The Report: Kuwait 2016
The fall in oil prices led to significantly reduced government revenues for Kuwait in 2015. Despite this the country’s 2016 spending remained largely in line with previous years as the government opted to draw on its considerable financial buffers to help make up for budgetary shortfalls. In the medium term the introduction of new taxes, a reduction of state subsidies and a renewed sense of urgency surrounding economic diversification drives in the wake of the oil price drop are all expected to help boost state revenues moving forward.
A member of both the Organisation of the Petroleum Exporting Countries and the GCC, Kuwait is arguably the most politically dynamic in the Gulf, which has afforded it strong foundations to help tackle recent issues concerning parliamentary elections and accountability. By continuing with economic diversification efforts and reducing dependence on oil revenues, it is also adding increased momentum to several large infrastructure projects, which will help further integrate Kuwait into the global economy. This chapter contains a viewpoint from Emir Sheikh Sabah Al Ahmed Al Jaber Al Sabah, on the importance of addressing regional security within the GCC; and interviews with Marzouq Ali Al Ghanim, Speaker, Kuwait National Assembly; Abdul Latif Al Zayani, Secretary-General, GCC; and Tobias Ellwood, MP and Minister for the Middle East and North Africa, UK Foreign and Commonwealth Office.Explore chapter
The story of Kuwait’s economy, like so many of its neighbours, has been dominated by oil. Once a regional port for pearling and fishing, the country was part of regional Gulf trade networks intimately tied to those of the Indian Ocean. Political independence in 1961, along with its huge hydrocarbons resources, helped Kuwait to become one of the top oil producers in the world. Still, the authorities are aware that crude is a finite resource, a fact brought into the spotlight during the recent period of low oil prices. As a result, the economic development blueprint Kuwait Vision 2035 draws on the country’s trading past in order to secure its future. The blueprint aims to re-kindle Kuwait’s history as a commercial centre, while also developing sectors such as finance and real estate to make them even more competitive internationally.
This chapter contains an interview with Sheikh Meshaal Jaber Al Ahmad Al Sabah, Director- General, Kuwait Direct Investment Promotion Authority (KDIPA); and Abdulwahab Al Bader, Director-General, Kuwait Fund for Arab Economic Development.Explore chapter
With a raft of large-scale, government-led development projects on the docket, rising retail deposits and strong support from regulators and other authorities, Kuwait’s banking sector is widely considered to be poised for a period of long-term growth. This follows a difficult period linked to the broader economic volatility that has impacted the Gulf region in recent years. Nonetheless, as of the first quarter of 2016 the nation’s 11 domestic lenders had KD59.8bn ($197.8bn) in total assets, up considerably from KD56.7bn ($187.5bn) at the end of the same period in 2015. Relatively plentiful liquidity has contributed to rising levels of credit issuance in 2015 and 2016, with data showing industry-wide credit growth in excess of 8% over the course of 2015.
This chapter contains an interview with Mohammad Y Al Hashel, Governor, Central Bank of Kuwait (CBK).Explore chapter
Trade & Investment
With strong foreign reserves, a rapidly improving investment framework and a major state-led development programme under way, Kuwait is well positioned to attract growing levels of foreign direct investment (FDI) and trade in the coming years. While the government has cut back on current spending recently, capital expenditure has continued apace and is forecast to grow in the coming years. Furthermore, due in part to incentives put in place by the Kuwait Direct Investment Promotion Authority, established in 2013 as part of an ongoing overhaul of the FDI framework, much of this expenditure is expected to come from private firms, either directly or in the form of public-private partnerships. Indeed, in 2015 and early 2016 a handful of multinationals moved to take advantage of Kuwait’s new investment environment, with positive implications for future activity. On the trade front, oil exports are down and a relatively strong Kuwaiti dinar (compared to regional currencies) has limited non-oil export gains in 2015-16, though in the fourth quarter of 2015 these posted an increase for the first time in a year.
This chapter contains an interview with Yousef Mohammed Al Ali, Minister of Commerce and Industry.Explore chapter
More than six years of strategic planning came to fruition in late April 2016, when Boursa Kuwait Securities Company, a private firm established in 2014, took over management of the Kuwait Stock Exchange. The move was widely understood to indicate the beginning of a new era for Kuwait’s capital market. This shift follows on from a series of major reforms initiated by the passage of the 2010 Capital Markets Law, under which the sector regulator – the Capital Markets Authority – and other state entities have worked to transform the bourse, with the long-term objective of boosting the market’s performance and overall value.
This chapter contains an interview with Nayef Al Hajraf, Chairman and Managing Director, Capital Markets Authority (CMA).Explore chapter
Islamic Financial Services
Driven by rising demand for new sources of financing in the face of weak oil prices, Kuwait’s Islamic financial services (IFS) sector is increasingly considered to be a core component of the nation’s development. The industry’s steadily improving profile is largely a result of the government’s efforts to shore up the sector’s reputation over the past decade, most recently by rolling out new sukuk (Islamic bond) regulations in November 2015. As a consequence, local Islamic banks, investment companies and sharia-compliant insurers have gained market share at a rapid pace, in the process turning Kuwait into one of the world’s leading IFS markets.
This chapter contains an interview with Mazin Al Nahedh, CEO, Kuwait Finance House.Explore chapter
Despite the slowing regional economy and strong competition among local players, Kuwait’s insurance sector has seen steady growth in recent years, due in large part to rising demand for non-life products and increased activity in the takaful (Islamic insurance) segment. In 2015 the industry brought in an estimated KD315m ($1.04bn) in total gross written premiums (GWPs), up 4.3% from KD302m ($998.9m) in 2014. Continued uptake of new insurance policies in Kuwait is in line with regional insurance trends. Between 2006 and the end of 2014 the GCC insurance industry more than tripled its overall premiums, with total GWPs growing from $6.4bn to $22.2bn, yielding a compound annual growth rate of 6.4%.Explore chapter
Transport & Logistics
Located at the northern section of the Gulf, Kuwait lies on the historical trade routes that have for millennia linked Mesopotamia, Arabia and Persia to the Gulf and Indian Ocean trade networks. The country already boasts a quite sophisticated infrastructure, but as part of diversification plans set out in Kuwait Vision 2035, stakeholders have laid out plans to transform the country into a regional hub and global player in transport and logistics. Despite a reduction in oil export revenues, the government has been vocal about its commitment to move ahead with capital expenditures, including an airport terminal, a port facility, a series of roads and highways upgrades, an urban metro system and Kuwait’s segment of the region-wide GCC railway.
This chapter contains an interview with Sheikh Yousef Al Abdullah Al Sabah Al Nasser Al Sabah, Director-General, Kuwait Ports Authority; and President, Arab Sea Ports Federation.Explore chapter
A founding member of the Organisation of the Petroleum Exporting Countries, Kuwait and other members together hold over 80% of the world’s proven oil reserves, of which Kuwait has 101.5bn barrels, or 6%. After the Second World War its role in newly global energy markets gradually increased, with production growing to 1m by 1955. Following independence in 1961, the country spent two decades bringing its energy resources under the government’s purview by acquiring shares in oil operations. In 1980 the authorities founded Kuwait Petroleum Corporation (KPC) to bring all state-owned oil operations under a single organisation. In the resulting structure, KPC manages the sector through its subsidiaries, which handle upstream, downstream, transport and petrochemicals operations. The Supreme Petroleum Council meanwhile is charged with overseeing all oil-related decisions, and the council includes the ministers of finance, oil, foreign affairs, and commerce and industry, as well as the state minister for Cabinet affairs.
This chapter contains interviews with Mohammad Ghazi Al Mutairi, CEO, Kuwait National Petroleum Company (KNPC); and Jamal Jaafar, CEO, Kuwait Oil Company (KOC).Explore chapter
Real Estate & Construction
Real estate has long been a mainstay of Kuwait’s non-oil economy, while its construction industry is among the strongest in the region and a rising star in the non-oil economy, with its growing population, tightly regulated land market and wealthy populous all combining to fuel demand for new building. In 2014 the two industries together accounted for 10.6% of non-oil GDP. Although a range of factors, including lower oil prices, have affected growth projections across the GCC, Kuwait’s real estate sector is particularly well-poised to face lower prices, with residential the largest segment by both sales and number of transactions, with sales reaching $4.6bn in 2015.
This chapter contains interviews with Khaled Al Mashaan, Vice-Chairman and CEO, ALARGAN International Real Estate; Ahmad Kasem, Deputy CEO, United Real Estate Company; and Osama Jawad Bukhamseen, Executive Director, Bukhamseen Holding; and Chairman, Engineering Group.Explore chapter
Kuwait’s traditionally telecoms-led ICT sector saw developments in the past year that could encourage continuing expansion in telecoms and spur progress in the industry. While three telecoms operators continue to compete for the country’s high-value consumer market, they have also partnered with global ICT firms to expand their enterprise businesses. The government, for its part, has taken on a larger role in supporting the sector. In 2016 it handed key oversight responsibilities over to a new ICT regulator, the Communications and Information Technology Regulatory Authority. The government has also introduced new foreign direct investment laws and a fund to support small businesses and start-ups, adding important legal and financial incentives to boost ICT business growth.
This chapter contains interviews with Salim Al Ozainah, Chairman and CEO, Communication and Information Technology Regulatory Authority (CITRA); and Eaman Al Roudhan, CEO, Zain Kuwait.Explore chapter
Economic diversification is at the heart of Kuwait’s long-term development strategy, as is establishing the country as a gateway to the northern Gulf and Middle East. The industrial sector has a central role to play in this, as the state looks to develop export-oriented businesses that can supplement hydrocarbons income and broaden the revenue base. Under the Kuwait Development Plan (KDP) 2015-20, which lays out a strategy for large-scale investments in infrastructure and energy, and includes a strong emphasis on private sector involvement, the government aims to raise the non-oil sector’s contribution to GDP to 64% in 2015-20, up from an average of 45.1% in 2010-13. The chemicals sector is already strong in Kuwait and is expected to raise output strongly in the coming years, leveraging the country’s wealth of resources and spurring a wave of investments. Other industries with potential include construction materials, demand for which is rising as Kuwait ramps up infrastructure projects, and food, where domestic demand and a strategic location are important upsides.
This chapter contains an interview with Ghosson Ghassan Al Khaled, COO, ACICO Industries CompanyExplore chapter
The retail sector in Kuwait has achieved rapid growth in recent years, with retailers benefitting from strong economic fundamentals, evolving consumer tastes and a relatively unsaturated market. These factors are set to continue underpinning further growth and diversification over the coming years.The retail market, including wholesale, was worth $5.8bn in 2013, or 3.3% of GDP. While the trend has been a positive one, growth has fluctuated in recent years. In 2009, as the global economic crisis struck, year-on-year market growth fell by 23.4% before surging back by 16.5% in 2010. Declines of 8.7% and 3% followed in 2011 and 2012, respectively, but in 2013 the market recovered again, expanding by 11.9%. The sector’s compound annual growth rate (CAGR) is forecast for 6.7% between 2013 and 2018, with the supermarket and hypermarket segment set for a CAGR of 9.6%.Explore chapter
The health care market in Kuwait is set to receive a fiscal boost over the next five years, as rising public investment and private demand keep growth at double-digit levels. Health care provision and facilities are already expanding at a faster rate than most Gulf countries, reflecting Kuwait’s affluence and the government’s determination to prioritise the sector as part of the Kuwait Development Plan 2015-20. The coming years are likely to see growing opportunities for private and foreign investors as the authorities look to ensure that provision keeps pace with demand. Developing specialist care for chronic conditions, and better preventive care, are priorities, while securing universal coverage for the large expatriate workforce is a long-term goal.
This chapter contains an interview with Dr Qais Saleh Al Duwairi, Director-General, Dasman Diabetes Institute (DDI).Explore chapter
Government education spending has grown rapidly in recent years, as the leadership has continued to emphasise the importance of education in creating sustainable employment for Kuwaitis and equipping them with the skills to compete in the global marketplace. Government expenditure on education grew at an average rate of 14.8% in the four years to the 2013/14 fiscal year. Falling oil prices have brought the need for economic diversification back into focus, reinvigorating efforts to develop knowledge-intensive sectors such as high-tech manufacturing and ICT. As such the country’s long-term development plan, Kuwait Vision 2035, places strong emphasis on education as a catalyst to economic diversification, sustainable growth and social progress. Substantial investment from the government is now being coupled with reform tailored to Kuwait’s needs and values. The private sector has a strong presence, educating more than 40% of pupils, and is expanding even more rapidly than the public education system, as demographics and economic growth drive demand.Explore chapter
This chapter contains an outline of the legal framework in which local and foreign investors operate, including a look at the key changes made to bylaws governing capital markets and a rundown of the new regulations aimed at boosting investor confidence.
This chapter contains a viewpoint from Alex Saleh, Partner, Al Tamimi & Co, on the new reforms to the capital markets law.Explore chapter
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 first-time or regular visitors.Explore chapter
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