The Kuwait Direct Investment Promotion Authority’s recent annual report disclosed that Kuwait has attracted foreign investments amounting to approximately 1.47 billion dinars over eight years, spanning from January 1, 2015, to the end of the 2022/2023 fiscal year. Moreover, the report stated that new direct investments in the past year amounted to a mere 195.37 million dinars ($633.29 million), highlighting Kuwait’s struggle to draw significant foreign investments when compared to its Gulf counterparts.
Kuwait’s untapped investment potential Economists assert that Kuwait possesses the necessary capabilities and components to become a regional and global financial and commercial hub, attracting substantial investments. Key opportunities lie in projects like the Silk City, Mubarak Port, residential cities, the development of Failaka Island, and ventures in tourism and industries with global demand.
Furthermore, Kuwait holds distinct advantages over neighboring countries, such as the absence of income taxes, value-added tax, or zakat, as well as low electricity prices, which are appealing to foreign investors. Absence of an integrated investment strategy One of the primary hindrances to attracting foreign investments is the lack of a comprehensive strategy to promote investments within Kuwait. The direction of the state’s economic development is unclear, leading to uncertainty about the long-term advantages and disadvantages of investing in Kuwait.
The abrupt enactment and modification of laws and regulations also deter potential investors, whether they are local or foreign. Comparative shortcomings Economic experts emphasize that Kuwait’s eight-year record of foreign investments is not commensurate with the nation’s potential. Compared to neighboring Gulf states, the comparison is unfavorable, irrespective of their size. Kuwait has made legislative changes and established bodies such as the Direct Investment Promotion Authority to incentivize and support foreign investors. Nonetheless, the overall investment environment remains insufficient, leaving foreign and local investors questioning the state’s commitment to fostering long-term investment opportunities. Eroding investor confidence Foreign investors are hesitant to engage in Kuwait’s investment environment due to the absence of clear government direction, the potential for abrupt legislative changes, and a lack of guarantees.
For example, an investor may not import specialized workers for their projects due to existing laws that prohibit this practice. Restructuring the nation’s demographic structure has significantly impacted the investment environment, as there are limitations on the importation of specialized labor. The Kuwaiti government’s inclination to enact measures that hinder local investments adds to the country’s unattractive investment landscape.
A repellant environment
The investment climate in Kuwait is unappealing to both local and foreign investors. Lengthy bureaucratic procedures and administrative obstacles hinder the establishment of new business activities or the execution of business-related processes. While Kuwait has implemented e-government solutions to simplify procedures, there are still steps that necessitate an investor’s physical presence, prolonging the process. These processes are dictated by outdated regulations and decisions that require revision.
In comparison to other Gulf countries such as Saudi Arabia, the UAE, Bahrain, and Qatar, Kuwait lags behind in terms of the efficiency and speed of commercial activities. Additional challenges include a shortage of industrial and artisanal land and potential limitations on the workforce required for projects. Corruption remains a significant issue, and the oversight and accountability mechanisms for government performance have weakened, adversely affecting investors and their business endeavors.
Key challenges to attracting investments:
- Lack of an investment vision in the government’s action plan
- Continuing tension and conflict between the legislative and executive branches
- Unpredictable changes and sudden issuance of laws
- Absence of an effective oversight and accountability mechanism for government performance
- Bureaucracy and extended bureaucratic processes in project launches
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