Political stability must be first step in Kuwait

28 March 2008
Despite moves to improve Kuwait’s investment climate, foreign direct investment remains low and the current political crisis will keep it that way.

Kuwait is trying to improve its investment environment, taking action that is needed if it is to make a success of the $265bn worth of projects the country has planned. It also needs to create jobs in the coming years for the 40 per cent of the population that are under 20 years old.

Reducing the tax for non-Kuwaiti firms to a flat rate of 15 per cent from the previous maximum of 55 per cent is a welcome move for foreign investors. Kuwait is also considering the establishment of a new capital markets authority, which would help to bring in even more foreign capital.

The revision of the build-operate-transfer law is another sign that conditions for investors are improving. The law extends the concession period for a construction project to up to 40 years. Previously, private developers had to transfer projects back to the public sector after 20 years, barely enough time to break even, let alone make a profit.

However, Kuwait’s latest political crisis, with the cabinet resigning and parliament being dissolved, will undermine all the progress made over the past six months. Bureaucracy and political infighting are the country’s biggest stumbling blocks.

It is therefore little wonder that only 5 per cent of Kuwait’s $265bn project portfolio is under way and little foreign investment comes into the country. Despite the ambition of designers and project sponsors, it is unlikely this will change until Kuwait’s politicians find a way to work together.

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