Kuwait intends to modify its foreign direct investment law this year as the Arabian Gulf oil producer embarks on a US$111bn plan to modernise its economy, a government official said.
“Foreign investors coming to Kuwait find obtaining necessary licenses a very difficult and prolonged process, as well as getting land needed” for projects, Sheikh Meshaal Jaber Al-Ahmad Al-Sabah, head of the Kuwait Foreign Investment Bureau, said in an April 18 interview at the bureau’s offices in Kuwait City. “The proposed amendment should overcome shortcomings of the law. We hope it will be passed this year.”
Kuwait expects private investors to contribute about half of the four-year development plan, which began in the 2010-2011 fiscal year, to diversify its oil-reliant economy. The country, which passed the foreign direct investment law in 2001 to ease foreign ownership limits, is seeking investments in projects including a US$14bn oil refinery.
In 2007, Kuwait’s parliament passed a law to reduce the tax burden on international companies for the first time in more than half a century, with corporate tax on foreign firms reduced to 15 percent from as much as 55 percent.
Kuwait, the fourth-biggest oil producer in the Organization of Petroleum Exporting Countries, was the lowest recipient of foreign direct investment among the six Gulf Cooperation Council states in 2010 with US$6.5bn, according to data on the United Nations Conference on Trade and Development’s website. Saudi Arabia, the biggest Arab economy, was the highest with US$170.5bn, followed by the UAE with US$76.2bn.
In contrast, Kuwait is estimated to own US$300bn of assets abroad through its sovereign-wealth fund. The Kuwait Investment Authority holds stakes in Daimler and BP, and invested in the initial share sales of Agricultural Bank of China and Citic Securities.
“Some government agencies still don’t understand the importance of international investors, and so take too long” to grant approvals required by the law, Sheikh Meshaal said.
The proposed amendment will shorten procedures to obtain licenses and land for investors who fulfill the criteria, he said. It will also stipulate the establishment of an independent authority to consolidate “all efforts to promote investment opportunities in Kuwait to the foreign market,” he said.
Kuwait’s economy expanded 5.7 percent in 2011 and growth is expected to be “a little higher” this year, Finance Minister Mustafa al-Shimali said in March. National Bank of Kuwait, the country’s biggest lender, last month raised its forecast for Kuwait’s 2012 real gross domestic product to 4.4 percent on expectations of increased oil output.
Foreign direct investments that come under the bureau’s jurisdiction climbed 20 percent in 2011 from the previous year, Sheikh Meshaal said.
“Since we started operations in 2003, about US$5.4bn in foreign investment was recorded to have come to Kuwait,” he said. “The law’s achievement may have been short of expectations, disappointing perhaps, but it is still progress.”
The bureau operates under the Ministry of Commerce to oversee foreign investors interested in operating within the framework of the law.
Clashes between the government and parliament have hindered projects in the development plan, which include a metro and rail network, an airport terminal and power stations. Lawmakers last month rejected a bill that covers the plan in the 2012-2013 fiscal year and have criticized the government for carrying out projects too slowly. Government officials have acknowledged delays and a panel is investigating obstacles to the plan.
“Our democratic political system should not threaten foreign investors,” Sheikh Meshaal said. “They’re used to it in their countries.”