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A number of major developments are underway in the transport sector following the massive spending plan approved by the Kuwaiti government in 2010. Projects include the expansion at Kuwait International Airport, with a new terminal set to raise passenger capacity from 7.2m to 20m upon completion in 2017. Plans to develop a metro system are now at the feasibility stage. While defence and government services are set to decline with the withdrawal of US troops from Iraq, the energy industry has become the greatest source of demand for logistics in the country. A new port project at Boubyan brings the possibility of construction and development projects in post-war Iraq.

Ever since Kuwait opened its mobile market to further competition by granting a licence to a third mobile operator, Viva, in 2008, competition has ratcheted up. However, while the number of mobile subscribers has also increased, from 4.09m in first-quarter 2010, to 4.59m registered users in 2011, operator revenues have declined. With tightening margins, mobile internet and value-added services have become the primary battleground in the fight for revenues. Blackberry, iPhone and iPad promotions, for example, are now targeted at the youth and high-income segments of the population. Internet penetration rates have increased, yet at just 39%, the coming years should see many opportunities for entrepreneurs to deliver specialised online content to Kuwaitis. However, the government wishes to ensure that internet service providers bring prices down over time as the market develops, and is considering the introduction of a sector regulator.

As in many other countries, the construction industry in Kuwait was one of the first-hit areas of the economy during the global recession. However, because of this, the sector is set to benefit from hundreds of billions of dollars in infrastructure spending to be spent over the next 20-25 years as part of Vision 2035. This investment will be staggered over a series of five-year plans, the first of which being the National Development Plan (NDP), which will run until 2014. Key to the NDP will be the development of several transport projects that will improve the efficiency of commuter and construction networks. In addition, a number of human development projects are in the works, with several universities, medical facilities and hospitals set to be built in the coming years. Residential construction is also a key aspect of the plans, and to help meet growing housing demand, the government is planning six new residential cities across the country with a total of 70,000 units. The government sees liquidity injection and private-sector participation as key means of achieving these ambitious targets.

With oil still very much the backbone of its economy, Kuwait is looking to expand production. State-owned Kuwait Petroleum Corporation (KPC) has approved $90bn worth of spending on the oil and gas industry up to 2015. Indeed, gas has sizeable potential, since Kuwait currently produces less than 1% of its proven reserves of natural gas. Increasing this amount will translate into both financial and environmental benefits, reducing dependence on more costly liquid fuels. Diversification is another key domestic policy; plans have been announced to build four 1000-MW nuclear reactors by 2022, and Kuwait has signed cooperation agreements with a number of countries. Solar power is also being examined to increase electricity generation capacity, both as part of Kuwait’s diversification strategy and to meet rapidly rising demand for electricity. This chapter includes an interview with Farouk Al Zanki, CEO, KPC.

The sector is entering a period of transition following its recovery from the global economic downturn. Although penetration rates are low, rapid population growth, rising per capita income levels and regulatory developments like the 2010 privatisation law are driving up demand for insurance products in Kuwait. A number of takaful (sharia-compliant) insurers are successfully emerging, tapping into a market that has traditionally been inaccessible to conventional providers. Insurers are also looking for ways to take advantage of the government’s economic stimulus packages, set to be implemented over the next few years. It has been estimated that government spending alone could produce a 10-20% growth in premium income over the next several years. At the same time, the Kuwait Health Assurance Company is set to make health care mandatory for expatriates in an effort to reduce costs, promote new forms of care and increase privatisation.

Sharia-compliant banking represents a large and vibrant market segment in Kuwait, as Islamic banks exhibit a similar profitability trend to their conventional counterparts. Within Kuwait, Islamic banks hold 35% of total banking assets, and it has been estimated that they are growing at a rate of 20% per annum. On the other hand, the 2008 financial crisis brought the sharia-compliant segment slow or stagnant expansion and, in some cases, contraction. This has highlighted the need for a comprehensive regulatory structure to complement the legal framework and the implementation of a new layer of regulations. The government is poised to address this need with new sukuk (sharia-compliant bonds) and trust laws, designed to establish a robust governance framework for sukuk issuance. This chapter includes interviews with Mohammad S Al Omar, CEO, Kuwait Finance House; and Mohammed Jarrah Al Sabah, Chairman, Kuwait International Bank.