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Kuwait's parliament rejected the govenrment's four year development Plan, of US$ 111 billion. The plan provides for a series of huge infrastructure projects including a new airport terminal, new oil refinery and hospitals and is aimed at diversifying an economy heavily reliant on oil. Kuwait wants private investors to meet almost half the cost of the development plan to modernize its oil-based economy. The investments include a new refinery, construction of a metro network, expansion of airport, new power stations, cities, hospitals, roads and a port on Boubyan Island.

 

Kuwait’s parliament rejected a bill that covers the government’s $111 billion four-year development plan in the 2012-2013 fiscal year. According to the state news agency, the lawmakers who blocked the bill described the plan as “unrealistic” and criticized the government for lagging in its implementation of projects.

 

The plan, which began in 2010-2011, requires parliamentary approval for every fiscal year. Minister of State for Planning and Development Affairs, Fadhel Safar, said “many projects were accomplished in the first two fiscal years of the plan," in remarks carried by state media. This contradicts independent and opposition assessments who say the government has only completed small parts of the plan such as work on roads and bridges but has failed to push forward with the major projects which would attract international companies.

 

April 26, 2012

 

 

Analysis and Forecast: Increasing Risk


 

The rejection of the development plan is both a political blow to the government as well to the plans to divesify the economy. Although both the government and opposition agree on the need for develoment plans to diversify the economy.

 

The key reservation of the opponents was allegations of corruption in the implementation of the development plan. Whilst these allegations were rejected by the government, continuous delays in the actualization of the plans during the past years have made the public highly skeptical. The plan’s rejection delays efforts to diversify the economy away from oil – key development challenge for Kuwait, as well as opening the door for a government-parliament clash, leading to increased political risk.

 

The figure below shows the make-up of the Kuwaiti economy: