Doing Business In Kuwait

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Introduction

The land area of Kuwait is about 17,818 square kilometers, or roughly the size of Wales.

Kuwait is a closely-knit society, the people are well educated and many speak English fluently.
Kuwait's economy is heavily dependent on oil revenues. The Kuwait government is keen on reducing the dependence on crude oil revenue. It plans to increase investment in downstream industries of the oil sector and also through
promoting the role of the private sector and privatisation.

Kuwait Map

Kuwaitis are fine negotiators. Its merchants have a reputation for financial astuteness and business acumen.
Today's Kuwaiti businessmen, many of whom have been educated in Europe or the US, have considerable experience of the business methods of both East and West, and their shrewdness should never be underestimated.

Strengths of the market

  • Kuwait has 10% of the world's oil reserves.

  • Kuwait has the most advanced democracy in comparison to its gulf neighbours and Kuwaitis are proud of it. In 2009, four female MPs were elected for the first time.

  • Kuwait is one of the single largest investors in the UK in terms of liquidity, investment portfolios and property, both by Government institutions, private sector companies and private individuals.

  • Kuwait is a major buyer of British military equipment and training. As well as security services.

Opportunities in Kuwait

Kuwait in 2010 is in line for a recovery from a tricky but not difficult 2009. The impact from Dubai should be limited. Building on higher oil prices and a need to improve infrastructure will drive business. Kuwait's Development Plan, announced late 2009, aims to transform Kuwait from an oil dependant country into a commercial and financial hub. Oil prices between $75-78 pb provides the means to finance ambitious new investment. The 2009-2010 surplus is estimated to be over £15 billion. Thanks largely to high oil prices, but also burgeoning financial and logistics sectors, GDP rose to over $148 billion or rather more than $50,000 per capita in 2008. However Kuwait will need to overcome internal political disputes to realise its potential.

Opportunities in Kuwait for British companies are in:

 

Oil & Gas

In the oil and gas sector the government are looking to invest £50b in new projects. Kuwait is looking to increase its capacity of crude oil to 4 million barrels a day by 2020.
There are also plans and projects, which are underway to expand and upgrade existing facilities.
Downstream, there are a number of projects including a 4th refinery.
Shell is developing Kuwait's Northern Gas reserves.

Project Kuwait, a plan to bring in the IOC's to boost production in the northern fields has remained mired in politics, but the work is instead being carried out by the Kuwait Oil Company and managed by firms such as AMEC, Fluor and Petrofac who have won very significant business.
Downstream, upgraded export facilities, a fourth (615,000 bpd) refinery and two new petrochemical plants are planned. At current prices, well over US$60 billion is due to be spent in the sector by 2020.

Financial Services

The Kuwaiti financial system is sizeable and well developed.
Besides commercial and specialized banks at the core of the system, it includes a growing number of financial companies and investment funds, as well as insurance companies and an active stock exchange. Although the establishment of new banks domestically is restricted, there is adequate competition and opportunities in financial markets, with the exception of the insurance sector. Domestic institutions offer a wide range of up-to-date services.

Construction

With multi-billion dollar budget surplus for 2009, the government is expected to embark on a number of projects. The government is looking to fund/implement several large-scale developments. It is estimated that projects worth over £130 billion are planned, including the high profile development of island projects - Failaka and Bubiyan. Others include expansion of Kuwait Airport, extension of existing Ring Roads and the construction of an 8th Ring Road. Renovation and development of sewerage network, building of Subiya causeway, a metro rail system and utility plants are also being planned. Additionally, new city developments in Subiya, Khairan, Jaber Al Ahmed city, Arifjan and other smaller satellite city developments such as Al Mutlaa, Saad Al Abdullah, Sabah Al Ahmad city are likely to provide further opportunities for UK industries.

Builders Hat

The government is looking to fund a number of projects for the development of northern bay of Kuwait. This plan includes the construction of Silk City, which is estimated to over £55b, a road and rail network and a new Bubiyan Port and housing projects. A cornerstone of the programme is Silk City, a planned financial and commercial hub which will be located in Subiya. As a stimulant to the project is the Bubiyan Port Project which when completed will boast of a modern port with the capability to fuel economic growth helping Kuwait to grow as a trading hub.

A new Kuwait University (University City) is being planned. It will provide a modern campus with state of the art facilities for academic staff, students and other employees of Kuwait University. It will include several faculties, dormitories, sports facilities and auditoriums as well as car parks for several thousand vehicles. There will also be a medical school and an associated 400-bed teaching hospital. The campus will cost about £4 billion over ten years.

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Education & Training

Education is key to reform. In particular, the need for more skills-based learning, through better ICT, to increase the employability of Kuwaiti youth across the private sector. Kuwait's draft education strategy demonstrates a commitment to developing a modern, qualitative and outward looking education strategy.

The current educational strategy includes 31 projects for all school levels to be implemented within the next four years, such as establishing an educational TV station, utilising personal computers, using white/active smart boards and other relevant technologies. The Ministry through one of its departments, Kuwait Educational Development Centre, has set-up committees and teams to look into proposals to update the general goals of public education development and the 2005-2025 educational strategy. Their mission is to consider new educational developments, scientific studies and experiments which are being integrated in countries like the UK.

We believe that the educational sector will remain profitable within the coming years as the government is keen on improving the standard of education in Kuwait. The private sector too is forging ahead with new schools and even universities, the market for equipping these ran to some $300m last year.

Power

The country plans to invest billions in increasing power capacity to approximately 16 (GW) by 2012 from around 10 (GW) in 2008. Four power plants are planned to come on-line by 2013 to avert a power shortage.

Environment

Comprehensive studies on the solid waste sector in Kuwait including an assessment of the existing conditions and the identification of investment opportunities in waste recycling have been carried out. The current mis-management and poor disposal practices coupled with inefficient use of spare land are causing environmental, economic, social and health impacts. A number of investment opportunities are available in recycling activities, which include the establishment of integrated, cost effective and sustainable municipal solid waste management where both the private and public sector can jointly participate.

Aviation

Kuwait has already made significant investment in infrastructure to accommodate growth. The centrepiece of Kuwait's expansion plan is a £1.4 billion upgrade of Kuwait International Airport. Kuwait Airways, the country's national carrier is in the process of privatisation, while Kuwait's two low cost carriers continue with further expansion. Opportunities exist in Airport security, Air traffic management and training.

Healthcare

The nation's healthcare sector will benefit from the Governments development plans. The Kuwait government has plans for the construction of eight new hospitals, which are being planned to be open before 2017. There are also a number of healthcare service centres that will be opened. Currently the Jaber Ahmed Al Sabah Hospital costing over $1b is under construction (www.jaberalahmadhospital.com). Opportunities exist for partnerships with UK specialised treatment centres, private sector hospitals and medical equipment.

Retail

Retail sales rose from £20b in 2008 to almost £33b in 2009. Among the factors that will stimulate growth are an increasing population in the 22 to 45 age bracket (and a high level of urbanisation with nearly 99% of those living in Kuwait expected to be residing in built up areas by 2015). High levels of disposable income have sustained consumer spending from which, through their franchised local stores, UK high street names such a Debenhams, Next, Mothercare, M&S and Boots have benefited, to the tune of some £250m last year. British goods dominate the market with high street brands such and M&S, Boots, Debenhams and Next being household names. Inspite of this, demand continues for new British partners.

Defence & Security

Kuwait has major projects planned in both the defence and security sectors over the medium to long term. There is a significant budget for the replacement and upgrade of much of the Armed Forces inventory. The planning for a number of these programmes is moving forward and we predict that over the next 10 years some £9-10Bn will be available for these projects. On security, many programmes are planned in both the government and civil sectors. The Ministry of Interior has a number of large scale projects it hopes to achieve, some of these are based around homeland and border security. In the quickly growing civil sector projects with security elements include the oil & gas sector and major construction projects such as Bubiyan Port. Kuwait is one of the few posts around the world with a specialist officer from UKTI Defence & Security Organisation at post to assist and advise on these prospects.

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Trade between UK and Kuwait

UK Trade In Goods With Kuwait 2006-2010

£ Million
2006 2007 2008 2009 2010
UK Exports to Kuwait 446 457 537 451 530
% Change over previous year 2.21 2.42 17.50 -15.99 17.57
UK Imports From Kuwait 790 754 1,055 725 956
% Change over previous year 100.2 -4.5 39.8 -31.2 31.9
UK Balance with Kuwait -343 -297 -518 -274 -426

UK Trade In Goods And Services With Kuwait 2009

£ Million
Goods Services Goods & Services Total
UK Exports to Kuwait 451 617 1,068
UK Imports from Kuwait 725 162 887
UK Balance with Kuwait -274 455 181

Source: BIS analysis of data from H M Revenue and Customs and the ONS

Top 10 Products At 2 DIGIT SITC Level - UK Trade With Kuwait

UK Exports to Kuwait £ Million % share
71   :Power Generating Machinery & Equipment 119 22.4
78   :Road Vehicles 97 18.3
74   :General Industrial Machinery & Eqp. & Machine Pts 38 7.2
89   :Miscellaneous Manufactured Articles nes. 32 6.1
54   :Medicinal & Pharmaceutical Products 29 5.4
77   :Electrical Machinery, App & Appliances & Elec Pt Thereof 26 4.9
69   :Manufactures Of Metal nes. 22 4.1
87   :Professional, Scientific & Controlling Ins & App 19 3.6
84   :Articles Of Apparel & Clothing Accessories 18 3.3
04   :Cereals & Cereal Preparations 13 2.5
Total UK Exports of Goods to Kuwait 530 100.0

 

UK Imports from Kuwait £ Million % share
33   :Petroleum, Petroleum Products & Related Materials 864 90.4
71   :Power Generating Machinery & Equipment 49 5.2
79   :Transport Equipment (Excluding Road Vehicles) 18 1.9
57   :Plastics In Primary Forms 9 0.9
74   :General Industrial Machinery & Eqp. & Machine Pts 2 0.2
87   :Professional, Scientific & Controlling Ins & App 2 0.2
28   :Metalliferous Ores & Metal Scrap 2 0.2
89   :Miscellaneous Manufactured Articles nes. 2 0.2
75   :Office Machines & Adp Machines 2 0.2
78   :Road Vehicles 2 0.2
Total UK Imports of Goods from Kuwait 956 100.0

nes = not elsewhere specified
Source: BIS analysis of data from H M Revenue and Customs


Economic Overview

Kuwait is a small, rich, relatively open economy with self-reported crude oil reserves of about 104 billion barrels - 10% of world reserves. Petroleum accounts for nearly half of GDP, 95% of export revenues, and 80% of government income. Kuwait's climate limits agricultural development. Consequently, with the exception of fish, it depends almost wholly on food imports. About 75% of potable water must be distilled or imported. High oil prices in recent years have helped build Kuwait's budget and trade surpluses and foreign reserves. As a result of this positive fiscal situation, the need for economic reforms is less urgent and the government has not earnestly pushed through new initiatives.

The majority of fiscal surpluses are transferred to the Kuwait Investment Authority (KIA), which manages the Reserve Fund for Future Generations (RFFG) and the General Reserve Fund (GRF). Details relating to the RFFG and GRF are not made public. However, in late June local media reported from a closed session of the parliament that total KIA assets rose 14% to KD 70.2 billion (£157 billion) at the end of March 2008 compared to a year earlier.

Pointing ManIts economic expansion continues to be fuelled by oil wealth, so much so that, and every sector of the economy has benefited from the profits attained through oil production. Kuwait's GDP increased 176% between 2000 and 2006, with growth averaging 26% a year. However, these gains have also posed many new challenges.

The government realises it must liberalise legislation regarding private enterprise, as well as control the rapid growth in credit and asset prices. In addition, it is vital that it begins developing Kuwait's non-oil sectors to ensure sustainability - a difficult task as oil revenues have been the catalyst for growth. Inflation has also caused concern for both the government and the central bank. Revaluing the dinar will serve to stem some of its growth, but this process is likely to be gradual.

Subsidies on electricity and key consumer goods have also helped to keep a lid on prices, but such subsidies are expected to rise in the coming year. To combat this, the government is considering the establishment of a price control committee to dissuade traders from hiking prices without approval. While many in Kuwait are able to absorb the rise in prices, the extensive, unskilled expatriate population, who a large part of the economy depends on, would be more vulnerable. Kuwait's efforts to create and strengthen ties with key economic players around the world are also beginning to pay off. Deals are currently in the works with Singapore, the US and the EU, while major contracts are already in place with Korea and China.


Population

The population of Kuwait has always been so small that the country has had to rely on foreign workers. Prior to the Iraqi invasion in 1990, nationals of virtually every country could be found working in Kuwait.

Population by Nationality in the country's 9th census, done in April 2005

Year Kuwaiti Non-Kuwaiti Total % of Kuwaitis
1965 168,793 298,546 467,339 36.1
1975 307,755 687,082 994,837 30.9
1985 470,473 1,226,828 1,697,301 27.7
1995 653,616 921,954 1,575,570 41.5
2005 880,774 1,332,629 2,213,403 39.8

Data published by the Public Authority of Civil Information shows that Kuwait's total population stood at 3.44 million at the end of June 2009. Since 1998 the population has grown by an annual growth rate of 4.2%. Just a third of the population is made up of Kuwaiti nationals. The remainder consists primarily of expatriates, most from South Asia, Iran, Philippines, Egypt and other parts of the Arab world. There are also significant number of people from North America, Europe and Japan currently living in Kuwait.

Political Overview

Government Structure

The State of Kuwait is a Constitutional emirate whose Head of State is the Amir, His Highness Sheikh Sabah Al Ahmed Al Jaber Al Sabah, who acceded in February 2006.

Succession is hereditary and restricted to the ruling Al Sabah family. The Amir is aided by the Crown Prince, HE Sheikh Nawaf Al Ahmed Al Jaber Al Sabah, and the Council of Ministers, headed by the Prime Minister, HE Sheikh Nasser Mohammed Al Ahmed Al Sabah who is the head of the government. Power is exercised by the Amir through a Council of Ministers headed by a Prime Minister chosen by the Amir.

Legislative power is shared between the Amir and an elected National Assembly, whose members serve a four-year term and drawn from the Kuwaiti population.

Kuwait has a National Assembly of 50 elected members (who are elected freely by secret ballot) plus 15 cabinet ministers. The National Assembly can act freely and criticise the Cabinet, but the Amir retains the right to overrule the Assembly and can dissolve Parliament, and has exercised this right on several occasions. Legislation must be sanctioned by the head of government and can be initiated by the Amir, the Ministers, or the National Assembly. National elections were last in 29 June 2006, with the next election scheduled for June 2010.

Kuwait is a member of the six-country Gulf Co-operation Council (GCC) as well as of the Organisation of Petroleum Exporting Countries (OPEC). Greater adoption of GCC-wide standards are expected in the future, especially after the establishment of the customs union in March 2005. Starting from 2008, citizens from Kuwait, Bahrain, Qatar, Oman, Saudi Arabia and UAE will have equal rights to carry out business in any GCC country. This would include residency rights, working in government and private institutions, real estate ownership and investment opportunities, move freely within the GCC and receive education and healthcare benefits. The aim of the Gulf common market is to create one market, raising production efficiency, optimum usage of available resources and improving the six countries negotiating position among international economic forums.


Getting here and advice about your stay

By Air

British Airways presently have a daily service to Kuwait, the flight is direct and takes about 6 hours.

Visas

British nationals travelling by air can obtain a 90-day visit/business visas on arrival in Kuwait. You will be charged three KD 3 (three Kuwaiti Dinars, just over £7) for the visa.

Passport

Further information can be obtained from the Kuwait Embassy in London. Exchange facilities are available at Kuwait International Airport 24 hours a day, every day. You should have a ticket for travel out of Kuwait. It may speed the processing of the visa if the traveller is able to show a sponsor's letter or confirmation of a hotel reservation. If you have an Israeli stamp in your passport you may be refused visas/entry to Kuwait. Travellers arriving by land or sea should obtain visas in advance from the Kuwaiti Embassy in London.

 

Passport Validity

Your passport should be valid for at least six months beyond the end of your intended stay.


Travel by Air

British Airways operate daily flights between Kuwait and London.

FCO Travel Advice

The FCO website has travel advice to help you prepare for your visits overseas and to stay safe and secure while you are there.

For advice please visit the www.gov.uk/foreign-travel-advice

Source - UK Trade & Investment

 

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