AN ISLAMIC FINANCE LEADER: KUWAIT
Kuwait can be an important trade centre in the upcoming period with its geographical advantage and well-trained young population
Ayşe Hilal Sayan Koytak, T.R. Ambassador at Kuwait, analysed the current situation in Kuwait and offered her insights into the present and future of Turkey-Kuwait relations, and the current and possible opportunities with a broad perspective.
WHAT COULD YOU SAY ABOUT KUWAIT'S ECONOMY IN 2020? WHAT ARE YOUR OPINIONS ON THE PANDEMIC'S IMPACT ON THE ECONOMY AND PROJECTIONS FOR THE NEW PERIOD?
2020 was a challenging year for Kuwait in terms of economy, just like the whole world. Social restrictions and travel bans imposed due to the novel coronavirus (COVID-19) pandemic seen in Kuwait in February decreased the economic activity in the country. The drop in oil prices down to $15 per barrel in April also affected Kuwait's economic balance quite adversely. 89% of Kuwait's budget revenues, 95% of export revenues, and 55% of the country's entire economy are directly or indirectly dependent on oil revenues. According to the International Monetary Fund's (IMF) estimations, Kuwait's economy will shrink by eight per cent in 2020 due to the drop in oil prices and the decreasing economic activity. And the budget deficit estimations of the country's Ministry of Finance for 2020-2021 are around $43 billion. There are ongoing discussions as to whether it would be better to borrow from Kuwait's Future Generations Fund (estimated to have $592 billion worth of assets), borrow from international banks, or lay taxes on income/sales to finance the deficit.
And there is the "New Kuwait 2035 Vision" first announced in 2007 by the Kuwait Government, an important road map to improve the country's economic structure and turn it into a commercial and financial centre. Kuwait is expected to introduce some reforms to reduce the dependence on oil and achieve the goals of the vision that I have mentioned. I believe that COVID-19's status and the course of oil prices will determine how Kuwait's economy will progress in the upcoming period. IMF announced the 2021 growth estimates for Kuwait as 0.6% if it recovers from the impacts of the pandemic without going through a second wave. However, the social restrictions that were loosened before have started to be introduced gradually again after COVID-19 and mutation cases increased. 2021 will also be a tough year for Kuwait's economy if the pandemic does not slow down its pace. If Kuwait reduces its dependence on oil and puts the goals of the 2035 Vision into practice after the pandemic, it will be on track to start its economic growth again. Kuwait can be an important trade centre in the upcoming period with its geographical advantage and well-trained young population.
AND WE CAN TALK ABOUT TURKISH INVESTMENTS AS PART OF KUWAIT'S ISLAMIC BANKING ACTIVITIES. WHAT IS THE RECENT SITUATION OF ISLAMIC FINANCE IN KUWAIT?
Kuwait is among the leading countries in the world in the field of Islamic finance. Founded in 1977, the Kuwait Finance House (KFH) is a quite important institution that has proved its competence and prestige in this field. It is, in fact, the world's third-largest Islamic bank with investments also in our country. Apart from KFH, there are four other Islamic banks that entered the market of Kuwait after 2000. These banks are respectively listed as Boubyan Bank, Ahli United Bank, Warba Bank, and Kuwait International Bank according to their asset sizes. The total asset size of the banking market in Kuwait, where 11 local and 12 foreign banks operate, exceeds $230 billion. 58% of this asset size belongs to conventional banks and 38% to Islamic banks. And the rest belongs to the Industrial Bank of Kuwait, which focuses on private banking transactions. In addition to Islamic banking, Kuwait is also the home of takaful companies that are providing Islamic insurance services. These takaful companies have a market share of 20% in the entire insurance field.
Apart from this, there are 30 investment companies in Kuwait that invest in Islamic funds and projects. And the total asset size of these companies exceeds $10 billion. To sum it up, Kuwait has an efficient market in different areas such as banking, insurance, and participation banking that have a strong Islamic finance presence. As the Embassy, we carry out high-level contacts with these Islamic finance companies. Our counterparts closely follow the developments in our country and appreciate the increasing interest in this field. We are working hard to increase the interaction between our country's participation banking sector and Kuwait's Islamic finance market. And we will continue our activities nonstop in the upcoming period.
COULD YOU ELABORATE ON THE UPCOMING PROCESS OF DEVELOPING TRADE BETWEEN THE TWO COUNTRIES?
Turkey and Kuwait have quite positive economic relations, and this relation especially shows itself in foreign trade, contracting, mutual investments, tourism, cooperation in healthcare & education & defence industries. As the Embassy, we show maximum effort to increase our trade. Together with the support of our Ministry of Trade, we bring together Kuwaiti buyers and exporters online in virtual trade delegations and virtual acquisition committees. Thus, I can say that we adapt to the changing conditions pretty easily. From a contracting point of view, the contracting companies of our country received a project of $526 million in 2019 and $841 million in 2020 even though the shrinking market conditions in the recent past.
Our companies managed to win tenders in the road, infrastructure, hospital, bridge crossing, public building, and airport projects in Kuwait. They still follow many tenders and pass the pre-qualification phases. I think our companies will be able to get more projects from Kuwait in the upcoming period. We observe that we have been acquiring the favour of Kuwaiti companies for our country in terms of
investments, especially in the last 10 years. Kuwaiti investment companies have been investing in real estate projects, shopping malls, industrial companies, restaurants and café chains, banking, and finance sectors in our country. There is now a total of $2 billion investment stocks. I believe that with the further improvement of our country's investment environment in the upcoming period, Kuwaiti investments will continue to increase. Kuwait has the biggest population/tourist ratio that visits Turkey. The number of Kuwaiti tourists increased by 50,000 every year after 2015, reaching 374,000 in 2019. Although the global pandemic negatively affected tourism in 2020, it will quickly return to normal as the effects of the pandemic diminish. The fact that Kuwaiti tourists prefer our country for their long holidays and purchase real estate in our country contributes to our country's tourism revenue greatly.
And we maintain our intensive efforts for the inclusion of Turkey in the Kuwait Ministry of Health's overseas medical tourism programs. Negotiations between our country's Ministry of Health and Kuwait's Ministry of Health are progressing positively. Our Kuwaiti friends also show great respect to our country in areas such as hair transplant, plastic surgery, dental treatment, and eye treatment, which are not included in the official patient transfer. And this is positively reflected in our country's healthcare tourism income. As the Embassy, we also spend a lot of time on cooperation in education. We continue to negotiate with the Kuwait Ministry of Higher Education to enable more Kuwaiti students to receive higher education in our country. We aim to include our universities within the official scholarship program of the Kuwait Ministry of Higher Education, welcoming more Kuwaiti students to receive their education in Turkey.
Finally, I would also like to talk about the defence industry cooperation, another aspect that we want to add to the economic relations between the two countries.Kuwait is among the countries with the highest defence expenditures compared to its national income and is almost entirely foreign-dependent in this area. Important opportunities may arise for our companies, especially in the fields of armoured vehicles, unmanned aerial vehicles, various marine vehicles, electronic warfare, and cyber security.
T.R. Ambassador at Kuwait Ayşe Hilal Sayan Koytak