THE TIMES KUWAIT REPORT
Timely implementation of crucial infrastructure and energy projects has been a major stumbling block in the path of Kuwait’s growth and development over the years. With projects worth over KD8 billion reportedly in the pipeline for fiscal year 2023-24, and a government apparently keen on implementing projects on a priority basis through its four-year action plan, it remains to be seen whether this year could finally break the traditional lethargic pace of project developments in the country.
However, if project spending in the first half of this fiscal is any indication, project implementations this year are likely to be no better than that witnessed in recent years. Despite repeated assurances of prioritizing spending on development projects and facilitating their completion, latest official data shows that during the first half of fiscal year 2023-24, only KD108 million dinars were spent on development projects, or roughly 10 percent of the KD1.02 billion set aside in the budget for projects this fiscal year.
According to the finance ministry, of the 130 projects ear-marked for fiscal 2023-24 only 5 have so far been completed and are being readied for handover. Of the total projects, 13 had not even commenced, 52 were still in the preparatory stage, and 60 were in various stages of implementation. In this regard a look at the project spending in fiscal year 2022-23 reiterates the narrative that low project spending has been a persistent shackle that Kuwait has found difficult to shake off.
According to official data, Kuwait’s actual spending on development during fiscal year 2022/2023 amounted to KD665 million, or a little over half of the total financial appropriations of KD1.3 billion for the year. This amount also represented a decrease of 29.5 percent compared to the 2021-22 fiscal year, when spending totaled around KD945 million. Analysts have expressed concerns about the low disbursement and completion rates in this fiscal, fearing a repeat of previous years.
Circulars from the Ministry of Finance, strongly urging the various government entities to prioritize development plan projects, including by initiating special procedures to implement them ahead of budget approval, and to initiate tendering processes without waiting for approval from parliament, have obviously not evinced the desired response from the involved authorities.
Also among the development projects for this fiscal year that have lagged or remained in limbo for a while now, are several strategically important ones. These include the expansion of Kuwait International Airport’s Terminal 2; the Mubarak Al-Kabeer Port on Bubiyan Island; and the Northern Economic Zone Development Project, which seeks to attract high-value global investments with special laws that will also ensure transparent financial resource management.
A previous report that analyzed project pipelines and implementation of development projects in recent years, identified several procedural and process barriers that hindered effective implementation and timely completion of projects in the country. Among others, this included delays in contractual procedures, repeated revisions to signed contracts, and difficulties in obtaining required approvals from regulatory authorities.
Moreover, the need for many projects to have their own laws, or amendments to existing legislation, necessitated parliamentary approval which further delayed project implementations. Given the turbulent political environment that has prevailed in recent years, it is obvious that in order to make any headway in implementing crucial projects, the executive and legislative arms of government will need to find common ground and cooperate with each other.
The report also highlighted deeper structural shortcomings that have proved to be persistent challenges to implementation of projects over the years. Overcoming some of these deep-rooted challenges would require structural reforms that have long been sidelined by policy- and decision-makers as they were deemed to be politically unpopular.
Numerous studies and reports by local and regional entities, as well as by global institutions such as the International Monetary Fund and the World Bank have recommended the government undertake these ‘unpopular’ structural reforms in order to boost the country’s sustainable growth going into the future. These reforms include the need to rationalize the public sector wages and subsidies that continue to consume nearly 80 percent of the state’s budget expenditure.
Other reform recommendations include reorienting the economy away from overreliance on hydrocarbon revenues, and spurring non-oil growth; enhancing workforce productivity, which, despite enormous amounts spent on human resource development by the state, continues to be relatively low; engaging the private sector to drive development projects; and, incentivizing nationals to seek job opportunities in the private sector.
Political instability has also been identified as a major reason for the tardiness witnessed in project pipelines. A background reading of the turbulent political scenario that prevailed for much of 2022 and the first half of 2023, reveals the influence of political instability on development projects. In April 2022, the government headed by His Highness the Prime Minister Sheikh Ahmad Nawaf Al-Ahmad Al Sabah tendered its resignation, citing inability to work with opposition legislators.
Subsequently, His Highness the Crown Prince Sheikh Meshal Al-Ahmad Al-Sabah, officiating for HIs Highness the Amir, dissolved the Parliament in June, and announced that general elections had been set for 29 September. Following elections, a new government was eventually formed in October, headed once again by His Highness Sheikh Ahmad Al-Nawaf. But barely three months into the new parliamentary term, in January 2023, the government once again resigned citing incompatibility in working with opposition members in the National Assembly.
Then, in early March 2023, Kuwait’s constitutional court annulled the parliamentary election held in September 2022, citing technical irregularity in how the previous government had been dissolved. The court also ruled to reinstate the dissolved 2020 parliament. In May 2023 the Crown Prince dissolved the reinstated 2020 Parliament and ordered for fresh elections to be held. Accordingly, snap general elections were held on 6 June of this year to elect a new parliament. In mid-june a new cabinet once again headed by His Highness the Prime Minister Sheikh Ahmad Al-Nawaf was sworn in.
In short, for all practical purposes, the parliament has been in abeyance for nearly nine months of fiscal year 2022-23 and, so far, for around five months in this fiscal including the annual summer recess of parliament, leading to important decisions and laws being shelved. The political upheavals over the past period have not only affected project pipelines, it has also held back the fiscal and structural reforms that the country direly needs to boost growth and revive its development process.
On the plus side, the recent cooperation and coordination witnessed in parliament has been encouraging, and, if continued, could bode well for the country’s overall economic development and project implementation. The government is apparently keen to push through economic growth and reenergize vital projects, including the country’s ambitious Vision 2035 development plan , which has now been updated to the 2024-2040 period, due to recent health, economic and geo-political crises.
The government’s proactive and pro-development stance was apparent during the speech by HIs Highness the Prime Minister to parliament in mid-July. Addressing the first session of the 17th legislative term of parliament, the premier outlined his government’s action plan for the 2023-27 term of the National Assembly. He termed the work plan a document of cooperation between legislative and executive authorities, and one which establishes joint constructive work-rules based on putting the supreme national interest first,
Elucidating the government’s work plan, the premier said it encompasses major economic and value-added development projects with specific timetables, with the focus being on ensuring economic diversification, improving development performance, and addressing economic and financial challenges. Improving living conditions and answering social needs for citizens, mainly housing, education, health and entertainment, was also part of this initiative, he added.
A more detailed look into the government’s action plan reveals several interesting aspects that could be crucial to driving Kuwait’s sustainable economic growth in the years ahead. Among others, the plan calls for establishing ‘Ciyada Development Fund’, a new sovereign fund drive development process. The Ciyada Fund, which will invest in the local economy and help develop vital megaprojects, will be a significant boost to economic growth and project development, both of which have historically suffered from low investments.
The action plan also calls for engaging with the private sector to shoulder a greater role in economic development; increasing private investments in developing and operating special economic zones; creating more jobs for Kuwaitis in the private sector; enhancing workforce productivity; launching a new privatization strategy; and restructuring subsidies to target only vulnerable sections of the population.
Other initiatives in the plan include digitizing government services, and shifting the economy to a circular one with the goal of achieving carbon neutrality by 2060. In addition, the work plan includes several fiscal reforms and initiatives including prioritizing the passing of a draft law that has remained stalled in parliament since 2017, introducing a performance-based medium-term framework for the budget, reducing oil dependency through repricing government services, reviewing the corporate’ tax law, and creating new non-oil revenue streams.
The emphasis on revitalizing the development process and opening a new chapter in the country’s growth was also reiterated by the Deputy Prime Minister, Minister of Oil, and Minister of State for Economic Affairs and Investment, Dr. Saad Al-Barrak. In a statement to Kuwait News Agency during his visit to China — as part of the high-powered entourage accompanying His Highness the Crown Prince Sheikh Meshal Al-Ahmad Al-Sabah’s state visit to China in late September — the minister noted that several agreements had been signed with the Chinese side related to major projects, including the completion of the Mubarak Al-Kabeer Port.
He also revealed that during the visit, the Minister of Justice and Minister of State for Housing Affairs, Faleh Al-Rakba, had signed a memorandum of understanding on the housing cities project — for the construction of an integrated residential city, And, the Minister of Electricity, Water, and Renewable Energy, Dr. Jassim Al-Ostad, had in turn signed a memorandum of understanding to establish a solar electricity generation station. Other agreements were also signed by Foreign Minister Sheikh Salem Abdullah Al-Jaber Al-Sabah related to infrastructure and other fields.
Tellingly, the minister did not elaborate on Kuwait’s new strategy of engaging with the West in terms of ensuring the country’s defenses, and pivoting to the East, most notably China, in relation to spurring its economic growth and development. But then, irrespective of whether it is East or West the country’s strategic interest is in ensuring a growth-oriented safe and secure sustainable future for Kuwait and its people.