Kuwait is a constitutional emirate with a parliamentary system of government, with Kuwait City serving as the country’s political and economic capital. The country has the world’s fifth largest oil reserves. according to the Oil and Gas Journal, and petroleum products now account for nearly 95% of export revenues, and 80% of government income, according to the CIA World Factbook. Kuwait is the 16th richest country in the world in per capita, with a nominal GDP per capita of $39,497 in2011 according to the IMF. In 2007, it had the highest human development index in the Arab world, according to the HDI. Kuwait is classified as a high income economy by the World Bank and is designated as a major non-NATO ally of the United States. Does this mean that business in Kuwait is thriving?
Trade in Kuwait and the economy
Kuwait had an economic GDP of $172.778 billion in 2011, as estimated by the IMF. According to the 2008 Index of Economic Freedom, Kuwait has the second-most free economy in the Middle East. Petroleum and petrochemicals accounts for nearly half of GDP and 95% of export revenues. Other major industries include shipping, construction, cement, water desalination, construction materials and financial services, according to the CIA World Factbook. Kuwait has a well developed banking system and several banks in the country date back to the time before oil was discovered. 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. The government is keen on decreasing Kuwait’s dependence on oil to fuel its economy by transforming it into a regional trading and tourism hub. The planned US$77 billion Madinat al-Hareer (City of Silk) is the largest real estate development project in the Middle East, according to the AFP in 2010.
Business in Kuwait and Industry
Industry in Kuwait consists of several large export-oriented petrochemical units, oil refineries, and a range of small manufacturers. It also includes large water desalinization, ammonia, desulfurization, fertilizer, brick, block, and cement plants. The Kuwaiti dinar is a strong currency pegged to a basket of currencies in which the U.S. dollar has the most weight. Kuwait’s economy can be broken down into the following sectors, agriculture (0.3%), industry (52.2%), services (47.5%). While Kuwait’s main import partners are United States 12.7%, Japan 8.5%, Germany 7.3%, China 6.8%, South Korea 6.6%, Saudi Arabia 6.2%, Italy 5.8%, United Kingdom 4.6%. Kuwait was ranked as the 67th easiest country to do business in for 2012, according to the World Bank. In the same survey, it was ranked 29th for protecting investors, 112th for trading across borders, and 117th for enforcing contracts. So Kuwait did great in some areas but quite poor in other areas.
Overall, Kuwait is a relatively decent market to do business in. While the Kuwaiti market may not be large with a small population of 3,566,437, as reported by a 2010 government census, the market is quite rich. In addition, the Kuwaiti government does a great job protecting investors, which is why it got such a high ranking in that category in the World Bank survey. There is also a lot of construction work to be done, as the Kuwaiti government funds the development of a new city. In addition, the Kuwaiti government is aggressively trying to diversify its economy away from oil and gas towards more long terms sustainable industries. To find out more about investing in Kuwait, you can visit the official government website of the Kuwait Investment Authority at (http://www.kia.gov.kw/En/Pages/default.aspx).