INSIDER VIEW Kuwait - Summit Reportsmost half of Kuwait’s GDP and almost all export revenue. Kuwait has proven crude oil re-serves of about 98 billion bar-rels and production remains

SPECIAL ADVERTISING SUPPLEMENT TO THE NEW YORK TIMES

HISTORICALLY, Kuwait hasalways been one of the mostdynamic and pioneering coun-tries in its region. Situated atthe northern end of the ArabianGulf, it has been a center oftrade and commerce for cen-turies.

Today, the emirate boastsone of the Gulf’s most open andprogressive societies, and hasbeen making significant stridestowards greater democratiza-tion. The oil-fueled econ-omy is booming,budget surpluseshave filled state cof-fers, and a newsense of optimismhas unleashed awave of investmentand major developmentprojects.

For more than a decadeafter the 1990 invasion bySaddam Hussein’s Iraqi forces,Kuwait feared that historycould repeat itself. However,with the Iraqi dictator’s per-manent removal from thescene, the focus is shiftingaway from security and to-ward the future.

Business confidence hasincreased and the governmenthas been encouraged to press

ahead with far-reaching eco-nomic and political reformsunder the leadership of PrimeMinister Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah.

Record high oil prices, lowinterest rates, and even lowerinflation have powered eco-nomic growth. Real gross do-mestic product (GDP) in-creased by 4.6% in 2004, andhas been forecast to rise bymore than 6.5% in 2005.

Kuwait’s leading bankshave been ringing up

record profits andthe Kuwait StockExchange has beenbooming.

The strength ofthe economy has

been reaffirmed by in-ternational ratings agencies;

Fitch has given Kuwait a AAcountry ceiling rating, placingthe emirate on a par with coun-tries such as India, HongKong, and Taiwan.

The emirate has rebuilt itsforeign assets since its liber-ation by U.S.-led forces in1991to a level estimated at closeto twice its GDP.

Oil income in 2004/2005was three times higher thanexpected, reaching $27.8 bil-

lion and accounting for 91%of total revenues. Kuwait post-ed a budget surplus of $11 bil-lion, with actual revenuesreaching a record $30.5 billion.

The current budget isbased on a cautiously forecastoil price of $21 per barrel.Since the start of the currentfiscal year, however, the price

of Kuwait export crude hasbeen averaging more thandouble that estimate, ataround $44 per barrel. Withthe outlook for internationaloil prices remaining strong,independent analysts are pre-dicting that Kuwait could posta surplus for 2005/2006 of more than $20 billion.

Six consecutive years ofbudget windfalls have reducedthe need for precautionary sav-ing and are allowing the gov-ernment to invest tens of bil-lions of dollars in a variety ofmega projects.

Capital spending has been

SUNDAY, SEPTEMBER 18, 2005

FA C T S &FIGURES

POPULATION2.6 million

AREALand:

6,880 sq miles

CURRENCYKuwaiti dinar (KWD)

EXCHANGEUS$1= 0.29 KWD

CAPITALKuwait City

LANGUAGESArabic (official), English

widely spoken

GDP PER CAPITApurchasing power parityUS$19,000 (2004 est.)

GDP GROWTH4.6% (2004 est.)

EXPORTSCrude oil, natural gas,

refined petroleumproducts, fertilizers

IMPORTSfood, construction

materials, vehicles andparts, clothing

INTRODUCTION THE TINY OIL-RICH GULF STATE ISLIBERALIZING ITS ECONOMY AND POLITICAL SYSTEM,AND STRENGTHENING ITS POSITION AS A FINANCIALAND COMMERCIAL CENTER IN THE REGION.

INSIDER VIEW

THIS ADVERTISING SUPPLEMENT IS PRODUCED BY SUMMIT COMMUNICATIONS AND DID NOT INVOLVE THE REPORTING OR EDITORIAL STAFF OF THE NEW YORK TIMES

Modern buildings reflect a wealthy country with one of the highest GDP per capita figures in the world.

Return to the pioneer spirit

Kuwait

Highprice of oil

could boost this year’s budgetsurplus to $20 bil-

lion

Continued on page 2 SOURCE: CIA The World Factbook

KUWAIT 01-07 c 25/8/05 10:19 Página 1

POLITICS THE LANDMARK DECISION TO ALLOW WOMEN THE VOTE BRINGS THE OLDEST DEMOCRACY IN THE MIDDLE EAST INTO A NEW POLITICAL ERA

Giant steps toward greater equality

KuwaitSPECIAL ADVERTISING SUPPLEMENT SPECIAL ADVERTISING SUPPLEMENT

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MAJOR advances in extend-ing Kuwait’s democracy havebeen made in recent monthswith the granting of full politicalrights to women and the ap-pointment of the first femaleCabinet minister.

The decision to allow womento vote, taken by the NationalAssembly in May, more thandoubles at a stroke the per-centage of Kuwaiti citizens withthe right to vote, raising it fromfrom around 15% to more than30%. Previously, voting waslimited to adultmales who hadbeen citizens for 20years and were notmembers of the se-curity forces.

Passed by acomfortable major-ity, the move is amajor step towardsbringing Kuwait’spolitical system intothe modern era. Theemirate was the firstGulf state to write a constitutionand opt for parliamentarydemocracy back in 1962.

Women will cast their votesfor the first time in the 2007legislative elections and the mu-nicipal polls in 2009. With thevote comes the right to standin parliamentary and local elec-tions. Bahrain, Oman, and Qatarare the only other states in theGulf region to allow women to

vote and stand for public office.The appointment in June of

Maasouma Al-Mubarak asMinister of Planning andAdministrative Development,makes Kuwait the third Gulfcountry to have a woman in theCabinet.

According to Kuwaiti law, theU.S.-educated women’s rightsactivist and professor of inter-national relations automatical-ly becomes a member of theNational Assembly—the firstKuwaiti woman to do so.

Her appointmentcomes on the heelsof an earlier land-mark decision by theCabinet earlier inJune to appointSheikha FatimaNassr Al-Sabah andFawziya Al-Bahar asthe first womenmembers of theMunicipal Council,which deals withcivic planning.

Prime Minister Sheikh SabahAl-Ahmad Al-Jaber Al-Sabahhas welcomed the changes.“We are full of hope, trust, andaspiration that the participationof Kuwaiti women in politicallife will be an essential tributaryto enriching political work anddemocracy in the State ofKuwait,” he says.

The greater sense of securi-ty and confidence in Kuwait since

the fall of Saddam Hussein hascreated an environment moreconducive to change. The gov-ernment is poised to accelerateliberal reforms, including a re-duction in the number of elec-toral districts from 25 to10 in abid to curb alleged corruption.

A constitutional emirate,Kuwait remains one of themost open political societiesin the Middle East, striking abalance between modern lib-eral aspirations and the richheritage of the Al-Sabah dy-nasty, which has ruled the Gulf

state throughout its 250-yearhistory.

The National Assembly plays agenuine part in decision-making,and has powers to initiate leg-islation, question members ofthe Cabinet, and express lackof confidence in individual min-

isters. Formal political parties arebanned, but de facto politicalblocks exist and the most re-cent general election, in 2003,was judged free and fair.

In terms of press freedom,Kuwait is ranked 103rd inter-nationally, according to theJournalists Without Frontiersorganization, and second onlyto Lebanon among the Arabnations. Minister of InformationAnas Al-Rasheed is planningamendments to the press andpublications law to extend fur-ther legal protection to freedomof expression.

Outside the political sphere,women are coming to play anincreasingly important role inthe country’s economic life, withmany Kuwaiti businesswomenin prominent positions.

Increasing numbers ofwomen are achieving highereducation levels and taking upjobs. According to SheikhaHessa Saad Al-Abdullah Al-Sabah, who chairs the Councilfor Arab Businesswomen, thenumber of Kuwaiti women inthe national labor force hasgrown more than seven-foldover the last 20 years.

Return to the pioneer spiritrising sharply, and the2005/2006 budget proposesan 11% increase in expendi-ture compared to 2004/2005.

In the past two fiscal years,spending on infrastructurehas jumped from 14% ofKuwait's budget to 23%. Oil,petrochemicals, power, andwater projects are planned oralready under way, and thereare a host of schemes to de-velop the country’s transportinfrastructure of ports, roads,and the airport.

Real estate projectsplanned by the private sec-tor are valued at $8 billion andinclude entertainment com-plexes, hotels, and shoppingmalls, housing units, andcommercial office space.

Investor confidence hasrisen significantly as oppor-tunities have opened up bothin Iraq and other neighboringcountries. Minister of Foreign

Affairs Sheikh Mohamad Al-Salem Al-Sabah says theemirate is positioning itself asa financial, commercial andtransport hub for the regionand emphasizes its advan-tages as an investment des-tination. He elaborates:

“Kuwait has a critical geo-graphical position in the re-gion, which is something that

many international compa-nies do not realize. There arenumerous opportunities forforeign firms that establishthemselves here.”

The government is takingaction not only to make themost of the country’s oil re-sources, but also to explorenew sources of income andto encourage the develop-

ment of the private sector. Anumber of state-run enter-prises are to be privatized.

Petroleum accounts for al-most half of Kuwait’s GDP andalmost all export revenue.Kuwait has proven crude oil re-serves of about 98 billion bar-rels and production remains atclose to full capacity, at 2.8million barrels per day (bpd).

Aiming to raise productionto 4 million bpd by 2020, thegovernment is determined topress ahead with the long de-layed Project Kuwait, a multi-billion-dollar plan that wouldalmost double output fromthe northern oil fields.Thescheme is controversial be-cause it would allow the par-ticipation of international oilcompanies, but PrimeMinister Al-Sabah says it is ofstrategic importance for thecountry’s economy.

At the same time, the gov-ernment recognizes the needto diversify the economy toreduce dependence on asole—and ultimately finite—source of income and to gen-erate employment in otherareas.

Concerted efforts arebeing made to streamline bu-reaucracy and encourage theprivate sector to expand non-oil sectors of the economy,such as tourism.

Continued from page 1

MAASOUMAAL-MUBARAKMinister of Planning

The extension of full political rights to women means they will be able to stand for election to Kuwait’s hitherto all-male National Assembly.

The oil industry accounts for almost half of Kuwait’s GDP and 95% of export revenues.

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KUWAIT 01-07 c 25/8/05 09:37 Página 2


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Opening up to foreign investmentTHE huge revenues thatKuwait continues to receivefrom its oil industry have madeit a wealthy country with lessneed of foreign capital thanother developing nations.

What the emirate doesneed, however, is advancedtechnology, expertise, andknow-how in areas such asoil production, power gener-ation, and telecommunica-tions, in addition to access tointernational marketing net-works. These are require-ments that U.S. firms are ina good position to provide.

Kuwait is now taking activesteps to attract investment,particularly into the non-oilsectors of its economy that itwould like to develop, such astourism.

In a speech during his re-cent visit to Washington,Prime Minister Sheikh SabahAl-Ahmad Al-Jaber Al-Sabahextended a particular wel-come to U.S. investors.

“We emphasize that we willfacilitate the participation of theAmerican business commu-nity in the private sector whenit implements ambitious eco-

nomic projects in the State ofKuwait,” he said.

The emirate has revised itsformer restrictive investmentrules with a new ForeignInvestment Law that allows100% foreign ownership incompanies in most sectors.

The law also grants a 10-year tax exemption to foreignbusinesses. Before it cameinto effect, the 55% tax thatforeign companies had to payon profits from the start of op-erations had deterred in-vestment.

Just before theNational Assemblywent into recessfor the summer,the Financial andEconomic AffairsCommittee agreedwith a government pro-posal to reduce corporate taxon foreign companies to 15%.

Steps are being taken tocut through red tape and tosimplify and streamline bu-reaucratic processes. Visa reg-ulations have been relaxed for34 nationalities that are nowable to obtain entry visas at theairport or other points of arrival.

The emirate has also es-tablished the Kuwait ForeignInvestment Bureau (KFIB),tasked with facilitating proce-dures and formalities for for-eign investors.

The Kuwait Stock Ex-change (KSE), the most de-veloped financial market inthe region, is also now opento foreign investors, andthere are extensive oppor-tunities in the privatizationprogram.

Kuwait itself is an af-fluent, if small, mar-

ket with a taste forAmerican prod-ucts. For U.S.companies withwider ambitions,

it can provide asecure, reliable

base. The emirate’s lo-cation at the top of theArabian Gulf makes it anideal gateway to the othermember states of the GulfCooperation Council (GCC)—Bahrain, Oman, Qatar,Saudi Arabia, and the UnitedArab Emirates—as well asthe big potential markets ofIran and Iraq.

U.S.-KUWAITI RELATIONS ALLIES IN THE PURSUIT OF REGIONAL STABILITY, THE TWO NATIONS ARE FORGING STRONGER ECONOMIC AND COMMERCIAL LINKS

RECENT history has createda unique relationship betweenKuwait and the United States.Kuwaitis will never forget thatwhen Saddam Hussein senthis tanks rolling across theborder and occupied the coun-try, it was a U.S.-led inter-national coalition thatdrove the invadersback in the 1991Gulf War.

Since then, thestrategic partner-ship between thetwo nations hasstrengthened. A ten-year defense pact wassigned in 1991 and renewedfor a further ten years in 2001.U.S. military forces have main-tained an approved securitypresence in the country sinceits liberation.

Kuwait has been a staunchsupporter of U.S. policy inAfghanistan and Iraq, andplayed a vital role in OperationIraqi Freedom by allowing itsterritory to be used by coalitionforces. The emirate’s supportof the new Iraqi government

contributes towards theachievement of stabil-

ity in the region, and,because of its strate-gic position, it is serv-ing as a gateway to

the reconstruction ofthe country. The emirate is an im-

portant partner in the U.S. cam-paign against terror, and hasbeen praised for its cooperationagainst Al-Qaeda and the fi-nancing of international terrorism.

Kuwait was the first memberstate in the Gulf Cooperation

Council (GCC) to sign theIstanbul Cooperation Initiative,launched by NATO in 2004 tooffer security cooperation toMiddle-East countries.

President George W. Bushdescribes the emirate as asteady and strong friend of theUnited States, and last yeardesignated it a Major Non-NATO Ally.

Ways of boosting bilateral re-lations further, particularly inthe areas of economic andcommercial cooperation, were

discussed when Kuwait’s PrimeMinister visited Washington inJuly. Sheikh Sabah Al-AhmadAl-Jaber Al-Sabah character-ized his talks with PresidentBush as fruitful and construc-tive. For his part, Mr. Bush wel-comed the historic decision bythe Kuwaiti parliament to give

voting rights to women. Last year, Kuwait signed a

Trade and Investment Frame-work Agreement (TIFA) with theUnited States, which is seen asa first step toward a free tradeagreement. The United Statesbacks economic integration inthe region, and by 2013 hopes

to create a free trade area cov-ering the entire Middle East. FreeTrade Agreements (FTAs) havealready been signed with Jordan,Morocco, and Bahrain.

Richard LeBaron, U.S.Ambassador to Kuwait, says,“By 2013, we hope to developa critical mass of FTAs in theMiddle East and North Africathat can be woven into a MiddleEast Free Trade Area.

“If all the countries in this re-gion were combined into onetrading area, it would be theequivalent of our seventhlargest trading partner.”

The United States is Kuwait’slargest supplier of goods andservices. U.S. exports to theemirate range from iron, steel,drilling and oil field equipment,and chemicals to cars, telecom-munications technologies, andconsumer goods.

Since its liberation, the emi-rate has upgraded its defensecapability by purchasing billionsof dollars worth of U.S. weapons,military systems, and aircraft.

The United States buys crudeoil, petroleum products, andchemical fertilizer from Kuwait.The 260,000 barrels per day ofKuwait crude that it imports rep-resents approximately 3% ofU.S. oil imports.

Prime Minister Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah and President George Bush met for talks in July.

Dealsigned last

year is first move towards a free

trade agreement

Newinvestment law

allows 100% for-eign ownership in

Kuwait-basedcompanies

Buildingbusinesson a firmfriendship

KUWAIT 01-07 c 25/8/05 10:56 Página 3

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KUWAIT 01-07 c 24/8/05 08:38 Página 4


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INFRASTRUCTURE AWASH WITH OIL DOLLARS, KUWAIT IS SECURING ITS FUTURE WITH MAJOR SCHEMES TO DEVELOP ALL SECTORS OF THE ECONOMY

ONE of the most ambitious civilengineering projects ever un-dertaken in the Middle East is dueto get under way in Kuwait Baytowards the end of this year.

Approximately 16 miles longand 200 feet high, the plannedSubiya causeway will stretchacross the bay to link the newtown of Subiya to Kuwait City.Two artificial islands will be cre-ated to support the six-lanebridge, which will take five yearsto construct, at an estimatedcost of $1.5 billion.

The causeway is just one ofa number of mega projectsplanned for the coming years asthe emirate embarks on a spend-ing spree, using some of the vastwealth it has accumulated in oildollars to extend the national in-frastructure.

Many of these relate to the oilindustry, which will have billionsof dollars pumped into it in thecoming years. But large schemesare also planned for other sec-tors of the economy as part ofthe drive to diversify and increasenon-oil income.

Kuwait is strengthening itstraditional role as a transship-ment hub, for example, and amajor project is being launchedto construct the biggest seaportin the region on Bubiyan Island.

Minister of Public Works andHousing Bader Nasser Al-Humeidi is heading the $2 billionfirst phase of the project, whichshould see operations start inlate 2008 or early 2009. Laterphases in the port’s develop-ment—to be completed by2016—will boost capacity from1 million containers to 2.5 mil-lion containers.

Projects associated with thenew facility will include con-struction of a bridge linking theisland to the mainland, a freetrade zone, vast warehouses,and tourist facilities. There arealso plans to build a railwayconnecting the Bubiyan portwith Iraq, Iran, and SaudiArabia. Strategically located at the topof the Arabian Gulf, the port willeventually have the capacityto handle 80% of Iraq’s mar-

ket needs, according toMinister Bader N. Al-Humeidi.It will be a gateway for transitcargo as it will be the nearestport to the south and middleof Iraq compared to other Gulf

or Red Sea ports.The minister says the project

will represent a turning point forKuwait’s economy, elevating itto a higher competitive level. “Itwill provide many jobs for

Kuwait citizens,” he adds.Kuwait’s status as a leading

transshipment hub for the re-gion will be further reinforced bythe expansion of the capacity ofKuwait International Airport from6 million passengers per year to20 million, as well as moderniz-ing facilities.

Central to the plan is the pro-jected new terminal building thatwill be linked to the existing ter-minal via a tunnel and connect-ed to a new access road tothe south.

The expansion of theairport will make animportant contribu-tion to the develop-ment of the tourism,which the governmentsees as one of the mostpromising non-oil sectorsof the economy.

The centerpiece of plans todevelop the tourism industry is thetransformation of Failaka Islandinto a major tourist destination.Situated approximately 12 mileseast of Kuwait City, Failaka is themost beautiful of Kuwait’s islands,

with an ancient history datingback to the early Stone Age.

Foreign investors have been in-vited to participate in the $3.3 bil-lion development, which will seethe construction of a huge holi-day resort featuring entertainmentcenters, hotels, chalets, restau-rants, and a golf course.

An important feature of theproject will be a new harbor witha capacity for 300 boats to linkthe island with the mainland.

Telecom is another area inwhich private sector par-

ticipation is movingthings forward.

The Ministry ofCommunicationsrecently awarded an

almost $50 millioncontract to Siemens to

upgrade telecommunica-tions in six urban areas by in-stalling fiber-optic wiring as partof a nationwide rollout. The firstusers are being connected thisyear, and the ministry claims thatKuwait will be the first country inthe world to offer such a servicenationwide.

Spending spree on mega projects

Construction of huge new developments is due to start this year.

Ambitiousplans will boostsectors such as transport and

tourism

HUMANSOFT is a Kuwaiti share-holding company with a missionto provide integrated solutions inthe field of human and technolog-ical development. Over the yearsthe company has evolved into oneof the largest companies of its kindin the country. Founder, Chairmanand Managing Director Fahad AlOthman comments on Human-Soft’s role and ambitions.

HumanSoft is one of the Kuwaiticompanies spearheading the de-velopment of the region’s knowl-edge economy. What is yourcom-pany’s vision?

Our vision revolves around pro-viding services that integrate hu-man resources and informationtechnology (IT) development tohelp organizations maximize ontheir human capital, individualsrealize their full potential andeconomies prosper in our highlyglobalized markets. We invest increating solutions in education atall levels, IT, and organizational de-velopment to meet the specificneeds of our local markets by pro-viding them with the best tech-nologies and practices availableglobally. We pursue this complexmission through our specializedsubsidiaries that offer a balancebetween specialization and com-

prehensiveness, working with andrepresenting world leaders such asMicrosoft, Cisco, Sun, Oracle, andThomson NETg.

In the long term I would like tosee the entire region contributingpositively to the rest of the worldand, I believe, if provided withgood education and opportunitiesfor economic development, the re-gion can do that.

Do you feel that Kuwait can be-come the regional center for ed-ucation and training services inthe future?

Definitely. Kuwait offers the mostsophisticated base for operations inthe Gulf. It is unique in many ways.It has: a population that is histori-cally known for its business incli-nation and expertise; several gen-erations who have reached highereducation levels; the written con-stitution and laws that foreign in-vestors need to see to feel protect-ed; a financial sector with 40-50years of banking and investmentexperience; a relatively mature stockexchange and central bank; and,overall a very positive business en-vironment. In particular, Kuwait iscurrently enjoying the security of thepost-Saddam era, the huge capitalsthat returned home after Septem-ber 11, and increased oil revenues.

Is your growth strategy focusedmore on moving into new marketsormore on expanding the range ofservices you offer?

I would say both are important. Weare already well established in Kuwaitand the Gulf. Our learning solutionsand e-learning subsidiary operates atthe Middle East level. But our ambi-tion is to be global.

At the same time we aim to repli-cate in other fields what we haveachieved in information technology.

Early on in 1995, we envisaged theopportunity of utilizing the training andcertification of leading IT vendorssuch as Microsoft, Oracle, and Sun,to create the technical cadres the Mid-dle East is in dire need of. However,we had to localize what IT vendorsdevelop for practicing ITprofession-als to make it accessible to the mass-es of young Arabs. The learning so-lution we came up with was at the timea novel concept that enabled us to tapwhat was an entirely new market forIT vendor training.

You already work with the mostrenowned names on the interna-tional IT scene. Where can Hu-manSoft benefit most from furtherpartnerships with US companies?

American companies have a lot tooffer and like all oil producing coun-tries in this region, Kuwait suffers fromovercapitalization. There are billionsof dollars in need of decent invest-ment opportunities throughout theGulf but this is a market that you mustcommit to. As a company, in spite ofbeing for-profit, we are eager to bringlong-term value to wherever we work.This is the business philosophy that

has made us so successful and it is whatwe are passionate about. So we lookfor American companies who are in-terested in people, who share our vi-sion, who can join us in an equal part-nership, and believe in the region as along-term proposition.

You have lived in the United States.What did you gain from this expe-rience?

As a person who lived and stud-ied there, I personally owe atremendous debt to the U.S. I metgood people there and experiencedlove and appreciation from peoplewho supposedly differ in religion,culture, and color.

Kuwaitis have a true love forthe American people that was on-ly enhanced by your liberation ofour country. I encourage all busi-nesspeople, researchers, acade-mics and journalists to really in-vest in understanding Kuwait.Kuwait can be a very importantally and help disseminate a lot ofthe good things about Americathroughout this part of the world.

www.human-soft.com

FAHAD AL OTHMAN, Chairmanand Managing Director ofHumanSoft, states: “To complete ourmission and successfully bring thelatest technology to this part of theworld we have to address thequestion of who will operate and useIT effectively.”

Human development company to up productivity in the Gulf

KUWAIT 01-07 c 24/8/05 08:38 Página 5

Banking offers the best op-portunity for Kuwait to diversi-fy away from oil. Total bank-ing assets amount toapproximately $68 billion. Lastyear saw record profits, and allfive of the largest banks post-ed profit increases in the firstquarter of this year. Creditto the private sectorgrew by 37.6% in2004 over the pre-vious year’s level asoil prices continuedto surge.

Governor of theCentral Bank ofKuwait (CBK) SheikhSalem Abdul-Aziz Al-Saud Al-Sabah sees a bright futureahead. “The banking sector isin a very healthy state,” he says.“It is an extremely liquid mar-ket, and opening our system toforeign banks will continue todevelop and add value to our

banking system through healthycompetition. It also presentsopportunities for integrationand synergies for domesticKuwaiti banks and banks fromabroad.”

The first foreign banks to belicensed are already busy set-ting up shop in Kuwait City. TheEuropean banking and finan-cial group BNP Paribas hasbeen present since March, andthe National Bank of Abu Dhabiand HSBC expect to be oper-ational by the end of the year.

Currently limited to singlebranch operations, the foreignbanks will focus on corporatebanking, trade, and privatebanking services.

The Governor of the CentralBank says the foreign banks

are aware that they willnot be able to com-pete with Kuwaitibanks in the retailmarket, but therewill be a high level of

competition in thecorporate market.“We are well placed to

compete,” he adds. “The sizeof the investment portfolio man-aged by the investment com-panies is currently about $27.4billion,” he comments.

Yousef Al-Jassem, SecretaryGeneral of the Union of KuwaitiBanks, agrees. “Kuwaiti banks

have been given A ratings byagencies like Moody’s, Fitchand Standard & Poor’s,” he ob-serves. “They are among themost technologically advancedin the region and are well pre-pared for any foreign compe-tition.”

Technology has become oneof the weapons used as the bat-tle for retail customers has in-tensified. The National Bank ofKuwait (NBK) and Burgan Bankhave pioneered online bankingfacilities and services allowingconsumers to use their cellphones for retail purchases.

The government-controlledKuwait Finance House (KFH),which has enjoyed a monopolyin Islamic banking, is introduc-ing a range of new customer in-centives now that the sector hasbeen opened to competition withthe passing of a new IslamicBanking Law.

Operating according toIslamic principles has made KFHone of the largest Islamic banksin the region, with assets worth$7 billion, 27 branches, and acustomer base of 400,000 rep-resenting approximately 35% ofthe Kuwait retail market.

With the issuing of two newIslamic banking licenses, how-ever, others are set to tap intothis highly profitable market.Kuwait Real Estate Bank (KREB)


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FINANCE AND BANKING AS THE STOCK MARKET BOOMS, THE ARRIVAL OF FOREIGN BANKSAND INCREASING DEMAND FOR ISLAMIC BANKING PROVIDE NEW CHALLENGES

EXCITING and challenging timeslie ahead for Kuwait’s financial in-stitutions as fresh opportunitiesarise from liberalization and theoil-driven economic boom.Competition is arriving in theform of foreign banks, and de-mand is increasing for new prod-ucts and Islamic banking.

Kuwait boasts one of thelargest banking sectors in theGulf, and has been advancingits ambition to be recognized asthe financial hub of the regionthrough reform and improved su-pervision of the finance industry.

Tighter guidelines have beenintroduced on credit extension,deposit taking, and capital andasset ratios. The authoritieshave won praise from theInternational Monetary Fund,which has acknowledged thedevelopment of financiallysound, well-managed, andprofitable institutions.

Change and competitionreshape the landscape

Newtechnology

plays a key part as the banks

battle for customers

A prime example of Islamic prin-ciples in action is aviation leaseand finance company ALAFCO.Ahmad A. Alzabin, the firm’sChairman and Chief ExecutiveOfficer, says: “All our financialoperations are Islamic compli-ant, all involve ethical investingand are equity related—solelyusing the genuine asset or thecash-flow they generate.”

Over the last three years,ALAFCO has propelled itself intothe ranks of the fastest-grow-ing and most successful com-mercial aircraft leasing firms.Since 2002, during the sever-est down cycle in the air travelindustry, the Kuwait-based com-pany has built a fleet of 12 air-craft, which it leases to airlinesin Asia, the Middle East, andEurope.

“During this period our cap-ital quadrupled on account of thecompany’s outstanding resultsand the growing confidence ofour shareholders,” Mr. Alzabinrecalls.

ALAFCO was established in1992 as a prospective subsidiaryventure of Kuwait Airways, butwas relaunched in 2000 afterbeing acquired by KuwaitFinance House (KFH), whichspecializes in Islamic banking.

Kuwait’s sole aircraft leasing

firm, ALAFCO also offers con-sultative services in relation toaircraft acquisition and dispos-al, lease management, and tech-nical monitoring.

Year-end resultsreported by thecompany in Sep-tember 2004 show-ed a 98% rise in itstotal revenues to $39million over the pre-vious year, while netprofits increased to$10 million.

ALAFCO’s assetvalues total morethan $369 million,with 12 owned and13 managed aircraft, and morethan 15 million airline customers.This year, the acquisition of a fur-ther five planes will expand thesize of its fleet to 17 aircraft.

ALAFCO is investing inemerging technologies that willset the standard for the indus-try’s future, having signed amemorandum of understand-

ing to purchase 12Airbus A350 long-haul, medium ca-pacity aircraft. Theintention to order isvalued at $2 billionand includes an op-tion to buy a furthersix. Deliveries willstart in the thirdquarter of 2012.

“We believe thatAsia in general , andChina and India in

particular, will remain the fastestgrowing markets, and over 50%of our present fleet is placed inthose countries,” concludes Mr.Alzabin.

Ahmad A. AlzabinChairman and CEO of ALAFCO

ALAFCO is increasing the size of its fleet to 17 aircraft.

With one of the largest banking sectors in the Gulf, Kuwait aims atbecoming a financial hub in the region.

Islamic principles underlieaircraft leasing firm’s take-off

KUWAIT 01-07 c 25/8/05 09:43 Página 6


7


Security has boosted marketAMONG the factors drivingwhat he views as a long-termrising trend on the KuwaitStock Exchange, Faisal Ali AlMutawa pinpoints the height-ened sense of security sinceSaddam Hussein ceased torule neighboring Iraq.

“Security in the area is nolonger a problem,” says Mr.Al Mutawa, Chairman andManaging Director of BayanInvestment Co. “Safety hasa very important psycholog-ical effect that feeds into theboom we are in and has hada positive impact on the stockmarket.”

Formed by a group of busi-nessmen, banks and financialinstitutions in 1997, BayanInvestment Co. has won astrong reputation for its localand international investmentservices, featuring among thetop 150 companies in the GulfCooperation Council (GCC).

It was the leading invest-ment company in Kuwait in2004 in terms of profits, andin the first quarter of 2005recorded the highest profits ever posted by a

Kuwaiti investment company.Among its many services,

Bayan manages investmentportfolios on behalf of clients,and advises on participationin international investments,both direct and indirect. Thecompany also provides ac-cess to investment opportu-nities in selectedsectors, in addi-tion to initial pub-lic offerings (IPOs)and private place-ments.

Mr. Al Mutawafirmly believesKuwait has thepotential to be-come a financial,commercial andservices center.“We believe in itand we think thisis what Kuwaitneeds to do,” he says.

“It has all the ingredients,including its strategic locationnext to Iraq which will requirehuge construction efforts forthe next 20 years. Once se-curity is attained in Iraq, it willbe one of the biggest work-

shops since the SecondWorld War’s Marshall Plan.Kuwait has to be prepared tobe the gateway for the re-construction of Iraq.”

Mr. Al Mutawa affirmsKuwait has a strong, vibrant,and experienced private sec-tor and wants to see a greater

role for it in the de-velopment of theeconomy.

A leading ad-vocate of closeties with the U.S.,and co-founder ofthe liberal NationalDemocratic Mov-ement, he urgesinvestors to con-sider Kuwait as apotential oasis ofinvestment and totake advantage ofthe liberalization of

the economy. “Bayan would be happy to

assist U.S. investors in par-ticular,” he says. “We havethe know-how, the capabili-ty, and the system to makeinvestments as professional aspossible.”

FAISAL ALI AL MUTAWAChairman and MD of BayanInvestment Co.

Mutual Trust …

FinancialSecurity …

SuperiorPerformance…

P.O. Box 104 Al-Dasmah, 35151 Kuwait – Tel: (965) 84 00 00 – Fax (965) 243 1435www.bayaninvest.com Email: [email protected]

International standards helpGlobal win regional reputationA firm belief in the value ofresearch contributes to thesuccess of Global InvestmentHouse, an investment bank-ing firm that manages morethan $4 billion from clients allover the Middle East andNorth Africa (MENA) region.

Global stands out for itsfocus on investing in intel-lectual capital and data, ratherthan solely on playing thebooming stock markets. Asa result, 65% of its fees arerecurring, while most of itscompetitors depend on stockmarket performance for 80 %of their fees.

The company boasts theregion’s largest data bank.“We have more than 70 fi-nancial analysts at Global,and this is the largest corpo-rate desk in the entire MENAregion,” says Maha K. Al-Ghunaim, Vice Chairman andManaging Director. “We doresearch for companies, sec-

tors, and countries all overthe GCC.”

Global has establishedmore than 20 companies, in-cluding specialized firms withinterests in the health and ed-ucation sectors, some with acapital of $300 million.

“For big projects youneed a local partner,”says Mrs. Al-Ghunaim. “I don’tmean a Kuwaitipartner but a GulfC o o p e r a t i o nCouncil (GCC)partner who canopen doors through of-fering support in data andstructuring and equity finance,in which we are very active.”

Global recently won the‘Best Equity House in Kuwait’award from the financial mag-azine Euromoney and is dri-ving up standards across theinvestment industry in Kuwaitand the region. Profits went

from $10.6 million in 2002 to$73.3 million in 2004.

“Ourr company has alwaysstrived to attain internationalstandards and to work for in-ternational clients,” says Mrs.Al-Ghunaim. “We have alwayspositioned ourselves for two

things: one is to be thenumber one in GCC

markets and theother is to be thebest partners forinternational com-panies that want

to come and workhere.”

Global now hasoffices in Bahrain, Oman,Dubai, and Jordan. It is list-ed in Bahrain as well asKuwait and is soon to be list-ed in Dubai.

“Global is not a Kuwait-based company anymore,”Mrs. Al-Ghunaim says. “Likemany other banks, it is ex-panding throughout the Gulf.”

is in the process of convertingfrom a conventional bank to afully Islamic bank, and a newIslamic bank, Bank Bubiyan,has been established.

Several international banksare eager to enter the market,including HSBC and BNPParibas. “That’s one of the mainreasons they are coming here,”says Jassar Al-Jassar, KFH’sGeneral Manager.

He expects to see signifi-cant growth in Islamic bankingin the coming years. “There isa growing demand, not onlyfrom clients and banks, butalso from governments,” heelaborates.

The changing landscape athome is prompting Kuwaitibanks to look at extending theiractivities beyond their nation-

al borders. Leading the way isNBK, whose regional networkhas expanded to include SaudiArabia, Qatar, Bahrain, Jordan,and Iran. NBK is one of threeforeign banks authorized to op-erate in Iraq, and has acquireda 75% majority stake in CreditBank of Iraq.

Meanwhile, Gulf stock marketshave been enjoying one of themost sustained booms in their his-tory. The Kuwait Stock Exchange(KSE) is among the fastest grow-ing in the Middle East.

In 2003, KSE was among theworld’s top-performing marketswhen its index advanced by aremarkable 102%, before slow-ing to 30.3% in 2004. Investorconfidence pushed market cap-italization over the $100-billionmark for the first time in April this

year, and the first half of 2005witnessed the listing of 19 newcompanies.

Analysts remain bullish onKSE’s prospects, and the out-look continues to look posi-tive. Legislation is being pre-pared to improve transparencyand introduce stiffer punish-ments for insider trading.

In May, Dow Jones laun-ched the Dow Jones KuwaitIndex, a composite equityindex that will track the per-formance of the Kuwaiti mar-ket. Leading companies inthe index include the PublicWarehousing Company, theMobile TelecommunicationsCompany (MTC), and threeKuwaiti banks: NBK, KFH,and the Gu l f Bank o fKuwait.

Firm offershelp with data,red tape, equity

finance, and structuring

Analysts remain bullish about prospects for the Kuwait Stock Exchange (KSE), one of the fastest-growing stock markets in the Middle East.

DA

NIE

L S

TOR

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KUWAIT 01-07 c 24/8/05 08:40 Página 7


8


FOURTEEN years ago theinfrastructure of Kuwait’s keyeconomic sector was all butdestroyed by the Iraqi army,which left the country under apall of black smoke from burn-ing oil wells as it was driven outby U.S.-led coalition forces.

Today, the emirate is backamong the world’s leading oilproducers, and planning toincrease its current outputof 2.8 million barrelsper day (bpd)) to 4 bil-lion bpd by 2020.

That the industrywas restored soquickly is a tribute tothe work of theKuwait Petroleum Cor-poration (KPC), the bodyresponsible for the production,refining, and transportation ofKuwait’s oil.

State-owned but commer-cially oriented, KPC was estab-lished in 1980 to unify Kuwait’sdiverse oil sector under a singlecorporate umbrella. Now thecorporation is set to play a keyrole in a multi-billion-dollarinvestment plan to rehabilitateand modernize the sector’sinfrastructure.

According to Minister ofEnergy, Chairman of KPC andPresident of OPEC Sheikh

Ahmad Fahad Al Ahmad AlSabah, Kuwait plans to investaround $10 billion over the nextfour years as part of its long-termstrategy to boost output and ex-port capacities. Over the next 20years, investment in the oil in-dustry will rise to $55 billion.

Central to the government’splans is Project Kuwait, whichaims to almost double the oil pro-

ducing capacity of thenorthern oil fields to

900,000 bpd. Approximately

two-thirds of Kuw-ait’s oil productioncomes from the

southeastern on-shore Greater Burgan

field. Investment inProject Kuwait will be focusedon the oil fields of Rawdatain,Abdali, Sabriya, and Ratqa tothe north, which currently pro-duce around a fifth of the total.

The project depends on mas-sive investment by internationaloil companies in the advancedtechnology required to developthe fields. The cost is estimatedat $8.5 billion.

It would be the first time thatmajor foreign investment hasbeen allowed in Kuwait’s oilsector since the industry wasnationalized in the 1970s.

However, the authorities are atpains to stress that ownershipof the oil would remain with thestate, in accordance withKuwait’s constitution.

“Basically, we have fourmajor oil fields where therewould be an operating serviceagreement with an international

oil consortium,” explains HaniHussain, KPC’s DeputyChairman and Chief ExecutiveOfficer. “Through an operatingservice agreement, they wouldbe entitled to certain profits thatwill be linked to the operationand will be enhanced as per-formance improves.”

WORLD demand for oil isexpected to increase signifi-cantly over the next 25years, and the oil-rich ArabGulf states will be increas-ingly relied upon to supply it.

Almost 80% of the world’soil reserves are controlled byOPEC, the Organization ofPetroleum Exporting

Countries, of which Kuwaitwas a founder member in1960 together with Iran,Iraq, Saudi Arabia, andVenezuela.

The 11 members ofOPEC today produce about40% of the world’s crude oiland are responsible foraround 60% of oil exports.

OPEC’s objectives areorder and stability in theinternational oil market. Itcoordinates petroleum poli-cies among its membercountries, with the aim ofensuring that supply anddemand remain steady andsecure, while prices for con-sumers, revenues for pro-

ducers and returns toinvestors are fair and rea-sonable.

OPEC expects globaldemand for oil to increase by28 million bpd to 111 millionbpd by 2025—an averagegrowth rate of 1.5% perannum. Much of it will comefrom developing nations—

particularly China and India—whose consumption isexpected to almost double.

Demand for 2006 is fore-cast to average 85.2 millionbpd, an increase of 1.5 mil-lion bpd, or 1.9% over total2005 consumption.

Despite the continuingrise in the price of crude,

OPEC argues that the oilmarket remains well sup-plied and that its productionshould be more than suffi-cient to meet requirements.

It says it is committed toexpand capacity in both themedium and the long term inorder to meet the needs ofconsumers.

SHEIKH AHMAD FAHAD AL AHMAD AL SABAH, Minister of Energy,Chairman of KPC and President of OPEC

Energy for our worldCELEBRATING ITS SILVER JUBILEE THIS YEAR, THE KUWAITPETROLEUM CORPORATION IS ONE OF THE WORLD’S TOPENERGY SUPPLIERS. AS IT PREPARES FOR THECHALLENGES AHEAD, IT ANTICIPATES A BRIGHT FUTURE.

OPEC: sustaining global economic growth

Overthe next 20 years, $55 billion

will be pumped into the oil

sector

Kuwait Petroleum Corporation (KPC)

The likely returns to the for-eign companies involved in theproject have been estim-ated at around $3.2 billion.ChevronTexaco, ExxonMobil,and BP are leading consortiacompeting for the contract.

The project passed the firsthurdle in June when a parlia-mentary committee unani-mously approved a draft law toseek the help of foreign compa-nies. Kuwait's parliament is dueto debate the project inOctober.

Mr. Hussain saysthe next 25 years willprovide both chal-lenges and opportu-nities, but he remainsconfident of a con-tinued bright futurefor the petroleumsector.

KPC operatesthrough five majorsubsidiaries: theKuwait Oil Comp-any (KOC), which is responsi-ble for oil and gas production;the Kuwait National PetroleumCompany (KNPC), which con-trols refining, gas processing,and product marketing; theKuwait Oil Tanker Company(KOTC), which transportscrude oil and liquefied petrole-um gas (LPG); the Petro-chemicals Industries Com-pany (PIC), which managesdomestic petrochemical andfertiliser production; and the

Kuwait Foreign PetroleumExploration Company (KUF-PEC), which undertakesexploration activities abroad.

The Supreme PetroleumCouncil, the highest energyauthority in Kuwait, has rec-ommended that KPC priva-tizes some of its non-corebusinesses, and both KOTCand KUFPEC are to be sold.

Mr. Hussain stresses theimportance of private sectorparticipation in future oil sector

projects. “The pri-vatization processwill encompass alot of segments inthe oil sector, andin some casesAmerican partici-pation would comein collaborationwith the Kuwaitiprivate sector. Sothere are greatopportunities.” Hemakes the point

that, on both the managementand technical side, there isalready a large American partic-ipation in Kuwait’s oil industry,even in sectors that are largelygovernment owned.

“We utilize a lot of U.S. tech-nology, particularly when build-ing our refineries and petro-chemical plants,” says Mr.Hussain. “Most of the sophisti-cated processes that we useare ones that are licensed byAmerican companies.”

HANI HUSSAINDeputy Chairman and CEO of KPC

KUWAIT 08-13 24/8/05 08:42 Página 8

KuwaitSPECIAL ADVERTISING SUPPLEMENT

9


IN the vanguard of the gov-ernment’s plans to produce 4million barrels of petroleum aday is the Kuwait Oil Company(KOC), the subsidiary of theKuwait Petroleum Corporation(KPC) responsible for oil andgas production.

Formed in 1934, KOC man-ages 10% of the world’s oilproven reserves. A successfulpartnership between the com-pany and international oil com-panies will be the key to thesuccess of Project Kuwait, andKOC is preparing by under-taking a major upgrade of in-frastructure.

Hundreds of miles of un-derground crude oil and gaspipelines are being replaced.Upgrading and rehabilitationwork is under way at oil gath-ering stations—where impuritiesare removed from the crude—and gas booster stations.

KOC has signed contractsworth almost $2 billion withSouth Korea’s SK Engineering& Construction Company andthe British-based companyPetrofac. Petrofac has alsobeen contracted to supply fullmaintenance services.

According to Farouk Al-Zanki, KOC’s Chairman andManaging Director, the con-tracts will provide a completelynew infrastructure and add sig-nificantly to the company’s pro-duction capabilities. They willalso help to meet another of

KOC’s priorities by providingits workers with a safer work-ing environment.

Over the next couple ofyears, KOC also plans to ex-pand its storage and exportfacilities at Mina Ahmadi,Kuwait’s main port for crude oilexports. Storage capacity foran additional 11.4 million bar-rels of crude is tobe created.

“The moderniza-tion project will raisethe production ca-pability in the southand east of Kuwaitfrom the present av-erage of 1.5 millionbpd to a level of 1.7million,” says Mr. Al-Zanki. “The new ex-port facility will in-crease our exportcapability to a sustained levelof 3 million bpd.”

Advanced techniques arebeing introduced to discovernew reserves of oil and toexploit the capacity of exist-ing wells as fully as possible.They include the use of hori-zontal drilling to reach pock-ets of oil lying adjacent to theoriginal finds.

The reopening of GC15,Kuwait’s largest oil gatheringstation, in the northernRawdatain region in January,has boosted productioncapacity by 380,000 bpd to2.8 million bpd. The station

was the scene of an explosionand fire in 2002, in which fourpeople died. A gas boosterstation and a power stationwere also destroyed. Therebuilding project, includingnew and improved technology,was carried out by SouthKorea’s SK Engineering &Construction working withmaintenance teams at KOC.

KOC itself has been under-going internal reorganizationand a drive to increase the skills

and safety of itsemployees.

“We needed tochange the way weconducted our busi-ness,” says Mr. Al-Zanki. “We havebeen making a sig-nificant effort toreshape the compa-ny. Changes havebeen made to theorganizational struc-ture, new processes

have been developed, and weare in the process of implement-ing very effective training pro-grams.”

Emphasis on health andsafety has been strengthenedconsiderably since the accidentat GC15. Mr. Al-Zanki stressesthat the new company cultureis dedicated to providing a saferwork environment for theemployees and to giving themthe confidence to reach the tar-get for increased productioncapacity. To conclude, hepoints out that KOC now con-siders safety as a number onepriority.

Powering globalexpansionAT THE CENTER OF ITS LONG-TERM STRATEGY FORGROWTH, THE KUWAIT OIL COMPANY IS UPGRADINGITS FACILITIES AND ENLARGING EXPORT CAPACITY.

Since 1946, when Sheikh AhmedAl-Jaber Al-Sabah turned a silverwheel to commence the flow of the first Kuwaiti exports, KOChas striven to modernize andexpand

FAROUK AL-ZANKIChairman and MD of KOC

Kuwait Oil Company (KOC)

Established in 1934, the Kuwait Oil Company (KOC) is not only one of the lowest cost oil producing companies in the world, but also a source of pride for the nation. While its activity portfolio includes onshore surveys, drilling of test wells, development of production fields, andnatural gas exploration, KOC’s professionalism, stringenthealth and safety standards, and strong know-how are itstrue sources of power.

Kuwait Oil Company (KOC)

www.kockw.comTel +965 3982929 Fax: +965 3982233

TRUE TO POWERFULPROFESSIONALISM

KUWAIT 08-13 24/8/05 08:43 Página 9

www.knpc.com.kw Tel: +965 2440420 Fax: +965 2450390

KNPC – at the heart of Kuwait’s worldResponsible for refining Kuwait’s hydrocarbons, Kuwait NationalPetroleum Company (KNPC) runs one of the largest oil complexesin the world. A superior example of public sector performance,KNPC provides a reliable supply of high quality refined productsand LPG to local and international markets. A major contributorto the national economy, the company provides plentiful employ-ment opportunities while adding maximum value to Kuwait’shydrocarbons by applying the flexibility and high service levelsdemanded by the international market. A socially-minded andenvironmentally-concerned organization, KNPC is at the heart ofKuwait’s long-term development.


10


Kuwait National Petroleum Company (KNPC) posted an almost seven-fold rise in profits in 2004/2005.

New refinery willbe ready by 2010MAJOR investment is plannedto boost Kuwait’s oil refining ca-pacity. Existing refineries arebeing modernized and an ad-vanced new refinery is to bebuilt to provide environmentallyfriendly fuel to the emirate’spower stations.

The current combined pro-duction capacity of the emi-rate’s three existing refineries—Mina Abdullah, Mina Ahmadiand Shuaiba—is 930,000 bar-rels per day (bpd). The KuwaitNational Petroleum Company(KPNC), the refining arm of theKuwait Petroleum Corporation(KPC), plans to expand this ca-pacity to 1.3 million bpd by2010 by investing more than $7billion.

Established in 1960, KNPCprovides high quality refinedproducts and liquefied petrole-um gas to local and interna-tional markets. It is at the heartof the country’s energy grid anda vital element of its economy.

Together with the rise in theprices of oil products, increasedoperational efficiency has con-tributed to a marked improve-ment in KNPC’s balance sheetin recent years.

The company posted an al-most seven-fold rise in net prof-its for 2004/05, reaching a record$2.15 billion from $322 millionthe previous year. The WorldRefining Association has cho-sen Mina Abdullah as Refineryof the Year.

“One reason for our successhas been our technical features,”explains Sami Al-Rushaid,KNPC’s Chairman andManaging Director. “The differ-ence between the spread of light

crude and heavy crude in-creased considerably. Our re-fineries are designed for Kuwaitcrude, which is considered heavyto medium. In effect, we are buy-ing cheap crude and producinghigh quality products. That iswhy Mina Abdullah has done sowell, since it is the highest con-version refinery that we have.”

Construction of KNPC’snew refinery is expected tostart before the end of 2006and to be completed by theend of 2010 at acost of $5 billion.With a crude refin-ing capacity of450,000 bpd, thenew facility will bethe largest in theregion, producinglow-sulfur fuel forKuwait’s powerstations.

“It will be flexi-ble enough to han-dle the heaviestcrude that Kuwait produces,as well as the standard Kuwaitexport crude,” says Mr. Al-Rushaid.

If, at some later stage, Kuwaitstarts importing natural gas fromneighboring countries, such asIran or Qatar, the refinery will bereoriented to produce oil prod-ucts for export.

The project managementcontract has been awardedto the U.S.-based firm FluorDaniel, which is also handlingthe upgrading of the MinaAbdullah and Mina Ahmadi re-fineries. A $36.9 million con-tract for upgrading work atthe Shuaiba refinery has beenawarded to Kuwait’s Heavy

Engineering Industry andShipbuilding Company.

Kuwait’s oil exporting capac-ity received a major boost inFebruary with the opening of anew, state-of-the-art offshorepier at Mina Ahmadi, which is themain port for the export of crude.

Built at a cost of $330 million,the pier is the largest and mostadvanced of its kind in theMiddle East. It is able to receivecrude supertankers with a ca-pacity of up to 350,000 tons

and can cater to sixvessels simultane-ously, while its state-of-the-art facilitieshave cut loading timefrom 48 hours to 30hours.

KNPC is offering acontract to build a$400 million ethanerecovery unit at MinaAhmadi, for whichSouth Korea’sHyundai Engineering

& Construction is the low bid-der. In May, it signed a 20-yearcontract with the Kuwait-U.S.firm Petroleum Coke Industries(PCI) for the construction of aplant to produce 350,000 tonsof calcinated petroleum cokeannually at Mina Abdullah.

Privatization of Kuwait’slocal fuel distribution network,which KNPC was originallyestablished to manage, isalready under way. A privateholding company, the FirstCompany for Local FuelMarketing, has been set up—with KPC holding a 24%stake—and has been takingover control of the gas sta-tions from KNPC.

SAMI AL-RUSHAIDChairman and MDof KNPC

Kuwait National Petroleum Company (KNPC)

KUWAIT 08-13 24/8/05 08:44 Página 10


11


Safer vessels on order for tanker fleetKUWAIT has a rich tradition ofshipping. Long before the dis-covery of oil, Kuwaiti vesselswere sailing the waters of theArabian Gulf, the Red Sea,the East Coast of Africa, andIndia, trading in goods andcarrying passengers.

The Kuwait Oil TankerCompany (KOTC) was found-ed in 1957, by a group of in-vestors who foresaw how important seaborne trans-portation would be for the de-velopment of the oil industry.By the 1970s, oil export hadbecome of such strategic im-portance to Kuwait that in1976, the government decid-ed to become a partner toKOTC, assuming a 49% sharein the company and boostingits development.

Three years later, the gov-ernment acquired full control,and when the KuwaitPetroleum Corporation (KPC)was established in January1980, KOTC became its ship-ping arm. KOTC currentlytransports approximately 20%of KPC’s total oil exports.

Today, in line with KPC’splans to increase productionto four million barrels per day(bpd) by 2020, KOTC is mak-ing substantial investmentsrenewing its fleet—one of thelargest in the world, current-

ly numbering 26 vessels. Thisis due to take place in twostages, the first of which willinvolve the construction ofseven tankers.

Last August KOTC signeda $1.8 billion contract withHyundai Heavy Industries ofSouth Korea for the con-struction of four of the vessels:

two crude oil tankers with adeadweight capacity of317,000 tons and two largetankers for liquefied gas andammonia with a capacity of82,000 square meters. Thefirst of the ships is due for de-livery before the end of 2006.

All the new tankers will bedouble-hull vessels, providing

AS a prime example of thehigh potential of partner-ships between Kuwaiti andU.S. companies, EQUATEis hard to beat. It is a jointventure between Petroch-emical Industries Company(PIC), the petrochemicalsarm of the Kuwait OilCompany (KOC), and theAmerican-based Union Car-bide Corporation, a wholly-owned subsidiary of DowChemical Company.

Now in its tenth year,EQUATE is one of the world’sleading suppliers of polyeth-ylene, one of the most com-monly used plastics, and eth-ylene glycol, which is used tomake polyester for fabricsand plastic bottles.

From its 800,000 tonsper annum ethane crackerat Shuaiba, EQUATE sup-plies more than 600,000tons of polyethylene and400,000 tons of ethylene to

markets in the Middle East,North Africa, the Far East,and Europe.

With demand for plasticsand chemicals expandingrapidly, Kuwait’s abundantethane feedstock and prox-imity to world markets givesEQUATE a great competitiveadvantage, and the compa-ny has gone from strength tostrength in terms of profitabil-ity. Its 2004 results showednet profits of $620.5 million, a126% increase on the previ-ous year. President and ChiefExecutive Officer, Hamad Al-Terkait, described 2004 as agolden year.

EQUATE is proud of itssafety record and of the highpercentage of Kuwaiti nation-als in its labor force.

PIC and Dow, meanwhile,are pressing ahead withexciting new projects, forwhich EQUATE will be thesole operator.

In March, work started onthe building of a second eth-ylene and derivatives com-plex, designated Olefins II,which is expected to startoperations in 2008. Projectmanagement is being han-dled by the U.S.-based firmFluor Daniel.

Olefins II is planned tohave an 850,000 tons perannum ethane cracker anda world-scale 600,000tons per annum ethyleneoxide/ethylene glycol plant.The existing plant’s600,000 metric tons ofpolyethylene capacity is tobe expanded to use theadditional ethylene.

In addition to Olefins II,PIC and Dow are also plan-ning to build an ethylben-zene/styrene unit of 450,000tons per annum suppliedwith ethylene from Olefins IIand benzene from a newaromatics plant.

New project for winningKuwaiti-U.S. partnership

twice the protection for bothcargo and the environment.

KOTC plans to order ninenew vessels in all, in-cluding two giantcrude tankers. By2008, it aims tohave a modernizedfleet of 29 tankers,with a deadweightcapacity of 4.6 mil-lion tons, capable oftransporting up to 30% ofKuwait’s oil exports.

Fully aware of its responsi-bilities as the face of Kuwait

in international waters, KOTCis committed to maintaining itshigh standards and sound rep-

utation. The companywas awarded the

world safety andquality certificates(ISM/ISO) in Novem-ber 1997.

“Our deliveryoperations are clean

and non-polluting,”says Abdullah Al-Roumi,

KOTC’s Chairman and Man-aging Director. “Providing re-liability and high international

standards is the best way ofmarketing your services toclients.”

KOTC follows all marinesafety and security regula-tions, while improvements inequipment, procedures, cargohandling, discharging, andmanagement of ballast wa-ters have further reduced thechances of damaging or al-tering the marine environment.

“We have the highest stan-dards in terms of our shipsand our crews. Ninety-five per-cent of shipping incidents aredue to human error, so youhave to invest in training,” saysMr. Al-Roumi.

KOTC has an ongoingcadet training program, send-ing young Kuwaitis to collegesin Britain to study marine en-gineering and navigation, fol-lowed by further training onboard tankers.

Mr. Al-Roumi elaborates:“Many of our young peoplego through rigorous training invarious aspects of shippingand management to enhancetheir capabilities to take overfuture jobs awaiting them.”

KOTC is earmarked for pri-vatization, but it is unlikely totake place soon. In 2004 thecompany made net profits of$60 million.

Mr. Al-Roumi emphasizesthe cyclical nature of the busi-ness and the need to respondto changing circumstances.“We need the freedom tomove with the market.” heconcludes.

The new offshore pier at Mina Ahmadi, which opened in February, is the largest and most advanced in the Middle East.

KOTCis proud of itsreputation for

reliabilityand clean operations

Kuwait Oil Tanker Company (KOTC)

KUWAIT 08-13 24/8/05 08:45 Página 11


12


“We opted to be a world-classcompany from day one”

Saad H. Al-Barrak, Managing Director of MTC Group

Saad H. Al-Barrak, MTC’s Managing Director and Vice Chairman, was acknowl-edged earlier this year as the Middle East’s Information and CommunicationTechnology CEO of the year.

FOUNDED IN KUWAIT IN 1983, THE MOBILE TELECOMMUNICATIONS COMPANY (MTC)HAS BEEN EXPANDING SINCE ITS MANAGING DIRECTOR AND VICE CHAIRMAN SAAD H.AL-BARRAK TOOK OVER IN 2002. HERE HE OUTLINES THE COMPANY’S REMARKABLETRANSFORMATION, HIS MANAGEMENT STYLE, AND THE VISION THAT DRIVES HIM ON.

How would you assess theprogress made by MTC since youtook over?

When I assumed my position in2002, MTC was moving from gov-ernment control to private control.What our people have achieved in avery short period of time since thenis a most impressive transformationprocess. Since then, MTC hasgrown from a companybased in Kuwait to be-come a regional playerin five Middle-Easterncountries and 13African countries asCeltel. It has moved froma local, government-runmonopoly to a fast-growing,open, flexible, market-oriented, andhighly competitive company. It is re-ally a great achievement for the youngprofessionals who work here, and thenew generation will take MTC to thefrontiers of world-class companies.

What is your personal manage-ment style, and how has it im-pacted on MTC?

I am a very impatient person.Unless the challenge consumes mylife I will not go for it. I am a man ofslogans. I come up with a sloganand our people here at MTC all gocrazy to implement it.

I went to the United States whenI was 17 years old and lived therefrom 1973 to 1982. My experiencein America has influenced my life ingeneral. America is the greatest busi-ness environment in the world—20years ahead of Europe in my view.

What is MTC’s strategy for cop-ing with competition?

MTC has been market proac-tive. We did not wait for the com-petition to come here, we wentto them in their countries andcompeted with them. We havecompetitors in all of those coun-tries—some of them alliances withthe most renowned names in the

world. We opted from dayone to be a world-class

company, because ourobjective at the end isto be a global com-pany. So it is a proac-

tive strategy rather thana reactive one.

How much potential do yousee in the regional telecom-munications sector? Are youlooking for help from foreign in-vestors?

The Arab world has 300 mil-lion people and less than 52 mil-

lion mobile lines, so the penetra-tion rate is less than 18%. Thismarket is likely to grow by fivetimes in the next five to sevenyears. That’s a unique econom-ic opportunity.

We would welcome joint co-operation with American firms inthe development of the telecom-munications market in this partof the world. My message to theAmerican business community isnot to look at Kuwait as a mar-ket but as a window to a greatermarket.

We look forward to learningfrom the Americans once we setup our company in the UnitedStates to compete for the U.S.mobile market.

In 2003, MTC won a contractto operate a GSM network inIraq. What was the challengeand why did youtake it on?

“Inorder to

evolve into aglobal company

we must aspire toworld-classstandards”

The Middle Eastregion’s telecomsector is expectedto grow by 85% within thenext five years.

Strategy aims to achieve transformation from local to global player in just 9 yearsALREADY a leading cellphoneoperator in the Middle East andAfrica, MTC has set itself thetarget of becoming a globaloperator in a period of less thana decade.

Launched by Saad H. Al-Barrak in 2003, an ambitiousthree-by-three expansion strat-egy aims to achieve in just nineyears what other companieshave taken more than 27 yearsto bring about.

The strategy allocates threeyears for the completion ofeach of three stages of pro-gressive development—local,regional, and global. Acquis-itions and partnerships will bean important part of the driveto attract 20 million customersby 2011.

Having established a strongregional presence (see articleon facing page), MTC made amajor advance in its expansion

strategy by acquiring 85% ofthe subscribed shares of Celtel,the leading sub-Saharan cellu-lar company. The remaining 15%of Celtel will be secured overthe next two years.

The move boosts MTC’scustomer base to 10.6 millionspread across 18 countries—13 of them in Africa—and pro-pels the group into the inter-national arena.

“We have exceeded our tar-

gets for the first leg of our 3x3x3strategy ahead of schedule,”says Dr. Al-Barrak. “Our acqui-sition of Celtel will help us ex-pand our footprint into Africa.

“The MTC Group strives to beat the heart of the global telecom-munications community. Wehave strengthened our key op-erating metrics and financial ra-tios and with the Celtel acqui-sition, MTC is a leader amongits peers.”

Subscriber base per country as of Jun 30, 2005 Subscribers by Operation (000s) Q1 2005 Q2 2005 Growth MTC-Vodafone, Kuwait 1,307,000 1,381,000 6% Fastlink, Jordan 1,255,000 1,434,000 14%MTC-Vodafone, Bahrain 136,000 165,000 21% MTC-Atheer, Iraq 346,000 650,000 66%MTC Touch, Lebanon 446,000 479,000 7% Middle East - Total 3,490,000 4,033,000 16% Africa - Celtel * 6,574,000 - Total 3,490,000 10,607,000 204%

*Celtel acquired in Q2 2005

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MTC track record

The challenge has been tobuild a viable business in a verycostly market within two years,which is the period of licensingthat we have before renegocia-tion later this year. We have donethat out of our commitment to theregion, our social and nationalresponsibility as a leading com-pany. Our investment is expect-ed to reach $430 million by theend of 2005. Staffed 100% byIraqis, the MTC-Atheer opera-tion now has 650,000 active sub-scribers.

Also, it is estimated that as aresult to our presence in Iraq,some 7,000 direct and indirectjobs have been created, whichwill reach 10,000 by the end ofthe year. We have been encour-aged by the government to in-vest and play our role. We all haveto endeavor to channel Iraq intoa better future.

What is MTC’s philosophyof corporate governance?

We comply with world stan-dards in terms of corporate gov-

An 18-countryplaying fieldand room forexpansion ONE OF THE LARGEST TRANSACTIONS IN THE HIS-TORY OF THE REGION’S CELLULAR MARKET PUTSMTC AT THE HELM OF A MAMMOTH OPERATION.

At the forefront of technological developmentMTC is embarking on the nextstage of its business devel-opment, embracing new tech-nologies and partnerships.The company’s dedication toproviding its customers withthe most up-to-date serviceshas put it at the forefront oftechnological development inthe region.

MTC-Vodafone Bahrainwas launched in 2003 withthe first 3G/EDGE nation-wide network in the world.Within 18 months, the op-eration had gained over165,000 subscribers andtaken an approximate 20%market share.

Earlier this year, MTC

Vodafone Bahrain was award-ed two international certifi-cates by the international ver-ification, testing, andcertification company BSIManagement Systems: ISO9001:2000 Quality Manage-ment Systems and BS7799-2:2002, the international stan-dard for Information SecurityManagement Systems.

MTC-Vodafone Kuwait andMTC-Vodafone Bahrain arethe only telecommunicationsoperators in the Middle Eastto be certified to BS 7799-2:2002 with a full organiza-tion scope. The accreditationcovers all the company’s busi-ness processes.MTC provides its customers with the latest hi-tech services.

WITHIN just three years,MTC has firmly establisheditself as a leading player inthe Middle East, where mar-ket analysts predict growthof 85% in the telecom sec-tor by 2010. More recently,it has undertaken a ground-breaking expansion to 13African nations.

In June 30, 2005, As a re-sult of the acquisition ofDutch-based Celtel Internat-ional B.V., which represent-ed the single largest foreigndirect investment in Africanhistory, the company regis-tered a 306% customer in-crease in relation to 2004.It now serves over 10.6 mil-ion customers in over 18countries in the Middle Eastand Africa.

In Kuwait, where it oper-ates as MTC-Vodafone, itconfirmed its position as theleading mobile telecommu-nications operator in Junewhen it reached a total of 1.3million subscribers.

MTC entered into astrategic partnership withVodafone, the world’s lead-ing cellphone company in2002. The agreement wasthe first of its kind in theMiddle East.

MTC’s first step towardsbecoming a regional com-pany was taken with the ac-quisition in January 2003 ofa 91.6% equity interest inJordan Mobile TelephoneServices Company (Fastlink).

In April 2003, anotherMTC-Vodafone partnershipwas awarded the secondGSM license in Bahrain.

In October 2003, MTCwas selected by theCoalition Provisional Auth-ority in Iraq to install and op-erate a GSM network with-in Southern Iraq. Launchedin March 2004, MTC-Atheercompleted the roll out of the1120-mile network cover-age along the entire South-ern Region, and has sinceextended its services intoBaghdad. The network willcover all of Iraq by the endof 2006.

More than 650,000 cus-tomers have signed up tothe service and the figure isexpected to increase to 1mill ion subscribers bySeptember and 1.5 millionby the end of this year whenthe network wil l be ex-panded to offer full GPRSservice.

In June 2004 the gov-ernment of Lebanon award-ed MTC a four-year contractto manage the cellular net-work LibanCell. Now calledMTC Touch, the network hasbeen upgraded with a newIntelligent Network (IN).

Now an expanding inter-national company, MTC iscontinuing to look for oppor-tunities abroad and also with-in its own region, whose lowpenetration rate makes it apotentially lucrative market.

ernance, and this has attracteda good many companies in theworld to come and talk to usabout cooperation and joint ven-tures, both inside and outsideKuwait.

People know our books are ac-curate, and that we are trans-parent and declare everything wedo. MTC is a public company. Wetry to keep a very tightly con-trolled, disciplined corporate gov-ernance, without losing flexibilityand agility.

How do you see relations be-tween Kuwait and the UnitedStates?

Kuwait is a country that, in itshistory, is as young as the UnitedStates—250 years. It has alwaysexcelled in its business skills, evenbefore the oil. And it is a countrythat is most indebted to the UnitedStates for what it has done for it.I think we stand in a very uniqueposition vis-a-vis the U.S., andthere are great opportunities towork together to develop the eco-nomic opportunities of the region.

MTCoperations inthe Middle

East and Africa

Kuwait-based MTC has become a major contributor toregional progress in the last two years.

DA

NIE

L S

TOR

EY

Kuwait

Jordan

Bahrain

Iraq

Lebanon

Burkina Faso

Chad

DemocraticRepublic of CongoGabon

Kenya

Malawi

Niger

Republic of Congo

Sierra Leone

SudanTanzania

Uganda

Zambia

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14


INDUSTRY THE AL-KHARAFI GROUP IS PRESENT IN VIRTUALLY EVERY SECTOR OF THE ECONOMY

Family firm goes fromstrength to strength

Second cellphoneoperator expands its horizons

RECOGNIZED as one of the world’sleading business personalities, NasserMuhamed Al-Kharafi puts no limit on hisambitions for the international con-glomerate that he heads. As theChairman of M.A. Kharafi & Sons, hewould like to see the family-owned, multi-sector group—current turnover ap-proximately $4 billion—double, or eventreble, in size.

With roots in Kuwait going back morethan 100 years, the Al-Kharafi group isactive in virtually every sector of the emi-rate’s economy. Its interests range fromengineering and construction, agribusi-ness and food industries, finance andbanking to manufacturing and industry,real estate, infrastructure, tourism, leisure,and hospitality.

Kharafi is one of the largest con-tracting groups in the Middle East anda major player in BOT (build-operate-transfer) schemes in the region, but itsactivities extend much further, to SouthAfrica and Europe.

“Since Kuwait is a very small market,the only way of developing the group wasto go international and take risks, as wellas assuming the huge potential of theregional market,” explains Mr. Al-Kharafi.“First we ventured into other Gulf coun-tries—Saudi Arabia, the United ArabEmirates—and then to Egypt and on toSouth Africa.”

The group has established a trackrecord for handling major projects. InKuwait itself, it recently completed thenew Sulaibiya sewage treatment plant,the largest reverse osmosis complex inthe world. The $447.5 million facility willprovide for 26% of Kuwait's overall waterdemand. It was built in partnership withthe U.S. company Ionics—one of a num-ber of partnerships undertaken by Al-Kharafi with American companies.

“They have equity with us and webought technology from them for thereverse osmosis process,” says Mr. Al-Kharafi. “The project was finished threemonths ahead of schedule and has beena great success.”

The group is also buildingthe new Al-Shaikh Jaber Al-Ahmed International Stadium,to the south of Kuwait City.Due for completion next year,the KD 55 million ($190 mil-lion) hi-tech stadium will beequipped to stage the biggestregional and internationalsports events before 60,000spectators.

Mr. Al-Kharafi believesthere are many opportuni-ties for American companiesin the region.

Through its subsidiary company,Americana, the largest food companyin the Middle East, the Al-Kharafi Groupowns the franchise for Pizza Hut,Kentucky Fried Chicken, TGI Friday's,Hardees, and several other U.S.-basedfast food chains in the region. The con-

sumer goods it produces include HeinzKetchup and Cadbury’s chocolate.Americana has reached annual sales of$1 billion dollars through 600 outlets in11 Arab countries.

“We started with Wimpy and then itdeveloped into Kentucky Fried Chicken,

Hardees, and Pizza Hut,”recalls Mr. Al-Kharafi. “Wewent into the industry con-vinced of what we weredoing.”

The Al-Kharafi group isone of the largest foreign di-rect investors in Egypt, withassets and investments to-taling approximately $1.8 bil-lion. Its most recent projectsinclude the new Marsa AlamInternational Airport—Egypt’sfirst successful BOT trans-portation project, for which it

holds a 40 year concession—and thePort Ghalib International Marina.

The conglomerate is the largestsingle shareholder in the Marsa AlamTourism Development Company(MATD), which is developing the 12-mile stretch of Red Sea coastal

land in which Port Ghalib l ies.The conglomerate is involved in re-

construction in Iraq through its KharafiNational company, which provides en-gineering, construction and mainte-nance services to the petroleum, chem-icals, power, water and commercialindustries. Kharafi National is workingas a subcontractor for a subsidiarycompany of Halliburton on a U.S. Army-awarded contract to rebuild Iraq’s oilinfrastructure.

The National Bank of Kuwait, inwhich the Al-Kharafi Group owns an es-timated 16%, is part of a consortiumof banks that is rebuilding the bankingmarket in Iraq.

Recent activities further afield by Al-Kharafi companies include the buildingof hotels, tourist villages and a holidayresort in Albania, and the developmentof a $200 million golf and residential es-tate in South Africa.

“Our group has been very active over-seas for a long time,” says Mr. Al-Kharafi.“That’s where our capacities lie. It makessense to go to developing countries.They are the perfect places to find abun-dant opportunities.”

THE cellular market in Kuwaittook off after the entry ofWataniya Telecom in 1999 asthe second cellphone opera-tor. In the following three years,penetration rates jumped fromjust 14% to 54%, and cus-tomers have reaped the bene-fit as competition has drivendown prices.

“We were the company tobring competition to Kuwait’stelecommunications sector,”says Harri Koponen, Wataniya’sGeneral Manager and ChiefExecutive Officer. “Wataniyashowed Kuwaitis what com-petition can do for them.”

Over the last year, the pen-etration rate has risen to ap-proaching 85%, but Wataniyacontinues to be a growing com-pany looking for new business

to explore.This year, Wataniya Telecom

has significantly upgraded itsnetwork, providing faster andmore efficient wireless internetaccess and supporting appli-cations such as video andmusic downloads. “It is impor-tant that we invest in customerservice,” says Mr. Koponen.

Kuwait, he says, is distin-guished from other developingcountries by its wealth.

“Kuwaitis want Kuwait to be aleading country and they don’twant to use old technology.They are very curious aboutnew technology and are readyto spend for their future. Theysee the benefits.”

In the first quarter of 2005 thecompany posted a consolidatednet profit of $41.6 million, an in-crease of 11% compared to thesame period in 2004. There wasgrowth in Wataniya’s markets inTunisia, Algeria, and Iraq, andtotal active customers increasedby 22% to almost 3.5 million.

In March, the company’s subsidiary, Wataniya Inter-national, signed a managementagreement with Saudi Arabia’sPublic TelecommunicationsCompany after acquiring a 38%stake.

Wataniya Telecom and Nokiaare embarking on extensive co-operation after signing a $125million agreement to enhanceWataniya’s network in Kuwait,opening the way to fourth gen-eration cellular technology.

“The company is becominga service leader in the regionand is seen by the people as acompany that uses the highesttechnology to benefit the cus-tomer,” says Mr. Koponen.

The Kharafi group’s activities include major construction projects.

NASSER MUHAMEDAL-KHARAFIChairman of M.A.Kharafi & Sons

Wataniya is achieving standards of excellence in Kuwait’stelecommunications.

KUWAIT 14-20 25/8/05 09:51 Página 14

See if it fitsMany American companies already wear the Kharafi hat with pride.American companies have a worldwide reputation for beingshrewd, efficient, and skilled in the latest technologies andbusiness techniques.

When they look for local partners overseas, they look for thesame qualities.

The Kharafi Group of Kuwait can point with pride to manynotable American companies with whom we have workedin Kuwait and elsewhere in the region.

Construction and civil engineering is one of our mainactivities and we are one of the region’s largest contractors,and we are ISO-9001 certified.

We act as agents for overseas manufacturers and servicecompanies and represent them in Kuwait and elsewhere.

We make paper, insulating foam, steel pipes, andpotato chips among many other goods.

The largest food company in the Near East,with over 600 outlets in 13 countries, is

part of the Kharafi Group.

So, if your company is looking to dobusiness in Kuwait, you know whose

hat to try on first. We will give you a head start.

The Kharafi Group of KuwaitWe’ve got everything it takes

Call our Marketing Department for a copy of our corporate video on DVD or VHS

Marketing Department M.A. Kharafi & Sons WLLPO Box 886, Safat 13009

KuwaitTel: 00 965 481 3622

Fax: 00 965 483 0078email: [email protected]

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16


Unisteel wants export restriction relaxedINDUSTRY KUWAIT’S SOLE MANUFACTURER OF STEEL HAS THE CAPACITY TO SELL MORE OF ITS HIGH QUALITY PRODUCTS TO OTHER COUNTRIES

IN production for just threeyears, Kuwait’s sole manufac-turer of reinforcing and structuralsteel, the United Steel IndustrialCompany (Unisteel), has built areputation both for its compet-itive pricing and the quality of itsproducts.

The world-class plant alreadymeets the need for steel withinKuwait itself, export-ing production toneighboring GulfCooperation Council(GCC) countries.However, Unisteel iseager to use theextra capacity it hasto export more.

Awwad Al- Khaldi,Unisteel’s Chairman,predicts that de-mand for finishedsteel products in theMiddle East will grow by about5% in the coming years, notleast in Kuwait itself, wheremajor projects are in thepipeline.

Unisteel was established in1996 through joint partnershipof Kuwait investors and Ascotecof Germany, and worked withVoest Alpine of Austria to erectthe first rolling mill in Kuwait.

The company uses 100%iron ore and no scrap metal inits products. It has the capaci-ty to produce up to 800,000

tons of steel barswith sizes rangingfrom 8mm to 40mmin diameter. Most ofits billet supplycomes from Iran.

“We can produceto any internationalstandard, depend-ing on the cus-tomer’s require-ments,” says Mr.Al-Khaldi.

“We have enoughcapacity for Kuwait’s marketand its close neighboring areasin terms of high quality finishedproducts. We already exportour goods to Saudi Arabia, and

Iraq as well through theAmericans. For southern Iraqwe are the best source of fin-ished steel.”

Last year Unisteel increasedits production of reinforcing steelbars to 460,000 tons, but thecompany would like the limit on

its level of exports removed sothat it can make full use of its ca-pacity. Currently, the govern-ment allows Unisteel to export

150,000 tons of steel per annum. “During the last year, we

would have been able to pro-duce 800,000 tons of finishedsteel products, but we haven’tdone so because of a minis-terial decree restricting exportof steel,” says Mr. Al-Khaldi.“We need to establish a free,transparent and competitivemarket.”

He urges U.S. companiesto come to Kuwait. “We aregrateful to the United Statesfor its historical role in defeat-ing aggression. Kuwait hasgreat potential for investment.”

He says Kuwait needs tobe open and flexible as it wasin the past. “We want to returnto the situation in the 1950sand 60s, when Kuwait was anopen country with no barriers.

“We have to be an opencountry if we want to regain ourposition as a regional leader,because other countries in theregion are already taking off,”concludes the chairman.

AWWAD AL-KHALDIChairman ofUnisteel

Unisteel’s state-of-the art plant employs the latest technology to manufacture high-standard products.

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17


TRADE FOCUSING ON EXPANSION OF INTERNATIONAL BUSINESS

Reliability andexperience

KUWAIT Industries Company(KIC) was established as aholding company in 1993.KIC is an entrepreneurial pi-oneer in the State of Kuwait.Its subsidiaries, includingKuwait Aluminium Company,United Glass Company,Kuwait Metals and ArabianLight Metals, are all ISO-9000certified for quality manage-ment systems, while ArabianLight Metals is the first com-pany in Kuwait to gain theOHSA 18001 certification.

KIC is now looking to de-velop its plan for the building of

an alumina refineryon Bubiyan Island,the largest island inKuwait’s coastalchain, and is seekinga suitable partner.

There are alreadytwo giant aluminiumsmelters in theMiddle East and twomore are expectedto start productionby 2008.

At the momentall of these are importing alu-mina from outside the region,so there is a tremendous po-

tential for an alu-mina refinery inKuwait. Aware ofits competitiveedge, the com-pany is eager tocapitalize on thegreat scope forthe growth in alu-mina refining.

KIC is pro-moting investor-friendly policies inthis type of enter-

prise and developing advancedtechnology for research anddevelopment in this area.

KIC plans island alumina plant

MOHAMMED AL-NAKIChairman of KuwaitIndustries Company

STRATEGICALLY located at thehead of the Arabian Gulf, Kuwaitis developing the infrastructure tobecome the trade hub for the re-gion. The emirate is already serv-ing as a gateway for recon-struction in Iraq, and the launchof a common Gulf CooperationCouncil (GCC) market due totake place in 2007 will give a fur-ther boost to regional commerce.

The United Arab ShippingCompany (UASC) has providedregular, uninterrupted shippingservices to the Arabian Gulf foralmost 30 years. While other ship-ping lines called a halt during theinvasion of Kuwait, UASC sim-ply carried on.

“We are reliable in this part ofthe world in good times and inbad times,” says Khalifa A. Al-Shebli, Deputy CEO, andChief Finance andAdministration Officer.

With its head-quarters in Kuwait,UASC is the largestocean carrier of drycargo to the MiddleEast. It has maintainedits market leadership bybeing the top carrier both interms of liner cargo and portcoverage. “We have great ex-perience and know the areabetter than anybody,” says Mr.Al-Shebli.

Improvements in operationalefficiency and cost controlhelped to increase UASC’sturnover to more than $982 mil-lion, with a net profit of $135 mil-lion in 2004—the tenth con-secutive year that the companyhas achieved profitable results.Another landmark was achievedby transporting more than 1 mil-lion TEUs (20-foot equivalentunits), in addition to 890,000tons of general cargo.

The 25 ships of UASC’s fleetare maintained to the highest in-dustry standards—all vessels areclassified as Lloyds 100A1. Aspart of the company’s growthstrategy, eight new 6800 TEUhigh-speed container ships havebeen ordered, and are due for de-livery in 2008. Clients are able tomake cargo bookings, and tracktheir shipments via the internet.

UASC offers container ser-vices for the global trade flows be-tween North Europe, theMediterranean, North Africa, theRed Sea, the Indian Sub-Continent, Asia, and NorthAmerica. Its current focus is onexpanding its international busi-ness. Jorn Hinge, Deputy CEOand Chief Trade and OperationsOffice, explains: “Today half our

business comes from theMiddle East. In the next

five to 10 years, wewould like it to repre-sent one third of thebusiness as we growin the rest of the

world,” he says.The Kuwait-based

Public Warehousing Com-pany (PWC) is already the lead-ing provider of end-to-end sup-ply chain solutions in the MiddleEast. PWC has been workingclosely with the U.S. military inthe region, and was named NewContractor of the Year for 2004by the United States’ DefenseLogistics Agency (DLA).

By acquiring both the U.S.-based Transoceanic ShippingCompany and the Asian-basedTrans-Link Group this year, PWChas become one of the world’slargest logistics services providers.

Kuwait’s world-class logisticssector is not limited to shipping,however. Two further large con-tracts with the U.S. military were

The United Arab Shipping Company passed a landmark for container transportation last year.

Thelaunch of a

common GCCmarket will boost

regional commerce

Master plan to develop tourism “WE have good hotels and goodfood, and could easily do whatDubai and Qatar have done andmore, given Kuwait’s size, itslarger population and its biggerfinancial resources,” says HaniKafafi, General Manager of theCrowne Plaza Hotel in KuwaitCity. “All that is needed are cre-ative projects.”

Like others in the emirate’shotels and hospitality industry,Mr. Kafafi feels Kuwait hastremendous potential fortourism development and wel-comes the extensive 20-yeartourism development plan thathas been launched by the gov-ernment.

The development of a prof-itable tourism industry is a keyelement of the emirate’s bid todiversify the economy and cre-ate new jobs for Kuwaiti citi-zens. The government’s long-term development plan, drawnup in association with the WorldTourism Organization and theUnited Nations DevelopmentProgram, aims to promoteKuwait as an ideal location bothfor family vacations and for busi-ness meetings and exhibitions.

Mr. Kafafi is “very positive”that recent changes, such asthe New Investment Law andthe relaxation of visa regula-tions, will help the tourism mar-ket to grow.

“At the moment Kuwait doesnot have the facilities to ac-commodate a big conferencefor a couple of thousand peo-ple, but with the opening of newhotels and the easing up ofvisas, a lot of new opportuni-ties will be created,” he says.

Part of the InterContinentalHotels Group, the CrownePlaza’s target clientele is the busi-ness traveler, for whom it pro-vides everything to make his orher stay as pleasant and con-venient as possible—includinghigh speed internet access inevery room. The hotel boastsno fewer than seven restaurantsand is the only one in Kuwait tohave a gym open 24 hours a day.

The hotel also offers some ofthe tightest security in the coun-try. “Security in Kuwait is of a veryhigh level,” adds Mr. Kafafi.

A lot of emphasis is placedon the InterContinental Hotels

awarded to the company’s sub-sidiary PWC Logistics in June,worth a potential $15.5 billionover a five-year period.

The first means that PWC willcontinue as the prime vendor forthe provision of food and relat-ed items to the U.S. Military inKuwait, Iraq, and Jordan. Thesecond is for the largest heavy-lift transportation contract everawarded by the U.S. military.

Kuwait’s hotels offer a pool of opportunities for business travelers. Continued on page 18

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IFA1/2 page

Group Priority Club loyal-ty program. “Recent sur-veys have indicated thatthe highest number of re-peat guests in our hotelsare members of the PriorityClub,” says Mr. Kafafi,who is the Director ofOperations for the group inthe Northern Gulf.

InterContinental Hotelsis the biggest hotel groupin the Middle East and hasbeen present in Kuwait forthe past 20 years. Withinthe next four years, it ex-pects to have four hoteloperations in the emirate.

The government’s blue-print for tourism includesplans to develop the islandof Failaka, Kuwait’s mainarchaeological site, andBubiyan island as majorvisitor attractions.

The main focus is ondomestic and regional tourism.With many Kuwaiti nationalscurrently taking their vacationsabroad, and spending billionsof dollars outside the country,the authorities are eager to redi-rect a high proportion of this rev-enue to boosting Kuwait’s GDP.

They also want to capture asignificant share of the lucra-tive regional market by at-

tracting visitors from across theGulf Cooperation Council(GCC) area, targeting marketssuch as Bahrain, Oman, Qatar,Saudi Arabia and the UnitedArab Emirates.

The emirate has alreadytaken steps to make itself moreaccessible. Visitors from NorthAmerica, Western Europe,Southeast Asia, Australia and

New Zealand are now ableto obtain entry visas on ar-rival instead of having toapply for them weeks in ad-vance.

Millions of dollars havebeen spent on improvingpassenger and baggagehandling systems at KuwaitInternational Airport. Pass-enger and commercial flightsare increasing at the airport,which handles approxi-mately 2.5 million passen-gers a year and is served by35 major airlines.

Under the new ForeignInvestment Law, foreigncompanies are now allowed100% ownership of tourismprojects, and a number ofmajor tourism projects areunder way, including newhotel complexes and otherleisure developments.

Kuwait City is a moderncity with excellent shopping

facilities, ranging from glitteringair-conditioned shopping mallswith the latest designer storesand boutiques to traditionaldowntown souks offering car-pets, jewelry, and gold.

Events like the recently es-tablished annual Hala shop-ping festival, have already start-ed to increase the number ofvisitors.

Investing for lasting valueNOBODY has ever seenanything quite like The Palm,Jumeirah before. A man-made island offshore Dubaicontaining premium hotelsand luxurious developments,it has escaped the con-straints of earth’s natural ter-rain to create a resort thatfew could even imagine.Such an adventurous, am-bitious, and high profile pro-ject is typical of its largestinvestor, Kuwait’s investmentpowerhouse, InternationalFinancial Advisors (IFA).

IFA has a long history ofsuccess in providing bor-rowing and lending services,offering financial advice, trad-ing securities, and manag-ing investment portfolios.Since becoming Chairmanand Managing Director in2002, Jassim M. Al-Baharhas expanded the compa-ny’s activities, particularly in-creasing its focus onproperty investments andhotel and resort develop-ments.

Its subsidiary, IFA Hotelsand Resorts, is now at theforefront of tourism basedreal estate developments inthe Middle East, Europe, theIndian Ocean,and Africa. Thesuper-premiumSheraton Al-garve Hotel inPortugal, thestunning Zim-bali Coastal Re-sort in SouthAfrica, and theexotic ZanzibarBeach Hoteland Resort arefurther exam-ples of IFA’sleading ven-tures.

“In property, we go afterquality investments, creat-ing long-lasting value,” saysMr. Al-Bahar. Regarding IFA’sability to deliver products thatstand out on the market, thehead of IFA emphasizes thecompany’s worldwide net-work of alliances. “The key

element in our operations isthe forging of internationalstrategic alliances. We bringour expertise, but we alwaysneed a strong local partner

with knowledge ofthe area.”

Listed on theKuwait Stock Ex-change with a mar-ket capitalization ofover $1 billion andplans to be listed inJohannesburg andeventually London,IFA is well posi-tioned to continueits global expansion.

Mr. Al-Bahar be-lieves IFA is build-ing upon Kuwait’s

entrepreneurial tradition. “Thepeople of Kuwait have al-ways been pioneers. Theyhad the vision and courageto go and seek worldwideopportunities without navi-gation charts. Today it is theinvestors’ and bankers’ turnto explore the world for busi-ness openings,” he says.

JASSIM M. AL-BAHARChairman and MD ofInternationalFinancial Advisors

Modern shopping malls and traditionalsouks make Kuwait a shopping paradise.

Continued from page 17

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Dedicated to promotingpeace and developmentacross the world

THE Kuwait Fund for ArabEconomic Development madehistory on its foundation in 1961when it became the first aidagency to be established by adeveloping country. It has beencommitted to helping peoplearound the world regardless oftheir race or creed ever since.

“Kuwait has been blessed,and we want to use our wealthto help promote developmentand peace in theworld,” says Direc-tor General Abdul-wahab A. Al-Bader,explaining the rai-son d’être of theKuwait Fund.

Originally foc-used on Arab na-tions, the fund isnow expanding itsglobal reach to pro-vide financial andtechnical assistanceto countries aroundthe world. Offeringloans with favorableconditions, the fund has lentover $11.5 billion to financeprojects in 101 different coun-tries so far. East Asian andPacific countries are big recip-ients and, increasingly, Africa isbecoming a priority.

“Our emphasis on Africareflects the pressing need toalleviate poverty and improvepeople’s opportunities for a bet-ter life,” says Mr. Al-Bader.

It remains a little-known factthat Kuwait’s foreign assistanceis considerably higher than theUN target for rich, capital sur-plus countries. This generosity

is felt across the world, includ-ing in some countries closer tohome. Mr. Al-Bader elaborates:“As a whole Kuwait has close re-lations with countries around theworld although, of course, wehave had problems with Iraq. Iremember being in Iraq in 1989to sign a loan agreement two orthree months before the invasion.Now, we are in the process ofestablishing good and strong

relations with thecountry, and are be-ginning to assist inits developmentagain.”

The fund is in-creasingly focusingon social issuessuch as health andeducation, particu-larly in Africa. It hasrenewed its long-standing commit-ment to the riverblindness controlprogram in WestAfrica until at least

2010 and is working in sup-port of the Highly Indebted PoorCountries (HIPC) Initiative andthe United Nation’s MillenniumDevelopment Goals.

“We are intensifying our effortsto address the plight of poorpeople and to create the con-ditions necessary for improvingtheir lives,” states Mr. Al-Bader.

One of the fund’s key toolsin the fight against poverty isthe support of social funds.“Well designed social fundswith microfinance schemesallow the poor, particularlywomen, to contribute to their

own well-being,” explains Mr.Al-Bader.

The Kuwait Fund’s coop-erative philosophy is evident inits approach to the projects itfunds, where it works along-side both local bodies and development institutions to ensure effective project im-plementation.

“Over half of the projects wesupport are co-financed. Wethink of ourselves as a devel-opment partner in the 101countries where we are pre-sent,” says Mr. Al-Bader.

In addition to finance, thefund also builds technical ca-pacity by supplying the exper-tise required for projects to getoff the ground and the trainingof local partners.

“Capacity building is es-sential for countries to takecharge of their develop-ment—to help them in lead-ing and in owning their de-velopment operations,”stresses Mr. Al-Bader.

In December 1961, theKuwait Fund for ArabEconomic Development(KFAED) became thefirst aid agency to befounded by a developingcountry when it wasestablished as the Stateof Kuwait’s agency for the provision of financial and technical assistance to developingcountries. By the end ofMarch 2005 KFAED had participated in thefinancing of over 670projects in 101 differentcountries around theworld regardless of theirrace or creed.

Committed to Development

Kuwait Fund For Arab Economic DevelopmentPartners in Development

since 1961

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Infrastructure is essential for economic and social development. The transport sector accounted for 68% ofthe fund’s total loans in 2003-2004.

AID ABROAD THE KUWAIT FUND FOR ARAB ECONOMIC DEVELOPMENT CHANNELSA SIZEABLE PORTION OF THE NATIONAL INCOME INTO LESS WELL-OFF COUNTRIES

ABDULWAHAB A. AL-BADERDirector General ofthe Kuwait Fund forArab EconomicDevelopment

COUNTRY STAFFCommercial

and Project Director:Kerren Triffon

Editorial Director:Daniel Storey

SPECIAL THANKSto Mohammed Sarfraz for his help and collaborationwith the graphic material

for the report

KUWAIT 14-20 25/8/05 10:09 Página 19

Sailing to new shores.

When we look back on our accomplishments, we can’t but feel proud for becoming one of the leading mobile operators in the Middle East and Africa in two short years. When we look ahead and see all the promising opportunities, we can’t but realize that there is still a lot to be done. In the end, the horizon is always bound to meet the sky. Visit us at www.mtc.com.kw

K U W A I T J O R D A N B A H R A I N I R A Q L E B A N O N A F R I C A ( 1 3 C O U N T R I E S )

KUWAIT 14-20 24/8/05 08:57 Página 20

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INSIDER VIEW Kuwait - Summit Reportsmost half of Kuwait’s GDP and almost all export revenue. Kuwait has proven crude oil re-serves of about 98 billion bar-rels and production remains