Kuwait Foreign Direct Investment
“If you look at the World Bank’s Protecting Investors Index, you will see that Kuwait has ranked 27th globally, which is better than most OECD countries. Therefore, the government is undertaking all the appropriate measures in order restore confidence and attract investment companies.” – Ahmad Al-Haroun , Minister of Commerce and Industry
Investing in Kuwait
How to attract foreign investments? This is a question which all states deal with (even the communist regime in North-Korea opened its doors a couple of years ago). For the Kuwaiti government, however, the challenge is neither a lack of money nor ignorance of the principles of corporate finance.
“Kuwait doesn’t lack capital, therefore, what we are looking to have provided by foreign companies is mainly their admnistrative and technical expertise, which we really can benefit from,” Kuwait’s Minister of Commerce Ahmad Al-Haroun says.
A basket economy no more
Kuwait’s budget surplus widened to 8.33 billion dinars ($28.81 billion) in the first eleven months of the 2009/10 fiscal year, as official data released on March 29th show. The surplus is the result of higher-than-forecast oil income in 2009. In other words, Kuwait is awash with liquidity. In addition, the state’s main sovereign wealth fund, the Kuwait Investment Authority (KIA) holds assets in access of U$200bn.
In business circles it is well-known that the KIA is a shareholder of world brands such as Daimler AG (7.6%). In December 2009, the KIA sold its stake in Citigroup with a U$ 1.1bn profit.
But who from abroad will invest in the Kuwaiti economy?
In contrast to global spending, Kuwait barely benefited from the rising foreign direct investment that the GCC countries attracted during the first decade of the new millennium.
For example, while the United Arab Emirates attracted U$16bn FDI in 2005, Kuwait only attracted U$250m. In 2008, Saudi Arabia was a major recipient of FDI inflows in the GCC where FDI inflow reached U$38.3bn, an increase of 57.2 per cent. In the same year Kuwait witnessed decreasing FDI.
But according to Al-Haroun, the country’s relative stand on the global FDI stage is better than its reputation. Ahmad Al-Haroun: “If you look at the World Bank’s Protecting Investors Index, you will see that Kuwait has ranked 27th globally, which is better than most OECD countries. Therefore, the government is undertaking all the appropriate measures in order restore confidence and attract foreign companies.”
Between 2004 and 2008, Kuwait emerged as the GCC’s second largest capital exporter after the UAE, with around U$32.05bn. But at the same time, it was the least attractive destination for FDI, which stood at only about U$535 million.