Winds of change blow

The decision by Kuwait to cancel its mega-projects sends damaging messages to potential investors for the future.

The recent move by the Kuwaiti government to cancel the Zour refinery (and before that the K-Dow petrochemical joint venture), came as a strong slap to international investors and efforts to diversify the country's economy.

What was behind this cancellation was not economic fact, or a logical necessity that would be an acceptable reason for such cancellation. Amidst the furore some members of Kuwait's parliament even threatened public questioning of PM Sheikh Nasser al-Mohammed al- Sabah.

They said the investment was too large at a time of falling oil prices and "a waste of public funds''.

State-owned Petrochemical Industries was to pay US$7.5 billion for a 50 percent stake in Dow's basic plastics business, $3.5 billion less than announced a year ago.

In a statement carried by the state-owned Kuwait news agency (KUNA), the Kuwaiti government said the K-Dow venture was ‘'very risky'' in the wake of the financial meltdown and crashing oil prices.

Again, the government decided to cancel the Al Zour refinery project after awarding the contract - saying the refinery is no longer economically viable as oil had fallen dramatically since then.

We find ourselves in front of reasons that can't be accepted. Before any major investment (especially when the cost is billions of dollars) a feasibility study should be undertaken, and as we know in any feasibility study, you take the worse scenario. Secondly, the feasibility study was undertaken in time when oil prices were around $50-60 per barrel, surely then the worse scenario should take a price of $35 to $40 per barrel.

It is good to have a parliament controlling the work of the government, but this should not mean they allow themselves to cancel mega projects depriving future generations from diversifying the country's economy.

I hope the newly elected parliament will reverse these acts. The wind of change has already swept in to Kuwait, where for the first time four women have been elected.

As the French proverb says, "When the wind of change blows, some people build walls, others build windmills". Kuwait must now build windmills to take advantage of the current financial situation by acquiring companies, and not building more of the walls we saw last year.

Abdelghani Henni is the of editor Petrochemicals Middle East.

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