The Report: Kuwait 2018
As hydrocarbons forms the backbone of Kuwait’s economy, the resurgence in global commodity markets bodes well for the future and has led to a renewed sense of optimism. The recovering market is also supporting the government’s diversification efforts under the auspices of the Kuwait National Development Plan, or New Kuwait.
Country Profile
As a member of both the Organisation of the Petroleum Exporting Countries and the GCC, Kuwait has numerous strategic ties. Additionally, the country is arguably the most politically dynamic in the Gulf, which has afforded it strong foundations to help tackle recent issues regarding parliamentary elections and accountability. By continuing with economic diversification efforts and reducing dependence on oil revenue, Kuwait is also adding momentum to several large infrastructure projects. The tabled projects are set to further integrate Kuwait into the global economy.
This chapter contains a viewpoint from Emir Sheikh Sabah Al Ahmed Al Jaber Al Sabah.
Explore chapterEconomy
With 6% of the world’s proven oil reserves and 1% of its natural gas, Kuwait had an estimated GDP per capita of $71,943 in power purchasing parity terms in 2017, which was the eighth-highest value for any country or autonomous region, according to the World Bank. Kuwait has also been a prudent saver of its petrodollars and has the world’s fourth-largest sovereign wealth fund, with the Kuwait Investment Authority managing $592bn in assets in mid-2018, according to the SWF Institute. In 2018 the IMF calculated this financial buffer to be equivalent to 470% of Kuwait’s GDP. Although Kuwait is still exposed to oil price fluctuations for now, development initiatives already under way should ensure a sustainable economic growth path in the long term. This chapter contains an interview with Sheikh Meshaal Jaber Al Sabah, Director-General, Kuwait Direct Investment Promotion Agency.
Explore chapterTrade & Investment
As a founding member of the Organisation of the Petroleum Exporting Countries (OPEC) as well as the site of approximately 7% of the world’s crude oil reserves, Kuwait has long been a major energy exporter. In 2017 the nation’s oil sector generated more than 90% of government revenues, and oil exports were equal to some 42% of GDP, the highest figure among member states, according to OPEC data. Like other countries in the GCC, Kuwait has taken advantage of these revenues both to build a deep portfolio of global investments, thereby ensuring long-term returns, and to invest in economic diversification projects at home, with an eye towards developing new industries and attracting foreign direct investment in strategic areas.
Explore chapterBanking
Underpinned by rising commodity prices and, consequently, increased domestic spending, Kuwait’s banking sector performed well in the 18 months to mid-2018. The industry posted net profit growth of 8.9% and total asset growth of 5.9% to $251.9bn in 2017, even as local banks moved to adhere to a raft of new provisioning rules. With the price of crude more than doubling from $28 per barrel in January 2016 to $76 in September 2018, the state has expressed confidence in its ability to move forward with $112.5bn in planned capital expenditure under the National Development Plan 2015-20. This will have positive knock-on effects for the banking sector, which has long been a beneficiary of state spending in the form of government deposits and financing opportunities. This chapter contains an interview with Mohammad Y Al Hashel, Governor, Central Bank of Kuwait; and Fatah Adour, General Manager, Citibank Kuwait.
Explore chapterCapital Markets
The Kuwait stock market is undergoing a series of changes, which have the potential to trigger transformations in the market’s daily operations and long-term prospects. This commenced in 2016, with private operator Boursa Kuwait taking over operations of the publicly owned bourse, then known as the Kuwait Stock Exchange. In mid-February 2018 the Capital Markets Authority (CMA) announced it had expanded the team of companies overseeing the exchange’s privatisation, and in April the CMA launched a bidding process for an equity stake in Boursa Kuwait capital stocks of between 26% and 44%, with the initial public offering of the stake set to be launched in early 2019. The offering is expected to enable the implementation of further upgrades and reforms in the future, including new trading and settlement systems and, eventually, the launch of derivatives. This chapter contains an interview with Khaled Abdulrazzaq Al Khaled, CEO, Boursa Kuwait.
Explore chapterIslamic Financial Services
Over the course of 2017-18 Kuwait’s Islamic financial services (IFS) industry saw continued growth and ongoing development, shoring up the country’s long-standing reputation as a global centre for sharia-compliant banking, insurance and investment activities. Global IFS assets topped $2trn for the first time in 2017, with Kuwait accounting for 6% of these assets, having an estimated value of $123bn. A key area of potential growth is the sukuk (Islamic bond) market, which is widely expected to benefit from rising demand for sharia-compliant debt from the government and private entities. In addition, takaful (Islamic insurance) providers are also gaining a larger share of the Kuwaiti market. This chapter contains an interview with Mazin Saad Alnahedh, Group CEO, Kuwait Finance House.
Explore chapterInsurance
In 2017 and early 2018 Kuwait’s insurance sector enjoyed growth on the strength of steadily rising premium, regulatory tweaks and forays by individual underwriters into a number of new market segments. Nonetheless, according to many stakeholders, the obsolescence of the country’s insurance law remains a major hurdle to the sector’s future growth. Various iterations of a new insurance law have been circulating among government bodies since at least 2012. The central amendment proposed by these drafts is the establishment of an independent body charged with oversight and enforcement responsibilities, which many local insurers believe is needed to ensure the sector’s stability profitability over the long term.
Explore chapterTransport & Logistics
With major new development projects under way across all transport sectors, Kuwait is pouring billions of dinars into transforming its roads, ports and airports. The country’s medium-term objective is to capitalise on its strategic location in order to become the northern nexus of the Gulf, facilitating and profiting from flows of international trade across the region for decades to come. In the shorter term, Kuwait faces challenges in tackling delays and congestion that slow the flow of goods and people around the country and across its borders. This chapter contains an interview with Sheikh Yousef Al Abdullah Al Sabah Al Nasser Al Sabah, Director-General, Kuwait Ports Authority.
Explore chapterEnergy & Utilities
The energy sector is the backbone of Kuwait’s economy, accounting for 90% of both exports and government revenue. Major projects led by state-owned companies responsible for the extraction, processing and marketing of oil and gas also drive the non-oil economy by supporting tens of thousands of jobs in engineering, construction and support services. Despite the fall in oil prices, progress on these projects and investment in new technology continues. With self-imposed production cuts coming to an end, the strategic intent is to transform Kuwait from a country that primarily pumps and exports crude oil, to one with an integrated energy industry. Goals include optimising oil extraction, realising the full potential of domestic natural gas fields and doubling refining capacity to produce cleaner fuels and increased volumes of feedstock for a more diversified downstream sector. This chapter contains an interview with Nouf Al Abdul Razzaq, General Manager, BP Kuwait.
Explore chapterConstruction & Real Estate
Hundreds of thousands of construction workers in Kuwait are busy building bridges, roads, homes, the region’s largest refinery, an expanded airport terminal and a new port. These are just some of the major projects being completed as the country works towards the New Kuwait 2035 vision. However, these developments are almost entirely driven by government spending and components of the Kuwait National Development Plan 2015-20, which have been subject to delays and postponements in 2017 and 2018. Despite these setbacks, the remaining two years of the plan should see the completion of major infrastructure improvements that could serve as the catalyst for significant changes within Kuwait’s economic landscape.
Explore chapterICT
The government’s New Kuwait 2035 strategy has signalled ICT development as a key pillar that is expected to attract investment and boost the local economy. In 2016 telecoms accounted for 7.7% of non-oil revenue and 3.92% of total GDP at constant prices, according to the Central Statistical Bureau. Though its contribution to the non-oil sector grew to 8.2% in 2017, its GDP share dipped slightly to 3.86%; however, sector contribution to GDP is regaining momentum, with telecoms accounting for about 5% in the first half of 2018. The sector generated $1.9bn at constant prices by the end of the second quarter of 2018, a year-on-year growth of 34%, and its positive trajectory is expected to continue, backed by the expansion of three international mobile network operators in Kuwait: VIVA, Ooredoo and Zain. This chapter contains an interview with Salman bin Abdulaziz Al Badran, CEO, VIVA Kuwait.
Explore chapterIndustry
As Kuwait tries to curb its dependency on hydrocarbons, which accounted for over 90% of state revenues in 2017, other industries are coming into focus. Excluding refined petroleum products and nuclear fuel, manufacturing industries’ contribution to GDP rose by 6.2% in 2017 to $5.6bn, according to the central bank. Meanwhile, refined petroleum products and nuclear fuel’s portion of GDP expanded by 18% to $3.3bn in 2017 from $2.8bn the year before. Much of this recent performance is due to implementation of the country’s national development plan, New Kuwait 2035, which prioritises infrastructure upgrades and economic diversification as part of 164 programmes, projects and initiatives that aim to transform the country into a centre of finance and industry. This chapter contains an interview with Faisal Awwad Al Khaldi, Deputy CEO, Kuwait Steel.
Explore chapterRetail
Retail and wholesale trade accounts for a sizeable percentage of Kuwait’s non-oil GDP – at 9.1% as of February 2018 – and there are solid growth forecasts for the coming year. Kuwait has one of the highest per capita incomes in the world at $68,500 in 2017, according to the World Bank, and there is strong demand for luxury and imported goods among wealthy locals and foreign residents, who now make up around 70% of the population. Kuwait’s retail sector saw significant growth in 2017 as new and old players rushed to adapt to changing tastes and demands. Innovative malls and increased competition from e-commerce retailers have started reshaping the local market. These trends are expected to continue into 2019 as stable macroeconomic fundamentals and government infrastructure programmes boost growth and encourage investment.
Explore chapterHealth
The health profile of the Kuwaiti population has changed significantly in the past several decades. Kuwaiti citizens, who account for around 30% of the population of just over 4.2m, have become more prone to non-communicable diseases (NCDs). While deaths from infectious diseases are posing less and less of a threat, NCDs – the four main categories of which are heart disease, cancers, diabetes and upper respiratory diseases – accounted for 72% of deaths in Kuwait in 2015, according to the World Bank. In the coming years the government will aim to address the increasing prevalence of NCDs, which are also associated with rising health care costs. Efforts to reduce public health care expenditures will also require a shift in the financing of care for the large expatriate population, and solutions for this challenge are now being formulated.
Explore chapterEducation
Kuwait and the wider Gulf have some of the youngest populations in the world, with one-third of the GCC’s population expected to be under the age of 25 by 2030. As such, ensuring that Kuwaiti youth are equipped with the skills to compete in the global marketplace has become one of the government’s main priorities. This is laid out in New Kuwait 2035, a bold government development plan prioritising education reform and investment, among other policy pillars. The downturn in global oil prices, following the commodity’s high of $111.48 per barrel in June 2014, prompted GCC governments to cut or freeze spending, intensifying pressure for private sector involvement in sectors dominated by public actors. Recognising this, the Kuwaiti government has taken concerted steps to facilitate private investment in schooling, developing build-operate-transfer agreements, public-private partnerships and technical cooperation programmes aimed at improving school curricula, teaching and management.
Explore chapterLegal Framework
This chapter contains an overview of the legal framework in which local and international investors operate in Kuwait, including a look at the incentives available for qualifying overseas investors and the changes to intellectual property protection framework. This chapter contains a viewpoint Alex Saleh, Partner, Al Tamimi & Co.
Explore chapterThe Guide
The guide contains listings of some of the leading hotels and resorts in Kuwait and contacts for important government offices and services. It also contains useful tips and information for business and leisure visitors alike.
Explore chapterTable of Contents
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Crown Prince Sheikh Mishal Al Ahmad Al Jaber Al Sabah
Sheikh Meshaal Jaber Al Sabah, Director-General, Kuwait Direct Investment Promotion Authority (KDIPA)
Basel Al Haroon, Governor, Central Bank of Kuwait
Mohammad Al Osaimi, CEO, Boursa Kuwait
Sheikh Nawaf Al Sabah, CEO, Kuwait Petroleum Corporation (KPC)
Maen Mahmoud Razouqi, CEO, Kuwait Airways
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