Guidance

Overseas business risk: Kuwait

Updated 17 September 2019

See below for information on key security and political risks which UK businesses may face when operating in Kuwait.

1. General Overview

Strategically situated at the north-west corner of the Arabian (Persian) Gulf, the State of Kuwait is a small, stable and prosperous country in what is sometimes a difficult neighbourhood. Kuwait’s economy is built almost entirely on oil production and the revenue from the investment of its oil profits overseas. This makes Kuwait a very wealthy country and allows the government to offer many benefits to its citizens, including generous provision for housing, education and health care. The most recent census (2019) put the population of Kuwait at 4.7 m, of which only around 1.4 m are Kuwaiti nationals with large minorities of migrant workers from all over the globe.

The British expatriate community numbers about 8,000. Kuwait is an important partner and longstanding friend to the UK. The Kuwaitis genuinely value the bilateral relationship – many consider the UK their second home. Although doing business in Kuwait can be challenging, there are opportunities for UK businesses as bilateral trade continues to strengthen. Total trade in goods and services (i.e. exports plus imports) between the UK and Kuwait was £3.4bn in the four quarters to the end of Q1 2020, an increase of 4.7% or £151m from 2019. Priority sectors with opportunities for UK exporters are in Healthcare – digital health and med-tech, Agri-tech, Construction, Oil & Gas, Food & Drink, Education, Retail and Security.

2. Politics

Kuwait’s political system is a semi-democratic constitutional monarchy. The Head of State is HH the Amir, Sheikh Sabah Al Ahmed Al Jaber Al Sabah. HH Sheikh Sabah Al Ahmed has been in power since 2006. The Amir appoints a Crown Prince, currently HH Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah, with an absolute majority approval from the National Assembly. The Amir also appoints a Prime Minister, currently HH Sheikh Sabah Al Khaled Al Sabah, who in turn appoints a Cabinet. The most recent Cabinet was formed in December 2019, after the previous Cabinet resigned in November 2019. The Cabinet witnessed several minor shakeups in January-March 2020. The Amir was hospitalised in July 2020 and a decree was issued granting the CP extra powers and designating him as the Deputy Amir.

Kuwait’s fifty-member unicameral legislature, the National Assembly, is elected to a four-year term by universal suffrage (women gained the franchise in 2006 by Amiri Decree). The National Assembly has the power to propose laws, to interpolate ministers and even to remove them from office. However, Kuwait’s parliament has been dissolved nine times in 40 years, five of them taking place between 2006-2016. The Amir reserves the right to dissolve the National Assembly and call for new elections, so long as he does not cite the same reason for doing so twice.

Tensions between the executive and the legislature have long been a feature of Kuwaiti politics; neither can effectively govern without reference to the other, but relations between the two have not always been smooth. Political parties have not been legalised in Kuwait, although informal political ‘blocs’ (liberal, Islamist, populist/tribal and Salafist) do exist.

The most recent parliamentary elections took place on November 26, 2016. The previous two parliaments (elected in February 2012 and December 2012) were dissolved by Kuwait’s constitutional court, with the third dissolved by Amiri decree. Though still rife with infighting between parliamentarians and the Cabinet, the current parliament has fulfilled most of its 4-year term already and there have been no serious threats of dissolution, making it the second parliament ever to reach full term in Kuwait’s history. The next parliamentary elections are expected to take place at the end of November or early December 2020.

In respect to Kuwait’s international and regional roles, the country had a non-permanent seat on the UN Security Council for 2018-19, and had the GCC Presidency in 2018, having passed the baton to Oman in 2019. The current Secretary General of the GCC is the previous Kuwaiti Minister of Finance, Dr. Nayef Al Hajraf. Kuwait is still playing a key mediating role in the Qatar crisis.

Information on political risk, including political demonstrations, is available in the FCDO Travel Advice

3. Economics

The conservative investment policies Kuwait has pursued since the 1990 invasion have protected it from major losses, as has the Sovereign Wealth Fund’s diverse investment portfolio. Kuwait’s economic development since liberation in 1991 has lagged behind others in the region making it harder for it to regain its position as a regional financial, business and transport centre within the GCC. Despite its strong macroeconomic indicators, Kuwait still faces challenges to improve its infrastructure, implement social welfare reform and diversify its economic base.

Over 90% of Kuwait’s revenue is generated by the state-owned oil sector with export revenues expected to stay at that level through 2020. The private sector is largely dependent on government spending and expatriate labour. The state’s dominant economic role has led to a large public sector (which employs about 90% of the Kuwaiti labour force), and contributed to a relatively weak business environment, numerous subsidies and a dependence on oil revenues and government expenditure. The drop in oil prices over the last few years has been a helpful impetus for change in Kuwait as Government entities start focusing on economic reform. Officials have long been trying to address subsidy reform and high energy consumption, but faced parliamentary objection.

In 2017 Kuwait rebranded the five year National Development Plan initially introduced in 2015 as the “New Kuwait 2035 Vision”. The new plan aims to develop the country on five strategic pillars: making it a financial hub, a leading hydrocarbon exporter and petro-chemical manufacturer, a lucrative venue for foreign investments, a pivot for knowledge transfer in renewable energy and information technology, and an enticing cultural centre in the region by the year 2035. Its associated objectives are centred on seven pillars: economy, infrastructure, public administration, living environment, health care, human capital, and Kuwait’s global position.

UK consultants are involved in several areas of the development plans such as education, healthcare, infrastructure & transport, and oil & gas. To support the initial NDP, several key pieces of economic legislation were passed, which require Kuwait’s public enterprises to meet international governance standards, enable the privatisation process to start, and provide new support to SME development. The momentum has been maintained thanks to a series of reforms that have improved the operating environment for foreign private sector companies and streamlined bureaucratic procedures. These changes have included the suspension of the offset programme, changes to the Kuwait Direct Investment Promotion Authority (KDIPA), and an overhaul of public-private partnership processes.

As part of its efforts to boost the country’s competitiveness and increase the private sector’s participation in the economy, the Kuwaiti government initiated an ambitious Public-Private Partnership (PPP) programme, which promotes collaboration between the public and private sectors to develop quality infrastructure and services for Kuwaiti citizens. The comprehensive programme contains well-defined legislative, governance and executive frameworks to help ensure the success of Kuwait’s PPP initiatives. In March 2015, the Kuwaiti Government issued new executive by-laws for public-private partnerships, essentially kick-starting this long-awaited PPP scheme.

This has reinvigorated the rebranded Kuwait Authority for Partnership Programs (KAPP), as evidenced in the number of projects it is now actively tendering. KAPP has initiated several high-impact projects in the power, water/wastewater, education, health, transportation, communications, real estate and solid waste management sectors, which were identified as key sectors for increasing economic diversification and private sector participation in Kuwait. KAPP selects projects that advance Kuwait’s key development goals. These include expanding private sector employment, improving the investment climate and competitiveness, diversifying the economy and improving government service provision.

Nonetheless, the World Bank’s most recent Ease of Doing Business index currently ranks Kuwait at 83 out of 190 countries overall and although there has been signs of incremental improvement a number of indicators still score lower than the average for the Africa and Middle East Region. The index ranks Kuwait at 162 in terms of trading across borders. Cost to export in terms of border compliance to Kuwait is over 50% more than the average for an economy in the MENA region. Due to inefficiencies at Ports of Entry, this situation is likely to worsen at the expense of UK and other exporters. The index also ranks Kuwait 82nd in terms of starting a business and this has certainly improved over recent years. So while some challenges do exist, there are plenty of commercial opportunities for UK companies wishing to trade or invest in Kuwait.

Like all countries in the Gulf region and elsewhere, Kuwait’s economy has taken a major near-term hit from the spread of and required response to the ongoing 2020 COVID-19 pandemic. The main impact has come from a combination of forced business closures, travel restrictions and supply chain disruptions that have hit the retail, hospitality, travel and transportation sectors hard. On top of this, the collapse in global oil prices partly triggered by the virus has hit confidence and the government’s finances.

4. Business and Human Rights

Kuwait has a long history of democratic institutions, a proud tradition of freedom of speech, an independent judiciary and a free press, although concerns have been raised by human rights NGOs in the past about Kuwait’s record on labour rights (e.g. domestic workers), human trafficking, and its treatment of the Bidoon (stateless) minority.

Whilst Kuwaitis benefit from generous public subsidy, are unionised and have the right to strike, this right is not extended to expatriate workers – who comprise the majority of the labour force in Kuwait, but can only become non-voting union members after working for five years. The International Labour Organisation (ILO) have publicly criticised Kuwait for this stance. In 2015, the National Assembly passed a law granting domestic workers the right to one day off per week, 30 days paid leave per year, a maximum 12-hour working day with rest, and an end-of-service benefit of one month’s wage for every year worked at the end of the contract, among other rights. In 2016 and 2017, the Interior Ministry passed implementing regulations for the law, and mandated that employers must pay overtime compensation and established a minimum wage of KD60 (approximately US$197) for domestic workers.

Trafficking of domestic workers is an issue (the US State Department lists Kuwait as a Tier 2 country), and the oversight and regulation of the controversial sponsorship (Kefala) system is weak. Embassies of labour-exporting countries operate shelters for workers running away from abusive employers – thousands do so each year. Kuwait has now opened the first government-operated shelter for these vulnerable women, and is the largest in the Gulf. There are plans for a men’s shelter as well.

The ongoing 2020 COVID-19 crisis has brought to light a major humanitarian lapse in the form of a marginalised unskilled labour force numbering in the hundreds of thousands living in the country either illegally or brought to the country under false pretences and then left to fend for themselves. The workers generally tend to come from the Indian subcontinent and Egypt and live in unsuitable conditions, often 10 or more per apartment. This fuelled both the spread of the virus and anti-expat rhetoric amongst many Kuwaiti nationals demanding the government do something to fix the demographic imbalance (Kuwaitis only represent about 30% of the total population).

Kuwait has a large minority of stateless Bidoon (approx. 110,000). These individuals are broken into two categories: one who has evidence of being in Kuwait since 1965, but did not apply for citizenship at the time due to coming from tribal or illiterate backgrounds, and others who claim Kuwaiti citizenship but have no documentation to prove this. They are banned from protesting, and struggle to access employment, healthcare and education. Concerns about their situation are frequently raised by a number of human rights NGOs. The government has promised to set out a working plan to deal with this issue in the upcoming legislative term.

Common to the rest of the region Kuwait also maintains the death penalty (on 25th January 2017 Kuwait executed seven individuals – the first death sentences since late 2013 – including two Kuwaiti nationals, one a member of the Al Sabah ruling family. All sentenced have committed capital offences including kidnapping and murder and have exhausted the appeals process. Reactions ranged from surprise to relief with international organisations’ condemnation). A handful of death sentences have been passed since, but none have been carried out, with one case recently reversed to life imprisonment.

NGOs have also raised concerns about Kuwait’s record on freedom of expression. Whilst Kuwait has a strong culture of freedom and democracy, lèse majesté and blasphemy laws remain on the statute book. Recent years have seen prosecutions against both, in particular for comments made on social media, which can and has carried onerous jail terms.

On 14 January 2016, the Kuwaiti government passed the electronic media law, a law that covers all forms of electronic media; including web based news services, newspaper and television portals as well as commercial services. On the face of it, this seems like a relatively normal law which regulates the media landscape online in Kuwait. However, the law in itself is vague, leaving much room for misinterpretation.

There are concerns from human rights groups regarding the implementation and implications of the cyber crimes and media laws but it is generally thought that this legislation is focused on tackling those who seek to use the cyber environment for radicalisation and organised crime purposes. The implementation of media laws designed to regulate official websites and to tackle the extremist narrative will continue to be monitored.

5. Bribery and Corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.

In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere. There are current cases in Kuwait of British companies under investigation for irregularities in relation to gaining contracts in Kuwait. Most companies will come across cases of bribery and corruption or what appears to be so.

According to the 2019 Corruption Perceptions Index conducted by Transparency International, Kuwait currently ranks 85 out of 180 countries (a drop of 7 places), with a score of 40/100. The Kuwaiti government has committed to eradicating bribery and corruption activities, and has taken steps to seek to address this through the launch of a National Anti-Corruption Strategy in 2019 and a strengthened National Anti-Corruption Authority.

There is acknowledgement that corruption has to be tackled especially in the awarding of government contracts. However, the situation is not helped by the large amount of bureaucracy and red tape that exists in Kuwait. Patience and close engagement with Kuwaiti business partners is always advised when dealing with these matters. The Minister of Commerce and Industry has made the tackling of red tape and ease of doing business a top priority, although political infighting has delayed progress. In addition, Kuwait Direct Investment Promotion Authority (KDIPA) has established a “one-stop” shop service to help newly established companies navigate local legal requirements.

The government has established a new capital markets authority to regulate the financial markets and the central tendering committee for government contracts continues to modify its practices in line with better international standards. This is evidenced in the beginnings of a move towards awarding more contracts on quality of bid rather than simply lowest cost. Kuwait’s National Anti-Corruption Authority, Nazaha, was established recently in 2016 and has a wide remit around investigation, whistle-blowing and asset declarations.

Visit the portal page providing advice and guidance about corruption in Kuwait and some basic effective procedures you can establish to protect your company from them.

Read the information provided on our Bribery and corruption page

6. Terrorism Threat

For up-to-date information please consult the FCDO’s current travel advice for Kuwait

7. Protective Security Advice

For up-to-date information please consult the FCDO’s travel advice for Kuwait. Violent crime is not a major problem in Kuwait but extreme care should be taken when driving as Kuwait has one of the highest road accident rates in the world.

Read the information provided on our Protective security advice page.

8. Intellectual Property

Trademarks, designs, patents and copyright are the principal forms of IP protection available to companies and individuals.

Kuwait is a member of the WTO and a signatory to the Agreement on Trade Related Aspects of Intellectual Property Rights.

Patents must be registered with the Patents Office at the Trademark Control Department of the Ministry of Commerce and Industry.

Industrial designs must be registered in the Industrial Designs and Models Register. An application for registration must then be submitted to the Trademark Control Department. The registration is valid for 5 years and can be renewed for 2 additional consecutive terms.

Kuwaiti Commercial Code, Law No. 68/1980 governs trademark registration and the penalties for infringement. You can apply to register your trademark at the Trademark Control Department. When approved protection is granted for 10 years and can be renewed for another 10.

Article (17) of Law No. 64/1999 defines period of copyright protection. The Ministry of Commerce & Industry in Kuwait takes the lead on IPR. UK companies who feel they have an IPR issue should contact the Director of the Department for Business and Trade (DBT) in Kuwait.

For more information, read our Intellectual Property page.

9. Organised Crime

Read the information provided on our Organised crime page.

10. DBT Kuwait

The government can provide finance or credit insurance specifically to support UK exports through UK Export Finance – the UK’s export credit agency. For up-to-date country specific information on the support available see UK Export Finance’s country cover policy and indicators.

The Director of DBT in Kuwait is Shikha Tiwari:

Shikha.Tiwari@fcdo.gov.uk

Tel: 00 965 2259 4362

Mobile: 00 965 9720 2355

Shikha will be happy to send you DBT Kuwait’s guide to doing business in Kuwait.