Achieving a diversified economy by investing in non-oil sectors is today a strategic imperative for Kuwait.
The oil and gas sectors accounting for about 60% of the country’s GDP and 95% of the export revenues, the country is estimated to close its fiscal year ending 31 March with a deficit of $12.8 billion or 10% of GDP, according to the National Bank of Kuwait .
Surprisingly, last year’s drop in oil prices has on the contrary undermined any action towards economic diversification that could have meant building non-oil revenue generating assets such . . . [ms-protect-content] as retail, hospitality, logistics and other core economic sectors like automotive and aviation parts industries.
Kuwait’s future beyond oil, that is the challenge today. How can it prepare its economy and its youth for an economy that is efficiently diversified to weather any volatility in oil price?
Transforming its economy with well-diversified and robust non-oil growth sectors, would allow Kuwait to envision a future that is beyond oil.
Partnering between the public and private sectors is perceived as the magic formulas that could help Kuwait’s go down this road, as Tamdeen Group chair Mohammed Al Marzouq wrote.
Meanwhile, there is a vision to transform the country into a world-class financial and commercial hub, with the private sector. . . .[ms-protect-content] leading economic activities, fostering competitiveness and increasing productivity.
Kuwait’s newly reformed Public-Private Partnership body — the Kuwait Authority for Partnership Projects — aims to do just that.
One example is a newly signed deal will see the creation of Kuwait’s first solar-thermal energy generation station, which will both help achieve the country’s goal of boosting the renewable energy sector, while enhancing private investment.
These partnerships can reduce the financial burden on the government by helping limit governmental spending. This in-turn will reduce the overt dependence of the government on oil prices to drive its infrastructure development plans.
Kuwait may have ample fiscal resources including great sovereign reserves, but considering that oil prices have greatly declined, there has never been a better time to reduce the burden on public funds.
Kuwait is planning to establish a new sovereign wealth fund to manage up to $100 billion in local assets, according to media reports.
The new fund will include local assets managed by the country’s existing wealth fund, the Kuwait Investment Authority (KIA) with the goal of selling the assets to private investors in five to seven years, Bloomberg quoted Al-Anba newspaper as saying.
KIA, estimated to have assets worth over $500 billion, will focus more on its international portfolio, the report said.
. . . [/ms-protect-content]