Kuwait in Turmoil as Dow Chemical Deal Cancelled to Prop up Domestic Housing Market

On December 28th, The Kuwait Petroleum Corporation withdrew  from an agreement to create a $17bn petrochemical joint venture with Dow Chemical of the US. The move follows a reversal of approval from the country’s Supreme Petroleum Council. Kuwait’s state-owned energy group was to pay $9bn for half of Dow ’s basic chemicals business in a deal struck a year ago. On December 1 2008, KPC renegotiated the price downwards by $2bn.

Apparently Kuwait now needs that money to pump into their domestic housing market in a futile attempt to keep prices over-inflated. Good luck with that. A recent press release disguised as editorial was put out by the Kuwait government. Published in that paragon of news services – 24/7, an Arabian-based press release farm.

Real estate sector in Kuwait sees turnaround as sales volumes rise

reads the headline. The meat of the matter is a little different, with the article going on to point out that -

“A total of 515 transactions were registered at a value of KD136.6 million (Dh1.82 billion), while transactions rose 77 per cent month-on-month(MoM). Sales volumes rose 43.8 per cent MoM compared to a year ago, a report by National Bank of Kuwait said.”

“The bank said growth was led by the residential sector, which saw sales volume and the number of transactions surge by 100.7 per cent and 117 per cent, respectively, though apartment and commercial property sales were also up notably.”

But then going on to say -

“NBK reported that the first 11 months saw real estate sales fall by 34.7 per cent in sales volume and 34 per cent in number of transactions compared with the same period last year.

Most of the decline in sales occurred in the residential sector, where both sales volume and number of transactions saw a decline of 42 per cent.

Meanwhile, average transaction size for registered transactions during the 11 months fell by 23.8 per cent for apartments and commercial property and 0.3 per cent for residential property compared to same period last year.

According to NBK, Savings and Credit Bank (SCB) loans declined during November with the number and value of loans approved falling by 19.5 per cent and 16.7 per cent, respectively. SCB approved 404 loans in November versus a monthly average of 378 in 2007.

Compared with October, the number of loans approved for the purchase of existing homes rose by 19 per cent, while the construction of new homes and additions and renovations declined by 28.7 per cent and 22 per cent respectively.

Meanwhile, the value of loans disbursed rose by five per cent to KD13m, though loans disbursed thus far in 2008 are 20 per cent under amount disbursed during the same period last year.”

Source

Which hardly constitutes a turnaround. Sooner or later, the Emirates are going to have to start providing some transparency to their markets because no one is buying these sort of mis-informational releases any more. The World’s economy is in turmoil and Kuwait is no more immune to the downturn that any other country – WIth the possible exception of Monaco…….