Kuwait: Foreign investment

FDI in Figures

Kuwait has always been a country open to foreign investment and is further opening to foreign capital, however, foreign direct investment is still underdeveloped in the country. In early 2003, a new law for FDI came into force. It allowed 100% foreign ownership in a number of sectors. This law also made available a number of tax breaks and other benefits to attract new investors, who in return must guarantee a set of quotas regarding the employment of Kuwaiti nationals. 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 country's authorities intend to attract investment to develop infrastructure through the 2015-2020 National Development Plan.

A number of decisions have been taken since then, 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 in the country. A law on taxation of foreign companies (which decreased the maximum rate of tax on profits made by foreign companies, with the exception of investment earnings, from 55 to 15%) was adopted in 2008. Although the opening of oil fields in the North to international oil companies seemed to be blocked for years, in late 2014, the Government started discussions with several foreign companies on this issue. Legislation on free zones and BOTs (January 2009) and on creating an independent stock market regulator (January 2010) also contributed to a more favourable environment for international investment, both financial and direct. Despite this, Kuwait ranks 96th out of 189 economies in the 2018 Doing Business report established by the World Bank, same as the previous year.

Kuwait continues to encourage foreign direct investment with the implementation of the FDI Law.  With the decline in oil revenue and the need to diversify its economy, the government seeks increased foreign investments as it plans to diversify its oil-dependent economy, and has taken a number of steps towards achieving this goal. The current policy to promote FDI focuses on a number of sectors that can most benefit from foreign investment and expertise. The industries covered by the FDI Law that allows 100% foreign ownership, include: infrastructure (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. So far, the majority of foreign investor interest has come from the United States and China.

According to the UNCTAD's World Investment Report 2018, the lack of diversity in the economy and the fall in oil prices since 2014 caused the decrease of inflows in 2017. This decline began in 2012 and Kuwait's investments did not achieve to recover. Inflows reach 301 millions dollar in 2017, a decrease of 28% compared to 2016 and of 90% compared to 2012. The FDI stock increases by 1.3% in 2017 and reaches 15.1 billion dollar, 11.9% of the GDP.

What to consider if you invest in Kuwait

Strong Points

Kuwait has several advantages for attracting FDI:

• Abundant oil reserves (the country has the 7th 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.

Weak Points

Kuwait has some obstacles to its economic development. They include:

• Necessary structural reforms that are hard to take hold because of a tormented political life and strong tensions between the parties
• Extreme dependence of the economy on the performance of the oil sector and in particular on the price of a barrel of oil
• A high degree of state intervention in the national economy (the civil service provides 90% of the jobs of nationals and the budget is 60% punctured by these current expenditures) which weakens the emancipation of a strong private sector
• The geographical location makes the country particularly vulnerable to political tensions in the region
• A  business environment with legislation that restricts the freedom of establishment of non-nationals and that does not sufficiently protect intellectual property

Government Measures to Motivate or Restrict FDI

In order to promote the diversification of its economy, Kuwait has set up the Kuwait Development Plan (KDP) for the 2015-2020 period. This plan is aimed primarily at transforming the country's financial and commercial platforms. A significant investment in the country's infrastructure and human resources and regulatory reform will create an environment conducive to attracting foreign investors and promoting Kuwait as a regional service centre. In addition to seeking to further involve the private sector in infrastructure projects, the government plans annual spending of $32 billion, half of which will be spent on investments in projects considered highly strategic:

• New refinery ($16 billion) and Clean Fuel Project ($13 billion), which will increase the refining capacity and quality of refined products in the country
• New Mubarak Port Al-Kabeer on the island of Boubyan ($7.9 billion), which will help solve the current problems of maritime traffic in the country
• Expansion of the international airport ($5.8 billion) and rail and metro projects that will help develop the country's communication infrastructure

Procedures Relative to Foreign Investment

Freedom of Establishment

The freedom to establish a company/enterprise is very limited and controlled.  Non-Kuwaitis cannot hold more than 49% of the capital of a company.  Establishing a new office, branch or creating a new company is subject to the existence of a citizen agent.  All permits have to be established on his name.

Acquisition of Holdings

Purchasing shares from the stock market has to be done through a broker authorized by the Kuwait Stock Exchange.

Obligation to Declare

There are no special rules to declare if the acquisition is less than 5% of the capital holdings.  If the acquisition is higher, a special procedure must be followed.

Competent Organisation For the Declaration

Kuwait Stock Exchange

Requests For Specific Authorisations

Some sectors, such as pharmaceutical, telecommunications, medical equipment, etc. require authorizations from the ministries that control each specific activity.

Source: santandertrade

Kuwait: Foreign investment

FDI in Figures

Kuwait has always been a country open to foreign investment and is further opening to foreign capital, however, foreign direct investment is still underdeveloped in the country. In early 2003, a new law for FDI came into force. It allowed 100% foreign ownership in a number of sectors. This law also made available a number of tax breaks and other benefits to attract new investors, who in return must guarantee a set of quotas regarding the employment of Kuwaiti nationals. 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 country's authorities intend to attract investment to develop infrastructure through the 2015-2020 National Development Plan.

A number of decisions have been taken since then, 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 in the country. A law on taxation of foreign companies (which decreased the maximum rate of tax on profits made by foreign companies, with the exception of investment earnings, from 55 to 15%) was adopted in 2008. Although the opening of oil fields in the North to international oil companies seemed to be blocked for years, in late 2014, the Government started discussions with several foreign companies on this issue. Legislation on free zones and BOTs (January 2009) and on creating an independent stock market regulator (January 2010) also contributed to a more favourable environment for international investment, both financial and direct. Despite this, Kuwait ranks 96th out of 189 economies in the 2018 Doing Business report established by the World Bank, same as the previous year.

Kuwait continues to encourage foreign direct investment with the implementation of the FDI Law.  With the decline in oil revenue and the need to diversify its economy, the government seeks increased foreign investments as it plans to diversify its oil-dependent economy, and has taken a number of steps towards achieving this goal. The current policy to promote FDI focuses on a number of sectors that can most benefit from foreign investment and expertise. The industries covered by the FDI Law that allows 100% foreign ownership, include: infrastructure (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. So far, the majority of foreign investor interest has come from the United States and China.

According to the UNCTAD's World Investment Report 2018, the lack of diversity in the economy and the fall in oil prices since 2014 caused the decrease of inflows in 2017. This decline began in 2012 and Kuwait's investments did not achieve to recover. Inflows reach 301 millions dollar in 2017, a decrease of 28% compared to 2016 and of 90% compared to 2012. The FDI stock increases by 1.3% in 2017 and reaches 15.1 billion dollar, 11.9% of the GDP.

What to consider if you invest in Kuwait

Strong Points

Kuwait has several advantages for attracting FDI:

·          Abundant oil reserves (the country has the 7th 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.

Weak Points

Kuwait has some obstacles to its economic development. They include:

·         Necessary structural reforms that are hard to take hold because of a tormented political life and strong tensions between the parties

·         Extreme dependence of the economy on the performance of the oil sector and in particular on the price of a barrel of oil

·         A high degree of state intervention in the national economy (the civil service provides 90% of the jobs of nationals and the budget is 60% punctured by these current expenditures) which weakens the emancipation of a strong private sector

·         The geographical location makes the country particularly vulnerable to political tensions in the region

·         A  business environment with legislation that restricts the freedom of establishment of non-nationals and that does not sufficiently protect intellectual property

Government Measures to Motivate or Restrict FDI

In order to promote the diversification of its economy, Kuwait has set up the Kuwait Development Plan (KDP) for the 2015-2020 period. This plan is aimed primarily at transforming the country's financial and commercial platforms. A significant investment in the country's infrastructure and human resources and regulatory reform will create an environment conducive to attracting foreign investors and promoting Kuwait as a regional service centre. In addition to seeking to further involve the private sector in infrastructure projects, the government plans annual spending of $32 billion, half of which will be spent on investments in projects considered highly strategic:

·             New refinery ($16 billion) and Clean Fuel Project ($13 billion), which will increase the refining capacity and quality of refined products in the country

·             New Mubarak Port Al-Kabeer on the island of Boubyan ($7.9 billion), which will help solve the current problems of maritime traffic in the country

·             Expansion of the international airport ($5.8 billion) and rail and metro projects that will help develop the country's communication infrastructure

Procedures Relative to Foreign Investment

Freedom of Establishment

The freedom to establish a company/enterprise is very limited and controlled.  Non-Kuwaitis cannot hold more than 49% of the capital of a company.  Establishing a new office, branch or creating a new company is subject to the existence of a citizen agent.  All permits have to be established on his name.

Acquisition of Holdings

Purchasing shares from the stock market has to be done through a broker authorized by the Kuwait Stock Exchange.

Obligation to Declare

There are no special rules to declare if the acquisition is less than 5% of the capital holdings.  If the acquisition is higher, a special procedure must be followed.

Competent Organisation For the Declaration

Kuwait Stock Exchange

Requests For Specific Authorisations

Some sectors, such as pharmaceutical, telecommunications, medical equipment, etc. require authorizations from the ministries that control each specific activity.

Source: santandertrade

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