• Home
• News Article

Kuwait: Eastern Horizons

News of a major refinery deal with China and a visit from Pakistan's president have recently highlighted once again Kuwait's expansion in overseas markets. Energy was the common denominator too for both these South Asian and Far Eastern connections.

Indeed, investors in Kuwait are being heavily courted these days by Pakistan's president, General Pervez Musharraf.

As part of a six-day swing through the Middle East, the general stopped in Kuwait on December 4 and urged Kuwaitis to invest in the Pakistani energy sector.

His call for greater interest in his country's emerging economy was welcome news too for many Kuwaitis, who are currently looking to expand into overseas markets.

Speaking to Kuwait's Chamber of Commerce and Industry, Musharraf said that when it came to future needs, Pakistan's energy demands were growing fast and his government had to take action now to ensure we don't fall short, AFP reported December 5.

The Pakistani president said he was looking for investments in hydroelectricity, oil refineries and even wind energy.

Musharraf then added that he was sorry trade was not more developed with Kuwait, and that he hoped the economic ties between the two countries could become as strong as their political ones.

Kuwait itself is an important source of income for the many Pakistanis who travel there to work, and for their families back home.

At the same time, the two countries' relationship has become even rosier following Kuwait's $100m pledge of aid for victims of the October 8 earthquake in Pakistan.

It was also logical that Musharraf might like to tap some of Kuwait's oil connections as well.

While Pakistan's foreign exchange reserves have been estimated at $11.6bn, they include large inflows of home remittances sent by overseas Pakistanis working in countries such as Kuwait.

An estimated 1.8m foreigners, mostly from India, Sri Lanka and Bangladesh, work in Kuwait, and make up more than half of the country's 2.8m population. Pakistan has said it wants to export 200,000 workers this year in total, with some 4700 of them recruited for projects in Kuwait - the largest labour solicitation from there in a decade.

Yet Kuwait's relationships with its many foreign workers can get touchy at times.

The government recently announced new restrictions on foreigners seeking driving licences. Under the new rules, only foreigners holding a college degree and earning at least $1300 can apply for a licence in Kuwait.

Expatriates seeking a licence also now have to have legally lived in the country for at least two years.

The rule aims to reduce the number of vehicles on Kuwait's roads, according to a Khaleej Times report on November 27, with the country currently possessing more than 1.1m vehicles.

The ruling may certainly do that, but is also likely to hit taxi firms in particular, which are usually staffed by expatriate drivers, few of whom are likely to have college degrees. Hailing a cab in Kuwait city may be about to become even more difficult and expensive, as the experience of localising the taxi industry in Oman has shown.

Meantime, Kuwait has not only been looking to the subcontinent recently, but further afield as well.

As December got underway, Kuwait and China signed a deal to build a refining and petrochemicals complex in China at an estimated cost of $5bn.

The facility will be designed to process crude oil from Kuwait and built in Guangdong province. According to Kuwait's Energy Ministry, the complex is scheduled to go onstream in 2010.

The memorandum of understanding for the project was signed by Kuwaiti Energy Minister Sheikh Ahmad Fahd Al Sabah and visiting Chinese Executive Vice-Governor Zhong Yangsheng.

Sheikh Ahmad said the refinery's capacity would be between 200,000 and 400,000 barrels per day (bpd).

The project is a joint venture between PetroChina, Kuwait's Petrochemical Industries Company and Kuwait Petroleum International . However, the two countries' representatives also agreed to invite other international players in the refining and petrochemical sectors to participate in the project.

According to the Kuwaiti state news agency KUNA, Sheikh Ahmad also explained to reporters on December 6 that the refinery and the plant were part of Kuwait's strategy to enter more oil markets that would be able to utilise the country's expected 10-year level of production of 3.5m-4m bpd.

Clearly, with China now the world's fastest growing market for oil and oil products, it is a natural target for this strategy.

Sheikh Ahmad also said that energy exports to the eastern giant would increase after the opening of a representative office for the Kuwait Petroleum Corporation (KPC) in China.

With its energy use increasing by 10% annually, China used about 300m tonnes of crude oil during 2004, according to KUNA, with half of it coming from the Middle East. So far, Kuwait has not been a major Middle Eastern exporter to China, but, it seems, times are certainly changing.

© Oxford Business Group 2005