Kuwait pins hopes on diversification with Vision 2035

There is a trend among development agencies and inward investment authorities to launch wide-ranging plans aimed at improving bureaucracy and creating the fundamentals that are conducive to investment and growth. 

In Kuwait, where investors and analysts have called for the country to do more to close the skills gap as well as slash regulations and red tape, the focus is on its National Vision 2035, the nation’s roadmap to bolster its financial status by diversifying its economy.

A national transformation

Kuwait’s National Vision 2035 articulates Sheikh Sabah Al-Ahmed Al-Jaber Al-Sabah’s vision to transform the country into a leading financial and commercial hub. It focuses on reducing reliance on hydrocarbon exports, creating new employment opportunities for Kuwaiti nationals, upgrading infrastructure to diversify the economy and providing a sustainable living environment. 

“Vision 2035 looks to the private sector to lead economic activities, supported by effective public institutions and citizen-centred policies, aimed at fostering competitiveness, increasing productivity, harnessing the human talents of Kuwait’s youth, and enabling the business environment to ultimately attain economic diversification and sustainable growth,” says Sheikh Dr Meshaal Jaber Al-Sabah, director-general at the Kuwait Direct Investment Promotion Authority (KDIPA).

Like all FDI initiatives, those working on Vision 2035 must now brace themselves for the realities of the coronavirus, or Covid-19, pandemic, which is expected to see global FDI shrink, with Unctad forecasting that the negative impact on investments will be felt strongest in the automotive, airlines and energy industries.

Global forces

When Vision 2035 was launched in 2017, some commentators felt they had heard it all before, and cautioned that geopolitical forces and internal politics could hamper its ambitions. Today, there are also questions about how Kuwait could be impacted by the Covid-19 pandemic and subsequent global economic downturn. In spite of these challenges, investors point to its ranking of 46th out of 141 in the WEF Global Competitiveness Index 4.0 2019 as well as its success in moving up the rankings in the World Bank Doing Business rankings. In 2020 it finished 83rd out of 190 countries, compared with 102nd in 2017. 

“Vision 2035 is capturing the attention of many international markets,” said Carlos Khneisser, vice-president of development for the Middle East and Africa at Hilton, speaking before the Covid-19 pandemic was declared. “Kuwait is now among the top 20 improvers in doing business on the World Bank’s index. This will impact the hospitality sector, creating new job opportunities and further boosting the economy.”

Other sectors that look ripe for expansion include financial services, infrastructure, healthcare, storage and logistics, housing and urban development, tourism, culture, media and marketing, and ICT.

Growth continues

“Direct investments attracted by KDIPA since it started operations in 2015 reached more than $3.4bn of approved value-added direct investments in leading services sectors such as ICT, renewable energy and healthcare, among others,” says Mr Meshaal. 

“These licensed direct investments are expected to have economic and social impact that leads to direct and indirect jobs for Kuwaiti youth, advanced training that nurtures local talents, and the transfer and settlement of technology through opening specialised labs and R&D facilities,” he adds.

KDIPA’s fourth annual report reveals that in the 2018/19 financial year it attracted approved direct investments from several European, Asian and American companies, including a Kd35m ($112.4m) investment from IHS in the ICT sector; a Kd78.8m investment from China State Construction Engineering Corp in the construction sector; and a Kd18m investment from Incheon Korea in the consulting services sectors. About 97% of the approved direct investments during the report period were concentrated in the services sector, covering IT, oil and gas, construction, energy, market research and consulting.

Earlier in 2020, Siemens issued its Business to Society report highlighting that more than 83% of its business in Kuwait is now generated in non-oil industries, contributing to the country’s economic diversification. The company, which has been operating in Kuwait for more than six decades, says its technologies are used to produce 22% of the country’s power-generating capacity, and in the distribution and transmission of 70% of its electricity. They are used in 85% of wastewater treatment facilities, 90% of the steel sector and 100% of the cement industry as well.

Siemens Gamesa Renewable Energy has also provided the turbines that power the Al-Shagaya wind farm, the first and only wind power facility in Kuwait. “Our contribution to [Kuwait’s] journey will continue as we bring energy-efficient, resource-saving technology to all our projects, and build on our efforts to transfer knowledge and skills to the next generation,” said Herbert Klausner, CEO of Siemens Kuwait, at the launch of the report.

Tourism prospects

The World Travel and Tourism Council’s figures reveal that the contribution of Kuwait’s tourism sector to the economy is low compared with other countries in the Gulf region. Even so, as the world gets to grips with the Covid-19 pandemic, local media in Kuwait have quoted travel and tourism agencies in the country, who have described the situation as ‘catastrophic’.

Once the pandemic is over, or at least under control, the tourism sector will hope to see growth resume as a result of the transformation of the country into a financial and commercial hub, and Kuwait’s involvement in China’s Belt and Road Initiative.

Mr Khneisser reports that Hilton has three hotels in the pipeline for Kuwait under its Waldorf Astoria, Canopy by Hilton and Hampton by Hilton brands. “Introducing and expanding our brands in Kuwait portrays the positive impact of working towards Vision 2035,” he says. “There will be plenty of opportunities for the hospitality industry to explore the country’s tourism landscape and expand or develop their business. This is a great opportunity for Hilton to grow in Kuwait, in partnership with investors, and develop alongside the country to achieve Vision 2035 by catering to the growing number of tourists in the coming years.”

This article first appeared in the April-June edition of fDi Magazine.