Kuwait - Overview
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Thanks to the increases in the price per barrel of oil and the increase in production, Kuwait's financial health in the coming years is guaranteed, with budget surpluses of about 25% (30% in 2013). The country grew by 2.5% in 2013 (after 6.2% in 2012).
The income from the country's oil allows to fuel a particularly generous welfare system (automatic access to public employment, artificial maintenance of public prices and prices of basic products at a very low level, high subsidies for home-buyers, generous medical insurance, etc.). However oil production is nearing its full capacity and this is impacting on a slowing down growth.
Despite its economic and financial health, Kuwait wants to move from a rentier economy to a more open and diverse economy. The authorities are also concerned about the enlarged public sector, built on and funded by oil revenues, the limits of which are already being felt in terms of job creation and investment.
With 100 billion barrels of oil in reserve (i.e. 9% of the world's total and representing 100 years of production), the country's industry is based on oil exploitation. Income from this sector represents more than half of GDP and more than 90% of exports, i.e. more than 95% of the country's income. By 2030, Kuwait is also planning to invest more than USD 87 billion in the oil sector, especially in creating new oil refineries. The indusrty sector has represented 50.6% of the GDP in 2013 and employed 22% of the active population.
The non-oil sector is dominated by services, mostly real estate and financial services, which were relatively hit by the financial crisis. The sector represents 49.1% of the GDP and employs 77% of the active population.
For further information, consult the "Doing Business in Kuwait" guide by the National Bank of Kuwait.
Foreign trade overview
Representing almost all export earnings of the country and almost two-thirds of the GDP in 2013, the Kuwaiti oil (10% of world reserves) is sold mostly to Asian countries. Significant reserves of non-associated gas were discovered in the north of the country. Their exploitation, due to start shortly, should cover the needs of local consumption (power generation, desalination of sea water ...) and generate a portion of oil production for export.
Kuwait’s largest suppliers in 2013 have been the United States, China, Saudi Arabia and India. Imports from other Gulf countries have increased since the introduction of the GCC (Gulf Cooperation Council). The main products imported are cars, agricultural and food products, as well as mechanical industrial products, electric and electronic products.
Kuwait’s exports quadrupled since 2002. Exports of crude oil and refined products accounted for 94% of the total in 2013, the remaining amount consisting of re-exports, mainly of machinery and transportation equipment. Kuwait’s main clients are the Asian countries, especially Japan, South Korea, and China but also the United States and India. The trade balance of Kuwait is largely positive due to the high prices of oil.
After a sharp slow down in 2011, the FDI influx towards Koweït is on the increase since then and totalled USD 1.8 billion in 2013.
Kuwait has always been a country open to foreign investment and with the introduction of new laws in recent years, the country is even more open to foreign capital. In early 2003, a new law for FDI came into force. It allows 100% foreign ownership in a number of sectors. This law also makes available a number of tax breaks and other benefits which can attract new investors who in return must guarantee a set of quotas regarding the employment of Kuwaiti nationals.
A number of decisions has been taken since, allowing the opening of the stock market to non-Kuwaiti, 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 January 2008. Although the opening of oil fields in the North to international oil companies seems blocked, broadening participation through "strengthened" technical agreements is being considered. Legislation on free zones and BOTs (January 2009) and on creating an independent stock market regulator (January 2010) also contributed to a more favorable environment for international investment, both financial and direct.
The current policy to promote FDI focuses on a number of sectors which can benefit most from foreign investment and expertise. In 2014, these include infrastructure investment such as water, waste-water treatment, power, and communications. Kuwait also tries to promote investment in the banking and financial sectors: investment aid, insurance, information technology and software development. Investment in hospitals and pharmaceuticals is also favored. Authorities are also keen to attract foreign capital into other sectors such as land and sea freight, tourism, real estate and urban development.
Information on the 2013 FDI influx in this region can be accessed in the Global Investment Trade Monitor published in January 2014 by the United Nations Conference on Trade and Development (UNCTAD).