Newsletter No. 1086
News-Analysis
July 20, 2008

 

FINANCE MINISTER FUKUSHIRO NUKAGA ENCOURAGES KUWAITI INVESTMENT

On the 15th, Finance Minister Fukushiro Nukaga began a three-nation tour of the United Arab Emirates, Kuwait, and Uzbekistan. His stopover in the UAE has not produced any major headlines. He met there with UAE Finance Minister Ubaid Humaid al-Tayer and apparently discussed general issues of bilateral cooperation. He is in Uzbekistan right now, and we will cover that in a separate newsletter in the coming days. Here we will focus on his mission in Kuwait.

The main point of his mission was that he wanted to have “aggressive” discussions about expanding Gulf Arab investment in the Japanese economy. Executives from the Bank of Tokyo-Mitsubishi UFJ, Mizuho Corporate Bank, the Sumitomo Mitsui Banking Corporation, Nomura Asset Management Company, and other companies were in tow with Nukaga.

According to the Cabinet Office, foreign direct investment (FDI) in Japan stands about 3% of gross domestic product at the end of 2007. This figure compares with 45% in England, 14% in the US, and even 8.8% in South Korea. There are many excellent reasons for Japan to seek to boost FDI in its economy, but it must be pointed out that the problems lie at home. As demonstrated by a series of recent economic events, powerful segments in Japanese society continue to be hostile to any significant control by foreigners of portions of the domestic economy. By blocking certain foreign investments and preventing foreign stockholders from making any real changes in Japanese businesses, Tokyo has only itself to blame for the lack of foreign investment. European Union Trade Commissioner Peter Mandelson became so frustrated with Japanese behavior this April that he called Japan the “most closed” market in the developed world. One would tend to believe, therefore, that if Finance Minister Fukushiro Nukaga is really worried about FDI, then his real work lies at home in Japan -- not in the Gulf states.

Be that as it may, Nukaga was able to pry out a promise from Kuwaiti Prime Minister Shaikh Nasr Muhammad al-Ahmad al-Sabah that his country would “sharply” increase its investments in Japan from the current US$15 billion level. No specific targets were publicly indicated.

Nukaga also met with Minister of Oil and Minister of Electricity and Water Muhammad al-Ulaim. The main topic of discussion appears to have been high oil prices. The reports from the Kuwaiti press hint that Nukaga and Al-Ulaim may not have seen eye-to-eye in this meeting. There was also an indication, however, that the Kuwaiti Amir may be planning to visit Japan before too long.

Nukaga’s mission was undoubtedly buoyed by a Reuters report that the Kuwait Investment Authority (KIA) is taking a fresh look at making new investments in Asia, including stocks, bonds, and real estate in Japan. Kuwaiti Finance Minister Mustapha al-Shamali stated: “China, India, and Asia in general are new markets, growing and promising markets for the future, and investment returns are good there… We are [also] thinking to increase investments in Japan… The volume of our investments in Japan until now is good… but it should be much more.”

Finally, to mention a recent investment going in the other direction, Japanese electronics retailer Best Denki announced a few days ago that they would be opening their first store in Kuwait City. The store may open its doors as soon as the end of this year.