Kuwait: good just got better (page 4 of 4)

The important decision was followed by a National Assembly action approving the measure in April 2003. Kuwait began to implement the union as of May 2003. The customs union unifies customs duties of the six-member GCC and promises to promote increased inter-regional trade.

In addition, the establishment of the customs union will give the GCC countries a better position to negotiate trade deals with other countries, which could result in the elimination of tariffs for aluminum and petrochemicals destined to the European Union (EU). Kuwait, like other GCC countries has plans to expand its petrochemicals industry with two new projects to build an aromatics plant and to double the capacity of the existing olefins plant.

The NBK report suggests that ample liquidity and low interest rates were main factors behind the pick up in domestic investment activity, primarily in real estate and equity markets. Real estate sales rose to their highest level in years, both in the apartments and commercial property market as well as in private residential property.

Lending by the government-owned Savings and Credit Bank (SCB), that provides subsidized loans to new home owners, continued to bolster activity, with supplemental loans from commercial banks giving an additional boost.

Consequently, there was an increase in the number of construction permits issued by the Kuwait Municipality was accompanied by a surge in the construction of homes and apartment buildings.
The NBK report also reviewed the strong performance of the local equity market, where the general Kuwait Stock Exchange (KSE) index shot up by 57% during the first five months of 2003 following a 39% increase in 2002, despite the fact that growth in corporate profits was tapering off.

The advance was accompanied by a surge in turnover, with the average value of shares traded per day more than doubling for 2002 as a whole and tripling in the month of May relative to 2001. This performance seemed to defy expectations that pessimism will prevail at a time of a possible war in the region.

The market, however, appeared willing to discount the risks and focused instead on the new opportunities that will open up in the region once the US-led war in Iraq was over. Investors were confident the war would be quick and bring much needed stability and increased growth opportunities for Kuwaiti corporations.