Kuwait flag Kuwait: Invertir a Kuwait

Inversió estrangera directa (IED) a Kuwait

FDI in Figures

Global foreign direct investment (FDI) flows showed a strong rebound in 2021, up 77% to an estimated USD 1.65 trillion, from 929 billion in 2020, surpassing their pre-COVID19 level. FDI flows in developing countries increased by 30% but almost three quarters of the total increase in global FDI (USD 500 billion) was recorder in developed economies, with developing economies showing a more modest recovery growth. FDI inflows to West Asia and the middle East increased by more than 49% in 2021 to 90 billion USD (UNCTAD, January 2022).

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 USD -319 million in 2020, compared to USD 104 million 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 USD 14.1 billion in 2020. The bulk of investments are directed towards the oil & gas sector, followed by real estate/construction and financial services. The majority of foreign investments come from the United States and China.

As a resource-rich economy, Kuwait is diligently looking to deploy its oil wealth to develop and diversify the economy. The nation aims to attract more than $200bn in foreign direct investment (FDI) between 2020 and 2035 in order to become a global centre for trade and finance. The government is taking concrete steps towards achieving its ambitions to boost private sector investment in key sectors. Kuwait Vision 2035 focusses on improving the country’s economic infrastructure, such as the construction of new airports, ports, roads, industrial areas, residential developments, hospitals, a railroad, and a metro rail.  The Northern Gateway initiative, which encompasses the Five Islands or Silk City projects, envisions public and private sector investment in the development of an international economic zone. It is not yet clear how increased fiscal pressure resulting from COVID-19 and lower oil prices will affect the plan (US State Department, 2022).

With the decline in oil revenue, 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 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% foreign ownership in some sectors and 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. 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 in the country. 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.
Kuwait ranks relatively low in the last World Bank's 2020 Doing Business report 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 & 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.

 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 351-142198
FDI Stock (million USD) 15,15114,60114,799
Number of Greenfield Investments* 261512
Value of Greenfield Investments (million USD) 695254146

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 
Country Comparison For the Protection of Investors Kuwait Middle East & North Africa United States Germany
Index of Transaction Transparency* 5.0 6.4 7.0 5.0
Index of Manager’s Responsibility** 9.0 4.8 9.0 5.0
Index of Shareholders’ Power*** 4.0 4.7 9.0 5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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What to consider if you invest in Kuwait

Strong Points

Kuwait has several advantages for attracting FDI:

  •  Abundant oil reserves (the country has the 6th largest oil reserve in the world - U.S. EIA, 2020) 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
  • Kuwait is strategically located as a thriving commercial centre in the region, close to three major markets (Iraq, Saudi Arabia and Iran)
  • An open market economy allowing Kuwait to enjoy free convertibility and full transferability in the foreign exchange market.
Weak Points

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

  • Necessary structural reforms 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) weakening 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
  • Strong dependence on the expatriate labour force.
Government Measures to Motivate or Restrict FDI

To promote the diversification of its economy, Kuwait has set up the Kuwait Development Plan (KDP) (Kuwait Vision 2035 "New Kuwait") for 2035. The main objective of this plan is to transform the country into a regional and international financial and trade hub to make Kuwait more attractive to investors. 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 will help develop the country's communication infrastructure

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Actualitzacions: September 2022

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