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Bank mergers necessary for revival of foreign investments in Kuwait
Kuwait is considered one among the countries that are least attractive for foreign investments worldwide, with the statistics indicating that the foreign capital influx in the country was about $120mn in 2006 and 2007, a World Bank official pointed out during the Kuwait Financial Forum.
The reduction in the inflow of foreign capital into the country is mainly due to lack of proper investment environment, says Radwan Shaaban, Director of World Bank office in Kuwait. The World Bank Report indicated that the investment environment in Kuwait had fallen behind in its global classification index and ranks 161 among countries worldwide.
According to the World Bank official, Kuwait is not as prompt as other countries in improving investment environment, but this negative positioning of Kuwait is not inevitable. Kuwait has the potential of becoming one of the best economies in the region, as the private sector of Kuwait is active.
Radwan emphasized the need to execute the proposed five-year plan by the government, which was recently submitted to the National Assembly. This plan comprises projects that can improve both economy and environment.
Radwan also said that the partnership between public and private sectors is crucial, and that the government should encourage investors to utilize the BOT (Build Operate and Transfer) Law introduced in 2008.
Meanwhile, HSBC-Middle East Chairman, Yousef Nasser, said that the negative effects could be due to retreat of foreign banks from the market and emphasized the need for bank mergers, although a rational approach is required for such mergers, he added.
The Executive President at Oman Central Bank, Hamood Sangour Al-Zadjali, said that Gulf Central Banks should begin by promoting domestic consolidation and then expanding it throughout the region to build stronger financial institutions. Bankers have been pointing out the gap existing between the financing needs of the region and the government announcements to invest billions in infrastructure and economic diversification projects and the ability of local banks to offer it.
The Deputy Chief Executive at the National Bank of Kuwait, Shaikha al-Bahar, questioned the ability of local banks to finance $2.3trillion worth of government projects in the region, and said foreign banks could play a crucial role here.
In the opinion of former Kuwaiti Finance Minister, Mahmud Al-Nuri, Gulf Banks will not be able to face the post-crisis condition without key mergers.
There should atleast be three to four regional bank mergers in the next five years, he said.
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