Forgot your password?



Back to login

Investment in industries the way forward in 2017
December 24, 2016, 5:00 pm
Share/Bookmark

With nearly US$600 billion in foreign reserves, several major state-led development programs being implemented or in the pipeline and an increasingly investment-friendly approach, Kuwait is well placed to attract foreign direct investment (FDI) and trade in the coming years. Though the country has slashed current spending in the wake of low oil prices, nevertheless capital expenditure has continued unchanged and is projected to grow in the years ahead.

Moreover, the Kuwait Direct Investment Promotion Authority (KDIPA), which was established in 2013 as part of a revamping of the country’s FDI framework, is offering incentives to encourage the private sector to take up a significant chunk of the capital expenditure either directly or in the form of public-private partnerships. In fact, in 2015 and early 2016, several multinationals seized the opportunities presented by KDIPA’s new investment framework and the prospects look bright for even more activity in the future.

Despite the recent revival in oil prices, the low oil price scenario that existed since mid-2014 has had a severe impact on government spending and the authorities are keen to wean the economy from its over-reliance on income from oil exports. The government is increasingly looking to diversify through a process of privatization and industrial expansion especially in its petrochemical industries. With industry's contribution to the GDP currently standing at just around 9 percent, the Director-General of the Public Authority for Industry (PAI), Mohammad Al Ajmi, recently announced that Kuwait plans to boost its industrial output by 25 percent in the coming years.

In line with this strategy, Kuwait’s joint venture entity Equate Petrochemical Company, which brings together US-based Dow Chemicals and local firms Petrochemical Industries Company, Boubyan Petrochemical Company and Al Qurain Petrochemical Industries Company, announced in August that it plans to build a 200,000-square meter industrial complex in Al Shuaiba. This facility is expected to support the operations currently being carried out by state-owned oil producer Kuwait Petroleum Company (KPC).

Existing facilities of KPC currently produce 1.8 million tonnes per annum (tpa) of ethylene, 825,000 tpa of polyethylene, 1.2m tpa of ethylene glycol and 829,000 tpa of paraxylene. The company announced in mid-October that it had received approval from the Ministry of Commerce and Industry to set up a new subsidiary — Kuwait Integrated Petrochemical Industries (KIPI) — to undertake refining and petrochemical projects.

The new company, with a capital of nearly KD2 billion, is expected to execute major downstream projects including the green-field Al Zour Refinery complex and the Clean Fuel Projects. Al Zour Refinery is projected to have a refining capacity of 615,000 barrels per day (bpd) and is expected to drive KPC’s strategy of increasing refining capacity of Kuwait up to 1.41 million bpd. The new refinery complex is expected to be commissioned in July 2019.

According to KDIPA projections, the country’s petrochemicals output are also expected to increase from its current 7.57 million tpa to 10.54 million tpa by 2019.

Industrial expansion is particularly critical for Kuwait in light of analysts’ projections that oil prices are likely to remain in the $50 to $60 range in the near future. This price range along with the budget deficit in the last financial year and the projections for a repeat deficit in fiscal 2016-17 have left the government with little leeway other than to continue with its economic reform plans including reducing and restructuring state subsidies and accelerating efforts aimed at expanding non-oil sectors.

In addition to boosting industrial output, especially in the high-potential petrochemicals and plastics segment, the country’s five-year Kuwait Development Plan (KDP) 2015-2020, envisions a KD30 billion infrastructure development strategy that will target non-oil growth of 5-6 percent per annum in the coming years.

Several new projects being implemented or in the pipeline, including the KD160 million Al Naayem Industrial Zone, launched by the Public Authority for Industries last year for heavy industries, are expected to support increased industrial production in the country. Meanwhile, the Kuwait Industries Union (KIU) has also announced plans to release 1056 industrial plots to kick-start industrial development. In the past two years, the KIU has already approved over 230 applications for new industrial projects, mainly in West Shuaiba, Amghara and Subhan. West Shuaiba, is expected to comprise nearly three dozen new industrial investment ventures worth nearly KD1 billion.

The government has also pushed through regulations, as part of its new FDI laws in 2013, which are expected to facilitate finding foreign tenants for the expanding industrial zones. Even though 100 percent foreign ownership is still restricted in some sectors such as banking and the oil, the new law enables a local company with up to 100 percent foreign equity, or a branch of an international company, to invest in many industrial sectors.


 

Share your views
CAPTCHA
 

"It is hard to fail, but it is worse never to have tried to succeed."

"Envy comes from wanting something that isn't yours. But grief comes from losing something you've already had."

Photo Gallery