Kuwait's parliament last week passed a $104bn four-year development plan, the first for decades, proposed by the government. The bill foresees boosting power and oil production, and several infrastructure projects. On the same day, parliament passed a long-delayed capital markets law that establishes a sorely needed stock market regulator


The funding is expected to be used to develop the new Silk City business hub at an estimated cost of $ 77 billion, as well as the upgrade of the country’s energy grid and the construction of a 25 kilometers container harbour. It also includes a railway and metro system, other new cities and additional spending on infrastructure, particularly in health and education.



Analysis and Forecast: Decreasing Risk


The passing of the bill by parliament carries two implications. First, that the tensions between government and parliament have eased. The second is that the authorities in Kuwait are moving forward for plans for economic diversification.


Kuwait is the GCC’s most exposed economy due to dependence on oil with no firm plans for diversification. Although Kuwait has over 100 years worth of oil reserves, competition from neighbouring GCC states has relegated its regional standing. Diversification is also important to tackling local unemployment as well as less exposure to fluctuation in oil demand.


However, there are serious concerns about how the government will implement the proposed plan, which is Kuwait’s first plan in over 24 years. This is in contrast to longer-term plans in neighbouring states such as Bahrain and the UAE. For the plan to be successfully implemented, it requires the setting up of competent authorities to carry it out and greater collaboration between parliament and the government.


Below is a figure showing the make-up of Kuwait’s GDP in 2007. Estimates put government income to be as much as 90% reliant on oil.