KUWAIT. Economic development in oil-rich Kuwait has been hard hit by political disputes which have stalled vital projects, analysts and lawmakers said.

Despite its oil-fuelled mega-wealth, Kuwait - which went to the polls on Saturday - has seen more political turmoil than it has development projects in the past three years, leading to a deterioration in services and stagnation in infrastructure programmes.

"The economy has been the main victim of non-stop political disputes. The national economy remains highly distorted and reform legislation stalled," economic analyst Hajjaj Bukhdur said.

The situation worsened in the wake of the global economic meltdown that severely impacted dozens of local investment firms and to a lesser degree other economic sectors.

That prompted Moody's Investors Service in March to place Kuwait's sovereign ratings on review for possible downgrade, while rating agencies have downgraded the ratings of several banks and investment firms.

"The rating action was primarily motivated by the recent resignation of Kuwait's government and the dissolution of parliament, the latest bout in the disruptive conflict between the executive and the legislature," Moody's said.

"In Moody's opinion, these events reflect an erosion of institutional strength which is of particular concern given the current challenges presented to Kuwait by the global economic and financial crisis."

Central bank governor Sheikh Salem Abdulaziz al-Sabah warned on 2 May that continued political turmoil in OPEC's fourth largest oil producer could eventually undermine the country's sovereign ratings.

"Urgent economic challenges require a national consensus on the economy which should be supported by tangible measures to overcome obstacles caused by political tension," Sheikh Salem said.

Under pressure from MPs, the government in December scrapped a US$7.5 billion deal with US giant Dow Chemical for a joint petrochemical venture, and also put on hold a US$15 billion refinery project.

Many vital projects for power generation, a mega harbour and a causeway have either been put on hold or are running years behind schedule.

Wrangling between the government and MPs also delayed for two months the approval of a government-sponsored multi-billion-dollar economic stimulus bill to aid ailing investment companies and banks.

After parliament was dissolved in March, the government issued the bill in a decree but under Kuwaiti law it must be sent to the new assembly, which has the power to reject it.

Many candidates had vowed to vote against the bill if elected, including former opposition MP Mussallam al-Barrak who described it as a "bail-out for investment whales."

"If the legislation is rejected, it will cause a major economic catastrophe. The national economy will suffer and the bourse could slump by 20%," Bukhdur said.

Former MPs and the government have been trading the blame for stalling key projects.

"Accusations that parliament has blocked development are baseless lies aimed at tarnishing the image of parliament and democracy," insisted veteran opposition leader Ahmad al-Saadun at an election rally.

"It was the government which stalled development because it is incompetent. We only stopped violations and attempts by influential people to take over state property," Saadun added.

Former Islamist lawmaker Khaled al-Sultan said parliament saved about US$30 billion by "blocking those projects which were marred by corruption."

Since 2006, Kuwait has seen the resignation of five governments and three parliaments have been dissolved, the last one after only ten months.

Pumping 2.2 million barrels of oil per day, Kuwait has posted a healthy budget surplus in the past ten fiscal years topping US$130 billion and has assets estimated to be worth more than US$ 200 billion.

Kuwait's oil-based economy is dominated by the public sector, which contributes about 77% of gross domestic product. GDP stood at US$147 billion last year.

A privatisation bill has been in parliament since 1992 but neither the government nor MPs appear in a hurry to approve it.

MIDDLE EAST BUSINESS COMMENT & ANALYSIS

• Top news
• Business News
• Company News