Kuwait As A Very Viable Investment Destination

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Kuwait has several advantages for attracting FDI which are:

Abundant oil reserves: the country has the 6th largest oil reserve in the world which provide the country with considerable and stable revenues

A strategic role in the political sphere of the region: the country is considered a very good ally of the United States

A young local population with a high average income and high domestic consumption

A well managed financial market and a strong banking sector

Good quality infrastructure

A globally positive business environment: the Kuwaiti government, through its desire to diversify its economy, has embarked on a policy of economic openness to foreign investment

Viable investment opportunities in Kuwait are:

  • Infrastructure
  • Chemical manufacturing
  • Banking, financial services, and insurance
  • Environmental Services
  • Air, maritime, and rail passenger transport
  • Tourism, hotel, and entertainment

Kuwait As A Very Viable Investment Destination

Kuwait is strategically located as a thriving commercial center in the region, close to three major markets namely: Iraq, Saudi Arabia, and Iran

An open market economy allows Kuwait to enjoy free convertibility and full transferability in the foreign exchange market.

Many of the leading businesses in the world chose Kuwait as their home in sectors such as telecom, retail, logistics, financial services, aviation designing, animation, art, etc., this choice shows us the strong business capacity and commercial mindset of Kuwaiti businessmen in establishing their businesses.

Investment opportunities

Infrastructure:

Kuwait for the next five years has a development plan for infrastructure development in sectors such as power, water, and transport infrastructures such as ports, aviation, and rail providing opportunities for international investors.

Chemical manufacturing:

Kuwait plans to double its chemical production capacity for ethylene and polyethylene providing room for international investors to make strategic alliances with leading local players.

Banking, financial services, and insurance:

A robust financial sector, proactive regulatory regime, and rising personal and institutional wealth make Kuwait an attractive destination for international institutions to offer specialized products and services.

 

Environmental Services:

Several projects have been initiated to address the current and future capacity constraints in critical environmental segments such as sanitation and waste management with the Government seeking active private sector participation.

Air, maritime, and rail passenger transport:

Kuwait is developing over 20 Billion Dollars worth of transport infrastructure projects in aviation and rail which will facilitate an increase in passenger transport activity in the country and augment demand for services allied to the transport sector

Tourism, hotel, and entertainment:

Tourist arrivals are expected to grow from 306,559 in 2013 to 491,000 by 2022, creating the need for greater hotels capacity. The limited presence of international budget hotel brands represents an opportunity for concepts targeting business travelers.

Other opportunities to invest in Kuwait are Education and training, Culture, media and marketing, healthcare, Integrated housing projects and urban development, and Storage and logistics services.

Kuwait, officially the State of Kuwait, is a country in Western Asia. It is situated on the northern edge of Eastern Arabia at the tip of the Persian Gulf, bordering Iraq to the north and Saudi Arabia to the south. Kuwait also shares maritime borders with Iran. Kuwait has a coastal length of approximately 500 kilometers.

Most of the country's population resides in the urban agglomeration of the capital city Kuwait City. As of 2021, Kuwait has a population of 4.67 million people where 1.45 million are Kuwaitis and 3.2 million are foreign nationals. Historically, Kuwait was a strategic trade port between Mesopotamia and India. Oil reserves were discovered in commercial quantities in 1938. In 1946, crude oil was exported for the first time from 1946 to 1982, the country underwent large-scale modernization, largely based on income from oil production. In the 1980s, Kuwait experienced a period of geopolitical instability and an economic crisis following the stock market crash. In 1990, Kuwait was invaded and later annexed into one of Iraq's governorates by Iraq under Saddam Hussein. The Iraqi occupation of Kuwait came to an end in 1991 after military intervention by a military coalition led by the United States and various other countries.

Kuwait is an emirate. The Emir is the head of state and the Al Sabah is the ruling family which dominates the country's political system. Kuwait's official state religion is Maliki Sunni Islam. Kuwait is a developed country with a high-income economy backed by the world's sixth-largest oil reserves. The Kuwaiti dinar is the highest valued currency in the world.

Kuwait is the fifth richest country in the world by gross national income per capita.

 

FOREIGN DIRECT INVESTMENT:

Kuwait has always been a country open to foreign investment and is further opening to foreign capital, however, FDI is still underdeveloped in the country. According to UNCTAD's World Investment Report 2021, FDI inflows have decreased considerably, to 319 million dollars in 2020, compared to 104 million dollars recorded in 2019, following the global economic crisis triggered by the Covid 19 pandemic. The lack of diversity in the economy and falling oil prices caused a decrease in inflows. The stock of FDI has been estimated at 14.1 billion dollars in 2020. The bulk of investments is directed toward the oil and gas sector, followed by real estate and construction, and financial services. The majority of foreign investments come from the United States and China.

With the decline in oil revenue, the government seeks increased foreign investments as it plans to diversify its oil-dependent economy, and has taken several steps towards achieving this goal. The FDI promotion policy focuses on several sectors that can most benefit from foreign investment and expertise. A law on foreign investment, enacted in 2013, was implemented in 2015 and a series of other laws related to businesses and public-private partnerships were introduced as well. The law allowed 100 percent foreign ownership in some sectors and also made available several tax breaks and other benefits to attract new investors, who in return must guarantee a set of quotas regarding the employment of Kuwaiti nationals. Further steps have been taken: allowing the opening of the stock market to non-Kuwaitis, the presence of foreign operators in the petrochemical industry, and the entry of foreign banks into the country. The industries covered by the FDI Law that allows 100% foreign ownership, include infrastructure like water, power, wastewater treatment, and communications; insurance; information technology and software development; hospitals and pharmaceuticals; air, land, and sea freight; tourism, hotels, and entertainment; housing projects and urban development; and investment management.

Kuwait ranks relatively low in the 2020 Doing Business report established by the World Bank compared to other Gulf countries. Nonetheless, the country rose to the 83rd position out of 190 economies this year, up by 14 spots from 2019. This was mainly due to significant improvement with regards to starting a business as well as obtaining credit and construction permits. However, the country continues to depend heavily on the oil and gas sector and such is sensitive to commodities prices fluctuation, and the degree of state intervention in the economy is considered too high. Furthermore, the local market is limited in size and the political situation is fragmented, with tensions between the parties.

The State of Kuwait the world’s eighth biggest exporter and the tenth-largest producer of oil with a small landmass of 20,000 square kilometers and a 4.2 million population, is a viable destination for foreign investment.

The geopolitical position of Kuwait in the northern Arabian Gulf bordering three major markets of KSA, Iraq, and Iran presents a perfect location for entering markets in various directions including Eastern Asia, Turkey, and Eastern and Central Europe.

Kuwait has several industrial areas, the largest being located in Shuwaikh, Sabhan, and Shuaiba and a Free Trade Zone located at Shuwaikh port provides facilities for the importing and exporting of goods, materials, and other related activities.

Strong investment-grade sovereign ratings and low political risk enable a possibility for foreign companies to do business with this country and on the other hand, the Government’s strong financial position gives it the ability to sign large projects.

Kuwait’s government, to attract foreign investments to the country, approved a law to regulate Foreign Direct Investments. This law allows foreign investors to own majority capital holdings up to 100 percent equity if their business activities are in the sectors that the government wants to develop, such as the projects of new infrastructures like water, power energy, drainage, and communications.

Kuwait presents several advantages. First, A hospitable culture: this country offers a mix of elements of modern society and traditional Islamic customs with new concepts. The local population is young and great consumers. They are very fond of foreign products, western brands, and high technology.

Kuwait is competitive in terms of power, water, land, and labor. Power tariffs are subsidized by up to 86 percent by the Government with tariffs for residential and industrial users.

The banking system of Kuwait has strong regulatory support that makes it one of the most stable of the banking markets in the Middle East and North Africa region.

Kuwait is undergoing significant expansion in the building and construction industry. The government has approved a 104 billion dollars National Development Plan that includes the construction of major roadways, a new airport terminal, new hospitals, new residential developments, a new Kuwait University campus, a new oil refinery, oil exploration, new power projects, and a new railway and metro system. Private construction and project development, as in other GCC urban centers, are planned and expected to move forward in the future.

Kuwait has the highest Human Development Index in the Arab world and also the largest number of stateless people in the entire region.

Kuwait has been classified as a potential middle power by the Hague Centre for Strategic Studies. Kuwait is a founding member of the GCC and a major non-NATO ally to the United States. Kuwait also has strong economic ties to China. In 2020, the Kuwaiti government experienced its first fiscal deficit since 1995, due to the fall in oil prices and the lack of economic diversification. Kuwait and China have many important cooperation projects including South al-Mutlaa and Mubarak Al Kabeer Port.

The U.S. Commercial Service in Kuwait has identified numerous project opportunities coming online over an extended period. These projects include a proposed 10 billion dollars expansion is desperately needed electricity generation capacity, investment in environmental cleanup projects, as well as defense and security opportunities.

The traditional import sectors of automotive, oil and gas, computers or ICT, telecommunications equipment, and construction equipment remain strong. There are a shortage of high-quality health care facilities and the Government of Kuwait is prioritizing healthcare infrastructure as part of the national development plan. The Government is focused on improving the IT or cybersecurity capabilities as well as enhancing efficiencies through the digitization of the oil and gas sector.

As the Government implements projects, U.S. companies in the construction sector are in a good position to take advantage of the opportunities since the majority of building materials are imported. As the need for educational platforms continues, particularly since the Ministry of Education evaluates enhancing technical capabilities. All of these factors bode well for high-end exports that already have GCC exposure.

Transportation equipment including automobiles, auto parts, accessories, and aircraft account for 44 percent of U.S. exports to Kuwait. U.S. high-end medical equipment has great promise, as clinics and hospitals are being upgraded. Oil and gas field equipment, electric generator sets, building materials and supplies, and information technology are also leading American export sectors. The Kuwait Petroleum Corporation and its subsidiaries are actively pursuing new U.S. sources for equipment and services. The Commercial Service organizes Kuwaiti delegations to U.S. trade shows in these key sectors. It also supports medical, aviation, defense, and oil and gas trade shows in the GCC region, in addition to organizing inbound U.S. supplier delegations and outbound foreign buyer delegations to U.S. trade shows.

In short, Kuwait is a wealthy country with savvy business people in the private sector. The dominant public sector moves slowly, at a glacial pace. Patience, persistence, and a strong local partner are important contributors to success.

 

WATCH FULL VIDEO BELOW: KUWAIT AS AN INVESTMENT DESTINATION - DOING BUSINESS IN KUWAIT (SEE WHY FOREIGN INVESTORS PREFER IT)

https://www.youtube.com/watch?v=X0vIQkH7WaU

 

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Conclusion

Kuwait is strategically located as a thriving commercial center in the region. Tourist arrivals are expected to grow from 306,559 in 2013 to 491,000 by 2022. FDI inflows have decreased considerably, to 319 million dollars in 2020, compared to 104 million dollars recorded in 2019.

 

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