The Kuwaiti parliament unanimously passed the first reading of the Capital Market bill that calls for stringent supervision and regulation of the Kuwait Stock Market which MPs claimed had been lacking. All the 48 members present, including cabinet ministers, voted for the law which Commerce and Industry Minister Ahmad Al-Haroun described as a "major push for Kuwait's comprehensive economic development".
The law essentially calls for setting up of a five-member Capital Market Authority and although it will enjoy an independent status under the law, it will still be monitored by the office of the prime minister. The law also calls for turning the Kuwaiti bourse into a public shareholding company in which 50 percent of its shares will be sold to citizens in an initial public offering.
Twenty-four percent of the shares will be held by the government while the remaining 26 percent will be sold to a strategic private investor.
In a separate development, the Kuwaiti government, in its weekly meeting, tentatively decided to privatize the national airlines, the Kuwait Airways Corporation (KAC). The government, during a marathon session, reviewed results of assessment of condition of the KAC on the basis of studies, conducted by specialized international consultancy agencies.
The cabinet approved a cabinet draft resolution creating a shareholding company under the name Kuwait Airways Corporation (KAC) and appointed a committee to undertake the necessary steps for the implementation of the law number 6 of 2008 regarding the transformation of the KAC into a shareholding company.
January 21, 2010
Analysis and Forecast: Decreasing Risk
The Kuwaiti bourse is the GCC oldest and one of the Arab World’s oldest bourse. However, the rising of other GCC states such as Dubai and Qatar have relegated the position of the Kuwaiti stock market. Criticisms of the Kuwait market have regularly centered on issues regarding lack of regulations and transparency. Although the passing of such a law is long overdue, it is seen as a necessary step towards making Kuwait more competitive for foreign investors who have for the past several years looked at other GCC markets.
The privatization of Kuwaiti Airways has been talked about in the past but the latest move indicates a strong intention to proceed. Despite being one of the region’s most well-established airlines, Kuwait Airways has fallen behind such companies as Emirates, Etihad, Qatar Airways and Gulf Air. Kuwait Airlines is also competing with Kuwaiti private airlines, who mainly serve regional routes. Although the other major flag-carriers are state-owned, directly or indirectly, by taking this step Kuwait aims to transform the airline into a more profitable entity and allow it to compete with a growing number of regional private airlines. The privatization is therefore a positive step in Kuwait’s attempts to reinvent its airline and airport business.
Both items of news indicate a strong move by Kuwait to making the country more friendly to foreign and private investment, steps that are essential to diversifying the country’s economy.