On attracting foreign direct investment to the country
How do you expect international investor confidence and foreign direct investment (FDI) levels to evolve in the economic recovery phase following the Covid-19 pandemic?
KHALIL: International investor confidence in Kuwait appears to be positive, as evidenced by the increase in new FDI approved by the Kuwait Direct Investment Promotion Authority (KDIPA). Approved investment increased to KD163.2m ($537.1m) in FY 2020/21, up from KD115.8m ($381.1m) in FY 2019/20. This trend appears to be continuing in light of recent investment by global players such as Amazon Web Services, which opened a new office in Kuwait in October 2021. Initiatives by KDIPA such as fiscal exemptions on applications for investment licences in 2020 and incentives for tech companies – together with measures taken by the government to improve the ease of doing business – could further boost FDI moving forwards. Additionally, lowering bureaucratic hurdles and ensuring a business-enabling environment would help to further support foreign investment.
In what ways are technology, automation and robo-advisory solutions boosting the efficiency of wealth management firms, and how will they change the client experience?
KHALIL: The cost advantages of robo-advisers over traditional wealth management firms stem from reduced personnel requirements, lower operating expenses and the digitalisation of processes. By offering robo-advisory solutions, wealth management firms can serve clients that were previously outside the purview of wealth management and retain those that prefer the digital experience. Given Kuwait’s young demographics and the preference for a digital experience among millennials, offering robo-advisory solutions would help wealth management firms attract this key segment.
The reduced costs and resulting growth in the client base could also aid in lowering the cost-to-income ratio for wealth management firms. However, it remains important to deliver personalised client engagement to maintain the attractiveness of traditional wealth management services. Additionally, the growing popularity of low-cost passive investing is aiding the growth of robo-advisory services. Furthermore, related platforms are contributing to innovative portfolio offerings focused on specific themes and sectors such as sharia compliance.
The pandemic has accelerated digitalisation in Kuwait’s financial sector. Since the outbreak of Covid-19, digitalisation has quickly become a necessity rather than a choice. Banks and other financial services companies are investing heavily in digitalisation and establishing it as a key component of their strategic plans. Kuwaiti banks continue to launch digital products and services such as digital account opening, digital wallets and Samsung Pay. They have also invested heavily in digitising their back-end operations through collaboration with technology firms. Similar trends can be seen in the case of asset management companies. Regulators have been agile and have provided support to Kuwaiti entities, while ensuring the stability and security of the financial sector. Companies that view and leverage technology as a differentiator and not simply a service are set to benefit in the long run and gain a competitive edge.
To what extent are environmental, social and governance (ESG) principles shaping Kuwait’s investment and business environment?
KHALIL: Technological innovation and ESG are two themes that are disrupting businesses, and Kuwait-based asset managers have adapted quickly. Some now offer algorithm-based investment management services, including automated portfolio planning, automatic asset allocation, online risk assessment, account rebalancing and other digital tools tailored to investors’ needs. Some of our digital transformation projects include the launch of a personalised investment app using robo-advisory called iMarkaz and an online resident services portal for real estate businesses.
Boursa Kuwait and the Capital Markets Authority play a leading role in enhancing the sector’s appeal to international investors. Both government organisations continue to introduce various initiatives, such as standardising listing rules, and are considering listing derivatives in order to boost liquidity and attract foreign investment inflows.
Sustainable investment is no longer driven by altruism alone: ESG and sustainability-focused funds such as those on the S&P/Hawkamah ESG Pan Arab Index outperformed their conventional counterparts in 2021, making them notable investment vehicles. The impact of ESG on the financial sector is two-fold. The first aspect relates to compliance. With this in mind, Boursa Kuwait launched its ESG reporting guide to help companies identify and adopt best practices in ESG implementation and reporting. The second aspect is the way ESG impacts products. Several banks in Kuwait are prepared to launch sustainable products and have sustainable financing frameworks in place through which they can issue ESG-related instruments, including green bonds and social financing instruments.