Politics holds back potential in Kuwait

30 August 2012

Contractors unsettled by ongoing political stalemate in Kuwait

With almost $100bn-worth of contracts on the verge of being awarded, political infighting forced the dissolution of Kuwait’s National Assembly in June.

Despite a new cabinet being sworn in July, international contractors feel history is repeating itself in the Gulf state.

The new cabinet is the 10th appointed since 2006. Although politicians have been saying the right things over the past couple of months, some of the bigger projects are facing delays.

Investment in Kuwait’s hydrocarbons and power sectors has borne the brunt of political indecision in the country. The two big-ticket oil refining schemes Kuwait has planned are worth a combined $30bn. If both schemes are successfully executed, it will overhaul the country’s downstream industry. But a lot can go wrong at that price.

Contractors are worried that more changes in government will further delay decision-making in what is already one of the most bureaucratic countries in the world.

Making decisions was a challenge even before the new parliament was sworn in and according to contractors working in the country, it has got even tougher. However, there is still no indication that any of Kuwait’s planned projects will be cancelled and this is an encouraging sign.

The Gulf state knows that major investment is needed in its power and water infrastructure and adding value to its huge reserves of crude makes even $30bn seem like good value given today’s oil prices.

The government knows that many of the proposed schemes in the oil and power sectors are central to the country’s national development plan. Compared with similar-sized neighbours such as Qatar, Kuwait also has some catching up to do in terms of infrastructure. For contractors awaiting decisions on key schemes, there is no need to hit the panic button yet.

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