The KD30 billion ($100 billion) development plan passed by Kuwait's parliament last week can boost the country’s non-oil private sector economy and support the construction sector, according to a report.

The plan is aimed at financing the much-delayed infrastructure projects, which are thought to include an  upgrade of the country’s strained energy grid, the construction of a container harbour and the development of a new business hub (Silk City), said the report by Stathis Kyriakides, assistant vice president – analyst, Moody's Investor Service.

These projects – including the development of the country’s northern oil fields – have long been delayed by political discord between the country’s executive and legislative branches.

Both the timing and manner in which the proposed plan is implemented will determine its impact on the economy and the local banking sector, said the report.

Kuwait’s corporate sector is dominated by a small number of highly interconnected conglomerates with links to the real estate and construction sectors.

Kuwaiti banks, particularly second-tier banks, have large exposures to the construction and real estate sectors. The implementation of the announced plan could bode well for the credit standing of local construction companies and have a positive impact on the asset quality of Kuwaiti banks, many of which suffered elevated credit charges in 2009 as a result of their large exposures to the sector, said the report.

Having cleared the parliamentary hurdle, the plan’s approval by the government, and
 ultimately the Emir, is expected to be straightforward. However, the efficient implementation of the development plan remains in question given that the country’s
 cumbersome bureaucracy has prevented authorities from meeting much lower spending
 targets, the report added. - TradeArabia News Service