Quality FDI over quantity

 

I would like to start by explaining that KFIB was established according to FDI Law No. 8/2001, as a division within the Ministry of Commerce & Industry, with a defined mandate to attract foreign direct investment (FDI) into Kuwait. As you are well aware, Kuwait does not need capital per se through FDI, but rather the know-how, technology and innovation, as well as to help the ongoing government efforts to create job opportunities and training for Kuwaitis, and add value to the domestic economy.

 

In order to fulfil these targets, KFIB manages a host of incentives and guarantees granted by FDI Law No. 8/2001, including up to ten years of tax holidays, full or partial custom duties exemptions, and the opportunity to create up to 100% foreign owned closed shareholding company. There are currently 14 open economic sectors and activities for foreign investors, including manufacturing, infrastructure, banking & insurance, transportation, logistics, environmental services, health, education and so on. 

 

Foreign investors have other entry points to invest in Kuwait besides KFIB and the FDI Law. They can establish a commercial presence with a share of up to 49% under Kuwaiti Commercial Companies Law run by the Ministry of Commerce and Industry; or, upon being awarded a procurement contract with Central Tenders Committee (CTC), with a certain threshold value, they are obliged to set an offset business venture (OBV) through the Kuwait offset programme managed by the National Offset Company (NOC); or alternately, engage in a PPP mega project under the Partnership Technical Bureau (PTB) in accordance with Law No. 7/2008. 

 

 

Since its inception, KFIB has always aimed to acquire quality FDI rather than volume. We have also been trying to facilitate procedures for existing and potential investors, and provide the needed support for them in areas of interest. Based on our experience under the current FDI Law, some obstacles and gaps were identified. This has motivated us to work hard with concerned government entities to propose a new draft modern FDI law, which will be more accommodating in addressing these issues and making the environment easier and more friendly for doing business especially that the duration of issuing investment licenses will be markedly reduced to 30 days from the current four months. The new proposed law is currently in the Parliament awaiting final approval, hopefully within the first half of this year. When approved, the new FDI Law will represent a big leap forward for us. It will also work well with the other economic laws that the Government has been working on over the past few months. Of those, the new Commercial Companies Law, the Commercial Agencies law and the Bankruptcy law will all duly contribute to make it easier to do business in Kuwait. 

 

 

We are well aware that red tape or bureaucracy had been a recurring obstacle in Kuwait, affecting both local and foreign investors. We have heard it first hand from our investors, and we have read it in international reports that tackle the business climate. 

 

Having said that, I would like to mention that here at KFIB, and elsewhere within the Kuwaiti government, we are all cooperating at various levels to act with a strong resolve to address this crucial issue. Actual steps on the ground have started earlier, and will be further consolidated in 2013 and beyond. We have launched our Investors Service Centre (ISC) in our head office and an airport branch to better handle inquires and offer support to potential and existing investors. Also, the Ministry of Commerce and Industry on its part has announced the establishment of a one-stop shop for providing various services and licenses. Other government agencies are holding one-to-one meetings with the beneficiaries to resolve related bureaucratic issues. We are very optimistic that there will be a notable change effected. This is further supported by the adoption of e-processes within the Government to reduce paperwork and save time. Thus as the ministries and public agencies are moving gradually towards online services, this will make the overall the government administrative processes faster, more secure, accurate and organised. 

 

 

Oil is a blessing for Kuwait and there is no denial that oil wealth has helped Kuwait to grow and progress as well as become a world player in the international development arena. Knowing that oil is a depleting natural resource, and its prices are subject to fluctuations triggered by changing global developments, the Kuwaiti Government has always adopted a economic diversification policy to reduce dependency on oil, especially reflected in its economic development plans based on HH the Emir’s vision to turn Kuwait into a leading financial and commercial centre, that, along with Kuwait’s strategic geographic location, could make Kuwait the continental hub. One important manifestation of this policy is the establishment back in 1953 of the Kuwait Investment Authority (KIA) that acts as an institutional investor to manage the Future Generations Fund, which is Kuwait’s sovereign wealth fund (SWF), by investing in lucrative and viable opportunities worldwide to generate another reliable source and steady stream of income for the country. 
 

The current focus on SMEs is crucial to support this diversification effort and linking it with the rising global value chain management. 

 

 

The Kuwait 2035 vision, based on HH the Emir’s vision, is meant to be a realistic and achievable one. To begin with, this vision will comprise the backbone of a series of medium-term development plans, the first of which was formulated through concerted efforts amongst all government entities and launched back in February 2010. For technical reasons it covered four years ending this fiscal year FY2013/2014. In my view, what was missing is to raise the level of public awareness on its intended objectives on one side, and on the other equally important side is to launch an internal and external promotional campaigns to present the mega projects offered as available investment opportunities for both local and foreign investors. 

 

As we are in the process of preparing the second medium-term development plan (2014/2015-2019/2020), we shall capitalise on the experience gained in the preparation of the first one, learning from our mistakes to come up with more efficient and tangible projects that will be achieved under the new plan along with enhancing exposure and engagement through public awareness and promotional campaigns.

 

 

The relation between the UK and Kuwait extends over more than 200 years making it a very unique relation that covers various channels of energy, defence, education, real estate, health, tourism, commerce and banking. Such a profound historical relation provides a solid ground for further nurturing. A new UK-Kuwait Business Council is expected to be launched very soon. This Council will have eight chief executives from both sides. It is hoped to make the existing collaboration even closer and easier for UK companies to secure more business in Kuwait in high value opportunities. The Kuwait-UK Trade & Investment Task Force was established back in February 2011 to attain the goal of doubling current bilateral trade and investment to £4 billion by 2015. The British Business Forum in Kuwait is a not-for-profit organisation of business people established in Kuwait that brings together British companies and has been active within the local business community.

 

 

As you know, the world is like a small global village, and we are all affected by it through the contagion effect. While the financial crisis created a lot of disadvantages and real economic problems for many countries, it provided lucrative opportunities for others. Kuwait, however, succeeded to weather the global crisis and preserving its financial stability compared to others. This is largely attributed to its continued strong macroeconomic performance, sound monetary and fiscal policies, and government financial rescue package, which was conducive for curtailing vulnerabilities that affected the banking and investment sector. 

 

Kuwait is differentiated by its neighbours in those factors as well as its strategic location, having a transparent regulatory and legal system, and a welcoming and friendly environment to foreigners with real appreciation of different cultures based on its deep rooted tradition of openness and extensive commercial relations. Foreign investors will find it easy to bring over their families to live and benefit from good schooling and healthcare as well as culture and entertainment in Kuwait. The infrastructure of transport and utilities is very good for business, and the cost of factors of production is competitive.

 

Kuwait also has highly educated young people who are the country’s real wealth. The human capital is the nurturer of innovation and entrepreneurship and this is what Kuwait aspires to achieve by focusing on education and sending Kuwaiti students all over the world to continue with their graduate and postgraduate degrees, thus creating a pool of highly qualified local employees who will contribute to build the pillars of its knowledge economy.

 

 

I would like to assure readers that there will be notable changes occurring in improving the business environment in Kuwait through serious efforts carried out by KFIB and other government entities. We are optimistic that these favourable changes will be felt on the ground. I will ask the UK investors to consider visiting Kuwait and explore the opportunities that are available. I hope our bilateral relations will thrive more as intended.