standards related to the production of food, pharmaceuticals, halal products and other items.

The development, along with ongoing efforts to spur industrial growth, will provide Kuwait with the opportunity to increase industrial exports to the wider GCC, which has a population of around 52m, as well as markets further afield.

The accreditation could particularly benefit Kuwait’s pharmaceuticals market, valued at $1.5bn last year, as it will enable laboratories to increase the efficiency of drug testing and ensure product quality.

Pharmaceuticals have been identified, along with petrochemicals, plastics and foodstuffs, as areas with significant production and export growth potential under the New Kuwait 2035 development strategy, which aims to diversify the economy away from oil revenue.

Distribution of land to boost industrial capacity

While the government has previously focused on developing an industrial base that supports self-sufficiency – through, for example, industrial financing for local firms and local content requirements for state projects – industry figures say the sector should shift its focus to outbound shipments, given a domestic market of just over 4m.

One factor that has historically hindered export competiveness is the lack of industrial space and high land costs, which limit the expansion of existing manufacturers and the development of new industries. In the past, this led to a situation where more than 2000 companies were forced to wait two to three years to commence operations while adequate infrastructure was developed.

To address this, in January the PAI announced new standards for allocating industrial land, noting that 1036 industrial blocks in the Al Shadadiya Industrial Zone would be distributed by the end of the year to qualifying companies.

The new standards gauge potential projects according to three criteria – industrial capital, industrial priority and value added to the economy – and give the PAI the opportunity to pursue growth in targeted sectors.

Industry players call for strategic investment to support exports

Although these new measures are steadily improving Kuwait’s industrial landscape, in order for the sector to play a significantly larger role in the economy and the diversification process, stakeholders have called for greater strategic investment to develop national products and promote exports.

“All investment in industry contributes to Kuwait’s economic diversification strategy away from oil, which is a primary goal for the government,” Faisal Awwad Al Khaldi, deputy CEO of Kuwait Steel, told OBG. “However, more focused and meaningful investments are required for Kuwaiti products to better compete in international markets.”

In support of this goal and to improve international competitiveness, Kuwait is partnering with the private sector to develop industrial zones, designed to stimulate growth across a number of high-potential industries. This should help to expand industry’s contribution to GDP, which currently stands at around 9%.

In March the PAI announced that it was planning to construct a multi-purpose industrial city 70 km west of Kuwait City. The PAI said it expected to source the majority of investment for the project’s development – estimated at $6bn – from the private sector, with the government to contribute $600m for infrastructure. This is a significant sum, given that overall industrial investment totalled roughly $13.9bn in 2016, according to the PAI.

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