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Doing Business with
Kuwait

GLOBAL MARKET BRIEFINGS

Doing Business with
Kuwait
SECOND EDITION

PAUL D. KENNEDY
MIDDLE EAST SERIES EDITOR:

ANTHONY SHOULT

GMB

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This edition first published 2004 by GMB Publishing Ltd.
© GMB Publishing Ltd. and Paul D. Kennedy
Hardcopy ISBN 0-7494-3906-8

E-book ISBN 1-9050-5060-7

British Library Cataloguing in Publication Data
A CIP record for this book is available from the British Library

Library of Congress Cataloging-in-Publication Data
Kennedy, Paul D.
Doing business with Kuwait / Paul Kennedy.– 2nd ed.
p. cm. – (Global market briefing)
Includes bibliographical references and index.
ISBN 0-7494-3906-8
1. Kuwait–Commerce–Handbooks, manuals, etc. 2. Business enterprises, Foreign–
Government policy–Kuwait–Handbooks, manuals, etc. 3. Investments, Foreign–
Kuwait–Handbooks, manuals, etc. 4. Kuwait–Economic policy–Handbooks, manuals,
etc. 5. Kuwait–Economic conditions–21st century–Handbooks, manuals, etc. 6. Business
etiquette–Kuwait–Handbooks, manuals, etc. I. Title. II. Series.
HF3769.Z6K46 2004
330.95367–dc22
2004011989

4 Intellectual Property Rights 2.6 The Economy 3 5 10 29 41 50 62 Part Two: Business Laws Introduction: The Regulatory Framework for Business 2.Contents Foreword Christopher Wilton CMG.5 Industrial Law 2. Kuwait Map 1: Kuwait and its neighbours Map 2: Kuwait City Introduction ix xii xiii xv Part One: Business Background Introduction: The Big Difference 1.6 Labour Laws 2.7 Litigation and Arbitration 91 93 98 117 123 135 147 159 Part Three: Taxation and Finance Introduction: The Financial Framework 3.2 History and Governance 1.2 Customs Duties and Other Imposts 3. HM Ambassador.4 Languages 1.3 Banking and Finance 175 177 185 189 .5 The People of Kuwait 1.3 Agency and Service Agreements 2.2 Business Entities 2.1 The Rules of Commerce 2.3 Religion and Business Behaviour 1.1 Corporate Income Taxes 3.1 The Country 1.

Restaurants and Places of Interest Further Reading 323 333 337 342 Index 345 Index of Advertisers 352 Other Titles in this Series from GMB 353 .2 Public Tendering and Contracting 4.3 Counter-trade Offset Programme 4.5 Marketing.viii Contents Part Four: Business Activities Introduction: The Marketplace 4.2 Tourists and Residents 301 303 309 Part Seven: Appendices: Further Sources of Information Appendix 1 Appendix 2 Appendix 3 Appendix 4 Useful Contacts Embassies Hotels. Advertising and Promotions 4.7 Doing Business through Kuwait: Looking North 207 209 225 237 245 251 254 257 Part Five: Business Behaviour Introduction: Social Aspects 5.6 Researching Opportunities 4.1 Getting In 6.1 Infrastructure and Business Opportunities 4.1 Behavioural Background 5.4 Import and Export Regulations and Standards 4.2 Practical Points 273 275 284 Part Six: Life in Kuwait Introduction: Personal Aspects 6.

That must include many firms that have used the authoritative information and advice contained in this publication to good effect. There is no reason why these favourable conditions for involvement by our companies should not last well into the future. and two-way trade is in good balance. As an entry point for the Iraqi market. The ousting of the old regime in Iraq in 2003 stimulated confidence not experienced by the Kuwaiti business community for many years. March 2004. There is certainly scope for this in what is a challenging market but one that. This applies in many fields. ultimately. where UK firms and their products carry a strong reputation for quality and reliability. Perhaps the most often heard plea from companies in Kuwait is for greater engagement by British firms. Several factors are contributing to this. can be highly rewarding for those businesses that take the right approach. Christopher Wilton CMG HM Ambassador Kuwait . Our trade in services is substantial and important. Kuwait is the United Kingdom’s third largest market in the Gulf after Saudi Arabia and the UAE. Kuwait and Britain enjoy a long-standing and warm association. A recently compiled list of projects for the oil and gas sector alone showed that Kuwait’s requirements over the next 10 years or so would be of the order of USD 17 billion. There are a great number of development projects on the table. Many of these have taken a new look at the real business opportunities that exist in Kuwait and applied themselves to business here. At time of writing.Foreword I am delighted to have been asked to write the foreword for the new edition of Doing Business with Kuwait. Britain’s direct exports to Kuwait are increasing and 2003 saw this rise to a value just falling short of GBP 400 million. I am sure that this version will continue the tradition of the title as a useful and important reference work for those with serious business intentions for the market. Kuwait is experiencing a business boom. Kuwait is hosting a tremendous number of new overseas business visitors. There is greater assurance on the part of Kuwaiti companies that investments can be made and held here rather than overseas. I am sure that new readers will find Doing Business with Kuwait equally indispensable. not least our commercial relationship. some that were previously on hold.

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Map 1 Kuwait and its neighbours .

Map 2 Kuwait City .

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• the government is actively pro-business. • foreign equity participation in local firms is limited to a minority interest of 49 per cent.Introduction The objective of this book is to illustrate Kuwaiti business culture and practices. SMEs and independent entrepreneurs looking to exploit the commercial potential of Kuwait. The book is aimed at major international corporations. To a foreign business entity or entrepreneur contemplating the country for the first time. • last. • foreign individuals and corporations may not acquire commercial licences in their own name.5 million enjoy some of the highest disposable incomes in the world. resident senior executives will find that their lifestyle is almost as good as it could be anywhere else. Generally speaking: • foreign individuals and firms may not own real estate in Kuwait. technical expertise and labour. Also. The competition however is intense and decision making is notoriously slow. • there is a stable legal framework of business laws. • it is possible for foreigners to have 100 per cent ownership of a local business under the new direct foreign investment laws. especially in the oil and related industries. . the simplicity of operating within a system where taxes are for the most part non-existent for individuals (but not companies) and everything is open to negotiation is a major enticement. In addition. Kuwait seems a very attractive place to do business because: • about 40 per cent of its population of nearly 2. • there are no exchange controls. • the economy has continuous requirements for imported goods. and to indicate how commercial opportunities. Kuwait also abounds with rules and regulations that can cause confusion and frustration. should be approached. English is used fairly extensively as the second language of business. • there are plenty of opportunities for major contracts. • the country has excellent communications and a sophisticated trading infrastructure. or restrictions on the repatriation of funds. but not least. • there are few controls over imports and exports. of which there are many in the country.

unlike local companies. Nowadays. Establishing a presence in Kuwait’s Free Trade Zone allows a wholly owned foreign business entity to be set up with a minimum of fuss and time. most of the restrictions can be circumvented. are taxed at some of the highest rates in the world. and is likely to take some time. however. The Kuwaiti people have a different way of looking at the world than do persons from the West or the Far East. It is expected that the book will be revised and updated every two years or so from now on. • a branch of a foreign firm must be represented locally by a Kuwaiti service agent.kuwait-kennedy. and the process of change is speeding up. If there are any aspects of doing business with the Pearl of the Gulf that have not been included here but that readers wish to see in the next edition. and their approach modified accordingly. The purpose of these restrictions is to ensure that control of domestic business is retained by locals. by email. But this will require the approval of the Council of Ministers. economic and legal foundations.xvi Introduction • a foreign individual or firm carrying on business in the country must be represented by a Kuwaiti person or firm. political. preferably. Paul D Kennedy DalCais Consultants Web site: www. they should contact the writer through the publishers or at his consultancy practice in Kuwait or. Large international corporations intending to make a substantial investment in the country can do so under the Direct Foreign Investment law. • a foreign firm may only bid for a public sector contract through a local representative. ie the government. However. The first was issued in 1997 and a lot has changed since then. • in addition. any success they achieve is likely to be due to luck rather than a planned effort. Unless Kuwaiti business culture is understood by overseas businessmen. In this writer’s view the greatest impediments to doing business successfully in Kuwait are cultural and language barriers.com E-mail: paulkpg@hotmail.com Tel/Fax: +965 242 9497 Mobile: +965 955 0275 . a difference that is reflected in the State’s social. foreign corporations (but not individuals). This is the second edition of Doing Business with Kuwait. the KFTZ is really only suitable for SMEs.

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staff and product providers. the Bank’s size and ability to move swiftly make it perfectly suited to a strategy of systematic growth. greater market capitalization and enhanced quality of earnings.S. By continuing to focus on our clients’ needs and relying on management’s professional skills. AUB is a commercially-driven organization. Headquartered in Bahrain. It is geared towards growth through the development of a larger client base in the GCC states and of close partnership with customers. whilst its UK subsidiary is regulated by the Financial Services Authority (FSA) and Investment Management Regulatory Organisation (IMRO). we aim to achieve excellent performance for our shareholders on a year-by-year basis. offshore and private banking services. the AUB Group operates within the regulatory framework of the Bahrain Monetary Agency (BMA). retail.C. improved liquidity. Ahli United Bank (AUB) is fully fledged commercial institution and investment bank providing wealth management. dedicated to implementing management’s vision through the application of market expertise and the latest technology. At the same time. AUB’s revenue business is organized into two divisions: Private Banking and Wealth Management and Commercial Banking and . corporate.AHLI UNITED BANK B. committed to providing the highest levels of service to an increasing customer base and to planned evolution through both organic growth and acquisitions. It is intended to achieve this through fully utilizing AUB’s larger geographical footprint and distribution network. enhancing out technological capabilities and continuing to apply a very effective risk management strategy. streamlining our business will instill even greater financial discipline as we enter new markets. and providing a high quality service to our customers through wider portfolio of commercial and investment banking services. treasury. The Bank has brought together an experienced and talented professional team. In addition to our stated intention of growing through mergers and acquisitions.

ensuring that each client enjoys services catering to their individual scenario. investments and finance services. This division includes all the non capital-intensive sectors of the business. Private banking is a key strategic element is AUB’s expansion plans. AUB Private banking offers a comprehensive product portfolio including standard banking. . Continuing improvements in methodology and concerted efforts in each Gulf market keep AUB’s products at the forefront of investment solutions.Treasury. AUB provides also an innovative range of Asset Management products that reflect the Bank’s customer focus. AUB also offers Morabaha services to corporations. inheritance and trust advice. Finance and Strategic Development Group supports both these divisions and is responsible for the Group’s expansion through mergers and acquisitions. structured lending and foreign exchange services. The Bank’s traditional role as a key financial link was further supplemented by improved access to more Middle East markets for European exporters and we now enjoy a significant further commercial advantage in the ability to offer a service that is individually tailored as well as highly competitive. offering customers an integrated wealth management service based on performance and a balanced product mix. Structured Finance activities encompass three business lines. along with wealth protection. personal care with expert financial support. providing money market type facilities in a Sharia’a compatible structure involving short-term trade financing with deferred settlement. AUB’s range of Sharia’a based services provides a complementary option to the Bank’s conventional product portfolio. Continued product innovation and greater access to customers in the Gulf has sustained steady progress in Islamic Banking areas. Consistency in both quality and breadth of service means that GCC customers now have access to standards and sophisticated international banking and fund management services through their existing network. Private banking combines discreet. We also offer a wide range of traditional funds and alternative investment vehicles. The Risk. tax. The Regulatory and Support Group is responsible for internal and external compliance and corporate governance issues.

leading edge technology. institutions and high-net-worth investors. over time. interest rate swaps. trusts and corporate bodies. Bespoke project financing – primarily an advisory and structuring service for project sponsors. AUB’s treasury management unit in Bahrain coordinates the group’s proprietary trading and the provision on a wide range of products and services for a customer base including regional and local banks. which it reviews continually. mezzanine loans on the same basis and pre-let and speculative development finance. The Bank is an experienced participant in international property finance and investment and has pioneered a series of commercial property securitisations in the UK. Both AUBUK and AUB Bahrain offer a range of personal banking services which. collars and floors. We manage global interest rate risk on behalf of corporates and quote forward rate agreements. deposits in all major currencies for all maturity periods. Collateralised oblications – in the high growth securitisation market the Bank can play significant role in the credit enhancement of special purpose structures. quality execution and resources. have anticipated and satisfied the . The group’s Treasury operations in Bahrain and London incorporates all the components essential to successful treasury management – innovative services. Joint venture financing proposals are considered. The Bank offers a competitive range of mortgage products. and the standard range of services includes investment loans secured on single assets or portfolios. These services include the quoting and trading of all major currencies including Gulf and regional currencies. interest rate caps. In London treasury specializes in money market services and off-balance sheet instruments. corporates.Acquisition finance – a dedicated team focuses on the origination of transactions derived from corporate merger and acquisitions activity. for property ventures in the office. The Bank provides a competitive and innovative range of mortgage products which it reviews continually to ensure consistent quality in an ever-changing marketplace. retail and industrial sectors. structured deposits accounts and a round-the clock foreign exchange service. The Bank provides a fast and efficient services to individuals resident in the UK or overseas.

At the core of the Bank’s strategic planning are two key concepts. current. deposit and fixed deposit accounts. Our strengths are vision.needs of customers in each location. and secondly: synergy – of people. credit cards and off-shore facilities. However. . As a new bank in the Arab world with established roots. creating organic growth and using mergers and acquisitions to bring consolidation to an over-saturated financial services sector. complementarity – of customers. or loans. Firstly. A key component in fulfilling this strategy is the quality of our management team and the discipline with which we run our business. The Group will realize significant operating efficiencies by leveraging technology platforms as we grow both domestically and internationally. AUB Bahrain provides the full range of personal banking services. AUBUK offers first-class banking and investment services for Gulf nationals with business or personal interest in the UK and continental Europe. becoming a more strategic part of their lives and decision making process. This will be further reinforced through the mobilization of AUB’s marketing expertise to capitalize on acknowledged reputation for product. These platforms will make it possible to expand sales of our products and enter new markets at a lower cost. we will provide clients with an even greater range of solutions. technological and corporate initiatives in identified business sectors based on the long standing involvement of its subsidiary bank on the region. products. focus and commitment. expertise and resources. being committed to providing quality services means offering more than core products such as savings. With a network consisting of fifteen branches across the country. and the future looks extremely promising as the potential of the demographically attractive Gulf customer base is matched by an enhanced product repertoire and distribution network. The Bank’s faith in these attributes has proved to be well founded. we will remain customer focused and looking forward. AUB is defining a fresh identity in the marketplace. At all times. All activities are designed to support and complement the Bank’s wealth management and investment services. markets and objective. service.

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Part One Business Background .

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more than a quarter of a millennium ago. of doing business with Kuwait. . already great. • The economy is based on a single resource that allows the average Kuwaiti to enjoy a reasonable standard of living without being overburdened by a daily grind. • The country’s position at the top of the Arabian Gulf makes it an ideal base for the region. Consider the following contrasting facts: • Islam is professed by the vast majority of the population and pervades most aspects of life. • Kuwaitis are a minority in their own country. But they control business life and their government through the only freely elected legislature in the Arab world. At the same time its businessmen take pride in striking extremely hard bargains. these clans selected a single family from among themselves to rule through consultation. The authority of the Ruling Family is still based on consultation and consent. Yet business life is rife with restrictions and bound in very red sticky tape. is quadrupling the burden. The expatriate entrepreneur who fails to appreciate how different Kuwait is from most other countries in the world. The purpose of this section is to impart the beginnings of such an understanding.Introduction: The Big Difference Kuwait began. Yet other religions may be practised freely and the governance of the country is based on a mix of Western presidential and parliamentary systems. or to act accordingly. To protect their interests. as a trading post run by free-booting merchant families.

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but. and to the south and south-east by the Kingdom of Saudi Arabia. In the south there was once a neutral zone between Kuwait and Saudi Arabia but this was partitioned in 1970 and the northern part of the zone is administered by Kuwait. The coastline in the north and around Kuwait Bay consists mainly of mud-flats. more normally. hot and dry. Autumn (5 November to 5 December) is very short but . Kuwait has nine islands. hot and dry from the north and north-west. The oil and gas extracted from the whole of the zone are shared equally by the two countries. sometimes warm and humid from the south.1. while in the south there are many fine sandy beaches. Almost all significant features in Kuwait are man-made.1 The Country Kuwait lies at the north-west corner of the Arabian Gulf. Kuwait has no rivers or mountains. Kuwait has four seasons. The plain is an ‘arid steppe’ desert that varies from firm clay and gravel in the north to loose sandy ground in the south. salt marshes and saline depressions around Kuwait Bay. but it is modified by the long coastline and by directional winds. Topography The land of Kuwait is a gently undulating desert that gradually rises away from the sea to a maximum height of 200 metres (m) in the north-west and 300 m in the west. just a few low hills and shallow depressions. to the north and west by Iraq. of which the two most important are Bubiyan and Faylacha. and an eastern area of coastal dunes. To the east it is bounded by the Gulf. Summer (21 May to 4 November) is long. There are four geographical zones: a desert plateau in the west. Climate and weather The climate is typical of desert regions. a desert plain that covers most of the country.

Consequently. except during late summer.6 Business Background Geo-data Latitudes 280 to 300 North Longitudes 460 to 480 East Land area 17.5 trillion cu m pleasantly mild. More than 200 species of fish can be found in local waters. Winter (6 December to 15 February) is usually cold and cloudy with occasional rain. . whales and sea-snakes.818 sq km Territorial waters 5. Dust storms may occur any time but are more frequent during spring and summer. the recorded extremes being +52 °C and -6 °C. Rainfall is unpredictable. lizards and other small animals. but wide daily fluctuations occur at most times of the year. Temperatures average 45 °C in summer and 8°C in winter. Animal life consists mainly of rodents.5 bn barrels Gas reserves 0. porpoises. Flora. And during Spring (16 February to 20 May) the weather warms up considerably. as little as 22 mm in one year and as much as 352 mm in another.625 sq km Coastline 195 km Borders: Iraq 240 km Saudi Arabia 250 km Distances (max): North–South 200 km East–West 170 km Temperature range -6 °C to 52 °C Annual rainfall 22 mm to 352 mm Oil reserves 96. Humidity is usually low. and sheep. goats and camels. and is seldom uncomfortable. fauna and marine life The soil in Kuwait is low in organic matter and some areas have a high concentration of salts. But nearly 300 other bird species use Kuwait as a stopping-off point during their transcontinental migrations in spring and autumn. as well as dolphins. flora is sparse. mostly larks. There are about 20 native species of birds. The Arabian Gulf is highly saline and seawater temperatures range from 12 °C to 36 °C.

Most of this gas is associated with crude oil and so the production of gas depends on the rate at which oil is produced. But as the oil lies relatively near the surface and is under pressure. about 9. a gigantic natural harbour. fishing still provides 50 per cent of local seafood requirements. Thus oil is Kuwait’s main natural resource and its economic raison d’être. Fisheries Fifty years ago the country was self-sufficient in marine foods. The oil ranges in age from the Pliocene to the Jurassic but the bulk of reserves are found in Cretaceous sediments.5 per cent and. Today it is the location of Kuwait’s main port and of a free trade zone. Indeed. . Oil Kuwait lies entirely within the Arabian-Iranian basin. the country suffers from a shortage of natural gas for local industrial purposes and intends importing gas from Iraq and Qatar in the near future. and enough to last for more than 100 years at current levels of extraction. which stretches from Iraq down through the Arabian Gulf and contains 65 per cent of the world’s oil reserves. Today. ranking it third in the world behind Saudi Arabia and Iraq. But the fisheries are being depleted through overfishing and the breeding grounds have been polluted by sediment from the Shatt al-Arab due to marsh draining in southern Iraq. Kuwait also has an estimated 52 billion cubic metres of gas reserves. and a few sparse water supplies. Kuwait’s export blend is classified as medium. some fisheries. despite a 20-fold increase in population. with an API (American Petroleum Institute) gravity reading of 31. Much of the crude has a high sulphur content of about 2. lighter crudes that can yield more refined products. the other is in Bahrain. the volume of which is restricted by Kuwait’s OPEC quota. one of only two in the northern half of the Arabian Gulf.The Country 7 Natural resources Kuwait has few natural sources other than oil. gentle anticlinal structures that have hundreds of feet of structural closure. production costs are among the lowest in the world. about 1. Most of the oil fields are located on large. Kuwait Bay Kuwait Bay is a generously sized natural harbour. Historically.6 per cent of the world total.8 billion barrels. Kuwait Bay provided access for trade entering and leaving the hinter-land of north-east Arabia and Iraq.1 per cent of world reserves. making it less valuable than other. The country has oil reserves of approximately 94.

• Bird-watching: There are various places where Kuwait’s plant. These are obtained from the Ministry of Information. Shark attacks are almost unknown. On the other hand. The beaches are safe but old shoes should be worn in the water to avoid being stung by sea urchins and stonefish. In its natural state this water can be used for irrigation and street cleaning. Kuwait’s only strategic reserve of pure water consists of an estimated 40 billion gallons contained in natural underground reservoirs in Ar-Rawdatain and Umm AlAish in the north.8 Business Background Tips for visitors • Clothing: During summer the heat can be stunning and cotton clothing is best. • Photography is allowed but. Photography is absolutely forbidden in sensitive areas such as oil installations and military zones. drinking water was imported. is still occasionally found in the desert or on the beaches. Abdali. North-west of the City. which tend to be muggy. though occasionally they do question persons taking shots of buildings and streets. Indoors during summer. Jellyfish are an occasional annoyance. Water Water in Kuwait is scarce. Sometimes sea-snakes are seen but they are not aggressive. . There are strong currents along parts of the coast. • Off-road driving is hazardous and a 4WD vehicle is best. access to certain areas. seldom query amateurs snapping their friends outdoors. Prolonged exposure to the sun should be avoided. To respect local sensibilities. during winter. The police. Most of the country’s naturally occurring water is brackish and is found underground in Sulaibiya. modest swimming costumes should be worn by both men and women. There are patches of soft sand and gullies that only the experienced can detect in time to avoid getting stuck. so bathing at the popular beaches is safest. Most water for domestic use and for drinking purposes is provided by desalination plants adjacent to the country’s power stations. loose clothing can be useful in centrally heated buildings. is restricted. Even before the oil era. the salt flats of Sulaibikhat are a popular feeding ground for waders and (very occasionally) pink flamingoes. animal and bird life may be observed. persons taking photographs in public areas should have a special permit. strictly speaking. salt tablets are useful for those who perspire excessively. • The sea can be enjoyed the whole year around. light. jackets or cardigans are a must to avoid a chill from the airconditioning. the military zone beyond Doha on the Az-Zour ridge and parts of the north. The police may be contacted on 777 (emergency) or the bomb disposal squad on 539 3348/9. especially at low tide. particularly if they are using tripods or complicated-looking equipment. such as the oil fields. a legacy of the Iraqi invasion. • Unexploded ordnance. Wafra and Umm Qadir. For security reasons. Shigaya. however.

near the desalination plants that provide their water.The Country 9 Populated areas Ninety per cent of the population live in the Metropolitan Area. to beyond Shuaiba in the south (see Map 1 on page xii). north-east and south of the country. . at the western edge of Kuwait Bay. The rest of the country is very sparsely populated. the government is planning new cities in the west. In order to absorb an expected growth in population and spread the population more evenly. a coastal belt stretching from Jahra.

The qUtub were originally nomads who changed to a settled way of life on the coast to make their living by trading. gave the qUtub de facto independence. Kuwait began to emerge as an independent business community about 250 years ago. In 1756 they elected Sabah bin Jabir bin Adhbi. At that time. a sub-set of the hAnayzi confederation of tribes from southern Arabia. the oil era. The Beni Khalid promoted the conveyance of merchandise along the Gulf coast and the caravan trade to Damascus in Syria. The clans of related families who settled in these areas grasped the economic opportunities in the places they colonized. which connected with the overland caravan routes to the Eastern Mediterranean. sea-faring.1. . The early period According to local tradition the qUtub.2 History and Governance The background to the establishment of Kuwait was the 17th-century migrations of the hAnayzi confederation of tribes from southern Arabia towards the east and north. a tribal federation of nomads and settled clans who ruled a large swathe of territory stretching from Qatar to Kuwait. arrived in Kuwait in the early 18th century where they settled under the suzerainty of the Beni Khalid. Its history since then may be conveniently divided into four time-frames: • • • • the early period. a direct ancestor of the current Ruler. one of the main international trading links between India and Europe was the sea-route through the Arabian Gulf. as their Amir (leader) to administer the town. which led to the creation of a string of settlements with intra-tribal connections from Qatar to Syria. Once Sabah’s authority was established the town grew rapidly. Khalidi rivals in central Arabia. the post-oil-boom era. the middle period. Internal disputes among the Beni Khalid and the rise of the Wahhabis. fishing and pearling.

Sheikh Jabir and his successors were not absolute rulers. who was also elected by the qUtbi merchants. real authority rested with the merchants. and not with the ruler. and a few to clans who were already in the area when the qUtub arrived. They consulted the merchants on important issues at regular diwaniyahs. During the 19th century the Sabah family consolidated their position as the ruling clan when Sheikh Abd Allah was succeeded by his son Jabir. Indeed. About 1764. It is advisable to study these closely in order to gauge the relative importance. who were few in number. both of a particular family and of any individual member. stable rule (he died in 1815). however distantly. meetings hosted by the Sheikh. Jabr Salem Al-Abdullah Al-Shayah. Its ruling elite were highly mobile merchants who had fleets of ships and merchandise. the Amir had less wealth than many of the leading merchants. Jabr Salem Al-Shayah.History and Governance 11 Kuwaiti names Kuwaitis have a profound sense of genealogy. a situation that did not change until the 1950s. arrived during the late 19th and early 20th centuries. eg. and not all persons of Persian descent with the same surname are necessarily related. The exception is persons of Persian stock whose names are based on the names of the Iranian villages whence they first came. as will those who belong to the same tribe. in the scheme of things. Many of today’s prominent families trace their ancestry to clans who arrived with the qUtub. Sabah was succeeded by his younger son. The names of a Kuwaiti (man or woman) always follow a set order: a given name. The surname is always the personal name of an ancestor and all persons with the same family name will be related. who. Kuwait changed from a small tributary sheikhdom to an independent business centre making a good living from international commerce. The raison d’eˆtre of the qUtbi settlement in Kuwait was trade. was chosen by the Sabah as head of the family and thus as Amir. Abd Allah. A business visitor will soon notice that certain names crop up time and again. meaning Jabr. In return they levied a . Some families of Persian stock. the father’s name and surname. On his selection he promised to rule in accordance with the Islamic principle of Shura (consultation) and on this assurance the leading merchants pledged allegiance. eg Behbehani. instead of being elected by the other qUtbi families like his predecessors. even remotely. During Sheikh Abd Allah’s lengthy. eg. the son of Salem of the Shayah family. however. The name of a person’s grandfather may be inserted after the father’s name and before the family name. According to Al-Rushaid (a Kuwaiti historian). ‘whom they only allowed to be chief out of courtesy’. In the early 19th century the Sabah ceased trading on their own account to devote themselves to government.

Eventually these families became trading dynasties with an intricate network of relationships spanning the Indian Ocean and the Middle East. Kuwait prospered. others buying plantations. some financing crops. A few established family-run agencies in the main ports around that ocean and. Kuwait relied on ad hoc alliances with neighbouring powers to preserve its independence and free mercantilism. Kuwait was a centre for caravans crossing from south-eastern Arabia to the Mediterranean Sea. as they became richer. but who were centred on Kuwait. Kuwait’s traditionally consensual form of governance. he realized that the rivalry of the Turks and European powers for dominance in the Gulf required Kuwait to establish a durable alliance with a powerful but distant force. in which views were expressed openly in the Sheikh’s diwaniyah. shipbuilding. west and south. fishing and pearling. It also helped the country survive against its more powerful neighbours to the north. The middle era During the first century or so of its existence. considered the founder of modern Kuwait. became more formal and several experiments were made with elected advisory and legislative councils. When Sheikh Mubarak the Great.12 Business Background small duty on imports. Mubarak revitalized Kuwait after its contraction in the 19th century. The 1899 agreement helped Kuwait survive when. Much of this prosperity lay. . where they relied upon the Amir to provide favourable conditions for their commercial activities. after the First World War. sailing the Indian Ocean between East Africa and the subcontinent. the victorious British and French were carving up the Arab world between themselves. the world recession and the introduction of the cultured pearl from Japan. Its geographical position and stable administration enabled early Kuwait to develop industries based on trade. Kuwaiti merchants handled most of the sea-trade that passed through Kuwait and also much of the trade that passed through other Gulf ports. due to a blockade by the Saudi Kingdom of Nejd. The Municipality was first elected by secret ballot in 1934. when the opening of the Suez Canal in 1869 diverted much international trade away from the Arabian Gulf and the old caravan routes to the north. transport by land and sea. But within a decade of his death the country entered an economic decline. During the 1920s and 1930s. rose to power in 1896. invested in the sources of their stock-intrade. according to Al-Rushaid. In 1899 he signed an agreement with Britain under which Kuwait’s independence was recognized in exchange for exclusive British rights over Kuwait’s foreign policy. in the shrewdness of the ruler in protecting ‘the rights of the merchants against the greed of foreigners’.

Cabinet government began in 1961 with the first appointment of a prime minister. drinking water and sewage systems. The increasingly complicated business of government led to the creation of state departments that later developed into modern ministries. The new wealth was also used to create a cradle-to-grave welfare system. development was rapid. economic and social structures. A new Kuwaiti middle class came into being and then a new class of professional administrators. who once worked as sailors. The Bedouin. the financial power that once belonged to the merchant class shifted to the Sabah family. entered the civil service.History and Governance 13 The oil era Oil was discovered in 1938 and exports began in 1946. Kuwait joined the UN in 1963. education. KOC (Kuwait Oil Company). who in the previous era carried arms and acted as caravan guards and whose loyalty lay with the Amir. which had a monopoly on the production of crude oil in Kuwait. Kuwait . In the same year a written constitution was ratified and Kuwait joined the Arab League. with the enormous revenues generated by oil. The building of Kuwait’s modern infrastructure then commenced and. In the 1950s Kuwait’s oil industry began expanding ‘downstream’ into activities such as refining and marine transport through other companies established by a mix of government. fishermen or shipwrights. In the three decades of the oil era Kuwait experienced profound alterations in its political. including totally free health and educational systems for citizens. found employment in the new police and army and in the oil industry. A series of laws on taxation. in an agreement signed by both countries in Baghdad. But the new wealth was spread among the merchant class by the purchase of their land for development projects at inflated prices. pearlers. As it was the Amir who decided how the vast oil revenues were spent. buildings. Ordinary Kuwaitis. labour etc were decreed during the 1950s and. commercial companies. Roads. were created out of almost nothing and within a few years the barren desert was transformed into a modern metropolis. The merchants also benefited from the opportunities to make money provided by the development boom. In 1962 the first National Assembly was elected. decrees restricting the rights of foreigners to participate in local companies and requiring them to have local business partners or agents were issued. The 1899 agreement with Britain was cancelled in 1961. to protect the old merchant families. To service the construction boom and the rapid expansion in government services there was a massive influx of expatriates. health. formally recognized Kuwait’s sovereignty and independence. as well as deep-water ports. and in October of that year Iraq. was foreign owned. local private interests and foreign corporations.

an ambitious landscaping programme to beautify the desert by planting trees and shrubs supervised by the Municipality. about 40 per cent of Kuwait’s foreign aid was given to the ‘confrontation’ states of Jordan and Syria. KPC (Kuwait Petroleum Corporation) was established and vested with the industry’s assets and overall authority for operating the industry. and the ‘Greening of Kuwait’. it extended aid to Arab and Muslim countries and also. to non-Arab and nonMuslim lesser developed states. These investments increased rapidly. During the 1960s the government began establishing a non-oil industrial sector by setting up joint ventures with private investors in industries such as transport. Kuwait developed extremely generous foreign aid programmes. the government began putting 10 per cent of all state revenues into a ‘reserve fund for future generations’. To reduce its dependence on crude oil. In 1981 its annual donations peaked at about 5. In 1965 a regulatory framework and generous incentives for industry were introduced. the Kuwait Fund for Arab Economic Development established in 1961. into a major player in the international oil industry. which is also invested overseas. Through KFAED. went into high gear in the 1970s.14 Business Background was a founder of OPEC in 1960 and in the mid-70s it nationalized its entire oil industry. it was strictly non-aligned. On the world stage. and the Ministry of Finance. flour mills and fisheries. it was unable to absorb its vast oil revenues and the government began investing the surplus abroad. By 1961 Kuwait was one of the richest countries in the world on a per capita basis. The creation of KPC in 1980 marked Kuwait’s change from an old-time oil state. a passive host to foreign companies exploiting its natural resources in return for a fee. In 1980. Agriculture was encouraged.8 per cent of GDP. It established diplomatic relations with the Soviet Union. The post-oil-boom era During the 1960s and 1970s the State matured and became a highly respected member of the international community. KPC modernized and expanded its downstream activities in Kuwait and . Once its basic infrastructure was in place. to provide an assured income when the oil runs out. verbally and financially. yet at the same time its relations with the West were friendly. During the late 1970s and early 1980s. from the 1970s. of the Palestinian and Pan-Arab cause. even though Kuwait was a constant supporter. By the mid-1980s the income generated by Kuwait’s overseas investments was equal to its oil revenues. After 1961 Kuwait pursued an independent policy in foreign affairs and soon achieved a reputation as a regional mediator and peacemaker. Oil prices fell in the 1980s. In 1976.

and by the time the country had been liberated most of the people. it was conducting a worldwide network of operations from the well-head to the petrol pump. But within 10 days one port was cleared. but the economy was picking up when Iraq invaded on 2 August 1990. led by President George Bush. Debts due to local banks . power was restored two months later. The ongoing privatization programme revitalized the private sector and the local stock exchange. factories. During the occupation more than 400 Kuwaitis were martyred. a parallel stock market. to avoid such a fate.History and Governance 15 diversified overseas. and the environment was almost destroyed by Iraq’s scorched earth policy in Kuwait’s oil fields. machinery and equipment needed to run an economy had disappeared. the ports were blocked and mined. Australian. Hundreds of Kuwaitis and expatriates were tortured and tens of thousands of women were raped. Warehouses. and its product revenues were exceeding its revenues from crude. crashed in 1982. But before liberation more than 70 per cent of the country’s suqs and shopping malls were looted. and others. Kuwait’s external reserves were used to pay for liberation and reconstruction. In August 1993 the World Bank submitted a report to the Kuwaiti government in which it outlined some of the structural problems inherent in the economy. Canadian. had to go into hiding. created an Arabic– Western coalition. power and water distillation plants rendered inoperative. Many private businesses were stripped of their assets during the occupation and were technically bankrupt. and also from Kuwaitis and expatriate Arabs. causing oil-related losses of about US $75 billion. Those in hiding received care and comfort from the few Westerners (Irish. it purchased refineries and retail outlets in Europe. causing these to be reduced by about 75 per cent. By the second half of the 1980s. which freed Kuwait on 26 February 1991. The Manach crash created a ‘bad debts’ problem in the private sector that was only finally solved recently. In 1994 the government began privatizing the public sector in a small way and by the end of 1996 over US $2 billion of state assets had been sold off. When the Suq al-Manach. museums and cultural centres were emptied. The depression in the international oil market caused the non-oil economy to go into recession. the government intervened to support prices on the main stock exchange and ended up holding 48 per cent of all listed shares. To guarantee markets for its crude and refined products. In addition. Thousands of Westerners trapped in Kuwait were arrested and forcibly used as human shields on key military and industrial installations in Iraq and Kuwait. offices and buildings were stripped. New Zealander and Danish) who were free to move about. The retreating Iraqis blew up oil installations and set 727 oil wells (about 80 per cent of the total) on fire. The United States. and the last oil fire was extinguished in November 1991.

brother) in order to get married and she may neither stand for election nor vote in elections for public office. cultural and business works. were uncollectable. At the end of September 2003 the government announced that it had finished drafting a new law that would give Kuwaiti women the right to vote and stand for office in the next municipal elections and that this would be submitted to the Assembly for approval in due course. create high-skill jobs for nationals. a counter-trade offset programme was established in July 1992. compounding the bad debts problem stemming from the Suq al-Manach crisis. as in many parts of the world. where there are several female under-secretaries and one female ambassador. and five of Kuwait’s commercial banks had extremely awkward-looking balance sheets. uncle. After the election two months later the new National Assembly rejected this law. In May 1999. and encourage the transfer of advanced knowledge-intensive technologies into Kuwait. Many women hold prominent posts in the civil service. effectively assuming the debts. and many ladies of the Al-Sabah family are renowned for their charitable. the Amir decreed a law granting women the right to vote and hold public office. Some well-educated Kuwaiti women. This programme has been somewhat successful in diversifying the Kuwaiti economy. fear that extending female suffrage to elections to the National Assembly might result in the eventual curtailment of their civil rights because women in Kuwait. the anger at the betrayal and aggression is still evident in casual conversations. The psychological damage due to the Iraqi invasion and occupation was no less severe than the massive material losses of public and private property. The programme requires foreign companies that sign ‘large’ supply contracts with government institutions to invest in projects beneficial to Kuwait. however. on the grounds that it had been issued concerning a matter that was not urgent. are very conservative and might well vote for conservatives or Islamists at general elections. and refused to reintroduce the matter. Since then the government has taken a soft approach. the ruling family itself is said to be in favour of women’s suffrage. The realization that the Arab peoples in . Several women have been very successful in local business and academia.to 20-year maturities. In 1992 the Central Bank replaced the non-performing loans held by these banks with government bonds with 10. and even today. Indeed. To help diversify the private sector. except that a woman under 25 years of age requires the permission of a senior male member of her family (father.16 Business Background Women in Kuwait Women in Kuwait have the same civil rights as men. This transformed the balance sheets of the commercial banks and put them on a solid financial footing. when the National Assembly was dissolved.

Italy and China. Before a law can be . The legislative process Legislative power is vested both in the Amir and in the National Assembly. The constitution guarantees fundamental human rights and imposes social welfare obligations on the state. The country is divided into 25 constituencies. which requires the system of government to be democratic and states that sovereignty resides in the people. The governance of Kuwait Kuwait has a written constitution. the UK. Russia. In 2003 it was the launch pad for the Iraqi Freedom War. executive and judicial powers. under the electoral law only males over 21 years of age who are ‘first-class’ citizens or the sons of naturalized Kuwaitis. Members of the police and other security forces are excluded from the electoral register. as are females. conducted by a coalition of the willing led by the United States and Britain. The National Assembly Kuwait’s National Assembly (Majlis al-Umma) is a unicameral legislature. and may dissolve it before its four-year term is complete but must then call a fresh general election within two months. and each has the right to initiate laws. The Amir may adjourn the Assembly for a period not exceeding one month. The Assembly’s function is mainly legislative and. each returning two members. the Assembly. Though the constitution guarantees universal suffrage. 1896–1915). The governance of Kuwait is based on the separation of legislative. whose countries it had helped the most with diplomatic and financial support in the preceding decades. its control over the executive is limited. or who have been naturalized for more than 20 years. France. Kuwait is a hereditary emirate and the Amir is the head of state. Succession is limited to male descendents of Sheikh Mubarak Al-Sabah (r. It comprises 50 elected members plus any government ministers who are not elected members. though it may question the prime minister and ministers.History and Governance 17 the ‘confrontation’ states. sided with Iraq during the aggression has led Kuwait to revert to Mubarak the Great’s policy of relying on distant foreign powers to preserve its independence. may vote in elections for. or be elected to. Since liberation Kuwait has become overtly dependent on the West for military support and has entered into defence agreements with major powers such as the United States. Members are elected to four-year terms in a general election of all members. which toppled Saddam Hussein’s Baathist regime.

the Assembly has overturned decrees issued when it was dissolved.18 Business Background promulgated or proclaimed publicly. The Council of Ministers or cabinet meets in secret. The judiciary Kuwait’s judicial system is based on the Egyptian model and. defence and interior portfolios. Examples are the Supreme Petroleum Council. is an amalgam of the Napoleonic and Ottoman civil codes. Non-members become ex-officio members upon appointment. The Amir appoints the prime minister. Key cabinet posts. are nearly always reserved for members of the ruling family. Detailed regulations under specific laws may be made by Amiri decree or by ministerial resolution where a particular law allows this. When the Assembly is not in session. such as the oil. The Amir also appoints ministers and relieves them of office on the prime minister’s recommendation. which is responsible for the State’s oil policies. and the Higher Advisory Committee for Labour Affairs. though it usually issues a press release after each session. Much of Kuwait’s detailed commercial regulations are issued as ministerial resolutions. who is the head of government. The Assembly may also veto a law proposed by the executive or send a law rejected by the government to the Amir for promulgation. finance. and their make-up usually reflects a cross-section of specialists and groups with interests in a particular area. New laws and regulations are published in Al-Kuwait AlYoum (the official gazette) within two weeks of being promulgated. which is responsible for advising the Ministry of Social Affairs & Labour on labour legislation and labour-related issues. Membership of these councils is by Amiri invitation. the Amir may issue laws by decree concerning ‘urgent’ matters. Ministers may either be members of the Assembly or other notable citizens. The total number of ministers cannot be more than one-third of the total number of members of the Assembly. The Executive The National Assembly has no role in choosing the executive. foreign affairs. as such. . Resolutions are passed by a simple majority of those present and the prime minister has a casting vote. and Islamic law. Higher advisory councils Various higher or supreme advisory councils exist to assist the government in formulating long-term policies in particular areas. it must be passed by the Assembly and sanctioned or ratified by the Amir. But these must be ratified by the Assembly when it is reconvened. On several occasions in recent years.

The roles of the governors and their councils are mainly political. The term originally referred to a reserved section of the Bedouin tent where male guests were greeted and entertained. Khaldiya. business and political life in the country. assessing the need for public utilities. They have existed since time immemorial. eg Jabriya. They also oversee local security. Jahra. These include ‘supervising the implementation of state policies. Judicial power is vested in the courts. Business matters are regulated by the commercial and civil codes. who is responsible to the Ministry of the Interior. The governorates The State of Kuwait is divided into six governorates: the Capital. diwaniyahs are purpose-built reception halls where meetings are held on a regular basis. The Mukhtars conduct regular diwaniyahs in which local opinions are gathered and government policies explained and defended. Court sittings must be in public except where the law requires them to be in camera. The diwaniyah system At the informal level. They act as channels of communication between the centre and the grass-roots. Membership of the councils is by appointment. The districts The governorates are each divided into several districts. alliances formed. such as marriage. Each is headed by a governor. Each district is headed by a Mukhtar. Christians and Jews. diwaniyahs or parlours are the reception rooms in Kuwaiti houses where the heads of households receive and entertain their male guests. At the formal level. associates introduced. These diwaniyahs are the core of social. They are the roots of . are governed by the religious laws of the people involved. responding to the problems of citizens and encouraging cultural and sporting activities’. a representative of the Amir. The hosts of these diwaniyahs are well-known local persons and acknowledged heads of extended families. who is supported by a council for the governorate. Ahmadi. Shia Muslims. divorce and inheritance for Sunni Muslims. The constitution guarantees the independence of the judiciary and the right of recourse to the courts for all. often weekly. the places where topics of interest are discussed. and similar networking activities undertaken. or mayor. Hawalli.History and Governance 19 Personal and family matters. Governors are usually members of the ruling family or closely allied to it. Farwaniyah and Mubarak Al-Kabir.

and what is said in them is often reported in the local press. Kuwait’s consensual political system. The Ministry of Defence is responsible for external security and its army. Six are appointed by the Amir on the recommendation of the government and the remaining 10 are elected by secret ballot from 10 constituencies. and food and restaurant inspection. All persons eligible to vote in National Assembly elections may vote in municipal elections. urban organization and planning and the approval of infrastructural projects. are never taken along. Diwaniyahs are traditionally strictly male gatherings and women never attend. The Municipality The Municipality is responsible for a variety of functions. Each candidate erects a large tent in his constituency where the local men eligible to vote sit around sipping beverages while being addressed on the issues of the day. Visiting businessmen who are invited to attend a diwaniyah by their local associates should accept with alacrity the opportunity to do some serious networking. The Ministry of the Interior is responsible for internal security. Females. After the speeches are over. There is only one Municipal Council for the entire state. The Municipality has far-reaching executive powers in commercial licensing. General election campaigning for National Assembly elections is mostly done through the diwaniyah system. It is expected that women will be allowed to vote in municipal elections. Each area has a police station and the police are organized into . and to stand for election to the Municipal Council. in the near future. which may be attributable both to local culture and to the efficiency of its police forces. however. candidates require very deep pockets indeed. To get their messages across. The Council has 16 male-only members. land acquisition. public forums anyone may attend. The security forces Kuwait has an extensive array of security forces. But since Liberation in 1991 a few well-known female personages from leading families have been holding regular diwaniyahs. which are attended by both men and women. It is responsible for issuing building licences in the Metropolitan Area.20 Business Background Hint for entrepreneurs . Kuwait has an extremely low crime rate by Western standards. navy and air force are comprehensively equipped. health and safety at work. the assembled multitude are fed sumptuously – every night for several weeks prior to the election. including the usual municipal services such as town cleaning and refuse collection.

Other security forces include the National Guard. control its stability and free convertibility into other currencies. such as investments overseas and in local companies. which are placed locally and internationally. which is responsible for the safety of the Amir. to direct monetary and credit policies. the Kuwait Investment Authority and the Government Audit Bureau. Public authorities and institutions The main public authorities that affect business life in Kuwait are the Central Bank. The CB also exercises some control over the informal financial sector. to supervise the banking system. The CB devises rules and regulations for the financial sector and influences commercial banking behaviour. The Kuwait Investment Authority (KIA) The Kuwait Investment Authority (KIA) manages the state’s investment reserves. public domain and private property. The Central Bank of Kuwait (CB) The role of the Central Bank (CB) is to issue the local currency.History and Governance 21 separate divisions for particular purposes. accountable to the Ministry of Finance. and to act as banker and financial adviser to the government. the KIO (Kuwait Investment Office) in London being its main centre abroad. Public domain property consists mainly of natural assets such as land and the hydrocarbon wealth lying underneath. It may set the maximum amounts of the operations (such as discount or loan operations) of individual banks and the minimum that customers must pay in cash to open documentary credits. As a . and the Amiri Guard. State-owned property in Kuwait takes two legal forms. The disposal of public domain property can only be made by legal decree. such as the general police who operate out of the police stations (using cars with red horizontal stripes) and the traffic police (using cars with blue stripes). It is an independent judicial body. The state’s private property consists of all non-public domain property. as well as the proportion of a bank’s funds that must be invested in the local market and the proportion deposited with the CB. The CB imposes upper limits on individual and corporate lending in proportion to a bank’s own funds. It may also fix the rate of interest paid on bank deposits and the maximum rates of interest and commissions charged to customers. It operates from the Ministries complex in Kuwait City but has several overseas offices. namely. which defends establishments of a sensitive nature.

. It has 4 full-time colleges and 24 field and industrial training centres. . The Kuwait Institute for Scientific Research (KISR) promotes applied research in areas closely connected with Kuwait’s development needs. as regards investments in Kuwait. though it does not have a direct auditing function as regards private companies. both local and overseas. The Public Authority for Applied Education and Training is responsible for vocational training. The Public Authority for Civil Information (PACI) maintains a comprehensive database on citizens and expatriates and issues the civil ID card. which must be carried by all residents. it operates under the Commercial Companies Code. . KIA merely acts as the government’s agent and possesses no assets of its own. . the state exercises its rights over its private domain property under private law. Government Audit Bureau The Audit Bureau is responsible for auditing the accounts of ministries and public establishments. . It is authorized to buy and sell shares and other investments in Kuwait and overseas under private law and. The Bureau has wide powers of investigation and. Though it is the main body through which state interests in local companies are bought and sold. Its centre in Vienna transmits the news of the Federation of Arab News Agencies (FANA) in English to European countries. It includes the National Scientific & Technical Information Centre (NSTIC). it does review major public sector contracts prior to signature and can investigate the relationships between public institutions and private sector companies. ranching and fisheries and provides financial and technical assistance to private companies. horticulture. which governs private sector companies in Kuwait. KIA is administering the privatization programme. The Public Authority for Agricultural Affairs and Fish Resources is responsible for the development of agriculture. which supplies scientific data to public and private clients. The Kuwait News Agency (KUNA) transmits news to local and foreign subscribers in Arabic and English.22 Business Background general rule. Its programmes cover business administration as well as technical and professional subjects and include training courses for oil sector workers. At present. It is supervised by the Ministry of Information. Other public bodies There are several other public bodies that impinge on the activities of businessmen in Kuwait: .

The KCCI publishes the Kuwaiti Economist. . firms and businesses operating in Kuwait must be registered with the KCCI. a widely read monthly magazine in Arabic. only KCCI members may obtain import licences. providing an arbitration service in disputes of a technical nature under construction contracts. and its main functions are: . Islamic and international chambers of commerce. and it is involved in standard setting and defining customary practices in commercial matters. all Kuwaiti and non-Kuwaiti agents. and pamphlets on local business regulations in Arabic and English. and have official and quasi-judicial roles in the organization and control of business activities. It is active internationally and has strong links with Gulf. commerce and finance is being considered. The Kuwait Society of Engineers The Kuwait Society of Engineers (KSE) is a club for engineers and architects. Non-government official organizations There are several non-government organizations that influence the country’s political and business life. . . . and agency agreements must be registered with the KCCI before they can be registered with the Ministry of Commerce & Industry. it maintains an official court of arbitration for resolving business disputes. advising the government on urban planning and architecture. The KCCI also has two quasi-judicial roles: .History and Governance . and the Chamber has been very successful in representing the business community’s views on matters affecting the economy. be consulted when legislation concerning industry. . . only KCCI members may bid for government contracts. The KCCI must. The Kuwait Chamber of Commerce & Industry The Kuwait Chamber of Commerce & Industry (KCCI) is the most powerful business organization in Kuwait. They advise the government on commercial matters. The KCCI has several quasigovernmental roles: . Arabic. 23 The Kuwait Foundation for the Advancement of Sciences (KFAS) is a funding agency for the promotion and support of scientific research throughout the world. by law.

The Kuwaiti Industries Union The Kuwait Industries Union (KIU) is a general union for industrialists. Though its power over government policy is weak. and organizing architectural competitions. and is mandatory for persons taking up certain government appointments. Things came to a head when it was announced that three other ministers were to be crossexamined following the hapless Minister of Justice. it can block legislation and force the dismissal of ministers (but not the prime minister) through its right to cross-examine their activities. and organizes lectures and training courses on industrial technology. at times. . . providing expert witnesses on construction matters in court cases. was forced out of office for allowing banned books to be displayed at an Arab book fair. Sheikh Saud Nasser Al-Sabah. Membership is mandatory for all persons and companies licensed to operate factories in Kuwait. Recent politics The National Assembly is a vigorous college of well-educated gentlemen. organizing seminars on engineering and architectural topics. . . carries out technical and economic studies on industrial matters.24 Business Background . advises the government on industrial issues. promotes industrial development in Kuwait. This has. In early 1999 tension between the government and the National Assembly (which had been elected in 1996) rose considerably when the Assembly began to cross-examine the Minister of Justice & Islamic Affairs (who was an elected MNA) for allowing the circulation of copies of the Holy Koran containing inadvertent errors and omissions. In March 1998. . . which: . The government threatened to resign en masse and the Amir suspended the Assembly. Expatriate professionals whose employers require them to sign construction and architectural reports must be registered with the Society. . Membership of the KSE is restricted to those with engineering or similar degrees. provides its members with an information exchange on industryrelated technical and legislative matters. He was then appointed Minister of Oil. then Minister of Information. led to gridlock between the Assembly and the government. which on several occasions has required the suspension of the Assembly by the Amir in order to enable the legislative and executive processes to proceed without undue hindrance.

History and Governance 25 The Amir then called a general election within two months. – The Salafists (Followers of Ancestors) are a very strict Sunni group advocating a return to the purity of yore. traffic penalties. – The National Islamic Alliance (INA) is the main faction for Shia Muslims. These groups are usually classified as Islamist. like their peers everywhere. Political groupings Political parties are not allowed in Kuwait. do form groups based on the colour and hue of their politics. various matters connected with economic liberalization. However. When the new Assembly convened it rejected all these laws on the grounds that they did not refer to ‘urgent’ or emergency matters (as required under the constitution). and is by far the major grouping among Islamists. The general election in July 2003 returned an Assembly that was significantly different from the outgoing Assembly. Liberal and Independents. . and the naturalization of Bedouns (stateless Arabs living in Kuwait). And they are on average somewhat younger than the previous cabinet. The most important groups in Kuwaiti political life are: . The new executive 2003 The new Council of Ministers has been slimmed to 15 members. During the interval. the Crown Prince no longer holds that office. more than 50 per cent are only in their sixth decade and more than 85 per cent are between the ages of 40 and 60. All either are well educated at tertiary level or are highly experienced members of the executive. The composition of the new government is shown in the box below. the Amir promulgated several innovative laws by Amiri decree covering inter alia women’s suffrage. and for the first time since the post of prime minister was first created. however. Among the Islamists – The Islamic Constitutional Movement (ICM) is the political wing of the Sunni ‘Muslim Brotherhood’. as required under the constitution. The Assembly then reintroduced most of these laws (with the notable exception of the law granting women voting rights) as parliamentary legislation. After the elections a new government was also formed. – The Islamic Popular Group (IPG) is a Sunni fundamentalist group with Salafi tendencies. members of the National Assembly (MNAs). Nearly half the ministers are newly appointed or have not previously been ministers.

between them. Among the Independents – Tribals are MNAs who have been selected through (technically illegal) primaries held by particular tribes. Most of these are conservative tribalists or non-factional deputies who are likely to align themselves with the government. the ICM only took two seats. were not replaced by Islamists but by Independents of various hues. . The ICM (see box). it seems. and other Islamists now seem to have. Other Islamic fundamentalists got about five seats. The Liberals. about 45 per cent of the votes in the Assembly. Twenty-three members (46 per cent) of the previous (Ninth) Assembly failed to retain their seats. the result has in fact been a gain for reform-minded pragmatists. However. – The National Democratic Movement (NDM) is made up mainly of secular progressives with liberal tendencies. Just as well. though independent. the fate of Project Kuwait (the US $7 billion plan to double output in the northern oilfield with the help of international oil majors).26 Business Background . Among the Liberals – The Kuwait Democratic Forum (KDF) is a long-standing (since the 1960s) association of secularists with Nasserist. in fact. moderates. who are seeking a stricter implementation of the Sharia (Islamic Law) and who are highly critical of US policy in the region. whose influence has been declining over the last decade. while Islamists won at least one-third of the seats. – Non-Factionals are MNAs who. Most of those described as Islamic in the new Assembly are. The New Assembly 2003 The general election resulted in some surprises in the Tenth Assembly. The Liberals lost seven seats and ended up with only three seats. pan-Arab foundations. These include: . a result that has been interpreted as expressing a desire for change among voters and a calamity for liberal opinion and the impetus for modernization and the granting of the right to vote. However. to gain advantages for their constituents. . tend to align themselves with either the government or other groupings on a variable basis. So in reality the continuous friction between the Ninth Assembly and the old government is unlikely to arise with the Tenth Assembly. and so assist the passage of reform legislation. To further their main goal of protecting the interests of their tribe they often align themselves with either the government or the Islamists. because there are many issues of concern for the future of Kuwait that have to be tackled over the next few years (and in some cases much sooner).

relations with the new Iraq. women’s suffrage. . 27 job creation for a rapidly increasing local population. 1948) Law degree (KU). 1948) Previously governor of Hawalli and of Ahmadi. 1937) Previously minister of defence and of the interior State Minister for Cabinet and National Assembly Affairs – Mohammad Dhaifallah Sharar (b. 1952) Degree in Banking & Finance (Illinois). In fact. has worked for Central Bank.History and Governance . 1952 – MNA) BS Pharmacology (Alexandria) and MS Pharmacology (UK). . 1943) Degree in Political Sciences (Cairo). . 1963) Degree in Economics & Political Science. in his current post since 2001 Minister of Communications & Planning – Sheikh Ahmad Abdullah AlAhmad Al-Sabah (b. 1929) Minister for Foreign Affairs for more than 28 years. Minister of Information from 2001 to 2003 Minister of Information – Muhammad Abbas Abulhassan (b. previously ambassador to UN and several countries Minister of Justice – Ahmad Yacoub Baqr Al-Abdullah (b. previously Minister of Justice. . in current post since 1998 Minister of Energy – Sheikh Ahmad Fahad Al-Sabah (b. and Minister of Social Affairs. brother of the Amir Minister of Defence (and deputy PM) – Sheikh Jaber Mubarak Al-Hamad Al-Sabah (b. . The Council of Ministers (Cabinet) Prime Minister – Sheikh Sabah Ahmad Al-Jaber Al-Sabah (b. at the time of writing (October 2003). . Has been defence minister since 2001 Minister of Interior (and deputy PM) – Sheikh Nawaf Ahmad Al-Jaber AlSabah (b. bureaucratic reform. experienced Assemblyman . . the housing shortage. and gender segregation in private universities among others. Awqaf and Islamic Affairs. the status of Bedouns (stateless Arabs). voting age and qualifications. many of these matters were being tackled in a straightforward cooperative way by the Executive and Assembly.

chairman of Kuwait Computer Company Minister of Foreign Affairs – Dr Sheikh Mohammed Sabah Al-Salem AlSabah (b. in KOC. in current post since 2001 Minister of Social Affairs & Labour – Faisal Al-Hajji Note: Members’ names were correct as of November 2003 . PhD (Glasgow) Minister of finance – Mahmoud Abdelkhaliq Al-Nouri (b. 1955) Bachelor in Surgery (Cairo). 1955) Degree in economics (Clermont). 1961) Graduate of College of Aviation Sciences. 1949) BA in Economics (KU). Director of the Arab Centre for Educational Research of the Arabian Gulf States Minister of Commerce & Industry – Abdullah Abdelrahman Al-Taweel (b. Diploma in Administration. PhD in Economics (Harvard). 1946) BSc (Alexandria) and MS in Education (UK). emeritus certificate from Royal College of Surgeons in Edinburgh Minister of Public Works and State Minister for Housing – Bader Nasser Al-Hmeidi (b. member of Municipal Council Minister of Awqaf & Islamic Affairs – Dr Abdullah Maatouq Al-Maatouq (b. 1949) MSc (Imam Mohammad).28 Business Background Minister of Health – Dr Muhammad Ahmad Al-Jarallah (b. and helped establish Public Institute for Social Security. has worked as adviser to Financial Committee in National Assembly. previously MD of Kuwait Public Transport Company Minister of Education & Higher Education – Dr Rashid Hamad Muhammad Al-Hamad (b. has worked in Ministry of Planning. previously professor of economics at KU and ambassador to USA. chaired Environment Protection Authority during the 1990s. 1944) Bachelor of Mathematics & Computer Science (US).

a person’s identity was evinced by his adherence to a particular tribal cult. While the form and role of Islam in the modern world may be debated. The separation of religion. where he became chief magistrate and had the political power to put what he preached into practice. His preaching of a strict monotheism in polytheistic Mecca was opposed and he migrated to Medina. God created man and the world. In the pre-Islamic era social and political life in Arabia was tribally based. . The origins of Islam The Prophet was born in Mecca. in the Hijaz (now the western province of Saudi Arabia).3 Religion and Business Behaviour Kuwait’s Constitution states: ‘the religion of the State is Islam and the Islamic Sharia shall be a main source of legislation’ (art 2). there is no God but Allah and that Muhammad is the Final Prophet of God. The vast majority of Kuwaitis and most resident expatriates are practising Muslims. Islam Islam means ‘peace and submission to the Will of God’. doubts about its intrinsic value are seldom expressed. business and politics is incomprehensible to most Kuwaitis and the effect Islam has on business behaviour can be seen in the recent rise of Islamic financial institutions. and leadership . and Islam is the single most powerful private and social motivating force in the country. The basic tenets of Islam are that: .1. . and morally correct behaviour is achieved by following God’s Law as revealed through the Angel Gabriel to the Prophet Muhammad. Kinship was the main social bond. in about 571 CE and began his mission some 40 years later. and endowed man with a moral sense and free will and assigned him a vice-regency on earth for which he will be held accountable.

conditional on the consent of the tribe. Shi’ism began during the reign of the sixth caliph as an Arab political faction grouped around the claims to the Caliphate of Husayn. He had formed a non-tribal community and a well-organized armed state that was dominant in the area. the son of the fourth caliph. Ali. The Shias then developed into an Islamic sect that attracted adherents among the indigenous populations of Iraq and Persia. Muhammad was succeeded by a series of caliphs (deputies). He did so by converting his political power in Medina into a religious authority. . who was the husband of the daughter of the Prophet. the introduction of a new concept of authority in which the Sheikh (leader) of the Umma governed by an absolute religious prerogative in place of the consensual (and revocable) authority granted by the tribe. The Shias are the main minority sect and constitute about 15 per cent of all Muslims. There are several other very small sects. The source of public authority thus was transferred from public opinion to God. and secondly. In 680 CE Husayn and his followers were massacred at Kerbala (in modern Iraq). the natural sciences and the humanities. Both Islam and Arab domination expanded rapidly and by the 8th century an empire stretching from Spain through North Africa to Central Asia had been created. The Sunnis are the major sect. It lasted for several hundred years and contained many brilliant centres of learning in mathematics. a transfer that shaped the whole future of Islamic political thought and governance. By the time the Prophet died in 632 CE the pagans of western Arabia had received a monotheistic religion that was on an incomparably higher moral level than anything that had preceded it and that included practical rules of social behaviour. a succession that in time led to the creation of the Caliphate. This duality is still the underpinning of Islamic society today. Sectarian divisions Islam has several sects.30 Business Background was a matter of personal persuasion. ie it was both a religious community and a political organism. and the Islamic Empire was on the point of being created. which was based on the existing social organization but with two vital changes: firstly. In order to further the universality of Islam and transcend the tribal nature of religion the Prophet created the concept of the Islamic Umma (community). In time the division between the mainstream Sunni and the minority Shia became as fundamental as the split caused by the Reformation in Christendom. one of the greatest institutions in history. The Umma was a new non-tribal community with Muhammad as its sheikh and Muslims and others as its members. the replacement of kinship by faith as the social bond.

though Umra. it is obligatory (except for the very old. these are embodied . a Muslim must face Mecca and recite prescribed prayers five times a day. Sunnah refers to the practices of the Prophet during his own lifetime. the Word of God as revealed to the Prophet. the Sunnah. the sick. social relations. The basic principle is that nothing is haram except that which is clearly prohibited by the Sharia. Salat. Sources of law The Sharia has four sources: the Quran. if something is halal then engaging in it is not restricted. drink. Halal means permissible. The Quran. menstruating women and travellers) during the month of Ramadan but may be practised at any time. Sawn and Hajj. Ijma and Qiyas. Haram means forbidden. Sawm is fasting. tobacco and sexual intercourse between sunrise and sunset on any day.’ Salat means prayer. Zakat. A normative force Two fundamental concepts underlie Islamic morality: Halal and Haram. Hajj is performed during the 12th month of the Islamic calendar. These are known as the Sharia.Religion and Business Behaviour 31 The Five Pillars In Islam. The Islamic guidelines to living extend deeper into everyday life than those laid down by other major religions – eg Islam requires a person to wash after sexual intercourse – and Muslims claim that the Sharia provides for all the conduct needed for an ordered society. morally correct behaviour includes performing the religious duties known as the Five Pillars of Islam: Shahada. which is considered by Muslims to be a revealed code of law that is eternal in place and time and to which all human beings are subject. Shahada is the profession of faith: ‘There is no God but Allah and Muhammad is His Messenger. Hajj is the major pilgrimage to Mecca every Muslim must make once in his or her lifetime provided he or she is physically and financially capable. The first two are the primary sources. was written down by his companions following his death. if something is haram then engaging in it is prohibited. including individual actions. the lesser pilgrimage. Islamic law (Sharia) Islam lays down rules governing all aspects of human behaviour. Zakat is an obligatory property tax on Muslims. which entails abstaining from food. the young. politics and war. may be performed at any time.

Ijma is the consensus of Ulema (religious scholars). whence from time to time they issue ‘fatwas’. The Quran states the principles of the Sharia while the Sunnah provides examples of the application of these principles. Islam prohibits monasticism and celibacy (as well as adultery and fornication). which are named after their compilers: Abu Hanifah. Muhammad Al-Shafi’i and Ahmad bin Hanbal. through a dialectic process known as Isjihad. rulings on particular matters that are considered binding. All. to prove his case. Qiyas is reasoning by analogy. It is highly developed. Personal and social life Islam regulates social life thoroughly and lays down detailed rules of personal and interpersonal conduct covering inter alia dress. it is applied where guidance from the Quran and the Sunnah is not directly available and an ethical query can only be answered by deduction from a comparison with similar situations. A defendant is presumed innocent until proven guilty and the burden of proof falls on the complainant. A complainant must produce witnesses. which were written down after his death and later compiled into various collections. eg the Quran prescribes norms as to how persons should greet each other. eg Islamic banking emerged as an alternative to conventional banking only within the last generation and is still evolving. Certain mores of social intercourse. including non-Muslims. food and family relationships. are equal before the Sharia. ie his actions and utterances. this consensus is applied in situations where no clear conclusion based on the Quran or the Sunnah can be made on an ethical matter. Modern Ulemas usually belong to colleges. ie by saying ‘salaam’ (peace) and by shaking hands. Separate forms of the oath are provided for Muslim and non-Muslim witnesses. Witnesses must testify under oath and the testamentary value of a male witness is double that of a female. with many issues yet to be settled. There are four main schools.32 Business Background in the sayings or Ahadith (plural of Hadith) of the Prophet. which in other cultures might be considered mere matters of courtesy. at least two and in some cases four. The family is considered the basis of social life. states . Islamic court procedures are similar to procedures followed in Western common law courts. Islamic jurisprudence Islamic jurisprudence (Fiqh) consists of collections of law based on the Quran and the Sunnah. But fatwas issued by different schools on the same matter are not always compatible and some schools are seen as more liberal than others. are elevated to the status of moral imperatives. and the actions approved by him. Malik bin Anas. The development of Fiqh is ongoing.

Overseas slaughterhouses exporting to Kuwait must employ mullahs to certify their meat. Though the eating of carrion and pork is haram. horn and hair of these animals may. medicines and intoxicants Islamic prohibitions against certain foods are strict but are not extensive. The prohibition against alcohol is extended by qiyas to all drugs that befog the mind. But a woman is entitled to hold property and deal with it in her own name and may carry on her own business. . nor may he serve it to Muslims or to non-Muslims. blood and idolatrous offerings. Muslims may eat meat slaughtered by Christians and Jews provided the animal has been killed in a permissible manner. Status of women In Islam men and women are regarded as equal though ‘men have a degree over women’ in the household due to their physical differences and the need to have only one head in the home. However. To be imported into Kuwait. except in vital need when no alternative is available. a prohibition that is strictly enforced in Kuwait. and lays down detailed rules governing marriage. according to most jurists. in Kuwait the importation and sale of items made from pigskin is prohibited. A Muslim is not allowed to drink or handle alcohol. Medicines containing such ingredients are never approved by the Ministry of Public Health in Kuwait. She may work outside the home and retain her earnings. Prophethood. Her consent is required for marriage and she has a right to maintenance from her husband. bones. Any wholesome food may be eaten and only four categories of food are prohibited: carrion. The prohibition against blood refers to flowing blood and to be halal an animal must have been slaughtered by bleeding as prescribed in the Sharia. A Muslim man married to a non-Muslim woman must allow his wife to practise her religion without hindrance. pork. meat must be accompanied by a ‘halal’ certificate signed by a mullah who has witnessed the slaughter. Alcohol may not be used as medicine. A Muslim may only take medicine containing substances from prohibited foods if his life is in danger and no alternative is available. the skin.Religion and Business Behaviour 33 that those who have the means should marry. any blood then remaining in the flesh is permissible. divorce and inheritance. She may inherit property and has a right to a share in the estate of deceased family members. Food. be used for other purposes such as clothing and accessories. The political system of Islam The political system of Islam is based on three particular concepts: the Sovereignty of God. and Khilafa.

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In Islam God alone is considered the creator, sustainer and master of
the universe and all that exists. Thus God alone is sovereign. This
principle lies in contradiction to the Western concept of the political
sovereignty of human beings.
Prophethood is the medium through which the Laws of God are
revealed to man. Muslims consider Muhammad the last Prophet of
God and the Sharia as the final Revelation. To a Muslim only the Sharia
can provide the principles upon which human life and its organization
should be based.
Under the concept of Khilafa man is God’s deputy on earth and is
required to exercise Divine authority in this world within the limits
prescribed by God. This concept is analogous to a trustee who must
administer property according to its owner’s instructions, exercise his
authority within the limits prescribed by the owner, fulfil the owner’s
intentions and return the property to the owner when the trust is over.
When a human being dies he, as a caliph, will be held accountable to God
for his stewardship.
Islamic democracy
Politics in Islam is founded on the idea that each and every individual is
equally responsible to God under Khilafa. The agency that runs the
state does so on behalf of the members of the community and derives its
authority to do so from the people who delegate to it the authority they
each have under Khilafa. When the people lose confidence in how the
government is carrying out the obligations of the caliphate on their
behalf they withdraw their authority and the government is required to
step down.
Western and Islamic notions of democracy are essentially different:
.

Western democracy is based on the idea of popular sovereignty
whereas Islamic democracy is based on popular Khilafa wherein
sovereignty belongs to God and the people are His caliphs.

.

In Western democracy the people make their own laws; in Islam the
Law is ordained by God.

.

In the former the government undertakes to fulfil the will of the
people; in the latter the government has to fulfil the Will of God on
behalf of the people.

.

In the West, democracy is a kind of absolute human authority; in
Islam it is subservient to Divine Law and may only exercise its
authority accordingly.

These differing notions are probably irreconcilable.

Religion and Business Behaviour

35

Islamic institutions of state
The Quran states that the aim and purpose of an Islamic state is the
establishment and development of those virtues by which the Creator
wishes human life to be enriched and the prevention and eradication of
those evils the presence of which debases human life. The state thus has
a purpose that extends beyond mere political administration.
The head of state (Amir) is required to be virtuous and able, and to be
selected by the people. He is accountable both to God and to the people
who selected him; under the concept of individual Khilafa every citizen
has the right to criticize the Amir and his government.
The Amir is required to govern on the advice of a Shura, an elected
advisory council. The Amir and Shura may legislate in matters not
specifically covered by the Sharia, but the Sharia itself cannot be
modified and all regulations must conform to the Sharia. The Sharia
thus acts as a constitutional brake on the ability of a legislator to create
new rules.
The judiciary is independent of the executive. Though judges are
appointed by the government, they derive their authority from the
Sharia and are answerable to God alone for their judgments. Their
jurisdiction extends to the functionaries and organs of the government
itself at the highest level. Judges are required to administer justice in an
impartial manner and discrimination on the basis of position, language,
colour, sex, descent or territory is forbidden.
Protection of rights
Islam lays down certain clear rights for man both as a human being
(fundamental rights) and as a citizen (civil rights). These rights are
expressed in Kuwait’s constitution.
Under Islam every human being irrespective of his or her religion or
where he or she lives has certain fundamental rights, such as the right
to life, the right to succour in time of distress, the right to a basic
standard of living and the right to freedom, justice and equality of
treatment from Muslims. These rights are unrestricted.
Islam also grants citizens civil rights. These include the right to own
property, the right to the necessities for life, the right to privacy,
protection against defamation, protection from arbitrary imprisonment,
freedom of expression and the right to form associations, as well as
freedom of conscience in matters of faith. Some of these rights are
subject to restrictions, eg freedom of expression and the right to associate may only be exercised in order to further virtue and truth.
Protection for non-Muslims
Muslims consider Muhammad to be the final Prophet of God, yet believe
in all previous prophets, though they regard the revelations made to the

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earlier prophets as either incomplete or as having been later perverted.
People (such as Christians and Jews) who received these prior revelations are called ‘People of the Book’.
These and other non-Muslims who accept the authority of an Islamic
state are known as Ahl Al-Dhimmees (Covenanted People). As the term
implies, the Islamic state has entered into a covenant with the Dhimmees; it guarantees protection to all non-Muslims living within its
community in return for their loyalty. It grants them equal rights with
Muslims before the Law. They have freedom of belief and may perform
their own religious rites.
These rights are irrevocable unless Ahl Al-Dhimmees themselves
renounce the covenant. Kuwait’s constitution guarantees non-Muslims
‘absolute freedom of belief and the right to practise religion in accordance with established customs’ (art 35). There are several Christian
churches in the country and the Catholic Church has a resident bishop.

Business ethics
Islam is pro-business and lays down detailed rules as to how business
should be conducted. At the same time it attempts to ensure support for
the weak.
Work ethic
The fundamental attitude of Islam towards man’s position in the world
is that God made the earth for the benefit of man, and it is man’s duty to
profit from this favour. In Islam self-reliance and the work ethic are
enshrined as cardinal virtues. A Muslim may not avoid working for a
living on the grounds that he is devoting his life to the worship or service
of God. Nor may he accept charity while he is able to earn sufficient for
his family’s needs by his own efforts; if necessity obliges him to beg, he
may not ask for more than is required to enable him to stand on his own
feet and once he has obtained this minimum he must stop asking.
Commerce
The Prophet held that the status of an honest merchant is equal to that
of a martyr in the cause of Allah and urged Muslims to engage in
commerce. In Medina he built a marketplace and organized the rules for
business transactions. His Companions included craftsmen, farmers
and traders, and the first three of his successors were renowned for their
acumen as businessmen.
Business transactions
The Islamic viewpoint is that God created people in a state of dependence upon one another and the exchange of goods and services is

Religion and Business Behaviour

37

The Islamic calendar
The Islamic calendar starts from the year 622 CE, the year the Prophet
Muhammad migrated from Mecca to Medina (the Hijra). Islamic years are
designated in English with AH for ‘after Hijri’, for example 1415 AH
(1995 CE).
The Islamic calendar is based on 12 lunar months, each 29 or 30 days long,
and the start of a new month depends on when the new moon is sighted.
Thus the Hijri year is nearly 11 days shorter than the solar Gregorian
calendar used in the West and each Islamic year begins either 10 or 11
days earlier than on the Gregorian calendar.
In Kuwait the Gregorian calendar is used for business purposes; the
Islamic calendar is used for official purposes and for feast days and
traditional periods such as Ramadan.

necessary for life. Any business activity that is fair and beneficial to both
parties and is transacted by mutual consent is lawful in Islam.
The Sharia, however, prohibits certain transactions. These prohibitions are designed to prevent specific injustices such as fraud, profiteering and unfairness in contracts. Their underlying purposes are to
remove uncertainty and to ensure a fair assumption of risk by both
parties – an activity that is to one person’s gain and another person’s
loss is unlawful.
Example of various kinds of business transactions are given in the
Ahadith. These are based on the economic environment of 7th-century
Arabia. Islamic rules of modern-day commerce are derived from these
by qiyas and isjihad.
Prohibited subject matters
The only products a Muslim may not deal in are things, such as
intoxicants, swine, idols or the like, the use of which is haram. Any
service that fulfils a need in society is regarded as good, with the stated
exceptions of prostitution and the erotic arts.
The Sharia prohibits dealings in stolen or usurped property and
usucapion is not recognized, ie there is no ‘statute of limitations’ in
Islamic law and the passage of time cannot deprive an original owner of
his right in property.
Prohibited trade practices
The principle of caveat emptor is not recognized in Islam and the Sharia
requires a Muslim to make everything clear about an article he sells,
including any defects it contains. Both parties have a right to cancel a
transaction as long as they have not yet separated.
Islam forbids fraudulent exploitation. Several Ahadith give examples
of behaviour that is forbidden because it is fraudulent in itself or carries

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a high risk of fraud. These include defrauding a customer by withholding full measure, and ramping (najash), in which someone bids a
price up without intending to buy. Going out of town to buy merchandise
that is on its way to market is not allowed because of the possibility that
the seller, ignorant as to the current price for his goods, could be
defrauded; where this happens the seller has the right to cancel the
transaction once he arrives at the marketplace. Hoarding is prohibited if
it is injurious to the common good or the aim is to force prices up.
Free market
Islam considers that the market is the best place for trading to take
place and requires that prices be free to respond to natural competition
without manipulation. Price control is only allowed where artificial
forces, such as hoarding and manipulation, interfere or where a natural
monopoly exists.
The practice whereby someone bringing goods to be sold in the market
at current prices is induced to give them to someone else to sell them
later on his behalf at a higher price is specifically prohibited. But
brokerage as a mediation between buyer and seller is permissible and
the broker is entitled to his fee on whatever basis is agreed.
Contractual conditions
Islamic businessmen are free to negotiate and enter contracts much as
they please. Mortgages and the pledging of security are permissible. But
transactions involving uncertainty or an unfair assumption of risk are
not allowed.
Contracts involving uncertainty are those where a quantity to be sold
is not specified or there is no guarantee that the seller can deliver the
goods for which he receives payment, eg accepting money for a stallion’s
covering. Many jurists do not prohibit a transaction where the uncertainty is small.
Contracts that provide a guaranteed return for one party or where one
party accepts the whole risk of a venture are invalid. Most examples in
the Ahadith that illustrate the underlying ethic are from agricultural
practice. The form of share-cropping in which the landowner takes a
portion of the whole crop is allowed as the risk is shared by both parties.
But forms of share-cropping in which the landowner lets the land in
return for the produce of one part and allows the cultivator to keep the
produce of the remainder, or in return for a specified measure or weight
of the produce and allows the cultivator to take any excess, are prohibited as in both cases there is a risk that the owner will take all while the
cultivator will get nothing. Renting land for money is forbidden because
the renter has a guaranteed return while the cultivator takes the whole

Religion and Business Behaviour

39

risk. But most modern jurists allow the leasing of depreciable assets,
such as machinery.
A sale on deferred payment is permitted provided it is by mutual
consent. Some jurists hold that an increase on the cash price because a
sale is on credit is haram because the difference resembles interest. The
majority of jurists, however, permit it as there is no clear text disallowing it.
Advance payments for merchandise to be delivered at a future date
are also allowed, provided the price, quantity and time of delivery are
specified in the contract.
Prohibition on usury
The Sharia prohibits the charging of riba (usually translated as interest) on money lent. However, not all Islamic scholars accept that the
Quranic prohibition refers to interest in the modern sense of the word
and a few make a distinction between interest and usury; some years
ago the mufti of Egypt issued a fatwa declaring that interest can at
times be legitimate.
Though commercial banks in Kuwait lend money at interest, the
religious prohibition on riba has led to the creation of several novel
Islamic banking products.
Insurance
Muslims consider that the Islamic system provides insurance for those
living under its protection, from the government’s treasury or through
mutual aid among individuals. A person rendered destitute by calamity
may request financial aid in compensation or to enable him to stand on
his own feet again. Zakat is available for those in debt.
Yet Islam is not against the concept of insurance per se and is merely
opposed to Western forms of insurance. Whether a form of insurance is
permissible depends on the relationship between the insured and
insurer, the construction of the contract, and the investment behaviour
of the insurer.
Essentially only two types of business relationship are recognized in
Islam, that of trade (the relationship between buyer and seller of goods
or services) and that of partnerships (where risk is shared equitably).
The conventional relationship between insured and insurer falls outside
these types.
Islam also recognizes cooperatives, ie collectives organized by members to help one another. For an insurance cooperative to be legitimate
its members must pay their money into the pool as a donation that
cannot be returned; in the event of a calamity befalling a member his
entitlement to compensation depends on the amount of the pooled
monies available and cannot be a pre-determined amount. This

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cooperative relationship is quite different from the relationship found
between insured and insurer in Western economies.
Under the Western system of insurance against hazards, if the
insured event occurs then the insured is paid the agreed sum, but if
the insured event does not occur then the insurer keeps the premiums.
With life insurance, if the insured dies after only a few premiums are
paid, his beneficiaries receive the whole of the sum insured, but should
he fail to pay the premiums as they fall due then he may lose all or a
great deal of the premiums he has already paid. Under the Sharia both
types of contract are invalid because they stipulate that in certain
circumstances one party is to receive all the benefits with nothing for
the other party.
In addition, Muslims cannot deal with conventional insurance companies as they invariably lend their premium monies on interest.
Several Islamic writers on finance are of the opinion that the conventional contract of insurance against hazards could be modified to bring it
closer to Islamic principles and that this form of insurance would then
be allowable provided the insurer were free of usurious business. But
most are of the opinion that the concept of life insurance cannot be made
compatible with Islamic principles, because the beneficiary is paid back
all the premiums plus an additional sum, which is a form of interest. In
Kuwait, insurance against commercial hazards, as well as life assurance, is freely available.
Forms of business enterprise
Sole traders and partnerships are allowed under the Sharia. At the time
of the Prophet the concept of the joint stock or shareholding company
had not yet evolved; however, most modern jurists allow it, reasoning by
qiyas that it is an extension of the concept of partnership.
A Muslim may pool his capital with that of others for any lawful
business venture. A Muslim with capital may enter into partnership
with someone without capital who gives time and effort to the business.
But in any partnership the profit and loss sharing ratio must be agreed
in advance and if losses exceed profits the difference can only be charged
against capital. Where only some partners contribute capital while
others contribute time and effort, the Sharia does not allow the providers of capital to be guaranteed a fixed return regardless of eventual
profits or losses. These rules are reflected in Kuwait’s Commercial
Companies Law, which, for example, does not enable shares with
differing rights (such as preference shares) to be issued.

is the native language of about twothirds of the inhabitants of Kuwait and the liturgical language of more than four-fifths of its people. and these are not always mutually intelligible. in some dialect or other. English is considered the second language of business and most. The script is written cursively from right to left using a phonetic alphabet. jazzy flavour in keeping with the self-view of the locals that they are the most avant-garde people in the area.4 Languages Arabic. Indian. Arabic grammar is complex. Modern standard Arabic evolved during the 19th century and is now the main vehicle of written communication throughout the Arab world. educated Kuwaitis are quite fluent in English. Egyptian and American loan words. But each Arabic region has its own distinct colloquial form of Arabic. including various versions of English. though most of these are familiar in other European languages such as Gaelic. It differs from the dialects of other Arabic countries in both its sound system and its vocabulary. Classical Arabic is the language of the Quran. Though Arabic is the most common spoken language in the country.1. several dozen other tongues are in daily use. though not all. The Arabic language Arabic is perceived as difficult to learn. Indeed. and colloquial Arabic. But at the more plebeian levels getting by on English alone can prove difficult and a smattering of Arabic is always useful at street level. The language is classified into three divisions: classical. The Kuwaiti dialect is a form of Peninsular Arabic (a mix of various Bedouin dialects with the dialect of the Gulf dhow traders) liberally laced with Persian. Its sounds are softer and less painfully glottal and its vocabulary has a hip. yet has strong similarities with the classical languages of Europe. The language has 10 sounds that do not exist in English. modern standard. understood by all educated Arabs. .

In public sector contracting all notices. which they themselves consider difficult. the official lingua franca is English. and are always impressed and helpful when an expatriate tries to use it. bids must be submitted in Arabic. The multiplicity of languages in use in Kuwait can lead to problems in communication. or even understanding of. however. the Arabic version is always authoritative. as a general rule. Most correspondence with government departments must be in Arabic and most official forms (eg customs declarations) must be filled out in Arabic. In the oil sector. however. though a translation in another language may be appended. such as regulations posted in a place of work. Some local versions of English are ambiguous and businessmen are cautioned not to assume that vital instructions are automatically understood. Learning to articulate common greetings and expressions of politeness as well as the basic numbers in Arabic is not too difficult. . though technical details may sometimes be supplied in English. and some business notices. When the word ‘yes’ is used to punctuate another person’s conversation it often simply means ‘I hear you’ and expatriate businessmen should not assume that a listener who murmurs ‘yes’ every now and then is necessarily indicating agreement with. Where a document is in more than one language. ie the Arabic version is the only version that will be considered by a court of law in the event of a dispute coming before it. are required by law to be in Arabic. the topic under discussion. Where a document is in more than one language. just ask a reader of Arabic.42 Business Background Hints for expatriates Kuwaitis are proud of their language. such as employment contracts. A few types of contract.1. Where pronunciation is problematic.4. Find a good reliable translator for vital documents. Official usage Arabic is the official language of Kuwait and all government documents and notices are in modern standard Arabic. Again the oil sector is an exception. correspondence and notices. In the private sector parties are generally free to use whatever language they wish in contracts. the Arabic version is always legally authoritative. invitations to tender and related documents are issued in Arabic and. Business vocabulary Having a business vocabulary to hand is useful and common business terms in Arabic are shown in Table 1.

4.1 Business terms in Arabic English Phonetic Arabic Advertising I’ilan Advice Naseeh Auction Mazad Taxi Taxi Tahta Al Talab (Ojrah) Car Sayyarah Aeroplane Tayyarah Hotel Funduq Travel agency Wakalat Safar Accounting Al Muhasaba Balance sheet Al Meezaniya Capital employed Ra’sul Mal Al Muwaddaf Assets Al Mawjoodat Fixed assets Al Mawjoodat Althabet Current assets Al Mawjoodat Al Mutadaawalah Receivables Al Madenoon Liabilities Al Matloobat Long-term liabilities Matloobat Taweulatul Ajal Payables Al-Da’inoon Loans Al Quroodh Working capital Ra’sulmal Al Aamel Profit & loss account Hisab Al Arbahwal Khasa’er Revenues Al Iradat Expenses Al Masroofat Written Arabic 43 .Languages Table 1.

4.44 Business Background Table 1.1 (cont’d) English Phonetic Arabic Gross profit Ijmalurribh Net profit Al Ribh Al Safi Cash flow statement Bayan Al Tadaffuq Al Naqdiah Journal entry Al Tasjeel fee Dafter Al Yawmiyah Debit Madeen (Alaih) Credit Da’in (Lahu) Trial balance Mezan Al Muruga’ah Invoice Fatoorah Receipt Iesaal Statement of account Kashf Hisab Debt Dain Business organization Tanzeem Alamal Al Tijari Establishment Mu’assasah Company Sharikah Limited liability Dat Mas’ooliya Mahdoodah Owner Malik Partner Shareek Shareholder Musahem Associate Zameel Businessman Rajul A’ama Decision-maker Saheb Qarae Board of directors Majles Idarah Written Arabic .

1 (cont’d) English Phonetic Arabic Chairman Ra’ees Majles Ida Managing director Udow MajlesIdarahMuntadabuq Influence Nufoz Office Maktab Employer Saheb Amal Employee Muwaddaf Manager Mudeer Secretary Secretair (m)/Secretairah (f) Typist Tabbaa’ Form Namozag Letter Resalah Computer Hasoob Photocopy Soorah-Nuskha Facsimile Fax/Nasookh Telex Telex Work Amal Importing Isteerad Bill of exchange Compiala Letter of credit I’itmad Mustanadi LC documents Mustanadat I’itimad Bill of lading Booleesat Shahn Bank charges Masareef Al Bank Bank commission Omoolat Al Bank Written Arabic 45 .4.Languages Table 1.

4.1 (cont’d) English Phonetic Arabic Bank interest Fa’idat Al Bank Telex fee Rosoom Telex Customs duty Rosoom Al Jamarek Cost Al-Taklufah Insurance Al-Ta’meen Freight Al Shahn Sea freight Al Shahn Al Bahri Air freight Al Shahn Al Jawwi Mail service Khedma Bareediya Courier Al Baareed Al Saree’ Packing Al Ta’bi’ah /Al Tahzim Container Haaweya Loading Tahmeel Unloading Tafreegh Customs declaration Bayan Jumroki Customs clearance Takhlees Jumroki Delivery time Tareekh Al Tasleem Financial Mali Bank Masraf / Bank Central Bank Al Bank Al Markazi Bank account Hisab Masrafi Cash Naqdi Cheque Shek Written Arabic .46 Business Background Table 1.

4.Languages Table 1.1 (cont’d) English Phonetic Arabic Sight draft Hiwaleh Tudfa Endattalab Promissory note Kompyaleh Foreign currency Imlah Ajnabiya Exchange rate Si’rulsarf Stock exchange Al Boorsah Commodity exchange Boorsat Al Bedaa’ah Spot price Al Si’rilhali Future price Al Si’ril Mustaqbali Taxation Ihtisabul Dhareebah Investment Istithmar Political organization Monazamat Syiasyiah Government Hokomah National Assembly Majles Al Ommah Ministry Wazarah Department Idara Agriculture Zira’ah Fishing Said Asmak Commerce Tijarah Economics Iqtisad Finance Tamweel Industry Sinaa’ah Transport Muwasalat Embassy Safarah Written Arabic 47 .

48 Business Background Table 1.1 (cont’d) English Phonetic Arabic Consulate Qunsuliya Professional services Khadamat Takhasusiah Consultant Mustashar Lawyer Muhami Accountant Muhaseb Engineer Muhandes Investment adviser Mustashar Istithmari Management consultant Mustashar Idari Translation bureau Maktab Tarjamah Marketing consultant Mustashar Tasweeq Inspection agency Wakalat Mu’aayana Loss adjuster Muthamen Khasa.ir Freight forwarder Naqel Homoolat Business centre Markaz Tijari Contracting and tendering Muqawalat Wamunaqasat Contract Aqd Terms of contract Shoroot ul Aqd Capacity to contract Al Qudra Alatta’aaqud Signature Tawqee’ Letter of intent Resalat Qasd Memorandum of understanding Madhakerat tafahum Written Arabic .4.

the best translator in the business.4. who may be contacted on (+965) 6837573 / 2462193 / 5610357 or by email at: afnan2004@hotmail.1 (cont’d) English Phonetic Arabic Feasibility study Derasat Jadwa Iqtisadiyah Financing Tamweel Bank guarantee Khitab Dhaman Tender Munaqasa Pre-qualification Tender documents Al Ta’heel Al Musbaq Mustanadat ul Munaqasa Bid bond Al-Kafalah Al-Awaliah Quality standards Maayeer Al-Joodah Quality control Al-Raqabah Ala Judah Written Arabic The business vocabulary was kindly supplied by Mr Abdul Kareem Rafiq Al-Said.Languages 49 Table 1.com .

of which Kuwaitis only made up 585. Children born in the State are not given citizenship unless their fathers are citizens.2) there were other tribes already living in the area who joined the new trading settlement.122. Pre-oil era: When the qUtub arrived in Kuwait (Chapter 1.1. was dominant in a total population of 2. 1946 to 1990: During the oil-boom years there was a dramatic influx of foreign ‘guest’ workers and two distinct communities evolved: the nationals and the foreign majority. which included 220.000. After the war many of the latter were deported. . Kuwaiti citizenship is restricted to descendants through the male line of persons who were in the country in 1920. the foreign element. and foreign women may claim citizenship after two decades of marriage to a Kuwaiti man. except for Gulf Corporation Council (GCC) citizens. the pre-oil era. Throughout the 19th and early 20th centuries there was a continuous trickle of immigration from Arabia. ie the children of Kuwaiti mothers sired by non-Kuwaiti fathers are denied citizenship.000 Palestinians. less than 28 per cent.000 souls all told. But there are a small number of naturalized Kuwaitis.5 The People of Kuwait Over 100 nationalities live in the State of Kuwait and Kuwaiti citizens have been a minority in their own country since 1960. southern Mesopotamia and Iran. By 1946 the population was perhaps 90.000 Bedouns (stateless desert Arabs) and 450. from 1946 to August 1990. are subject to strict rules of entry and registration as foreigners under the sponsorship of Kuwaitis or Kuwaiti companies. . Post-liberation: The invasion in August 1990 caused a major dislocation of the population. or as dependants of foreigners who already enjoy residence under Kuwaiti sponsorship. Demographic development Kuwait’s demographic development divides neatly into three periods: . Most foreign residents departed. All other nationals. except for Bedouns and Palestinians. and the present post-liberation period.000. . When Iraq invaded in 1990.

In the discussion below. predominantly Egyptians. who perhaps number 120.1). and it seems that the census was incomplete. civil identification cards issued by PACI. population census taken every 10 years. The final published figures showed a smaller population compared to figures based on PACI data published by the MOP at the same time. . Population data extracted from these are considered reliable. as the only segment of the population that could realistically be omitted from these databases is illegal aliens. the total population was 2. which is . The next census is due in 2005. The MOP publishes statistics from the CSO and the DOP from time to time. Sources of population statistics There are four main sources of data on the local population: .000 at the very most. Less than a decade ago. of which just over 37 per cent were Kuwaitis and nearly 63 per cent expatriates (see Table 1. Civil ID cards. the the the the residencies issued to expatriates by the MOI. Census data and data from the registration of births and deaths are processed by the Central Statistical Office (CSO) at the Ministry of Planning (MOP). The last census was taken in May 1995. less than 5 per cent of the total population. but the figures published from these two different sources are often contradictory. . Population by nationality At the end of December 2002. foreigners are still in the majority. are issued by the Public Authority for Civil Information (PACI). now it is about 4:6. have in the main been replaced by other nationalities. quoted statistics are based on PACIand MOI-derived data unless otherwise indicated.4 million. Though the composition of the post-liberation population is substantially different from that of the previous period. It should be noted that none of the quoted figures take into account the large numbers of foreign troops present in the country from time to time since 2002. and strict registration systems for births and deaths. All residence visas for expatriates are issued and cancelled by the Ministry of the Interior (MOI). while data from the MOI and PACI databases are processed by the Department of Planning (DOP) at the same ministry.5.The People of Kuwait 51 Today there are fewer than 125. . the ratio of Arab expatriates to non-Arabs was about even. which both citizens and expatriates are obliged to carry. who once formed the country’s administrative middle class. though servicing these men and their camps provides local traders with significant sources of income.000 Bedouns in the country and the Palestinians. The MOI and PACI have fully computerized databases.

52 Business Background Note for advertisers The transience of the expatriate population creates obvious difficulties for persons attempting to establish brand images and partly explains why advertising in Kuwait tends to focus on short-term tactical efforts such as promotions and discounts.420. gender ratios and religious affiliations Vital rates in Kuwait (Table 1.1 pt General mortality Natural increase 2. Bangladeshis and Sri Lankans) is very noticeable among expatriates.2 Vital statistics (2001) Kuwaiti Life expectancy (years) Birth rate Infant mortality Expatriate 76. Kuwaitis have a life expectancy at birth of 76.9% 2.522. Comparable figures for expatriates are meaningless as a majority of them are transients. Indians.1 The total population (as at the end of December 2002) Kuwaitis 898. perhaps the consequence of a deliberate political policy. A majority come to Kuwait on shortterm labour contracts and move on after a year or so.a.3 pt 0.7% Asians 856.2 pt General marriage rate 17.8 pt General divorce rate Note: pt = per thousand Source: Ann Statistical Abstract.8 pt 27. MOP.6 n.8 pt 1. Table 1. Vital rates. a reflection of the overall betterment of living conditions for nationals during the past 50 years.2) are on a par with the developed world and the local causes of death are now the same as in the West: traffic accidents. 2002 . 30.000 37.7 pt 10.000 26.000 35.1% Expatriates Arab (incl Bedouns) 646.8% 1.6 pt 5.000 100% Source: CSO Ministry of Planning The dominance of Egyptians and south Asians (Pakistanis.6 years.000 0.4 pt 9. heart disease and old age.4% Westerners Total expatriates Total 20.5. Foreigners have a high ‘turnover’.5.5 pt 0.4 pt 2.8 pt 0. Table 1.5.000 62. The vast majority of non-Arabs are Asians.

443.000 4. due to a reduction in the size of the expatriate population.8% Source: PACI . the expatriate population is estimated to have grown a full 7 per cent in 2003.000 3.3% 1.5% 2.485.375. about 80 per cent of the remaining expatriates are male.309.255.209.000 4. A high birthrate among nationals is ensuring that the Kuwaiti segment is growing steadily year by year. The breakdown of the population by religious persuasion.000 3. Shi’a 30 per cent). and the change in expatriate numbers is not predictable as it depends on the demand for labour and on the state’s residency policy. it is likely that the majority of expatriates are also Muslim and most of these would be Sunni.6% 1.5. However.000 2. This domination by males reflects the short-term single-status contracts most expatriates are on and the residency restrictions imposed on their dependants.4% 2. reliable anecdotal evidence suggests that the proportion of Shi’as among the national population is about 45 per cent.420. after the pick-up in 2001 and 2002.000 6.3 Annual growth rates Kuwaitis Expatriates Total Year Population Change Population Change Population Change 1997 759. Population growth The growth in the population fluctuates from year to year (see Table 1.7% 5.5.The People of Kuwait 53 The ratio of male to female Kuwaitis is practically even. Sunnis being a small.000 3.000 2. Christians (4 per cent) and Parsis.8% 2. The fall in the expatriate population in 1999 and 2000 was due to the recession that began in early 1998.000 5.7% 2001 870.5 per cent in 1997 but was actually negative in 1999 and 2000.7% 1. though there are about half a dozen or so Christian Kuwaiti families.000 3.000 4.5% 2000 842.1% 2002 898.439.8% 2.217.522. However. Although official figures are not published. It increased by 5. slowly decreasing majority.000 1998 786.000 72. the rate is falling and is expected to level off at about 3 per cent a year. with the remaining 15 per cent consisting of Hindus (perhaps 10 per cent of the total population).000 70. Judging by their countries of origin. according to the CIA’s The World Factbook 2003.3).3% 1. Changes in the expatriate population depend on net immigration rather than the birthrate.450.000 3.000 71.000 74.7% 2.271. Table 1.7% 1. if the domestic servants in the country are excluded.8% 1999 812. The vast majority of Kuwaitis are Muslim.000 3. is: Muslim 85 per cent (Sunni 70 per cent.7% 2. But about two-thirds of expatriates are male and.2% 1.

6 Total 898.285 100.540 2.5.5 40–44 43.3 163.0 1.3 67.0 2.4 Age distribution of Kuwait’s population at end 2002 Kuwaitis % Expatriates Number % Total Age Number Number % 00–05 131.428 9.4 177. the total population is expected to reach 3.2 213.4 35–39 54.1 33.194 4. But the distribution is gradually becoming less skewed as the birthrate falls.628 2.084 1.8 14.419.124 14. Over 46 per cent of them are in the age range 25 to 40.055 14.914 3. Less than 30 per cent of Kuwaitis are in the latter age range.3 million (39 per cent) and expatriates 2 million (61 per cent).6 73.928 100.406 1.4 10–14 110.452 11.6 293. Table 1.1 223.1 30–34 62.0 30. At the end of 2002.012 4.182 10.7 277.0 121.504 4.180 8.400 12.3 million in 2015.3 325.176 4.3 65+ 25.521.812 8.8 203.140 6.6 65.452 2.282 8.172 8.1 60–64 15.106 14.168 11.4).413 13.8 65.0 222.7 15.8 204.628 8. Young Kuwaitis are entering the job market in increasing numbers.176 14.3 88.594 7.0 202.897 1.0 262.8 113.7 55–59 18.698 17.8 45–49 34. 20 per cent were aged 15 to 24 (see Table 1.54 Business Background On the assumption that the growth rate for the population as a whole will average 3. over 40 per cent were under 15 years of age.286 4.1 50–54 23.715 7.5 per cent pa over the next decade.5 73.4 25–29 71.643 100.988 12. Age distribution The Kuwaiti population is heavily skewed towards the young.4 05–09 130.744 8.211 7.397 6.981 1.9 39. with nationals making up 1.124 0. the period .282 2.786 6.5.3 15–19 97.8 170.4 147.992 2.0 Source: PACI Expatriates on the other hand tend to be concentrated in the middle of the economically active age ranges.575 3. Only 40 per cent were aged 25 or older and less than 18 per cent were over 40 years.7 20–24 80.958 4. while almost two-thirds are aged 25 to 50 years.2 51.

the so-called POBIES (Post Oil Boom generation).7 18. in local consumer markets is growing.5).0 2002 75.0 Government sector Private sector Domestic service Unemployed Total labour force Source: CB Economic Report 2002 / PACI Over the same period the educational level of expatriates has declined due to a fall in demand for skilled foreigners as local skills have been .8 0.8 33. the educational status of nationals has shown steady improvement (Table 1.6 100.4 25.0 100.6 30.1 28.6 25.8 0.0 2001 72. The influence of Kuwaitis born after 1973. those who attend college overseas are also generously funded.8 26.7 19.3 10.8 27.0 2002 22.6 10.8 20.0 2001 41. As a result. Less cautious than their forebears and relatively Westernized.5. they enjoy an enviably high level of discretionary spending power.6 19.1 100.5.4 100. This contrast is reflected in the dependency ratios discussed below.The People of Kuwait 55 during which most people are likely to be working.3 100.7 23.2 5.0 40. Education and skills The government encourages the education of its nationals in a generous manner with free schooling at all levels.2 6.1 20. Those attending the local university receive a monthly stipend of KD 250.0 2001 29.5 30.9 32.9 100. in the 1970s only 22 per cent of technical staff in the government sector were Kuwaiti but by the early 2000s this figure exceeded 60 per cent.0 2002 45. Technical training from the Public Authority for Applied Education & Training (PAAET) is also free for Kuwaitis.1 100.2 100.6 33.3 28.3 32.5 Educational status of the labour force (%) None Low Moderate High Total 2001 8.2 100.0 2002 8.7 100.8 20.5 7.3 9.0 2002 43.4 7.0 2001 43. Table 1.7 12.

5.6 per cent. and domestic service. other public authorities and stateowned oil companies). But the illiteracy rate among the men is only 2.7). though this may be due to the fact that. This significantly higher rate may be because first efforts to eradicate illiteracy concentrated on men.000 (see Table 1. .6 27. the overall educational level of expatriates is abysmal – only 25 per cent of expatriates working in the private sector have secondary education or better (see Table 1. parental restrictions ensure that their sisters study at home.6) – and seems to be deteriorating.8 Low 0. .5.346.000 to 275. at least 20 per cent of the total workforce . the private sector.4 7.5. The labour force Employment in Kuwait falls into three categories: . Table 1.8 per cent.000 domestic servants (private maids. The private sector includes an estimated 250. was 6. the public sector (ministries.2 97.8 18. drivers and gardeners). according to the Ministry of Planning. Indeed.6 19. while many men study overseas on state scholarships.6 45. This is because the majority of guest-workers are unskilled labourers on short-term contracts and the need for highly skilled expatriates is falling as Kuwaitis become more educated.8 100.0 Source: CB Economic Report 2002 / PACI At the end of 2002.2 45.4 High 0.7 6. the level of illiteracy among Kuwaitis.1 27.1 Total 2. while it is 11 per cent among Kuwaiti women.6 Educational levels of employees in the private sector (%) (2002) Education Kuwaitis Expats Total None 0. of which 24 per cent were working in the public sector and 76 per cent in the private sector. At the end of December 2002 the total labour force was just over 1. which is on a par with (if not better than many areas in) Western Europe. Traditional attitudes to female education have definitely disappeared and Kuwaiti females outnumber males at Kuwait University.56 Business Background improving.7 Intermediate 0.

while only 35 per cent are from the main Arab countries.005 1.011 283 925 1. which suggests that Kuwaiti employers are reluctant to employ fellow countrymen who are members of another (perhaps rival) clan while Kuwaiti employees feel it would be demeaning to work for Kuwaitis who are not members of their own extended family. at nearly 38 per cent. the replacement of expatriates in the past half-decade with suitably qualified Kuwaitis has been genuinely successful. This change reflects the success of the state’s ‘Kuwaiti-ization’ policy. The percentage of women in the overall workforce.7 The labour force in Kuwait (in ’000s) Kuwaiti Expatriate Overall End year Public sector Private Total sector Public sector Private Total sector Public sector Private Total sector 1997 185 12 197 98 913 1. such as messengers and teaboys.013 313 944 1.208 1998 197 12 209 94 940 1.243 1999 206 13 219 97 910 997 293 923 1. and in technical positions.034 291 952 1. the high salaries paid in the public sector and.The People of Kuwait 57 and about one servant for every four Kuwaitis. Many expatriates who previously worked in menial jobs. Sri Lanka and the Philippines.5. The government’s role as the employer of nearly 94 per cent of national human resources is due to several factors: the state’s perceived duty to provide jobs for all citizens. Nearly all domestic servants are from India.216 2000 217 14 231 84 872 956 301 886 1. Table 1. the family nature of private sector businesses.257 2002 240 16 256 85 1. a figure that had fallen to little more than a quarter by 2002.187 2001 229 15 244 84 929 1. in the 1980s were still in the same jobs in the late 1990s but were employed by private sector contractors who now supply the services once provided inhouse. Initially this policy was more apparent than real. In private businesses 52 per cent of expatriate employees are from the Indian subcontinent (see Table 1. according to anecdote.346 Note: Domestic servants included under private sector Source: PACI A mere 6 per cent or so of Kuwaitis who actually have jobs are employed in the private sector.5. In the private and domestic service sectors more than 98 per cent of employees are expatriates.8). Before 1990 more than half the employees in the public sector were expatriates. such as computer programmers. However.021 1. is similar to that for female participation in Western economies. .090 325 1.

000 Pakistan 64. while for expatriates it is six times lower at 39. perceived as fifth columnists in 1990. These figures are reflected in the dependency ratio.000 Syrians 42. which on the whole is about 78. the participation rate for Kuwaitis is less than 30 per cent. but may be explained by the reluctance of the authorities to allow large numbers of Arabs who were.600 Iranians 42. as well as the restrictions imposed on the immigration of the dependants of expatriates.9 indicates that more than 50 per cent of the whole labour force is employed in community services.5.8 Private sector employees at mid-2003 Indians 184.200 Others 35. The crude ratio for participation in economic activity. is about 56 per cent according to PACI figures relating to the end of 2002.300 Lebanese 15.600 Egyptians 183.5. ie every 100 individuals in the labour force support 78 other persons in the country.200 Bangladeshis 116. However. unlike expatriates. However. as they were once dominant. Table 1.800 Jordanians 10.58 Business Background Table 1.000 Indian subcontinent 375. which include the police and .600 Total 725. for Kuwaitis the dependency ratio is 239.000 Note: domestic servants excluded Source: MSAL The predominance of expatriates in the private sector as a whole is explained by the preference of employers for their superior work ethic and the relatively low wages they are prepared to accept. erroneously or otherwise.500 Main Arab countries 251.400 Sri Lankans 11. ie the ratio of the total labour force to the total population.000 Filipinos 20. This vast difference reflects the fact that more than 50 per cent of Kuwaitis are below working age. while for expatriates it is more than 70 per cent. The rather meagre role being played by Arab expatriates in this sector seems surprising at first glance.

3 0.3 3.0 100. after declining markedly in 1999 and 2000.7 0. hunting & fishing Expatriates Total – 2. and that more than four-fifths of employed Kuwaitis work in these areas.6 4. the labour force is growing again.5 times the salaries paid to equally skilled .0 Community.9 52.2 0.2 Finance.2 6. which went into full swing in 2003.1 per cent in 2002. at 16 per cent. the growth in expatriate workers in that year could top 10 per cent and is unlikely to be any less in 2004.6 Manufacturing 2.5 45.7 7.1 4.9 Distribution of labour force by economic activity in 2002 (%) Kuwaitis Agriculture.5.1 Transport. The boom. a sector in which nearly 20 per cent of expatriates are working. consists of traders.0 100.9 per cent in 2001 and a further 7. The low percentages for mining and quarrying (ie hydrocarbons) and manufacturing (mainly petrochemicals) are explained by the capital-intensive nature of these industries.6 Construction 0.2 19. Table 1. social & personal services Other Total Source: CB Economic Report 2002 / PACI After a period of decline in 1999 and 2000.6 Mining & quarrying 1.3 81.0 1.4 9. the expatriate labour force. gas & water 2. real estate & bus services 3.8 4.7 100. jumped 5. Earnings and spending power Up-to-date statistics on the remuneration of Kuwaitis are not available. suggests that. insurance.3 3. while the Kuwaiti labour force has been growing by a consistent 5 per cent a year for the past half-decade owing to new entrants in the job market. education and healthcare.9 Wholesale & retail trades.7 16. hoteliers and restaurateurs. storage & communications 2.0 6. hotels & restaurants 1. The second biggest group of employers in Kuwait.3 0.8 7.1 Electricity. However. but in 1993 the World Bank stated that salaries for Kuwaitis in the public sector were about 2.7 7. It spurted by 5.The People of Kuwait 59 other security forces. when the figures are finally released.9 per cent in 2001 and by more than 7 per cent in 2003.

60 Business Background expatriates in the private sector.000 a month plus executive accommodation. The expatriate labour market Foreigners make up more than 80 per cent of the total labour force and though expatriate labour is cheap. 75 per cent of expatriates earn less than KD 180 (US $600) a month. school fees and annual flights home. hiring expatriates on temporary and part-time bases is illegal. In the private sector. with a matching propensity to splurge on all types of consumer products. Perhaps the top 5 per cent of expatriates’ spending power is on a par with that of middleclass Kuwaitis. Recruiting workers from overseas is expensive and time-consuming and must be planned in advance. including subsidies on housing and some foodstuffs. and only 10 per cent earn KD 420 (US $1. A foreigner may only work for the Kuwaiti individual or company who sponsors him or her. and so have levels of discretionary spending unmatched by ordinary citizens elsewhere. car. it would appear that expatriates as a whole have very low discretionary spending power. and earnings from part-time second jobs. Cottage industries providing computer programming and other professional services are clandestinely organized and most businessmen find outsourcing expensive and fraught with practical and legal difficulties. Though it occurs. The Kuwaiti manpower problem The shortage of employment opportunities for Kuwaiti manpower is posing a deepening socio-economic problem with political implications. This is because the State uses its fiscal dividend (surplus oil and investment income) to provide them with highly paid lifetime employment. the expatriate labour market is rigid and inefficient. Expatriates are less fortunate. The average is very low.400) a month. and transfers between sponsors are subject to legal restrictions and the permission of the current sponsor is required. which employs nearly 94 per cent of Kuwaiti manpower. Though these figures do not take into account the value of benefits. an Asian cleaner may get as little as KD 25 a month plus accommodation of sorts and a flight home every two years. Expatriates may not change employment at will. Though a Western executive may earn up to KD 3. In 1993 the World Bank stated that the public sector. had a staff surplus of 20 to . Moonlighting by expatriates is also illegal and even Kuwaitis who work for the government must obtain permission before taking up second jobs. Kuwaitis also enjoy cradle-to-grave welfare. such as housing and car allowances.

because of the higher salaries involved compared to hiring expatriates.000 Kuwaitis entering the job market each year and only 12. which vary from one industry to another.000 jobs in the government sector with no qualified Kuwaitis to fill them. which was once only paid to civil servants. and there are plans to subsidize their salaries by paying them the balance of the fiscal dividend (see page 71) they would receive in the public sector. It has been calculated that about 75 per cent of Kuwaiti job-seekers do not have the skills the market is looking for and there are about 9. is now being paid to Kuwaitis who work for private companies.000 extra jobs being created. even in the public sector. and is imposing fiscal and other penalties on companies that do not have these minimum numbers of Kuwaitis on their payrolls. who are relatively well educated. Kuwait has serious shortages of doctors. the monthly social allowance.The People of Kuwait 61 30 per cent. the public sector has been unable to absorb all Kuwaiti job-seekers. . do not match the requirements of the job market. over 21. It is also trying to make employment in the private sector more palatable for young Kuwaitis and their employers. more than 8 per cent of the Kuwaiti labour force. the government has started pre-job training sessions to impart the skills needed by the market. With 16. Despite this feather-bedding. a major problem is rapidly building.000 in the private sector. according to the Minister of Planning. In January 2004. The private sector is unable to absorb the excess. Part of the problem is that the skills of Kuwaitis. and this figure is expected to rise to 25. To alleviate the situation.000 Kuwaitis were unemployed. The government has also placed minimum limits on the numbers of Kuwaitis that private sector companies must hire.000 (10 per cent) by the end of 2004. nurses and teachers but there are no qualified nationals to take up these posts. 11.000 in the public sector and 1.

979 2. The form of the Kuwaiti economy may be fairly described as paternalistic capitalism. .6 GDP growth (%) Consumer price index (1978 = 100) Source: Central Bank of Kuwait . which provide substantial income. Kuwait also has sizeable overseas investments.6. and it incorporates a high level of welfarism.1 Economic data summary KD million 1999 2000 2001 2002 GDP (at current prices) 8.721 5. The most important economic activity in Kuwait is the transformation of mineral wealth into disposable funds. Local production of crude oil.357 10.679 3.1.525 4. there are few trade barriers between it and the outside world. it relies on imports to satisfy most of its requirements for goods and services.3 Exports (fob) 3.2 212.819 2.a.0 27. . .7 215. Non-oil development depends on revenues generated from these sources.042 1.738 16.6 2.6 The Economy The economy of Kuwait has five main characteristics: . it has limited domestic investment opportunities. . both privately and publicly owned. Table 1. it depends on oil for a large portion of its national income.161 2.683 Imports (fob) 2. political and economic ends.553 1.996 2.282 n.975 4.453 Trade balance 1. gas and refined products accounts for 45 per cent of Gross Domestic Product (GDP) and over 91 per cent of exports.8 77.496 10.980 4. 209.884 11. which are then used for social.501 2.230 Total current account 1.

and a half-share of the reserves in the Partitioned Neutral Zone (PNZ). and major consuming entities. a private sector controlled mainly by local merchant families. a consumer cooperative sector in which the local ‘co-op’ supermarkets are owned by Kuwaitis living locally. Oil. . and so the output of gas is linked to the rate at which crude is produced.2 Oil and gas facts Reserves Oil Gas 96.0m bpd Export revenues Share of world total (%) KD 4. and .1 Oil production Sustainable output 2. The industry is also wholly owned and firmly controlled by the state through: . international organizations such as OPEC and OAPEC. But it has a relative shortage of natural gas because its gas reserves are ‘associated’. The Supreme (or Higher) Petroleum Council is responsible for the country’s overall oil policy. gas and petrochemicals Kuwait has abundant reserves of crude oil. and directs political relationships with other producing countries. . The Ministry of Energy regulates the industry. a joint sector in which business enterprises are owned by a mix of public and private interests. The State of Kuwait owns all mineral wealth within the territory of Kuwait including its offshore reserves.6 52. the Supreme Petroleum Council.6.500m pa . the Ministry of Energy (previously Oil). .The Economy 63 The economy has four main sectors: . Kuwait Petroleum Corporation (KPC). Table 1. ie the gas is mixed with crude oil.0m bpd Actual production 2.5m bpd OPEC quota (nominal) 2.500m barrels 9. a public sector of government institutions and state-owned oil companies.400m cu m 1. .

But all other main operations. production. delivery and export KNPC [Kuwait National Petroleum Company KSC] Refining. development and production of crude oil and natural gas KPI [Kuwait Petroleum International Ltd] Overseas refining. local bottling and distribution of gas KAFCO [Kuwait Aviation Fueling Co KSC] Supply of aviation fuel in Kuwait KUFPEC [Kuwait Foreign Petroleum Co KSC] Overseas exploration. petrochemicals. gas liquefaction. petroleum products and liquefied gas is carried out by KPC from its headquarters in Kuwait City. marine agency. such as exploration. or refines it and markets the petroleum products. an independent wholly stateowned public body. KPC then sells and distributes the oil.6. Table 1. including refineries and petrol stations in Europe. export and local marketing of refined products PIC [Petrochemical Industries Co KSC] Production. each of which operates a different oil industry activity. is responsible for all hydrocarbon-related operations in Kuwait and abroad. LPG and refined products. research and marketing of petroleum products. The international marketing of crude oil.64 Business Background Kuwait Petroleum Corporation and subsidiaries Kuwait Petroleum Corporation (KPC). including the operation of fuel service networks KPIL [Kuwait Petroleum International Lubricants] Production and international marketing of lubricants Source: Kuwait Petroleum Corporation KPC is a highly successful business.3 KPC’s operating subsidiaries Name of company Principal activities KOC [Kuwait Oil Company KSC] Exploration. refining. The Corporation sets strategic guidelines for its subsidiaries and has a worldwide vertically integrated network of businesses extending from the well-head to the petrol pump.3). development and production of crude oil and gas within the State of Kuwait and the Divided Zone.6. local storage. distribution and marketing of fertilizers and petrochemical products KOTC [Kuwait Oil Tanker Co KSC] Marine transportation of crude oil. KPC buys the crude oil it extracts from the ground from the state through the Ministry of Energy at a selling price that is related to world market prices. transport and distribution. natural gas and . The Corporation and its subsidiaries sell about KD 7 billion (US $23 billion) of crude oil. are effected through KPC’s seven main subsidiaries (see Table 1.

The company also manages the gas filling plant. gas. Kuwait’s three refineries (see Table 1. east and north of the country is pumped through pipelines to nearby ‘gathering centres’.The Economy 65 refined products each year. and manages the Marine Agency Branch. liquefied petroleum gas to KOTC’s gas filling plant and fuel oils to the country’s power generation and water desalination plants.6. The oil is then pumped to a manifold (multi-pipe junction) in Ahmadi whence it flows into the North and South Tank Farms. KOTC charters its tankers on the international market. As well as transporting about 25 per cent of KPC’s crude and petroleum products.000 bpd KOTC has a fleet of 8 crude oil tankers.4 Refinery capacity Mina Al-Ahmadi 450. Production and refining Crude oil from the wells in the south. 6 liquefied gas tankers and 2 bunker barges. domestic kerosene and aviation turbine kerosene (ie jet fuel). as the eighth largest oil company in the world. jet fuel to KAFCO. gas oil. where it is stored for transfer to the refineries or to the export facilities in Mina Al-Ahmadi. The lube oil from Shuaiba’s blending plant is marketed under the brand name Kuwaitoil. which distributes about 9 billion cylinders of cooking gas a year for local domestic use. one of the largest fleets in the world. fuel and lube oils. These produce unleaded and leaded gasoline. 11 petroleum product tankers.000 bpd Mina Abdullah 265. on most major business criteria.000 bpd Total 915. which provides services for foreign oil tankers in Kuwaiti ports. Meanwhile the gas travels via booster stations to the LPG plant at Mina Al-Ahmadi refinery where its hydrocarbons and other products are extracted.6. KPC’s strategy through to 2020 was approved by the Supreme Oil Council in late 2003 but details were not available from KPC’s media office at the time of writing. KPC generates returns that are in excess of industry averages and is ranked.4) are run by KNPC. naphtha.000 bpd Shuaiba 200. and by-products such as sulphur and bitumen. Pipelines from the refineries carry naphtha and sulphur to PIC. Table 1. where natural gas and water are separated out. locally and internationally. . Mina Abdullah is the only facility in the Gulf producing petroleum coke.

Tunisia. development and production of crude oil and natural gas by KPC are undertaken by KUFPEC.000 bpd. well-diversified and commercially sound long-term export markets for its hydrocarbon products. once its capacities in crude production and refining had been restored to the levels existing before the Iraqi invasion of 1990. Lubricants based on Kuwaiti crude are produced at KPIL’s five blending plants and marketed under the Q8Oils brand across Europe and in 75 other countries. However.000 bpd refinery in Milazzo. and 17 properties under exploration or development. It seemed. China. The company has two fuel service networks in Europe. the creation of new facilities to boost the country’s crude export capacity to 3m bpd is going ahead. refining and petrochemicals. Pakistan. Australia. at home and abroad. in order to maximize its long-run profits while conserving the country’s major non-renewable resources.125. Indonesia and Malaysia. Thailand and several European countries. Italy. which supplies diesel to international road haulers.000 bpd. the project has been repeatedly stalled in the National Assembly owing to fears that it represents a sale of Kuwait’s oil assets (which were nationalized in the 1970s) to foreigners. These include 8 properties producing a total of 30. New products are developed by Kuwait Petroleum Research & Technology. KPI is KPC’s international marketing arm. The three-year project was expected to be completed by the end of 2003 but has been delayed for technical reasons and because related projects to increase production were also delayed. as it is known. and the IDS (International Diesel Service) network. Its basic strategic objective is to develop secure. . To expand overall production capacity to more than 3m bpd. KAFCO’s storage tanks at the airport have a total capacity of 30m litres. The overseas exploration. will cost US $7 billion and will require the assistance of international oil companies. giving it a total refining capacity. KUFPEC is expected to be producing 100. Sudan. enough for three weeks of normal use.000 bpd.000 bpd or its equivalent by 2010.66 Business Background KAFCO supplies airlines at Kuwait International Airport with Jet A-1 (ATK) from the local refineries. The Crude Export Facilities Project includes building a huge pumping complex and the expansion of existing export terminal facilities in Al-Ahmadi. that the US $800m project. Egypt. KPC intends to double the output of the northern oilfields to 900. KPI also supplies aviation fuel to airports in Hong Kong. which has interests in Yemen. in late 2003. Project Kuwait.000 bpd refinery at Europoort in the Netherlands and a 50 per cent share in a 270. In 1996. KPC began a long-term programme of expansion and diversification in production. the Q8 chain of petrol stations. Meanwhile. of 1. KPC has a 77.

is likely to be built in two stages. The Corporation is expected to invest US $5. would be cancelled and re-tendered. the local gas currently available as fuel for the local power stations is inadequate when the future demand for electric power is taken into account. markets and distributes petrochemicals. which has a total annual capacity of 100. Later. As selling heavy sour crude oils in the international market is difficult. with a total output capacity of 858. KPC is considering upgrading the fuel oils produced at Shuaiba refinery. and three urea plants. The polypropylene plant. Detailed studies for the modernization of the refineries were almost completed in late 2003 and KPC was in the final stages of deciding the process configuration for achieving a deep-conversion refining complex. In addition.000 metric tonnes pa. An MOU with Iran is expected to be signed sometime in 2004 and imports from Iran will require the construction of an undersea pipeline. In January 2004 talks were going on with Iraq on the feasibility of importing natural gas from Iraq via pipeline in the near future. perhaps costing more than US $2.The Economy 67 provisionally awarded to Kvaerner Engineering of Sweden. a pipeline exists but it requires extensive refurbishment. takes feedstock of propylene from KNPC’s .000 metric tonnes. especially in the developed world. which would take total domestic refining capacity to a maximum of 1. The company manages three liquid ammonia plants. PIC also has a very modern petrochemicals complex in Shuaiba. The preliminary study of the fourth refinery was due to be presented to the Board of Directors of KPC during the first quarter of 2004. which together can produce 792.5 billion. which includes a polypropylene plant and plants for processing olefins. Kuwait will have to refine this additional crude itself. a second stage will add deep-conversion facilities.4 billion in refining over the seven years to 2010. Product specifications are also tightening. beginning (hopefully) in 2006. The refinery.000 metric tonnes per annum. Kuwaiti crude has a medium to high sulphur content and as new reservoirs are exploited its crude will get heavier and sourer.5m bpd. when Kuwait begins importing gas. Kuwait has signed a memorandum of understanding (MOU) with Qatar to import Qatari gas via a pipeline running through Bahrain and Saudi Arabia. and Kuwait’s refineries will require further investment in order to meet new specifications. The first would be the construction of a crude topping refinery to convert all residues after desulphurization to low-sulphur fuel oil for power generation. It is also studying the creation of a fourth refinery. Petrochemicals PIC produces.

3 per cent stake in Gulf Petrochemical Industries in Bahrain and a 30 per cent share in the Sino-Arab Chemical Fertilizer Company in China. the government began establishing joint ventures with private capital in the early 1960s. Union Carbide of the United States (45 per cent). The government’s participation in the non-oil economy was boosted dramatically in the early 1980s. The private and joint sectors Kuwait’s private sector is very small compared to the state-owned oil industry and much of its activity consists. During the occupation. and. or where the investment required was too large for private capital alone. which has since been taken over by Dow Chemicals. many companies were technically bankrupt and debts due . These include a 33. the plants produce ethylene (capacity 800.000 metric tonnes pa). the ‘bad debts’ problem from the stock exchange crashes of the early 1980s was compounded by the widespread looting directed by business associates of the Iraqi regime.000 metric tonnes pa). which were considered socially desirable. a joint venture between PIC (45 per cent shareholding). and the local-quoted Boubyan Petrochemical Company (10 per cent). This project will include a new aromatics plant and a second olefins complex.68 Business Background refinery in Mina al-Ahmadi and converts it into three types of plastic material: homopolymer (clear plastic). Using feedstocks from PIC’s refineries. especially in non-oil industry. These were concentrated in areas such as transport. in order to double its current output of 1 million tonnes of petrochemicals a year. and ethylene glycol (400. random polymer (a strong plastic used for bottles and lids) and high-impact copolymer (used for suitcases and car bumpers. The Corporation will use the original business model – a joint venture with a foreign company coupled with the participation of the local private investors – for the second stage. a commonly used plastic. fisheries and flour mills. when it had to buy up shares to support prices on the local stock exchange. To encourage the sector. KPC is expected to invest US $4 billion on petrochemicals over the seven years to 2010. except that its new alliance with Dow will also allow for joint ventures outside Kuwait. including US $3. which is used to make polyester for fabrics and plastic bottles. on liberation.4 billion on the second stage of the EQUATE Project. in servicing the oil sector and the government through contracts for the supply of materials and services. polyethylene (600. PIC is already involved in joint ventures abroad. etc).000 metric tonnes pa). The olefins plants are owned by EQUATE Petrochemical Company.

and the private sector began to revive. Kuwait’s private sector suffers from a narrow base and a lack of advanced technology. as of yore. But it took more than a decade to build up to the current boom. has been very successful and in the past few years the local stock exchange has become the most active in the Arab world. the government began a privatization programme in 1994. a counter-trade offset programme. create high-skill jobs for Kuwaitis and encourage the inward transfer of advanced knowledgeintensive technologies. After a hiatus of 13 years. Kuwait. In an attempt to turn Kuwait into a regional trading hub. expects to be the import route of choice for the reconstruction of Iraq and to become a regional trading hub in the long term. trade with Iraq is wide open again and the effort to rebuild that country is already creating new millionaires in the transport and construction industries. The government has also been encouraging the participation of the private sector in the development of infrastructure and large state projects through various BOT (build–operate–transfer) and BOOT (build–own–operate–transfer) schemes. Indeed. despite competition from Jordan.000 shareholders in a total of 43 co-ops holding nearly 4 million shares. Kuwaitis and foreigners alike. with its excellent ports and transport facilities. There are more than 200. a free trade zone was established in Shuwaikh six years ago. beginning with many of the companies it bought up during the early 1980s. Another free trade zone has been approved for the northern area of the country. after a somewhat slow start. with the participation of the private sector on a BOT basis and. To widen and diversify the private sector. which. was established in 1992. Kuwaiti nationals (but not foreigners) may become members of their local co-op by buying shares. In 1992 the Central Bank replaced the non-performing loans held by the banks with government bonds.The Economy 69 to local banks were uncollectable. it has become quite successful. To diversify the sector. The consumer cooperative sector Kuwait’s consumer cooperative movement was developed with government encouragement. only shareholders receive a rebate when a co-op’s profit is distributed annually on the basis of their purchases for the year. under which foreign companies signing large supply contracts with government institutions are required to invest in projects beneficial to Kuwait. Though the co-ops sell to all. an individual’s return on his share is limited to 1 per cent. To prevent purchases on a commercial basis. effectively assuming these debts. It enables native consumers to benefit from bulk buying by receiving a rebate on the amounts they spend in their local ‘coop’ supermarket. .

which is controlled by the Central Bank of Kuwait (CB). Expatriates enjoy many of the benefits of the welfare system such as subsidized petrol. The health scheme for expatriates costs KD 50 per person per year (less for dependants) and entitles them to a wide range of medical services. At the same time. generous retirement pensions. The 7 per cent band allows for a smooth evolution of the historic behaviour of the KD. Co-ops are restricted in their freedom to source supplies and some prices are controlled. The linkage was created in order to bring the KD into line with the currencies of the other five member states of the Gulf Cooperative Council. employment. all of which are linked with the dollar. which had fluctuated against the dollar within a 3 per cent band over the previous six years. but since the beginning of 2003 the currency has been linked to the US dollar. the Consumers Cooperative Union. as well as comprehensive support for orphans. . Total sales exceed KD 300 million (US $1 billion) a year. with a margin of fluctuation of plus or minus 3. so that a single GCC currency can be adopted in 2010. the government is strongly pro-business and what Western business eyes see as gross inefficiencies in the Kuwaiti economy are in fact costs imposed by local culture without which the system might not work at all. The CB set the initial rate at 299. electricity and water. Welfarism The state provides its citizens with all-embracing welfare services. There are no restrictions on the movement of currency into and out of Kuwait. was established in 1971 and the movement is tightly supervised. as well as bail-outs when they encounter financial difficulties.63 fils (a fil is a thousandth of a Kuwaiti dollar) per dollar. But they account for a substantial portion of retail consumer sales in Kuwait. For 27 years the official exchange rate was based on a weighted basket of the currencies of countries with substantial trade relations with Kuwait. This welfare system is a reflection of the patterns of interrelated commercial and social responsibilities of the pre-oil era and is in keeping with local Bedouin traditions of paternalism. the elderly and the handicapped. The welfare system extends to the local business community.70 Business Background A governing body.5 per cent. Kuwaiti businessmen receive subsidies. such as housing. free health and educational services at all levels. The currency and exchange rates The national currency is the Kuwaiti dinar (KD).

relatively high-paying but undemanding jobs for life to Kuwaiti citizens in the public sector. have come into effect. . The WB noted that these inefficiencies are due to the state’s policy of using its ‘fiscal dividend’ (surplus oil and investment income) to provide: i. however. The World Bank Report The World Bank (WB) stated that there are two major sources of inefficiency in the Kuwaiti economy: (a) overstaffing in the public sector.3 GBP 525. including the payment of social allowances that were previously only paid to civil servants.5 Exchange rates at 31 December 2003 (per unit of currency) Fils USD 295.5 JYen 002.The Economy 71 Table 1.7 Source: Arab Times Economic problems and inefficiencies Kuwait is one of the richest countries in the world on a per capita basis. and ii. The WB stated that this would encourage Kuwaitis to work in the private sector as those who transferred from the public sector would not suffer a loss in income. and (b) excessive protection and subsidies provided to Kuwaiti businessmen. which has given rise to an inefficient private sector. protected markets. and recommended that this dividend be paid to Kuwaitis who do not work for the government.0 Euro 372. The WB estimated that up to 65 per cent of the salaries paid to Kuwaitis in government employment consist of a fiscal dividend rather than compensation for work done.6. accept that the economy is inherently inefficient. which has resulted in low productivity in the Kuwaiti labour force. subsidies and bail-outs to Kuwaiti businessmen in the private sector. The WB’s recommendation was well received and since 2000 several laws encouraging Kuwaitis to work in the private sector. Most senior Kuwaitis. In 1993 the World Bank submitted a report to the government outlining some of the economy’s structural problems and recommended privatization as part of the remedy.

many of these recommendations are. . signed a Unified Economic Agreement (UEA). and direct foreign investment is now possible in Kuwait. the free movement of labour and capital. and . defence and economic alliance that is moving gradually but cautiously towards a form of federation based on its members’ common cultural roots. Saudi Arabia. the charter is primarily an economic instrument designed to establish a Gulf Common Market. Despite resistance from local entrepreneurs. (e) to allow foreign companies and individuals to conduct business locally on the same basis as Kuwaiti companies or citizens and not require them to engage a Kuwaiti agent. being put into effect. . The GCC Unified Economic Agreement In May 1981 six Arabian Gulf states – Kuwait. (d) to refuse to provide financial incentives for domestic or foreign investment in Kuwait. It urged the government: (a) to refuse to support businesses in financial difficulties. . and (g) to update Kuwait’s business laws to reflect the current size and sophistication of the country’s commercial life. which between them control 45 per cent of the world’s oil reserves. Though its political and security aspects are the most publicly prominent. cooperation in transport. Bahrain. (f) to replace the existing licensing system for new enterprises with a simple system of registration whereby a new business merely informs the government that it is commencing operations but does not need authorization. free trade. utilities and communications. the coordination of economic policies. The idea behind this agreement was to enhance economic ties between GCC states.72 Business Background To improve efficiency in the private sector. Qatar. (c) to refuse to subsidize the operations of private businesses. (b) to allow foreign ownership of companies on the same basis as local ownership. perhaps belatedly. a political. In 1982 its six members. The GCC has its headquarters in Riyadh. the UAE. Oman and Saudi Arabia – signed the charter of the Gulf Cooperation Council (GCC). The UEA’s 28 articles cover: . the WB recommended reforms aimed at creating competitive markets.

When it becomes a reality. Many provisions. Free trade Under the UEA. The transitional period runs from January 2003 to the end of 2005. and (b) the share GCC citizens have in the producing plants is not less than 51%. The GCC states have found it difficult to bridge the wide gaps between their individual tariffs on foreign imports. customs unification will create the biggest consumer market in the region.The Economy 73 The UEA’s provisions were not intended for immediate implementation. which used tariff walls to protect a wide range of fledgling industries. freight and demurrage must be the same as for domestic products. with the exception of 417 items. by which time the GCC customs union is expected to be fully operational. have taken a decade or more to negotiate and are only now becoming a reality. Bahrain. GCC states must allow the free transit of goods across their territory from one member state to another and exempt them from duties and taxes. wanted compensation for reducing its duties. such as common customs tariffs. with imports exceeding US $50 billion a year. During the three-year transitional period the following is expected to be done: . On 1 January 2003 a unified tariff was imposed and all goods. storage. GCC states must allow products originating in the GCC to be imported and exported among themselves duty free and they must accord products from other member states the same treatment as their own products. Charges for porterage. lacking oil and relying heavily on taxes. In addition. once goods (with some exceptions) have cleared customs in any GCC country they are considered to have cleared customs in all GCC countries. and Saudi Arabia. and it is now mandatory that the GCC’s Unified Customs Law be applied in all GCC countries as of that date. provided: (a) the value added from production in the GCC is not less than 40% of final product value. entering a GCC country are now subject to a single duty of 5 per cent. wished to keep duties high on some goods. Common customs tariffs The UEA obliges signatories to establish uniform customs duties on imports from outside the GCC. In late 2002 the Supreme Council of the GCC agreed to begin implementing the customs union as of 1 January 2003. under a One Point Entry concept.

74 Business Background . labour and training. . There is as yet no GCC-wide manpower and training policy. with a mechanism to control goods in transit. In these areas. adoption of mutual recognition of national standards and specifications. establishment of unified customs measures with regard to foodstuffs. . They also have the right to do business in all GCC states and move their capital around the GCC freely. when the KD was linked with the US dollar in . . some achievements have been made. Industrial regulations are being examined with a view to drawing up a common set and many product standards are now common throughout the GCC. . GCC members are also expected to coordinate their financial and monetary policies and the UEA envisaged a common currency in the future. As GGC currencies circulate freely within the GCC and exchange rates are stable. GCC citizens may work and reside in any GCC state. etc. inheritance and bequest. technology. pharmaceuticals and medicines. with full rights of ownership. namely. Coordination of economic policies The UEA requires GCC members to coordinate their policies in virtually all areas of economic activity. They may move freely between member states without the need for visas. Movement of labour and capital Under the UEA. The GCC has been able to unite in negotiations with other economic blocs such as the EU. . But GCC states still compete head-on in new industries. industry. establishment of a mechanism for the collection and distribution of customs revenues among the member states according to the final destination of goods. though its members do not always adopt a common position within OPEC. abolishing the requirement for a permit to move goods from one GCC country to another. and adoption of a unified customs manifest as soon as the online GCCwide customs computer network is functioning. the need for a single currency is not intuitively obvious. abolishing protective tariffs gradually. with a view to achieving eventual economic integration through common development plans and a linking of production facilities. However. such as petrochemicals. oil. commerce. But the GCC states have made progress in unifying their investment regulations and in formulating a joint investment policy. and scant progress has been made in unifying industrial policies so that industries are allocated between the states according to their comparative advantages and local producers are induced to meet the needs of the GCC as a whole.

Table 1. Common standards for mobile telecommunications have been adopted.2 Non-oil 4.5 4. Since then the economy has been expanding gradually.6.2 80. The total value added at current prices in the oil and gas extraction and refining sectors actually declined in absolute terms in 2001 and 2002.450.767.606.0 83.9 81. Gross Domestic Product (GDP) in 1993 (the first ‘normal’ year after the war) was a bit higher than the pre-war GDP all-time high of 1989.4 7.586. roads. Economic performance The economy recovered rapidly from the destruction of the Iraqi occupation in 1990/91.The Economy 75 January 2003.6.1 8.5 Oil Production Refining Import duties Total GDP Sources: CB Economic Report 2002 / CSO Ministry of Planning Oil sectors As illustrated in Table 1.045.5 10. Intra-GCC transport is now exempt from duties and taxes and is accorded the same treatment as local transport. and to coordinate the creation of infrastructure such as seaports.656. Much progress has been made in this area. However. This was due to several factors.737.6 Gross Domestic Product at current market prices KD million 1998 1999 2000 2001 2002 2.6.9 84. sea and air.7 5.355.7 5.6 Total oil 2.035.9 4.0 3.234.5 77.884.495. water and power stations. and telecommunication facilities. the oil sector dominates Kuwait’s GDP.0 708. despite a drop in 2001.0 11.7 5. Coordination in utilities.5 4.836. Kuwait sticks rigorously to its production quota of crude and this has been declining from just under 2m bpd (its nominal quantity) to 1.4 430.6. the relative importance of oil and refined products within total GDP has been declining gently over the last decade.2 5.0 4.356.6 610.75m bpd as OPEC tries to control . airports.960. as can be seen from Table 1.6.9 4.819.7 10.1 501. the stated purpose was to enable a common GCC currency to become a reality by 2010.9 4.405. transport and communications To further joint economic development and integration the UEA obliges GCC states to cooperate in transport by land.965.8 6.543.327.6 374.

3 4.0 0.8 45. were completed).7.8 81.0 10.0 11. was not enough to offset an overall decline in valueadded in the overall oil sector. as well as a change in Municipality regulations allowing an increase in the allowable size of buildings on land parcels.836.2 0.0 100.035. continuing the upward trend displayed since 1993.2 80. the net effect was a reduction in revenues.6. the increase in refinery output in 2002 (which picked up after repairs to Al-Ahmadi refinery.5 0.7 51. coupled with a small (4 per cent) improvement in refined product prices. As it is associated.0 77.76 Business Background prices.4 42. The most significant growth is from the administration and defence.3% Non-oil sectors: Agriculture.450.7).9 5.1 0. damaged by fire in 2000.2 4.8% 100.5 53. and this growth seems to be due to a rise in the population and a reduction in the rate of dependency.7 53. Table 1.767.7 Change +16. the value-added at current prices in the non-oil sectors shows an average 6 per cent a year rise (Table 1.7 0.819.2 46.6.6.0% +27. Non-oil sectors In the five years to 2002.6% +2.045. All the more important main non-oil sectors. Though prices in 2001 and 2002 rose slightly.4 47. the volume of natural gas produced by the country has declined in tandem with its output of crude.4 .5 100. followed by the wholesale and retail trade and the hotels and restaurants sector.7 83. have made gains over the years up to 2002.960.8 Import duties Total GDP 8.5 48. More generous credit facilities at local banks contributed to the overall expansion of the non-oil sectors. livestock & fishing 39.7 Gross Domestic Product (GDP) by economic activity KD million at current prices 1999 GDP 2000 % GDP 2001 % GDP 2002 % GDP % Oil sector 4.9 54.4 6.234.0 0.884.1 5.5 100. The increase in the real estate sector in 2002 may be attributed to a rise in the returns on investment real estate compared to the interest earned on deposits in local banks and the receipt of compensation monies arising from the invasion by Iraq in 1990. as can be seen from the broad breakdown in the lower part of Table 1.9 47. with a consequent positive change in consumption patterns.356. education and healthcare sectors.737.9 0.0 10.495. Indeed.4 0.0 Non-oil 4.9 77.2 45.7 5.

767.4 5.2 75.6 2.3 Financial institutions 555.3 277.7 0.4 284.8 6.4 47.6 6.5 299.2 1.2 249.9 747.5 2.0 2.6 Personal & household services 244.4 4.6 0.2 11.7 53.3 604.7 9. Source: CB Economic Report 2002 / CSO Ministry of Planning .0 0.3 0.8 676. gas & water Insurance Real estate Notes: Electricity.3 10. hotels & restaurants 692.2 5.007.9 5.2 0.0 7475.5 3.0 307.0 2.The Economy 77 Table 1.2 635.3 2.9 0.2 2.7 51.9 6.8 263.2 16.2 666.7 2. storage & communications 451.5 2.2 250.3 6.5 Construction 239.9 6.7 2.3 5.8 0.4 51.6 74.3 563.2 7.6 6.2 255.5 Total non-oil 4.6 1.1 675.1 8.5 6.0 2.0 2.5 605.5 552.9 54.7 5.3 640.6 2.5 235.7 0.8 6.1 5.108.450.4 2.6 0.9 665.6 292.8 2.4 43.1 246.8 764.4 17.3 700.0 0.234.1 Transport.3 Healthcare 220.4 687.3 2.7 Other services 244.2 12.6.2 Manufacturing (excl refining) Electricity.3 2.6 Imputed bank service charges 7442.5 Business services 39.1 506.3 676.0 0.3 74.7 251.4 258. gas and water is a negative figure in 1999 because (as in prior years) the value added was calculated by the CSO at the Ministry of Planning on the basis of the net revenues derived from the sale of services (ie these services are sold below cost).1 15.3 2.2 5.7 248.8 0.3 276.0 74.0 712.8 306.7 0.7 5.1 2.7 (cont’d) KD million at current prices 1999 GDP Mining & quarrying 2000 % GDP 2001 % GDP 2002 % GDP % 0.008.7 7487.9 7.2 70.8 2.5 7.7 6.3 Education 575.5 245.4 Wholesale & retail trade.0 0.6 289.9 6.819.2 7489.7 2.2 2. These figures are positive for 2000 to 2002 because the basis of calculating value added has been altered – it is now based on the cost of production.5 0.6 2.9 5.2 46.5 Public administration & defence 993.4 276.9 1.

521.4 of which Government 2.0 7.0 11. this expansion is becoming more driven by internal demand (final consumption plus gross capital formation less imports).0 5.0 Resource surplus Total GDP 3.5 9.803. whereas the demand for exports was once the main impetus for the expansion of GDP. shown in Table 1.0 5.443.356.4 2.8 also indicates that within GDP there has been a recent shift away from investment in favour of consumption (led by the private sector).5 8. In 2002 there was also a remarkable increase in imports of goods and services. A significant portion of that rise reflects an increase in the value of merchandise imports during the latter half of 2002 as the military force to invade Iraq was building up.310.184.838. are shown in Table 1. implies that.0 Imports 3.78 Business Background Expenditure on GDP The broad analysis of expenditure on GDP.687.986.485.6.0 1.250.737.1 8.0 979.8 Expenditure on Gross Domestic Product.7 10.488.957.1 5. KD million at current prices Type of expenditure Final consumption 2000 2001 2002 7. Gross National Product Developments in Kuwait’s Gross National Product (GNP). which represents the sum of GDP plus net-factor income received from abroad.7 910.046. It seems that the well-being of the economy is beginning to depend less firmly on the external demand for oil than of yore.6.8. Table 1.7 8.0 934.534.490.377.824.6.2 2.803.808.898.0 4.9.8 5.495.2 Private 4.5 10.5 Exports 6.6.0 3.5 Source: CB Economic Report 2002 / CSO Ministry of Planning Table 1.2 Gross capital formation Expenditure by residents 867. .

287.4 Net savings 2.6 450.1 13.5 10.0 1.969.6.9 399.9 10. The government’s actual revenues and expenditures do not normally compare well with budgets.0 4.579.012.0 10.5 8.8 4. KD million at current prices Item 1999 2000 2001 2002 GDP 8.7 10.6 491.000.6 3.0 Disposable national income 9.7 720.0 1.The Economy 79 Table 1. .055.8 468. This reduction in NDI.9 11.6. as can be seen in Table 1.282. which affected the net income received on Kuwaiti assets held abroad.541. But it is unlikely that Kuwait will become a debtor nation soon.7 1.7 11.0 2.555.1 Final consumption expenditure 6.0 7652.998.503.501.825.356.4 1.1 418.9 National accounts – principal aggregates – at current prices. Except for the early 1990s.044. The increase in net current transfers over the three years to the end of 2002 reflects a continuing increase in the expatriate population.0 7637.0 7.0 GNP Depreciation of fixed capital Net capital formation Surplus from current transactions Source: CB Economic Report 2002 / CSO Ministry of Planning The decline of GNP in 2001 and 2002 reflects a decline in the returns on international financial markets during those years.953.439.553.6 10.5 11.4 528.0 7600. coupled with a rise in final consumption and net capital formation.495.10.3 7.0 1.0 2.1 12.6 11. Public finance and budgeting The fiscal year in Kuwait runs from 1 April to 31 March. Kuwait has never had to resort to deficit financing.215.261.411.898.942. is causing a decline in the surplus from current transactions with the outside world.810.443. which shows the budget and actual outturn in public finances for 2001/02. the immediate post-invasion period. and a predicted deficit has always ended up as an actual surplus.1 Net current transfers 7610. which in turn is leading to a reduction in national disposable income (NDI).412.0 13. and in recent years revenues have always exceeded budgeted expectations.0 11.4 National income at market prices 9.5 613.635.737.884. This is mainly because oil revenues are difficult to predict.737.824.5 Net factor income received from abroad 1.

7 747.8 1. Kuwait Ports Authority.882.3 Gross surplus / deficit 71.2 3.0 150. ‘Service revenues’ refers to the charges the government collects for inter alia healthcare and the provision of utilities.1 1.032.5 35.525.4 713.9 24.3 7. or the surpluses generated by selffinancing public corporations.3 +203.4 5.0 0.5 +39.6 710. .471.1 2.5 Goods & services 565.2 4.2 104.266.0 1.274.0 43.2 406.505.0 6.8 811.6 27.10 Government budget – 2001/02.8 2.1 0.3 4.2 719.7 730. such as the Savings & Credit Bank.825.6 15.6 +590.0 15.5 14.746.5 10.8 +240.4 Miscellaneous 121.1 7235.5 737. Kuwait Airways.831. All figures in KD million Item Budgeted value % Actual value % Difference value % Public revenues Oil revenues 3. as some but not all of these entities make handsome profits.7 100.0 0.7 545.4 88.1 583.4 75.0 40.3 Non-oil revenues Taxes.1 UN compensation Total non-oil Total revenues Public expenditures Transport.0 8.8 3. fees & duties Service revenues 337.0 533.2 78.4 2.6 7176.3 11.80 Business Background Table 1.3 Miscellaneous & transfer payments 2.9 10.7 10.2 ‘Oil revenues’ refers to the value of crude oil and petroleum gas sold by the government to KPC under a formula related to world oil prices.557.0 138. The budgeted revenues do not include income from overseas investments.263.5 73.336.6 +56.299.2 22.0 267.1 39.0 66.5 1.7 109.3 0.534.1 42.6 +1. etc.0 38.5 100. equipment & supplies Development projects & public acquisitions Net surplus / deficit Transfer to RFFG 383. a serious understatement.0 268.0 14.0 84.262.1 2.3 Wages & salaries 1.9 731.6.3 Total expenditures 5.8 329.0 72.5 710.6 785.0 85.0 5.6 1.442.8 109. while UN compensation refers to monies received to compensate for damages inflicted by Iraq in 1990/91.7 568.9 7527.2 0. dividends from KPC.1 +2.0 79.0 716.0 71.2 243.

282 5.11.273 349 364 397 389 410 Imports fob 2. the Municipality.819 2.357 5.11 for 2002 to total GDP at current prices for that year (Table 1.683 2.6.975 4.6.30 1.996 2. The funds are invested overseas. Foreign trade Kuwait usually enjoys a very favourable balance of trade. as can be seen from Table 1. Source: CB Economic Report 2002 / DalCais Consultants Kuwait has positive trade balances with most of Asia and Europe. by law. Kuwait University and the Fire Brigade.954 7.230 Trade ratio 1.6. and has negative balances with other GCC states and American countries. Figures for 2002 are provisional. 10 per cent of total revenues. .591 4. which is.980 4.161 2.82 3.763 7.582 3. Comparing the figure for total trade in Table 1. The rather wide swings from year to year in the trade ratio are mainly caused by fluctuations in the world price of oil and in Kuwait’s OPEC quota.11 Balance of merchandise trade KD million 1998 1999 2000 2001 2002 Exports & re-exports fob 2.578 4.141 7.721 5.931 3.91 of which: Oil Non-oil Note: fob = Free on board.25 1. budgets are divided into five chapters. and public authorities such as the Public Authority for Housing Care and many more.6) suggests that the total contribution of foreign trade to domestic economic activity is just less than 67 per cent.453 Total trade 5. Table 1. The large amounts shown under Miscellaneous & transfer payments refer to transfers to the Ministry of Finance to finance the activities of various institutions such as the National Assembly.979 2.6. Kuwait’s National Assembly must be one of the bestvalue-for-money parliaments in the world. At only KD 15m a year all found.351 2. This reserve is to provide for the distant future when the oil runs out.679 3. which seems to be on a par with most of the smaller countries in the developed world. where it sells much of its hydrocarbons.02 2.042 1.The Economy 81 On the expenditure side. The government’s budget always includes a transfer to a Reserve Fund for Future Generations (RFFG).136 Trade balance 580 1.

6.4 8.5 3.0 10.195. just a few percentage points below 50 each year. Tunisia.5 89.8 Germany 178.12.7 95. Source: CB Economic Report 2002 / CSO.3 100.8 3. A league table of countries that export to Kuwait.0 2.1 1.6 120.3 5.2 86.9 285.8 3. countries that had tilted towards Iraq during its aggression against Kuwait.6.0 145.1 5.6 246.4 7.8 90.0 9.0 India 82.0 5.0 3.413.0 3.3 10. .4 100.0 2.1 238. Algeria.1 9.5 France 70. cars about 14 per cent. a boycott that had only been erratically enforced.9 38.3 China 85.82 Business Background Imports of merchandise Kuwait imports nearly all its physical needs from a vast range of countries.3 849.5 4.720.7 901.9 255.0 3.7 9. France about a third.0 37.5 167.6.5 Japan 214. Min of Planning Imports overall are increasing each year and consumer goods are Kuwait’s favourite imports.008.0 6.6 86. insurance and freight).3 5.5 3.6 94.0 156. and against Jordan.9 159. The UK sells only about half the annual value each of these countries sells individually.8 230.0 5.4 137.9 10.7 3.1 Italy 117. shown in Table 1.12 Imports ranked by country of origin KD million 2000 Value 2001 % Value 2002 % Value % USA 239.0 5.8 UK 123. the Yemen.0 6. as can be seen in Table 1. indicates that the top-ranking countries selling to Kuwait are the United States.6 295. Table 1.2 3.0 Saudi Arabia 154.13.0 10.1 2. Kuwait has removed the trade embargos it imposed against Iraq.8 3.7 37. Sudan and Mauritania. The secondary boycott against Israel has been relaxed and now only goods actually made in Israel are treated as contraband.3 141.0 All others Total imports Note: All figures are CIF (cost.0 100.0 5.9 105. A breakdown of these figures (not shown here) indicates that food and beverages comprise about 13 per cent of Kuwait’s total annual imports.5 UAE 79.8 9. Germany and Japan.

Source: CB Economic Report 2002 / CSO Ministry of Planning Around 60 per cent of imports by merchants in the private sector are paid for in US dollars. as shown in Table 1.4 13.0 0.1 17.1 0.5 per cent in sterling and less than half a per cent in Swiss francs.149.4 15.6. refined petroleum products and liquefied petroleum gas.0 100. Exports of merchandise Kuwait’s exports are dominated by crude oil. A breakdown of these non-oil exports.0 378.2 371.5 91.6 36.2 36.6.3 27.0 0.6 4.3 100.11.6.4 0.0 4.8 3.2 46.0 Unclassified Total imports Note: All value figures are CIF (cost.3 364.026.7 1.0 2.1 2.1 419.5 18.0 36.3 91. is shown in Table 1.6.6 1. These exports have been rising more or less consistently over recent years.0 Total non-oil exports 384.0 1. Table 1. Kuwait also exports non-oil products and these generate between 8 and 10 per cent of its export annual revenues.14.13 Merchandise imports – basic classification KD million 2000 Value Consumer goods 2001 % Value 2002 % Value % 1.2 981.2 47.0 406.The Economy 83 Table 1.0 1.9 100.8 13.7 1.1 30.0 2.720.1 0.0 47.290.4 345.413.2 4.4 100. about 1.195. The remainder of these imports is paid for in a variety of currencies.14 Value of non-oil exports by commodity groups KD million 2000 Value 2001 % Value 2002 % Value % Food & beverages 15.5 100. the prices of which are inherently unstable.4 Raw materials 14.3 3. which are dominated by manufactured goods.0 3.0 Petroleum coke Unclassified Source: CB Economic Report 2002 / CSO Ministry of Planning .7 3.8 Manufactured goods 351.4 100. insurance and freight).5 3. while just under 10 per cent are paid for in euros.3 15.0 15.7 872.5 91.8 3.3 0.4 28.1 0.4 Intermediate goods 805.0 0.2 0.1 Capital goods 335.

fertilizers. plastics. in downtown Kuwait City. Ethylene products make up about 50 per cent of total non-oil exports.84 Business Background The major locally produced non-oil exports include building materials. as well as food and beverages. Kuwait’s small regional re-export trade suffered from the closure of the Iraqi border and competition from rival ports such as Jubayl and Dammam. glass and metal products. making the KSE the second largest stock market in the Arab world after that of Saudi Arabia. grouped in nine sectors.15). Table 1. But as the drive to rebuild Iraq is taking off. including paper products. The private . Kuwait’s ports are clogged with merchandise. and especially petrochemical products. steel structures.6.15 Sector breakdown of the Kuwait Stock Exchange (late 2003) Sectors Banking Investment Insurance Number of companies 8 28 4 Real estate 16 Industrials 20 Services 17 Food Non-Kuwaiti Mutual funds Total 4 11 5 113 Source: Stock exchange The official KSE general price index is a weighted average of all listed shares and is published at the close of business each day. when total market capitalization was about KD 20 billion (US $60 billion). were listed in late 2003 (see Table 1. There are private trading rooms overlooking the main floor for lady investors. But Kuwait also exports a range of locally manufactured goods to other GCC countries. Re-exports to GCC countries consist mainly of machinery and transport equipment. These exports mainly go to developing countries. prefabricated buildings. One hundred and thirteen companies. equipped with the latest technology for displaying prices and recording deals. wood. steel pipes. This re-export boom is likely to continue in the medium term.6. The Kuwait Stock Exchange The Kuwait Stock Exchange (KSE) is located in an impressive building.

Indeed. research.000 (US $3.000.000 for mutual funds. 5-year historical information.where the deal exceeds KD 50.000 traded are KD 1/250. the KSE is one of the most exciting exchanges in the world and it is open to foreign punters. the NYSE and AMEX. To open a brokerage account only requires a minimum of KD 1. through registered brokers. Commissions for each KD 1. electronic trading and real-time settlement and clearing on the KSE and on US markets such as NASDAQ. Listing and trading To be listed on the KSE. from Saturdays to Wednesdays inclusive. who may invest . Costs are US $18 per transaction for US markets and KD 2/500 for the KSE. Annual membership fees are 0. published by Al-Shall Consultants in their Weekly Economic Report. The introduction of electronic trading is expected to turn the KSE into a regional stock exchange. only includes major companies and gives more weight to companies with a higher market capitalization. (d) it must have realized operating profits in the financial year prior to listing.75 per cent of paid-up capital to a maximum of KD 7.000) and the account can be maintained in Kuwaiti dinar or US dollars. The KSE includes a futures market. a company must fulfil several conditions: (a) its capital must not be less than KD 2 million (or the equivalent in foreign currency). 6.000. (c) it must have already issued three annual balance sheets. These offer realtime market data in both Arabic and English. online trading in the KSE was introduced by KMEFIC (Kuwait & Middle East Investment Company) and by the end of the year 2.000.500. Listing fees are KD 10.000 for shareholding companies and KD 5. with a minimum of KD 2.000 punters were trading 6 per cent of the daily volume at the KSE through the company’s Internet facilities. Trading takes place in the chamber. reserves and retained earnings) must not be less than KD 3m. In February 2003. and (e) its average operating profit over the two years prior to listing must be at least 5% of its paid-up capital. or KD 1/. Clearing takes one day and settlements are made twice a week. (b) its total equity (capital. 9 and 12 months. 3. There are nine market makers in futures.The Economy 85 Al-Shall index. on Saturdays and Tuesdays. with five forward dealing positions: 1. Brokers are required to post a bank guarantee of KD 100. which for small volumes is a bit more expensive than the voice market on the KSE.

2. strong oil prices and full state coffers. and the expanding activities of investment portfolios. perhaps in the whole world. The fact that. Analysts think that about 40 per cent of trading in 2003 was speculative. The doubling of average prices in 2003.86 Business Background on the same basis as Kuwaitis. driven by better-than-forecast year-end corporate results.3 billion in 2001.000s. the most active year since 1992. an increase in bank credit available for trading. up 158 per cent on 2002. Annual turnover topped KD 15 billion (more than 150 per cent of GDP!). At the end of 1996 the market index. the success of the state’s privatization programme. In 1996 the Exchange experienced record activity levels due to several factors. while the general index went up by over 100 per cent during the year. including growth in corporate profits. the execution of promising investment projects by listed companies. Then in 2001 it went up nearly 27 per cent and in 2002 it rose 39 per cent. the Al-Shall index only rose by just 60 per cent.000. ie developments in Iraq.000 and was still heading up at the time of writing. following the Iraqi invasion. the KSE index rose by a whopping 250 per cent. the index climbed into the high 2. over the three years to the end of 2003. the listing of new companies on the market. the KSE began to take off in the second half of 1995 when the government’s privatization programme went into full swing.000. But with a downturn in oil prices it began to fall and during 1998 the index dropped 40 per cent and ended up well below 2. During 2003 the liquidity level of the KSE was the highest in the Arab world. suggests that the money was chasing the smaller and newer companies. It is obvious that a correction is overdue. because of the sluggish world economy. Performance After a slow start when it reopened in 1992. Average daily trading was KD 67m.375.790. and about five times the average in 2001. other than local real estate. the highest gains in the world. PE ratios were quite low by international standards and in 1997. For the next two years the index wobbled along. 101. These were due to the fact that many listed companies had signed major infrastructural deals in 2003 with either the CPA (Coalition Provisional Authority) or the interim Iraqi leadership.7 per cent higher than the 2. both through the Exchange itself and online. Indeed. without restriction. And on the close of trading in 2003 it was at 4. the base of which was set at 1. This writer feels that this will begin during the second quarter of 2004. In early 2004 the index surpassed 5. was due to very positive political and economic factors.000 on 29 December 1993. low interest rates. as well as a lack of alternative investment channels.3 it had reached at the start of that year. was heading towards 2. compared to KD 6. just as this book goes .6 billion in 2002 and less than KD 3.

are likely to be a continuing source of business opportunities in Kuwait for several years to come. The government’s oil revenues grew by 12 per cent during the first nine months of 2003. During the fiscal year 2002/03 the government’s capital spending on development and maintenance projects increased by 13. The surge began in mid-2002 when President Bush announced that it was time for regime change in Iraq. transport. This growth of public revenues allowed the government to pursue an expansionary fiscal policy. purveyors and caterers got busy. and this sector also has an ambitious capital expenditure plan (see page 66). The rapid fall of Saddam’s regime in April 2003 removed a psychological cloud that had been hanging over Kuwait for more than a decade and. communications and healthcare all experienced accelerated activity during 2003. despite an increase in overseas investments due to a recovery in the world’s capital markets. along with low interest rates and excess liquidity in the banking system. as well as improved income from overseas investments due to an increase in corporate profits internationally. Foreign companies eager to do business in Iraq began using Kuwait as a base or transit point. white goods for the new military camps. This increased optimism. wholesale and retail trade. Non-oil revenues were boosted by higher custom duties and tax revenues. real estate and business services. gaining momentum on the back of higher government and consumer spending and Iraq-related business. coupled with the resumption of commercial relations with Iraq. which also boosted demand for local goods and services. Capital spending in the oil industry is outside the state budget. Perhaps September 2004 would be the time to open an online trading account with KMEFIC. and higher UN compensation payments for losses due to the Iraqi invasion in 1990. as Coalition forces began setting up their invasion base in Kuwait.The Economy 87 to press. storage. boosted business confidence immensely. and that the slide will be steep and lengthy. when the price of Kuwait export crude averaged US $27 a barrel (14 per cent higher than 2002) and the amount of oil extracted rose by 19 per cent. local suppliers of vehicles. The upward trend of the KSE strengthened and.5 per cent. both inside and outside the oil industry. Major infrastructural projects. implementation has been spurred by the inefficiencies revealed when the industry’s production capacity was tested to the limit in spring 2003 during the war in Iraq. led to improved activity and prices in the stock market and real estate sector. Take-off time The Year of Grace 2003 was the first genuine boom year in Kuwait for two decades. Iraq-related business is expected to . manufacturing. In the private sector.

The boom in business with. making for a recovery that is feeding itself. following a 12 per cent increase in 2002. which was helped by a rapid expansion in consumer loans (up 14 per cent overall). may have been partly due to Iraq-related business but much of it was probably due to increased expenditures on private consumption. The stimulus to the private sector provided by UN compensation payments was much reduced in 2003 as these dropped more than 50 per cent compared to 2002 and 2001. in or through Kuwait looks likely to continue for several years to come. An increase in imports in 2003 of 24 per cent. as well as a fastergrowing population (due to increased demand for expatriate labour to service the boom). Increased employment in both the public and the private sectors led to higher household spending. This stimulus is expected to be almost negligible in future years as the percentage of Iraqi oil revenues set aside to pay compensation has been reduced from 25 to 5 per cent. .88 Business Background be a bigger boon to business once security problems in Iraq are resolved and reconstruction gets into full swing.

Part Two Business Laws .

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was the 114th resolution issued by that ministry in 1996. in the writer’s opinion. Law 68/1980. . Ministry of Social Affairs & Labour MR 114/1996. Rather than relying on the material in this section. the Commercial Code.Introduction: The Regulatory Framework for Business Doing business with Kuwait is subject to a regulatory framework of laws. seek legal advice. When in doubt. Amiri decrees and ministerial resolutions.com. As in most economies. Caveat . seek legal opinion. Many important topics have undoubtedly been omitted and the writer’s choice may not accord with the preferences or needs of readers. Those who disagree with this choice or who wish other topics to be covered in later editions are invited to communicate with the writer by e-mail to paulkpg@hotmail. Yet it is a burden. . the regulatory burden in Kuwait is no more onerous than elsewhere in the world. When not in doubt. businesspersons experiencing local difficulties should seek legal advice urgently. Ministerial resolutions are similarly classified under the name of the ministry that issued the regulations. owing to restrictions of space. For instance. for the writer as much as the businessperson. The reader should be advised that the writer is not a qualified lawyer. the volume of regulations seems to be expanding at an ever-increasing rate. and. for example. Despite impressions to the contrary. Legal opinion should always be sought before signing major contracts or commitments. are most likely to affect those doing business in or with the country are discussed here. only the basic laws and regulations that. These laws and Amiri decrees are neatly classified by number and the year in which they were issued. was the 68th law promulgated in 1980.

.

. similar to West European practice. non-GCC nationals may not. The rules of commerce in Kuwait are. In the past few years the above general rules have been modified to enable Kuwait to join the WTO (World Trade Organization). are: . as a general rule (art 23(1) of the Commercial Code). investment houses and insurance companies). However.2. The Commercial Code (Law 68 of 1980). And foreigners may invest directly on the Kuwait Stock Exchange. which have been amended several times since they were first issued. The new FDI (foreign direct investment) law allows wholly foreign owned businesses to be established in Kuwait. . carry on a trade in Kuwait unless they have one or more Kuwaiti partners and the capital owned by the Kuwaiti partner(s) in the joint business is not less than 51 per cent of the total capital (60 per cent in the case of financial institutions such as banks. in general. The Commercial Companies Law (Law 15 of 1960). in Shuwaikh. Foreigners (non-GCC nationals) may now establish businesses in the Free Trade Zone. . In addition. foreign individuals and corporations may not acquire commercial licences in their own name. And a foreign company (including a partnership) may not set up a branch in Kuwait and may not perform any business activities in the country except through a Kuwaiti agent (part 24 of the Commercial Code). nor may they own real estate in Kuwait. and retain 100 per cent ownership of their businesses.1 The Rules of Commerce The three main laws regulating business in Kuwait. The right to carry on business Any Kuwaiti or GCC national over 21 years of age may carry on commercial activities in Kuwait provided he or she is not affected by any personal restrictions (such as bankruptcy) or by the nature of the transactions undertaken (such as dealing in contraband). rather than being restricted to mutual funds as of yore. The Civil Code (Law 67 of 1980).

But only damages that could have been anticipated at the time the contract was concluded may be claimed. Commercial contracts The rules governing contracts are contained in the Civil Code and are similar to the rules found in European contract laws. the official gazette. contracting. normally every two years. This registration must be renewed each year. Where a party to a commercial contract is in breach of his or her obligations. Before opening for business. the aggrieved party must show that his or her losses were the ‘natural result’ of a failure or delay by the other party in carrying out his or her obligations. in some cases. If unforeseen exceptional circumstances arise that make it exceedingly difficult (but not impossible) for one party to comply with the terms of a contract without incurring a substantial loss. a trader must register in the Commercial Registry at the MCI and with the Kuwait Chamber of Commerce & Industry (KCCI). An applicant must show that business funds are available and that premises have been acquired. a business licence is necessary. such as the MCI. specific licences are required and these are often issued by the ministry that controls a particular activity. All licences require periodic renewal.94 Business Laws Business licences To do business in Kuwait. Where a manager with the power to sign on behalf of the firm is appointed. to GCC nationals and companies. the manager must be registered with the MCI if his or her signature is to be enforceable at law. Business licences are only issued to Kuwaiti nationals and Kuwaiti companies and. Though parties must carry out their side of a bargain according to the express terms of the contract. and. they must do so in a way that meets the requirements for ‘good faith and honourable dealing’. the commercial court may vary the obligations of the parties after taking their respective interests into account. and publication in Al-Kuwait Al-Youm. Costs are usually KD 100 per licence. Registration Most commercial activities require registration with some authoritative body. the other party can claim his or her actual damages and loss of profits. eg a publishing licence is obtained from the Ministry of Information. importing and industrial licences are obtained from the Ministry of Commerce & Industry (MCI). to be successful in court. For many particular commercial activities. . General trading.

The best way to make notification of a claim for business debts is by registered letter with receipt (recorded delivery) to be returned to sender. Where a loan is for a fixed period. as there is no guarantee that an attempt to cash it earlier than its date will not be made. Never write a post-dated cheque. a creditor does not have to prove that he or she suffered a loss as a result of the delay. plant . A person who issues a ‘bounced’ cheque is usually incarcerated until the cheque is paid.The Rules of Commerce 95 Hints for entrepreneurs A non-Kuwaiti manager cannot be empowered to sign certain documents. Where a contract is discovered or legally declared to be void. but if it is for less than one year. Simple interest may be charged on a commercial loan but compound interest is not allowed. These are divided into tangible elements such as fixtures and fittings. even where one party or both parties have partially or wholly carried out their obligations under the contract. then both parties must be restored to the position they were in before they began implementing the contract. A creditor may claim interest where the debt is an amount of money that was known when the contract was concluded and the debtor delays payment. The settlement of business debts may only be claimed during business hours. such as applications for visas and residencies. and less in some cases. The statutory rate of interest is 7 per cent pa. the creditor does not have to accept settlement before the repayment date unless the debtor pays the interest for the remainder of the period. interest is payable at the end of the year. interest is payable when the loan matures. if a loan is one year or more. To enforce his or her right to interest. The parties may agree on another rate but it cannot exceed the rate announced by the Central Bank from time to time. Commercial loans and interest A loan is a commercial loan if the money borrowed is used for business purposes. a business consists of a number of elements. Business elements and ownership rights Under Kuwaiti law. Business debts The time limit for claiming a commercial obligation is 10 years from the date the obligation matured. Unless otherwise agreed.

When a business is sold or pledged. and inventory. . ie using a formal notarized document. however. . The gaols of Kuwait are full of persons who issued dishonoured cheques. a cheque cannot be stopped. Once issued. eg Articles 61 to 85 of the Code detail the rights of the owner of a trademark. the contract must list the various elements that are being sold or pledged. The rules relating to cheques. punishable by up to seven years’ imprisonment. . bills of exchange and promissory notes. where the offender withdraws money from his or her account so that the funds left in the account are insufficient to meet the cheque. A cheque is payable at sight regardless of the date on it. .96 Business Laws and machinery. patents. ie a postdated cheque may be presented for payment before its date. . and intangible elements such as trademarks. . An action on account of a dishonoured cheque must be started within six months of the time limit for presentation. The National Assembly voted unanimously on 11 November 2003 to reduce the offence of issuing such a cheque from a felony to a misdemeanour and to reduce the period of incarceration to a maximum of three years with or without a fine of KD 300/. Ownership rights in these elements are governed by various provisions of the Commercial Code. and the contract must be registered in the Commercial Register at the MCI. The time-limit for presenting a cheque written in Kuwait is one month. Commercial papers The detailed regulations governing banking and commercial papers. where the offender issues a cheque without sufficient funds in his or her account. Both the sale and pledge of business can only be done under deed. beginning with the tangible elements. after which it becomes ‘stale’. such as letters of credit and guarantees.for cheques that are issued in the following circumstances: . are similar to European and North American practice. are unique. A person who writes a cheque without sufficient funds in his or her bank account commits a criminal offence. licences and receivables. Cheques The following regulatory peculiarities should be noted: .

The draft law states that an action on account of a dishonoured cheque must be started within four months of the date it was issued where the cheque was issued locally. The new law is expected to be promulgated in 2004. 97 where the offender gives an order to prevent the recipient from cashing the cheque (stop-payment order).The Rules of Commerce . or within six months of that date where the cheque was issued abroad but is payable in Kuwait. . or where the offender issues a cheque and signs it in a way that prevents payment. .

. Joint ventures A joint venture is a commercial association formed by two or more natural persons or corporations. Each venturer conducts business in his or her own name and is alone liable to a third party. The partnership agreement must be in writing. . in essence. merely a contractual arrangement between the parties involved and. Each partner is liable for the debts of the firm to the full extent of his or her . establishing a joint venture does not create a separate legal entity. though a third party. unlike in the case of the entities discussed below. general partnerships. a Kuwaiti national must stand surety for him or her. . Kuwait shareholding companies. except for businesses in the Free Trade Zone or those that are established under the FDI (Foreign Direct Investment) law and regulations. joint ventures. If a venturer dealing with a third party is not a Kuwaiti.2. How profits and losses are to be shared and the other rights and obligations of the venturers between themselves are defined in the joint venture agreement. can hold the venturers to their agreement as an association where they have transacted with him or her as such. of which the most relevant to expatriate corporations and entrepreneurs are: . companies with limited liability. which need not be entered in the commercial register at the MCI. however. The extent to which expatriate individuals and corporations may participate in these entities is restricted. It is.2 Business Entities Business entities in Kuwait may take one of several forms. General partnerships A general partnership is a relationship formed under a specific name by two or more natural persons for the purpose of carrying on a commercial business together.

A KSC’s capital may be increased once its shares are fully paid and may be reduced where it has incurred losses or its capital exceeds its requirements. The essential difference is that a closed KSC may not offer its shares for public subscription when it is being founded. Both natural persons and corporations may be shareholders or ‘partners’. nor may it issue shares or bonds that are freely transferable. or 3 where two of the partners are a married couple. Shareholders may be natural persons or corporate bodies. Companies with limited liability A company with limited liability (WLL) is the equivalent of a French SARL or a German GmbH. ie bearer shares are not allowed. The transfer of shares in a WLL is subject to the partners’ right of preemption. The maximum number of partners is 30 and the minimum is 2. A WLL may engage in all commercial activities except banking. It consists of a number of persons whose liability for the firm’s debts is limited to their share in the capital. A WLL’s capital must be divided into shares that are equal in value.500 and the value of a single share may not be less than KD 37/500. and a partner may not transfer his or her share to a third party without the consent of all the other partners unless this is allowed under the partnership agreement. A WLL may not raise capital or borrow money through public subscription.500 for a closed KSC. Kuwait shareholding company A Kuwait shareholding company (KSC) consists of a number of persons who own transferable shares in the company and whose liability for the firm’s debts is limited to the nominal value of their shares.Business Entities 99 personal assets. Shares are freely transferable but they must be registered. though it may later apply for a listing on the Kuwait Stock Exchange (KSE). . insurance and investing funds on behalf of third parties. are not sub-divisible and that bestow equal rights on their holders. ie if a partner wishes to sell his or her share to a third party he or she must notify the other partners of the price offered and these partners have one month in which they may buy the shares at that price in priority to the third party. The capital must be divided into shares of a fixed equal nominal value between KD 1 and KD 75. There are two types of KSC: ‘open’ and ‘closed’. but the capital must be adequate for the purposes of the company. A KSC is similar to a British plc or French SA. The minimum capital requirement is KD 37.500 for an open KSC and KD 7. The minimum capital is KD 7. Its duration is limited to 25 years.

the total capital and the amount to be contributed by each partner. the location of its registered office. the ratio in which profits and losses are to be shared. Forming a company is expensive and time-consuming. . . Shares of different classes (such as preference shares or non-voting shares) may not be issued. Any amendments to the articles must be agreed unanimously by the partners and must be registered at the MCI. to a share in the assets of the company on liquidation and to participate in the management of the company. The rights of shareholders may only be waived by the consent of all the shareholders in writing or by a unanimous vote in which all the shareholders participate. the partnership’s name and trade name (if any). however. . articles of association must be signed by all the partners and notarized at the Ministry of Justice. . Joint venture To form a joint venture only a simple contract between the parties is required. and . the duration of the partnership. The articles must state: . the purpose for which the firm is being established. Forming a business entity The formalities required in order to set up a business in Kuwait vary depending on the business entity chosen. as must any changes in partners. It takes about a month to establish a partnership and costs between KD 500 and KD 1. Once its share capital is fully paid.100 Business Laws The shareholders of a KSC must enjoy equal rights to dividends. a KSC may raise finance by issuing transferable bonds through public subscription. the names and surnames of the partners.000. The partnership must be registered in the commercial register at the MCI and a partnership agreement is not effective against third parties until this has been done. Partnership To form a partnership. The loan must be secured on the firm’s assets and the bonds must grant holders the right to receive interest at a specific rate on fixed dates. . .

the names of the directors who are to manage the company and the members of the supervisory board (see below) must be included. articles of association must be drawn up in the form laid down by the MCI.500. Once the MCI has agreed to incorporation. the founders (who must subscribe to all the shares) must issue a notarized instrument in the format prescribed by the MCI.Business Entities 101 Company with limited liability To form a WLL. The founders must publish the invitation to subscribe in the official gazette in the form of a prospectus that includes a re´sume´ of the memorandum and articles as well as full details of the subscription procedures. the founders must hold a constituent assembly among themselves. then the founders (who must subscribe to 10 per cent of the share capital) offer shares to the public. Kuwait shareholding company To form a KSC. . . Setting up a WLL takes about six weeks once the paperwork is in order and costs about KD 1. appoint the first auditors and proclaim the establishment of the company. The particulars that must be stated in the articles are similar to those required for a partnership. and finally its members hold a constituent general assembly. The purpose of the constituent general assembly. There are three steps in the establishment of an open KSC: . To incorporate a closed KSC. usually in the KSE. The decree must be published in the official gazette and the company does not acquire its corporate status and may not offer shares for subscription until this is done. including the estimated value of the non-cash assets subscribed. are shown in the articles of association. The KSC must also be registered with the KCCI and must obtain a commercial licence before it can begin operations. The WLL must then be registered in the commercial register at the MCI and it cannot commence trading until this has been done. . and it does not acquire its corporate status until this has been done. is to hear the report of the founders on the incorporation of the KSC. Shares may be issued for non-cash consideration provided full particulars. first. elect the first board of directors. In addition. After this meeting the company must be registered in the commercial register and its incorporation proclaimed in the official gazette. The articles must be notarized at the Ministry of Justice. a decree of incorporation must be obtained from the MCI. which must take place within three months of subscriptions being closed. there must be at least five founders and the company’s memorandum and articles of association must be in the form of a notarized deed that conforms to the pro-forma provided by the MCI. including lawyer’s fees.

Corporate management and control General rules governing corporate management are found in the Commercial Code. . unless their powers are restricted by the articles. each share has one vote.102 Business Laws Establishing a closed KSC will take about three months and will cost approximately KD 3. A manager may only be dismissed by a majority of partners. A WLL with more than seven partners must have a supervisory board of at least three partners. who need not be shareholders. a report from the supervisory board and the auditors’ report. Companies with limited liability A WLL is managed by its partners in general assembly. At a general assembly meeting. The actual managers. The appointment and dismissal of managers must be recorded in the commercial register.000 inclusive of legal advice and registration fees. its supervisory board (if any) and its appointed managers. The general assembly must meet at least once a year but a meeting must also be called whenever this is requested by partners holding at least 25 per cent of the capital. a second meeting must be called and at this meeting those present constitute a quorum irrespective of their number. The annual general meeting of the partners must be provided with the directors’ report on the activities and financial position of the firm. The board must have at least three members. a majority of the shares present at the meeting is required (unless a numerical majority of partners is stipulated in the articles). Partnerships Detailed provisions for managing a partnership must be laid down in an official document attached to the articles of association. To pass ordinary resolutions. they have full authority to represent the firm. and the purpose of this board is to control the management on behalf of the partners. If this quorum is not reached. The quorum is the holders of more than 50 per cent of the capital. But extraordinary resolutions require a numerical majority of partners holding 75 per cent of the capital. and. must be designated in the articles or appointed by the general assembly of shareholders. The persons authorized to manage the firm (who need not be partners) must be named in the articles and only these persons may manage the business. Kuwait shareholding companies A KSC is managed by its board of directors and governed by its shareholders.

on a motion proposed by an absolute majority of the board of directors or on an application signed by the holders of at least 25 per cent of the share capital.Business Entities 103 Note for entrepreneurs .500 (unless the articles specify a different percentage or nominal value) may be a director.000 each until the company is making sufficient profits. dissolve the company or merge it with another firm. ordinary and extraordinary. These meetings are of two types. their remuneration may not exceed 10 per cent of the annual net profits after depreciation. a chairman and deputy chairman to represent the company in its dealings with third parties. The shareholders exercise overall control of a KSC by convening in general assembly. The board may appoint. dispose of the entire business. Once a year the directors must elect. the mortgaging of real estate and the granting of guarantees must be stated in the articles. An extraordinary meeting is needed to amend the memorandum or articles. The names of the chairman. including the chairman. A foreigner cannot be the chairman of the board of directors of a KSC. the other members of the board and the managing directors must be lodged each year with the MCI. Though the articles must state how the directors and the chairman are to be paid. A director’s term of office is limited to three years. and the extent of the directors’ powers as regards borrowings. one or more managing directors to whom it may delegate the authority to sign individually or jointly on behalf of the company and to run the company on a day-to-day basis. though a corporate shareholder (including a foreign corporation) may deputize representatives to the board of directors in proportion to its shareholding. reduce the capital. However. . though he or she may be re-elected at the end of this period. they may be paid an annual fee of KD 1. which must also be notified of changes in the board as they occur. Only a shareholder who holds at least the lesser of 1 per cent of the shares or shares with a nominal value of KD 7. though this general power may be restricted by a KSC’s articles or by a resolution of its general assembly. The board of directors can exercise all the managerial functions consistent with the company’s objects. from among its members. from among themselves. transfers to reserves and a dividend of at least 5 per cent. Directors must be elected by secret ballot of the general assembly of shareholders. The board must meet at least four times a year and the quorum for a valid meeting is the greater of three directors or half the members of the board (unless the articles stipulate a larger quorum). The general assembly of shareholders may dismiss a director.

The chairman or members of the board of directors may not have a direct or indirect . Each share entitles the holder to one vote and attendance by proxy is allowed. but if this quorum is not reached a further meeting must be held and at this meeting the quorum is the holders of more than 50 per cent of the capital. And he or she may not enter into a contract with the partnership on his or her own account unless he or she has the permission of all the partners for each transaction or a general permission that is renewed annually. or deal in the shares in a company of which he or she is a director. A manager of a WLL may not manage a rival company. nor may he or she conclude deals on his or her own account or on the account of a third party that is in competition with. The directors must convene an ordinary general assembly at least once a year (the ‘annual general meeting’ or AGM). A director of a KSC may not be a director of more than three KSCs with their head offices in Kuwait.104 Business Laws The quorum for an ordinary meeting is 50 per cent of the capital. while the adoption of resolutions at an extraordinary session requires a majority of more than 50 per cent of the capital. elect members to the board of directors. Conflict of interest rules The Commercial Companies Law contains strict rules governing conflicts of interest. The adoption of resolutions at an ordinary meeting requires a majority of the shareholders attending. elect the auditors for the following year. the company’s trade unless he or she has the consent of the general assembly. and an extraordinary meeting when asked by holders of at least 25 per cent of the capital. decide the remuneration of the directors and auditors. A partner or manager of a partnership may not engage in a business that is similar to the firm’s business unless he or she is authorized by all the partners and this authorization is renewed annually. The directors must also convene an ordinary meeting whenever they consider it appropriate or when requested by shareholders representing at least 10 per cent of the share capital. and take decisions on any other business that the board of directors puts before them. For an extraordinary meeting the quorum is 75 per cent of the shares. but if this quorum is not reached a further meeting must be called and at this meeting the quorum is those who attend regardless of their number. or identical with. take advantage of any information that comes his or her way by reason of his or her position. A person may not be the chairman of the board or the managing director of more than one shareholding company that has its head office in Kuwait. at which the members must hear the reports of the directors and auditors. approve the accounts and declare a dividend for the year.

(b) on the expiry of its term (where fixed). Liquidation Generally speaking. by a court of law. WLLs and KSCs. A partnership will. if the liquidator has to sell off assets to meet liabilities. failing this. but in the case of a WLL or KSC the members are only personally liable for any shortfall to the extent that their shares are not fully paid. the same rules apply to the liquidation of partnerships. in the case of a partnership. If liquidators have not been appointed by the articles then they must be appointed by the partners or shareholders or. WLLs and KSCs. in addition. (c) if the entity is declared bankrupt.Business Entities 105 interest in contracts or deals concluded with the company or on its behalf. Any of these entities will terminate: (a) on completion of the purpose for which it was formed. the partners must bear the shortfall out of their private resources in their capital ratios. terminate if one of the partners is declared bankrupt or is otherwise prohibited by law from doing business or if the partners decide unanimously to dissolve the partnership. he or she cannot sell more than is necessary to settle those debts unless the partners otherwise agree. Termination A joint venture will come to an end as the venturers so decide or according to the terms of their contract. If a WLL loses more than half its capital then the directors must ask the general assembly whether the firm should be dissolved and if it loses 75 per cent of its capital then the holders of 25 per cent of the capital may demand dissolution. nor may they participate in managing a similar or rival company unless authorized by the general assembly. Where the assets of a firm are insufficient to meet its liabilities on dissolution then. If a KSC sustains a loss of 75 per cent of its capital then the directors must call an extraordinary general assembly to decide whether the company needs to be dissolved or have its capital reduced or have other appropriate measures taken. The Commercial Companies Law contains rules governing the termination of partnerships. or (d) if a court orders it to be dissolved. . The liquidator must collect the debts owed to the firm and pay off the creditors. Where a partnership is being dissolved. If a partnership incurs losses to the extent that it cannot continue trading then it must be terminated.

invoices and other documents relating to their commercial activities for five years. but a tax-related order of 1985 obliges foreign corporate bodies doing business in Kuwait to maintain a general ledger. inventory sheets and stock records. Compliance accounting.106 Business Laws Business records.5 per cent of its net profits to the government fund for the employment of Kuwaitis (Law 19 of 2000 – the Local Manpower Support Law). But a KSC must file its audited financial statements within three months of its year-end and a WLL must do so within 10 days of its AGM. In addition. Partnerships do not need to file accounts with the MCI. Full membership is restricted to Kuwaiti nationals. The particular accounting records Kuwaiti companies must keep are not specified by law. taxation and filing Partnerships are not obliged to produce annual financial statements. A WLL is exempt from this impost. A KSC must set aside and pay 2 per cent of its net profits (after transfers to statutory reserves and after offsetting losses brought forward) to the Kuwait Foundation for the Advancement of Science (KFAS). a KSC listed on the Kuwait Stock Exchange must pay 2.000 are obliged to maintain proper accounts that show all transactions relating to their business activities and that reflect the financial position of the firm. Accountants and auditors The Kuwait Association of Accountants and Auditors. . accounting. Enterprises in which the capital exceeds KD 5. and so Kuwait companies with foreign shareholders who are subject to income tax need to maintain these records on behalf of their foreign associates. These statements must be filed in Arabic. But both WLLs and KSCs must produce annual accounts that comply with International Accounting Standards issued by the International Accounting Standards Committee and must normally use the solar calendar (January to December) as their fiscal year. is the only professional accounting and auditing body recognized in Kuwait. This reserve may only be used to pay a dividend of up to 5 per cent in years when profits are not sufficient to support such a dividend. though suitably qualified foreign accountants and auditors may enjoy associate membership. WLLs and KSCs must transfer a minimum of 10 per cent of net profits to a statutory reserve each year until this reserve exceeds the company’s capital. taxation and auditing All businesses must retain true copies of outgoing and incoming correspondence. an expenses analysis journal. which is affiliated to the International Federation of Accountants. These internal accounting records do not have to be in Arabic but they must be retained for 10 years as of the date they are closed.

. proper books of account have been kept by the company. investment firms and insurance companies. He must be independent of the company he is auditing and must conduct his audit according to the International Auditing Standards (IAS). now that foreigners have the right to buy and sell shares on the Kuwait Stock Exchange on a par with Kuwaitis. . . In addition. if so. partnership or corporation in a Kuwaiti firm. whether these violations are continuing. as a general rule. In the case of banks. such participation is only allowed in a closed KSC if the company requires foreign capital or technology. . these restrictions do not apply to businesses set up in the Free Trade Zone. the accounting information appearing in the report of the directors agrees with the books of the company. . but not partnerships. Foreign participation in an open KSC is forbidden under the general rules. is. foreign participation is limited to 40 per cent of the capital. on the basis of the information available to him. the financial statements ‘present fairly’ in all material respects the financial position of the company and the results of its operations and cash flows.Business Entities 107 Audit requirements The accounts of both WLLs and KSCs. In his report on the company’s financial statements to the AGM the auditor must express his opinion as to whether: . WLL or closed KSC. whether it is a partnership. physical stocktaking was conducted in accordance with recognized practice. Foreign participation Participation by a foreign person. the financial statements include the disclosures required by the Commercial Companies Law and the company’s articles of association. and . must be audited annually. he obtained all the information needed to conduct his audit. However. any violation of the company’s articles or the Commercial Companies Law that might have a material adverse effect on the business or financial position of the company occurred during the year and. limited to 49 per cent of the capital. there is no reason why they should not be able to participate in the launch of an open KSC when that company’s shares are first offered for subscription. . An auditor must be a Kuwaiti person who is qualified by examination and is registered with the MCI. However.

However. In the case of a foreign corporation or partnership. and how the business is to be managed on a day-to-day basis. The 49 per cent rule also restricts the amount of capital a foreign firm may invest in a local company. WLL or closed KSC. the MCI will additionally need the following: . Those with large amounts to invest may consider establishing a wholly owned entity under the FDI regulations. . . a foreign entrepreneur needs to take into account the 49 per cent rule. a resolution from the board of directors of the foreign firm indicating the company’s willingness to be a founder member of a new firm in Kuwait. Choosing a corporate form Before joining in a local company in Kuwait. however. the capital investment to be made. the names of representatives entitled to sign on behalf of the firm. A foreigner going into partnership with Kuwaitis in either a general partnership or a WLL should ensure that. a copy of the foreign firm’s memorandum and articles of association translated into Arabic and certified by a Kuwaiti consulate abroad. a certificate appointing a representative in Kuwait and authorizing him or her to sign on behalf of the parent firm. It may be possible. the foreign firm’s last two sets of financial statements and board of directors’ reports translated into Arabic and certified by a Kuwaiti consulate abroad. . with or without a minority local participation. he or she is designated as the manager and that he or she is registered with the . The 49 per cent rule is designed to ensure that the locals retain control of companies operating in Kuwait. for a foreign participant to attain majority control by appointing another Kuwaiti (such as a lawyer) as a trustee for a small shareholding. there is nothing in law to prevent a shareholder from providing additional long-term finance in the form of loans. the MCI will require a certificate of good conduct from the police and a statement from his or her Kuwaiti associates explaining why foreign participation is necessary. in the articles of association. . Gaining a reasonable degree of control over day-to-day management can present a problem for expatriate entrepreneurs. Such loans should be secured on the company’s assets and suitable guarantees obtained from local associates. and these loans may be repaid and repatriated without restriction.108 Business Laws Before a foreigner can participate in a Kuwaiti partnership. Where a foreigner is a natural person. permission must be obtained from the MCI. and a certificate of consent from the Boycott Office. .

Business Entities

109

Hints for entrepreneurs
. A foreigner joining in a partnership in Kuwait is strongly advised to
ensure that the partnership agreement is notarized at the Ministry of
Justice and registered in the MCI, in order to ensure that the
agreement is enforceable.
. If a partner leaves a partnership (for any reason), his or her account
must be reckoned as of the day the event that led to his or her
withdrawal occurred and he or she must be paid in cash.
. If a partner dies, the partnership continues with the surviving partners
unless the articles stipulate otherwise.
. Take legal advice before entering a local partnership or shareholding
company.
. The transfer of a Kuwaiti partner’s share to a non-Kuwaiti is not
allowed if this would cause the Kuwaiti ownership in the firm to fall to
less than 51 per cent.

MCI and the firm’s bankers as a signatory of the firm. A prospective
shareholder in a KSC should ensure that he or she will obtain seats on
the board of directors in proportion to his or her shareholding and that
he or she has a pre-incorporation agreement with the other founders for
his or her election as the managing director with the power to sign on
behalf of the company.
The most appropriate vehicle for a long-term foreign investor who is
committing substantial amounts of money is a WLL because liability is
limited, formation costs and time are reasonable and, unlike a KSC, the
2 per cent tax for KFAS is avoided.
However, where a foreign company’s long-term interest is best
served by opening a branch in Kuwait and thereby retaining complete
control of its operations, or its main interest is in public sector contracting, it may find that it is best off operating through a local service
agent.
A foreign entrepreneur offering professional services may find that
establishing an entity in the Free Trade Zone is the most appropriate
approach to the Kuwaiti market.

Kuwait Free Trade Zone
Free trade zones were first mooted in Kuwait during the 1960s but it
wasn’t until 1995 that a law was promulgated to enable such zones to
be established. Law 26 of that year is based on international best
practice as codified in the 1979 Kyoto International Convention on
Custom Procedures. Two years later, executive orders regulating the

110

Business Laws

free trade zones were issued as Ministry of Commerce & Industry MR
69 of 1999.
Article 11 of Law 26/1995 entrusts supervision of the free trade zones
to the Ministry of Commerce & Industry but allows the MCI to delegate
the management of these zones to private sector companies subject to
the approval of the Council of Ministers. Article 5 of the law grants
permanent exemption from taxes and duties to projects operating in the
free trade zones, while Article 2 of MCI MR 69/1999 gives the management company the right to issue licences and to obtain work permits and
visas for licensees and their workers. The regulations require the
nationalities of applicants for licences to be stated but nothing in the
legislation requires a foreign licensee to have a Kuwaiti partner. So far
only one free trade zone has been set up but others are planned for the
near future.
Kuwait Free Trade Zone (KFTZ) is located in Shuwaikh Port, a
modern hi-tech port facility just a few miles from downtown Kuwait
City. It is managed on behalf of the MCI by the National Real
Estate Company (NREC), which is listed on the KSE, on a for-profit
basis.
Things were slow during the first few years of the zone’s existence,
while the actual offices and warehouses that comprise it were being
built, and investors found some of the administrative procedures slower
than expected. During those early days there did not seem to be much
point in the zone as trade with Iraq was blocked and the local economy
was in the doldrums. But the economy has picked up in recent years
and now, with the liberation of Iraq, the KFTZ is very active. A shakeup of top management in 2003 loosened administrative procedures
considerably.
Licensed activities
Article 2 of Law 26/1995 allows three main types of activities to be
carried out within the free trade zones:
.

general trading activities, such as import and export or storage and
distribution of goods whatever their type or origin, for which a
commercial licence is required;

.

professional services, such as financial and management consulting, auditing, legal and engineering consultancy, for which a
services licence is required; and

.

manufacturing, assembly, packing and repacking operations, for
which an industrial licence is required.

The licensing costs in KFTZ are reasonable, as can be seen from Table
2.2.1.

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111

Table 2.2.1 Licence processing fees
Type of licence

Registration fee
Issue fee

Commercial

Services

Industrial

KD

KD

KD

1,000

1,000

1,000

750

500

1,000

Annual renewal fee

375

250

500

Activity amendment fee

750

500

1,000

Fee for other amendments

100

100

100

A one-off registration fee of KD 1,000 is paid by all applicants for a
licence to operate in the zone. Licences, once granted, have to be
renewed each year. The activity amendment fee applies to current
licensees who wish to change the activities they are entitled to undertake. The fee for other amendments refers to amendments to a licence
that do not involve a change of activity.
The KFTZ also issues special licences, that is, licences for undertaking any of the three basic activities but for which there are special
requirements. Administrative fees for these licences are decided on a
case-by-case basis.
The procedures for establishing a business in the KFTZ are delightfully simple. After discussions with the KFTZ Marketing Department,
the applicant submits a completed application, which by law must
contain the following information:
.
.
.
.
.
.
.
.
.

applicant’s name, nationality, address and domicile;
legal form of association where the applicant is a foreign company;
details of the project or activities to be undertaken, including
expected duration;
accommodation requirements and whether these are to be pre-built
or open land;
details of equipment, machinery and other installations that will be
used;
capital to be invested and details of funding sources;
statement of expected consumption of electricity and water;
details of expected employees, their nationalities, skills, remuneration and working days per month; and
details of the calculated financial guarantees that will be provided.

Two types of guarantees are required when the licence is issued. A
salary guarantee of three times the expected monthly remuneration of
employees must be lodged, as must a security deposit of three months’
rent on the business accommodation chosen.

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Business Laws

Once the application has been received it is reviewed by the committee of the KFTZ. Then the facilities and services required by the
applicant are finalized, and the contract is negotiated and signed.
The new management at the KFTZ claims that commercial and services
licences can be processed within 24 hours and industrial licences can be
granted in ‘less than a week’.
KFTZ facilities and services
The contract with the KFTZ will include an agreement to rent business
accommodation within the zone.
Business accommodation is of two basic types: pre-built unfurnished
offices, warehouses and light industrial units; and open land on which a
licensee may build a suitable structure.
The costs of leasing these facilities are shown in Table 2.2.2 and, as
can be seen, the cost of leasing an unfurnished office is about the same as
in the downtown City area.
Table 2.2.2 KFTZ leasing costs
Rented facility

Monthly cost
KD per sq m

Open land

-/300 to -/600

Pre-built
Office (unfurnished)

3/- to 5/-

Warehouse

1/- to 2/-

Light industrial unit

1/- to 2/-

Where an entrepreneur rents open land, a building permit will be
required for building a suitable structure. The cost of a permit is 250 fils
for each square metre of floor space. Building permits are also required
for major additions to existing buildings.
A fibre-optics network to carry advanced voice and data services runs
throughout the KFTZ and extends to each client location (office, warehouse or plot), which makes getting services switched on simple and
quick. Data links can be provided from a speed of 64 kbps up to ATM
speed. International links are provided by the Ministry of Communications (MOC) in Kuwait proper through a dedicated 24F fibre-optics cable
from the KFTZ, but the management is planning to establish international gateways through other service providers.
The KFTZ provides authentication services for certificates of origin
and commercial invoices. Charges range from a minimum of KD 3 up to

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113

a maximum of KD 50. Certificates of origin are only given by the zone
provided the goods have been manufactured or, at least, repackaged
within the zone.
Entrepreneurs, their families and their workers are provided with
residency in Kuwait under the country’s strict immigration rules. The
basic charge is KD 100 during the first year and KD 22 for annual
renewal.
The KFTZ provides a host of other services for investors in the zone,
including legal advice and assistance in obtaining compulsory thirdparty liability and workers’ compensation insurance, driving licences,
finding accommodation for employees, etc. Staff at the customer service
centre in the zone are, between them, fluent in Arabic, English, Farsi
(Persian) and Hindi (Indian). Further information is available from
www.kuwaitfreezone.com.
Advantages
The KFTZ is superbly located. Just across the Gulf lie the ports and
cities of northern Iran, which have overland links to the emerging
markets of the Commonwealth of Independent States. There are direct
road links from the zone to Saudi Arabia and Jordan, thence to Syria,
Lebanon, Turkey and the areas of Palestine. The zone is only a 20minute drive from Kuwait International Airport.
Besides its excellent communications systems, the KFTZ has ample
supplies of energy and water, and there are no minimum capital
requirements for establishing a presence in the zone. Nor is there any
need to hire expensive Kuwaiti employees, a condition now being
imposed on business entities in Kuwait proper. Once the contract with
NREC has been signed, most of the tedious paperwork required to set up
a business presence in Kuwait, including residency formalities, is taken
care of by the management company.
Investors in the KFTZ are free to participate in trade exhibitions
inside Kuwait and may even open an office within Kuwait proper,
subject to approval from the committee of the KFTZ. Professionals
who establish offices in the zone may offer their services throughout
Kuwait, without hindrance.
Entrepreneurs who establish businesses within the zone are exempt
from all forms of business and personal taxes. Goods moving in and out
of the zone are not subject to customs duties, though they may be subject
to Kuwaiti customs duties when they move out of the zone and into
Kuwait to be sold. In addition, there are no restrictions on either the
inflow or the outflow of capital and profits.
Perhaps the best bit for foreign entrepreneurs wishing to do business
with a presence in Kuwait: no local partner is required and 100 per cent
foreign ownership is permitted and, according to NREC, encouraged.

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Business Laws
Hint for entrepreneurs
. Having a local minority shareholder, provided he or she is active and
has good connections, would be a smart idea.

Foreign direct investment
Foreign entrepreneurs may also invest in a business in Kuwait with up
to 100 per cent ownership under Law 8 of 2001.
The purpose of the law, besides liberalizing foreign investment to the
extent required to enable Kuwait to join the WTO, is to further the
country’s economic development by inter alia increasing export sales
and import substitution, enhancing educational, training and employment opportunities for Kuwaiti nationals and facilitating the inward
transfer of advanced technology and international management and
marketing practices. It is expected that the application of the law will be
restricted to larger projects.
The administration of the law is, on paper, simple. To obtain the
necessary permit, a foreign investor must make an application to
establish a foreign-owned business in Kuwait through the Foreign
Investment Office (FIO). The FIO has four months in which to study
the application and report to the Foreign Capital Investment Committee. The latter recommends to the Minister of Commerce & Industry
whether or not a permit for the investment project should be issued. But
before doing so, the Committee must obtain approval from the other
government departments concerned with the establishment of a particular type of business in Kuwait, such as the Public Authority for
Industry (to establish a factory) or the Central Bank (to found a bank),
etc. The permit is issued by the Minister in the form of a resolution.
The request for a permit must be decided within eight months of the
date it is submitted. If it is refused then the refusal must be in
writing, stating the reasons for rejection. As implementation of the
new law only started in October 2003, when the FIO began accepting
applications for the first time, it is too early to say whether this
time limit is an absolute maximum or whether eight months will
become the usual time it will take to get the initial paperwork over
and done with.
The application of the FDI law is not limited to projects with 100 per
cent foreign ownership, and foreign entrepreneurs, who may be individuals or corporate bodies, can have local partners.
Permitted sectors
Under Article 2 of the law, a foreign investor may only invest in
particular economic sectors as determined by the Council of Ministers.

Business Entities

115

The Council decided in October 2003 that all sectors of the Kuwaiti
economy are open to direct foreign investment with the sole exception of
the oil industry, ie oil and gas exploration and production. Major
infrastructural projects in power, water, sewage treatment and telecommunications are also open to foreign investors.
In a press release in late 2003, the Ministry of Commerce & Industry
announced that, shortly after the FIO was opened, it had received some
120 applications from foreign investors from the United States, and
European and Arab countries, to the value of ‘hundreds of millions of
dollars’, for projects in the health, real estate and industrial sectors.
Investment privileges
The Foreign Capital Investment Committee may grant some or all of the
privileges discussed below to foreign investment projects.
The extent to which these privileges are granted depends on the
extent to which a particular project fits in with the country’s economic
development plans and on the numbers of Kuwaitis who will be
employed in the project, which as a minimum must accord with Law
19 of 2000 (the Local Manpower Support Law):
.

Foreign investment projects may be granted exemption from
income tax and any other taxes for up to 10 years from the date
the project actually commences. Once the initial exemption period
has been granted, any fresh investment in the project will be
granted the same exemptions for a similar period of time from the
date the new investment is made.

.

Foreign investment projects may be granted the privileges available under the agreements Kuwait has for the avoidance of double
taxation and the protection of investments.

.

Total or partial exemption from customs duties may be granted on
the importation of both capital items such as plant, machinery and
spare parts, and consumables such as raw materials, semiprocessed products and packing and bottling materials needed for
production.

.

Land may be allocated to foreign investment projects subject to
local regulations.

.

The right to employ foreign workers in accordance with local
regulations.

These privileges (and indeed the DFI law as a whole) also apply to
investment projects undertaken by a Kuwaiti national without a foreign
investor provided his or her projects fall within the permitted sectors as
decided by the Council of Ministers.

including any compensation they receive on account of expropriation. abroad without restriction. Foreign investors also have the right to transfer their capital and profits. This compensation must be paid ‘without delay’. . except for any additional investments made after the date on which the amendments become operative. The project may not be nationalized and should it be necessary to expropriate it in the public interest then the investor must be paid the full market value of the investment as evaluated on the basis of the economic circumstances existing prior to any intimation that it was going to be expropriated. Should the DFI law be amended.116 Business Laws Investment guarantees The DFI law extends a wide range of solid guarantees to the foreign investor. subject to any stipulations regarding this matter in their licence. Foreign investors under the DFI law are allowed to transfer their investment to another foreign investor or to a Kuwaiti national. a foreign investor’s existing interests or benefits may not be adversely affected by such amendments.

usually buying and selling in their own name. with the exception of GCC nationals. except for firms that establish themselves in the Free Trade Zone or are established under the new Direct Foreign Investment law [DFI] (see Chapter 2. which is used to regulate commercial agents and distributorships. . it must have a local service agent or ‘sponsor’. provided they are the sole agent in the area. These exceptions aside. Law 68 of 1980). yet is applied equally to service agents or sponsors. The law only specifically defines contract agents.2. carry out buying or selling transactions for the account of their principal in return for a fee.2).3 Agency and Service Agreements A foreign firm wishing to do business within Kuwait on its own account may only do so through a local agent (art 24. General rules Several matters connected with the law of agency are a bit hazy and a new law has been expected for some time. unless they have been established in a free trade zone or under the DFI law. distributors and commission agents. they have the same rights and duties as a contract agent to the extent that these are relevant. commission agents and service agents. when a foreign entity operates a branch in Kuwait or takes part in a public tender or supplies goods and services to public bodies. Foreign individuals or firms. Only Kuwaiti individuals or firms may act as commercial agents in Kuwait. All arrangements between a foreign entity and its local agent are governed by Articles 260 to 296 of the Commercial Code. Contract agents are agents who negotiate transactions on their principal’s behalf in a particular area in return for a fee. are not allowed to carry on commercial activities in the country except through a commercial agent. ie they have an exclusive distributorship. Distributors are merchants who promote and distribute their principal’s products in a specific area. Commission agents are agents who. contract agents may conclude and execute contracts in their own name or in the name of their principal. under their own name.

Agents are required to keep proper books of account and must provide their principal with reports on the progress of their agency. In addition. are entitled to remuneration on transactions concluded in their area by their principal acting either directly or through others. the parties to an agency agreement have full freedom of contract and so in practice these agreements vary widely in their terms. If their statement of account contains any deliberate falsehood. But agents are not required to insure their principal’s things unless insurance by the agent is customary in the trade or their principal requests insurance. or circumstances. or if they realize that carrying out their instructions will cause serious harm to their principal. an agent’s remuneration is governed by a professional tariff (if any). It must include terms governing the activities to be undertaken. unless otherwise agreed in writing. then they may delay performance until they have communicated with their principal. and the duration of the agency (if limited). the principal . This remuneration is usually shown in the agency agreement registered with the MCI although. to ensure confidentiality. the custom of the trade. his or her remuneration. contract agents. Agents are not entitled to remuneration unless they conclude the transactions with which they have been entrusted or they can prove that these would have been concluded but for some act of their principal. or the nature of.118 Business Laws Valid agency agreements To be valid and enforceable an agency agreement must be in writing and must be registered with the Ministry of Commerce & Industry (MCI). unusual circumstances. Generally speaking. Agents are responsible for damages caused to the things they keep on behalf of their principal. it may be expressed in general terms in that agreement and the actual remuneration agreed in a separate private document. or inherent vices in. Agents’ responsibilities Agents are obliged to obey their principal’s instructions and if they fail to do so they are responsible for any damages that result. Where it is not specified in a written agreement. But a few provisions of the Code override what the parties might wish to agree. they must make arrangements as necessary to protect them. the things themselves. If they notice that their principal’s goods have been damaged during shipment. unless the damage is due to causes outside their control. the scope of the agent’s authority. Agent’s remuneration An agent is entitled to remuneration unless otherwise agreed. and any terms that contradict these provisions are void. But if they do not have express instructions.

claim compensation. Agents’ lien Agents gain a prior right over the goods consigned to them by their principal as soon as they come into their possession and this lien lasts as long as they remain in their possession. drawings and promotional and marketing material. All litigation arising from an agency agreement. And. take any precautions necessary to preserve their principal’s rights and are deemed to be their principal’s representative in legal actions relating to the non-performance of contracts in their geographical area. this right transfers to the sales proceeds. may not act for more than one principal competing with similar goods or services in the same area unless permitted by the MCI. The agents’ lien secures their remuneration and expenses. Agents must provide their principal with market intelligence relating to their area. including specifications. The principal must supply agents with all the information they need to perform their agency. samples. The agency agreement must specify the limits of the agent’s authority and geographical area and the trade marks (if any) of the goods concerned. They must. servicing or repairs. Compensation on termination The basic rule is that if a principal terminates an agency when his or her agent is not at fault. Agents must preserve confidentiality and may not disclose any of their principal’s secrets that they learn by reason of their agency. if an agent abandons his or her agency at an unsuitable time and . the agent may seek compensation for loss of income. and their right has priority over all other privileges except for legal expenses and amounts due to the government.Agency and Service Agreements 119 may reject the transactions shown in the statement. with the exception of claims for compensation on termination. and refuse to pay the agent’s remuneration for those transactions. must be initiated within three years of the end of the agency. however. Where the agent is obliged to erect showrooms or facilities for storage. An agent. the agency must have a minimum duration of five years. even after their agency is terminated. however. Contract agents A principal may have more than one contract agent in a particular geographical area for the same goods or services. Contract agents must operate independently of their principal and are responsible for their own management expenses. If the goods are sold and delivered to a buyer.

Any clause to the contrary in an agency agreement is void. . . the law expects it to be renewed on expiry. An action for compensation must be started within 90 days of the end of the agency. they must account to their principal for the difference in price. . but he or she does not have to pay the proceeds over prior to the due date under his or her principal’s credit terms. Commission agents may not disclose their principal’s name unless authorized. . Commission agents A few points concerning commission agents are worthy of note: . There is no set formula for calculating compensation on termination and it is decided in the Commercial Court on the basis of documents submitted by the litigants. the agent must pay over an amount based on the credit price. If a principal replaces his or her agent and the termination of the former agent was due to collusion between the principal and the new agent. Sales agents may not grant credit or allow a buyer to pay by instalments unless they are authorized by their principal. If the principal does not renew it. Commission agents are not responsible for performing their principal’s obligations unless they explicitly assume this responsibility or it is the custom of the trade. the agent may seek fair compensation (even if the contrary is stated in their agreement) provided the agent has not been at fault or negligent in his or her performance and provided his or her activities have resulted in a visible benefit to the principal in promoting the latter’s products or increasing the number of customers. If commission agents conclude a transaction on less favourable terms than those set by their principal. If a principal instructs his or her agent to sell on credit and the agent sells for cash. . the principal may reject the transaction provided he or she notifies the agent as soon as he or she is informed of it. Commission agents are strictly agents for their principal and may not insert themselves as the actual buyer or seller in a transaction unless authorized by their principal. If agents conclude a transaction for a more favourable price than the price set by their principal. . his or her principal may seek compensation for damages. the new agent will be held jointly responsible with the principal for settling any compensation due to the former agent.120 Business Laws without reasonable cause. Even where an agency is for a fixed term. . and they are not bound to disclose the name of a buyer unless the transaction is on credit.

Kuwaiti agents will expect a fee in return for their sponsorship and the use of their licences. Under a simple service arrangement the Kuwaiti agent is merely the foreign entity’s legal representative in the country and does little more than take care of licensing formalities. But before applying for registration with the MCI. the agreement must be registered with the Kuwait Chamber of Commerce & Industry. The application for registration must be made within two months of the agency being created. The principal is relatively free to manage local business as he or she sees fit. which. his or her principal and the actual buyer or seller may deal directly with each other. obtain visit visas and residencies for the principal’s executives and employees. If agents introduce business or obtain contracts on behalf of their principal they will expect extra remuneration.3.1 MCI fees: Commercial Agencies Register Applications for registration Annual registration fee KD 3/KD 50/- Annotations & amendments KD 1/500 Applications for cancellation Free Searches KD 2/- . in practice.Agency and Service Agreements . however. where the agent does little more than take care of local formalities.5 per cent of the principal’s gross income in Kuwait is considered fair. The agent does not take any active part in the management of the branch and all assets. Registration procedures An agency agreement is not enforceable unless it has been registered in the Commercial Agencies Register at the MCI. The provisions of the Code. are under the control of the principal’s employees in Kuwait. is used by foreign firms to open a local branch. and this is usually paid in the form of a commission on the extra income thus generated. apply to this form of ‘agency agreement’. and represent the principal officially. including cash. Table 2. In a simple service arrangement. 121 If a commission agent goes bankrupt. 2. while being fully responsible for all his or her local expenses. this form of agency agreement is not specifically mentioned in the Commercial Code. Service agreements Though a service agent or sponsor is usually required by a foreign person or firm setting up business in Kuwait.

a copy of the agent’s Kuwaiti nationality document (where the agent is an individual) or a copy of the agent’s registration in the commercial register (where the agent is a commercial firm). Hints for entrepreneurs . and . A claim for compensation by an agent is usually upheld in a Kuwaiti court unless fault on the part of the agent is clearly proved. . So that evidence is available to contest a possible future claim for compensation on termination. Obtain legal advice before terminating an agency agreement. Where the agreement was executed in Kuwait. a certified translation of the agreement into Arabic. an original copy of the agency agreement. a copy of the agent’s commercial licence. . Ensure that an agency agreement is registered.122 Business Laws The application for registration can only be made by the Kuwaiti agent. the original copy must be attested at the principal’s location by an official authority and the Kuwaiti consulate. . . The MCI also advertises the registration in the official gazette. But if an exclusive agency is terminated acrimoniously the principal risks being banned from the Kuwaiti market. Where the agency agreement was executed overseas. a certificate of registration from the KCCI. ensure that all deficiencies in an agent’s performance are fully documented and that all complaints to the agent are made in writing. . Ensure that a service agent has the necessary commercial licences and permits before executing an agreement. . Amendments to the agreement must also be registered. and when an agency expires or is revoked it must be removed from the registry. . . the names of principals and the trade names of goods. It must be made on two original copies of the official MCI form and must be accompanied by: . the MCI gives the agent a certificate. The exclusivity can be either for Kuwait only or for other countries also. . The MCI must decide within 15 days whether to register the agreement. ie a signed and stamped copy of the application. Obtain legal advice before executing an agency agreement. It is possible to give exclusivity to only one line of products and to use different agents for other products. Where the application is successful. The Commercial Agencies Register may be searched by the names of agents. it must be notarized by a Kuwaiti Notary Public. Both contract agencies and distributorships may be exclusive. .

is maintained in the Trademark Control Office at the MCI. notably in the Hawalli area. Registration initially protects a trademark for 10 years from the date the application to register was submitted. It is affiliated to the World Intellectual Property Organization. The person who registers a trademark is issued with a certificate and is considered the sole owner of the mark with the exclusive right to use it on the products for which it is registered. such the rights of publishing or reproducing literary. which is open to public inspection. the registrar must notify him or her in writing and the owner then has three months from the expiry date in which to submit an application for renewal. musical. are freely available on the streets in Kuwait and in many shops.4 Intellectual Property Rights The protection of intellectual property rights in Kuwait is quite good in theory. If the owner of a mark fails to renew registration in time. Registration can be renewed indefinitely for further periods of 10 years each provided the application for renewal is made within the last year of each 10-year period. Articles 61 to 85 of the Commercial Code provide for the registration and protection of trademarks.2. Trademarks A trademark is anything that takes a distinctive shape and that is used or intended to be used to distinguish products for the purpose of indicating that they belong to the owner of the mark because he or she makes them. A Trademarks Register. Trademarks are well protected provided they have been registered. issued on the last day of 1999 is comprehensive. artistic. However. selects them. and audio and visual CDs and cassettes. It is not a signatory to any international conventions on trademarks or patents. The State of Kuwait is a signatory to the World Trade Organization (WTO) agreement on the protection of intellectual property rights (TRIPIS) and is a party to the Arab Convention for Copyright Protection. trades in them or displays them for sale. computer software and other intellectual works. pirated copies of software. . A law protecting intellectual property.

There is no registry of service marks in Kuwait. however. an application must be submitted in Arabic to the Trademark Control Office along with a fee of KD 24. Recourse for infringements A person who infringes a registered trademark is liable on conviction to a fine of KD 600 or imprisonment or both. It may be noted that: . the owner may apply at any time to register minor alterations. But any order granting him or her relief becomes invalid if he or she does not commence a main action against the infringer within eight days of the order being granted.124 Business Laws Hints for entrepreneurs . such as the seizure of goods and wrappers on which his or her mark has been illegally placed. A convicted person may also be ordered to pay compensation. symbols or emblems must be deleted from the Register. Amendments. But the transfer of the ownership of a business is deemed to include the transfer of any trademarks that are related to the business and that are registered in the name of the assignor. An action for passing off is unlikely to be successful in a Kuwaiti court unless a trademark has been registered. provided these do not substantially affect the character of the mark. be registered by a third party but not until three years have elapsed since it was deleted. . transfers and deletions Once a trademark has been registered. But a change in ownership must be entered in the Trademarks Register and publicized in the official gazette. or it is proved that the mark has not been used for five consecutive years and the owner fails to explain satisfactorily why it is not in use. The court may order a trademark to be deleted from the register if it is proved that it was wrongly registered. Registration procedures To register a trademark. It may. A deleted mark cannot be reregistered for the same products by the original owner. unless otherwise expressly agreed. The owner of a trademark whose rights are being infringed may apply to the commercial court for temporary relief. Registration is best left to specialist agents attached to local accountancy firms. A trademark may be sold. before commencing legal action against the offender. A mark that the Boycott Office decides is similar to any Israeli trademarks. and is not effective against third parties until this has been done.

pharmaceuticals and medicines only last for . and marks may only be registered in the appropriate classes. which may be renewed for a further 5 years. If the registrar refuses to register a trademark or makes registration dependent on alterations. it must be advertised in three consecutive issues of the official gazette. Patent holders are protected against unauthorized use of their invention or design for an initial period of 15 years. But patents for chemical inventions relating to the manufacture of food. The registrar must give a copy of the objections he receives to the applicant. the registrar must formally notify both parties of his decision.Intellectual Property Rights 125 . The issue is decided by the registrar. foreign residents in Kuwait. Once he has decided the matter. the registrar must suspend registration procedures until a final judgment of the court is made in favour of one of the applicants or all the applicants agree in writing as to which of them will register the mark. who has 30 days to submit a reply. The registrar may impose any alterations he deems necessary to clarify a mark. Under Law 4 of 1962. the overall time needed to register a trademark is at least three months. either of whom may challenge him before the Commercial Court within seven days. Kuwaiti nationals. using or selling an invented product during a specified time. a further month will be needed to contest the challenge. . If several persons apply to register the same mark in the same class at the same time. Patents and industrial designs A patent is the sole right to the proceeds of an invention. foreign business people with an establishment in Kuwait and foreigners in countries that grant reciprocal rights to Kuwaitis have the right to be granted patents in Kuwait. he must notify the applicant in writing and the applicant has 30 days to challenge him before the Commercial Court. a patent may be issued for any new invention suitable for industrial use that has not been used in Kuwait during the previous 20 years. Objectors have 30 days after the third advertisement to challenge the registration in writing. who must hear both the applicant and the objectors. Once the registrar has accepted the application. If objections are lodged. including the right to exclude others from making. The international trademark classification system is used to classify marks. Because the application must be gazetted and time allowed for objections. .

is not limited to the above types of work and the legislation has been framed so that new types of works will be protected. the Arab Convention for the Protection of Authors’ Rights. literary works (written and oral). arts and the sciences.126 Business Laws 10 years and cannot be renewed. and . . These are: . All documents for filing a patent application. audio. motion pictures. . choreographic works. including the description and specifications of the invention. translated works. including: . artistic works (paintings. Holders may license their patents to others. notably the World Convention on Authors’ Rights (Geneva 1952) as amended. video. theatrical shows. sculptures. . computer works (software and databases). . the Convention on Trade Related Intellectual Property Rights (TRIPIS) and the founding treaty of the World Intellectual Property Organization. . and architectural and decorative works). The title to a work is also protected provided this has been created and it is not a common expression. . . however. works of applied art (craft and industrial designs). . photographs. carvings. musical works (with or without lyrics). The law specifies the nationality of authors whose works are covered. Protection. Copyrights Kuwait’s first general copyright legislation became law on the last day of December 1999. are required by law to be in Arabic. Scope of the Law Law 64 of 1999 is designed to provide comprehensive protection to the authors of all forms of intellectual works in letters. radio and TV works. . . designs and models. The legislation is an amalgamation of provisions culled from various international conventions. . illustrations and maps.

composers and directors of theatrical. 50 years from the end of the year in which the last author dies. works of applied art. and works owned by corporate bodies are protected for 50 years from the end of the year in which they are first published. or. protection was limited to audio-visual material of Arab origin (from 1994 onwards). in the case of joint authors.Intellectual Property Rights 127 (a) Kuwaitis whose works are published both inside and outside Kuwait. motion pictures. photographs. But these provisions do not apply to contracts made before this law came into effect. Period of protection The period of protection is 50 years from the death of the author. (b) nationals of countries that have signed the Arab Convention for the Protection of Authors’ Rights and whose works are published in one of those countries. of American origin (from 1995) and of British origin (from 1996). including computer software. Most businesspersons doing business with Kuwait will probably find that their home countries are signatories to the World Organization Intellectual Rights Treaty (d. and it was open season on all other forms of intellectual property. Such contracts are governed by the laws existing when these contracts were made. However. and (e) nationals of countries that treat the works of Kuwaiti authors on a reciprocal basis. it should be noted that the right of an author of a work in a foreign language to the translation of such a work into Arabic expires . Works published under a pen name or published for the first time after the author’s death. choreographic. (d) nationals of states that are signatories to the World Organization Intellectual Rights Treaty whose works are published for the first time in one of those countries. and TV and radio works enjoy 50 years’ protection from the end of the year in which their works were first performed or recorded. Prior to the enactment of the current legislation. The provisions of the law apply to works that existed at the date on which this law came into effect. above) and that their works are legally protected in Kuwait. computer works. But radio broadcasters are only protected for 20 years from the end of the year in which their works were first transmitted. (c) foreign authors whose works are published for the first time in Kuwait. The provisions of the law also apply to all contracts made after the date at which this law came into effect. ie mid-January 2000. Writers.

who are entitled to have a performance attributed to them. and – its translation into another language. The author may prevent any deletion. even if the show was written by someone else. musicians. Only the author has the right to decide whether his work should be published and to decide the manner in which it is to be published. Radio stations may license their recorded materials and may prevent their programmes being used without prior written permission. radio transmission. with the author’s permission. The author’s right of exploitation includes (but is not limited to): – reproduction of the work in any form. This takes care of the situation where the popularity of the show is due more to the quality of its performance than the efforts of the author. – its presentation to the public through public performance. unless the author has translated or had the work translated into Arabic during that time. singers. The law also covers those who have. change. or to whom the work is attributed upon publication. translated the work into another language or who have abridged or amended the work or given it a new shape. The law grants authors various rights as follows: . Authors and their rights An author is the person who created the work. They have the right to benefit financially from their performance by presenting it to the public or making original recordings of it available to the public. The same five-year limit applies to a translation into Arabic of a third-language translation of the original work. Only the author is entitled to exploit his work financially and third parties may only do so with his or her prior written permission. TV or cinema shows or by any other means. . unless there is evidence that he was not the actual author.128 Business Laws five years after the date the original was first published. addition to or modification of his work without his or her permission. . . These author’s rights are extended to performing artists. The author is solely entitled to have his work attributed to him. Reproduction An author’s right to the reproduction of his works is limited in several minor ways: . . etc. such as actors.

When a quotation is cited or published. None of them may exercise their . . 129 After publication. To preserve local culture. social and religious meetings provided these are addressed to the public. study or information. . all the authors are considered to be owners of the work in equal shares unless they have agreed otherwise in writing. or has not made a statement in his will preventing publication or specifying a particular date or other conditions for publication (in which case what is in his will must be followed). if he deems publication to be in the public interest. without the author’s permission. political. only the author is entitled to publish collections of his speeches and articles. literary. speeches. economic or religious topics of the day as long as the original article does not contain an explicit notice expressly prohibiting quotation. he may apply for a court order to have the work delivered to him for publication. artistic. however. where the heirs or successors of a Kuwaiti author do not publish or republish his work the Minister of Information is entitled. The mass media may publish or broadcast. to request them to publish the work. lectures and discussions given at public sessions of the National Assembly and other public forums and at scientific. an author may not prevent the presentation or performance of his work if this takes place privately and does not generate any income. his share in the work passes equally to his co-authors unless there is a written agreement to the contrary. Rights of author’s heirs and successors An author’s heirs are entitled to exploit his work to the same extent that he is. provided the author has not entered into a written contract with a third party for the exploitation of his work (in which case the contract must be executed according to its provisions). If within a year they fail to do so. The author may not prevent a person from reproducing his work for private purposes. and may not prohibit its analysis and the quoting of short passages from it for the purpose of criticism. Joint authors Where more than one person has created a work and the share of any one of them cannot be separated out from the shares of the others. Newspapers may use quotations relating to the political.Intellectual Property Rights . In these cases. a reference to the original work and the author’s name must be clearly shown. . The author’s heirs or successors have a right in such a case to fair compensation. If one author of a joint work dies without an heir or executor.

publish or distribute them without permission in writing from the person or persons he photographed unless it is agreed otherwise in writing. in these cases the photographs may not be shown if they would impair the honour. A person who takes photographs that show people is not entitled to show. reputation or dignity of the subject or subjects. and any disputes arising among the authors on this matter must be referred to court. each of them is entitled to exploit the part he has contributed provided (a) this would not affect the exploitation of the whole and (b) it has not been otherwise agreed in writing. unless there is a written agreement to the contrary. The subject may permit newspapers. However. magazines and similar media to publish the photographs even if the photographer does not permit this. But he may not dispose of this part as the basis for another musical work unless he and the composer agree in writing. including drawings and carvings. but without prejudice to the right of the lyricist. The provisions concerning photographs apply to all pictures of people and objects. Photographs The author of a photographic work cannot prevent others from taking new photographs of the same subject even if these photographs are taken in the same way and in the same general circumstances as the first photographs. each of the joint authors has the right to take court proceedings and to file a case to claim his share of any compensation for damages resulting from such infringement. Where their rights are infringed. lyricists and choreographers The composer of a musical work that includes lyrics is alone entitled to license the public performance or the execution. In the case of joint works such as musical plays and similar works. Musicians. The lyricist has the right to publish his own part. publication or reproduction of the whole joint work. the designer of the movements (the choreographer or director) is entitled to license the public performance of the whole joint work or its execution or reproduction.130 Business Laws rights except by unanimous agreement of all the joint authors. If the part made by each author in a joint work can be separated out. But obtaining permission is not necessary where photographs depict accidents that occurred publicly or where the subjects are public officers or well-known personalities or where publication is permitted by the authorities in the public interest. The composer has the right to dispose of his part but only .

the composer. the person who adapted the literary part of the original work upon which the work is based so as to make it suitable for the work: 3. in spite any objection from the composer or the author of the previous work from which the work is derived and provided the rights of the objectors in the work are not adversely affected. 3 and 5 above) together have the right to display the work prepared for cinema. and 5. 2. The producer of a motion picture or a work prepared for radio or TV is the person who is responsible for its completion or who provides the author of the work with the material necessary to complete the work. he is not entitled to prevent the other participants from using the part which he has already completed. The author of the literary part of the work (person 2 above) and the composer (person 4) have the right to publish their parts of the work in another manner unless agreed otherwise in writing. Sundry A collective work is a work created by a group under the direction of natural person or a corporate body in which the work of each participant . radio and TV The following persons are considered to be partners in the creation of a movie or a work for radio or TV: 1. 4. radio or TV. provided he exercised actual control over the work and made a positive contribution to the intellectual effort involved in creating the work. or is not able to do so due to circumstances beyond his control. 2. the author of the previous work is considered a partner in the new work. provided the music was created specifically for the work. Where one of the participants does not complete his part. Works prepared for the cinema. the director. the writer of the dialogue. The producer is considered the publisher of the work and has all the rights of a publisher. He may be a natural person or a corporate body. The author of the scenario and the person who adapted the literary work and the author of the dialogue and the director (persons 1. he is considered the author of the portion he has completed and has proportionate rights in that part. However. Where the work has been derived from another previous work.Intellectual Property Rights 131 provided it will not be used for a work similar to the joint work unless otherwise agreed in writing. the author of the scenario or the owner of the written idea of the work.

request the Court of First Instance to withdraw his work from circulation or have it amended. whether in whole or in part. However.132 Business Laws can neither be separated nor distinguished. otherwise the judgment will have no effect. However. a temporary injunction against the offender to prevent the breach continuing. the author’s rights are attributed to the creator unless an agreement in writing provides otherwise. its objective. The author cannot dispose of certain of his rights. Where a work is created for a natural person or a corporate body. To be valid. Civil remedies for breach An author whose rights are being breached may obtain. This order will only remain effective provided the author files a . and any agreement to do so is void. and the period and place where it can be used must be clearly specified. Where it is found that an agreement to dispose of a right is unfair to the author. It is his right to decide whether his work should be published and the manner in which it is to be published. the court. from a judge. the assignment of a particular right does not give the assignee the right to exploit any of the author’s other rights. Disposal of rights An author may assign rights to exploit his work to a third party. the author must refrain from doing anything that would materially impair the use of the assigned right. or where a work does not bear the author’s name. But he has to pay the transferee of these rights a fair compensation. Nor may an author dispose of his total future intellectual output. or where it becomes so as a result of circumstances arising after the date of the contract. the publisher whose name is registered on the work is considered as being authorized by the author to exercise the author’s rights unless the contrary be established. once a right is assigned. The person who directs the creation of this work and who organizes it as a compiled work is the only person entitled to exercise the author’s rights. the disposal must be in writing and the right being assigned and its extent. taking the circumstances into account and after balancing the interests of both parties. which must be paid within the time specified by the Court. if serious reasons arise. Where the author has disposed of his rights to financially exploit his work he may. As consideration for the disposal of a right. the author may accept royalties or any other form of recompense. may rule that part of the net profit resulting from the exploitation of the work be paid to the author in addition to the agreed amount. Where a work is published under an assumed name.

Where the accused has a previous conviction for a similar offence within five years prior to the date of judgment. or (d) removes or participates in the removal of a property right that regulates or limits public access to the work or its performance or transmission or its recorded material is liable on conviction to imprisonment for a maximum of one year or a fine of KD 500 or both. Its staff have the right to enter premises where works subject to . Where infringement of one of his rights is proved in court. the court may also increase the gaol term and fine by up to 50 per cent and may also order the closure of the premises used to commit the crime for a maximum of six months. Enforcement The Ministry of Information is charged with enforcing the provisions of the law. the court cannot order the destruction or confiscation of a building to preserve the rights of an architect whose design has been used unlawfully and it would seem that the architect is only entitled to monetary compensation. and all the tools used to publish it unlawfully provided they are only suitable for publishing the work. The court may also order the confiscation of all copies of the work. Criminal penalties Any person who: (a) infringes an author’s right to decide whether his work should be published and the manner in which it is to be published or to exploit his work financially or to have his work attributed to him. The court may also order the destruction of unlawfully published copies of the work. the author is entitled to compensation. or (b) sells any imitated work or offers it for sale or circulates or broadcasts it to the public in any manner or brings it in or takes it out of the country. The court may also order its judgment to be published in one or more newspapers at the expense of the convicted party. However. and also the destruction of the materials used for publishing it provided these materials cannot be used for another work.Intellectual Property Rights 133 court case against the offender within eight days of obtaining the temporary order. or (c) discloses or facilitates the disclosure of computer software before it is published.

Pirates do not normally keep records of the copies they make. They can bring the police with them. Unfortunately. ie where the violation is a second offence within five years. and it does so when complaints are lodged. as this requires the submission of documents detailing such losses or the gains made by the illegal copying. . music and software continues but little reduced from what it was when the law was first implemented. However. ie demonstrating to the court the losses suffered by the plaintiff due to illegal copying. But this does not affect the people who actually make the pirate copies.134 Business Laws the provisions of this law are dealt with to search for violations. Offended US citizens could complain to their embassy. which would mean examining the records of the defendants. Practical points The Ministry of Information does indeed send its staff around Kuwait checking shops and offices for breaches of the law and does take action when illicit copying is found. The Municipality has the power to remove street vendors and confiscate their wares. the Minister of Information may order the closure of that premises until the public prosecutor or the court allows the premises to be reopened or until the court case has been decided. the resources available are totally inadequate and the sale of pirated films. the assessment of actual damages has proved difficult. Where a violation may result in the closure of the premises. which is usually quick to lodge an official complaint where an offence is ongoing. Several foreign businesses have been successful in bringing court cases against local pirates under the law and have been awarded compensation.

5 Industrial Law There are several laws that regulate industrial activities in Kuwait. implementing projects to support industry. . Kuwait Municipality. the Public Authority for the Environment. . Finance. and four members from the industrial sector (including a representative from the Kuwaiti Industries Union) nominated by the Kuwait Chamber of Commerce & Industry (KCCI). . preparing infrastructural plans for industrial areas. The Public Authority for Industry The PAI consists of 14 members drawn from a wide cross-section of commercial life: a Director-General and one representative each from the Ministries of Commerce & Industry. The Industrial Law The Industrial Law of 1996 replaced the old 1965 Industrial Law. and Social Affairs & Labour. Planning. MCI MR 158 of 1995 regulating industrial consultants and feasibility studies.2. . . proposing sites for industry and industrial services. and (b) to supervise industrial activity. and the Industrial Bank of Kuwait. The Authority’s specific responsibilities are very wide and include inter alia: . . The Environment Protection Law (Law 62 of 1980). Law 21 of 1995 establishing the Public Authority for the Environment. It came into effect when the Public Authority for Industry (PAI) was established in January 1997. Energy. devising an industrial development plan for Kuwait. . These include: . The Industrial Law (Law 56 of 1996). The statutory aims of the PAI are: (a) to promote and develop industry in accordance with the Government’s economic policy objectives.

assembling. maintaining the cleanliness of public areas around industrial sites. inspecting industrial firms and installations. . ensuring compliance with regulations to protect the environment. Expected to be selffinancing. approving the designs of industrial plants and industrial service installations. The PAI is an independent body that operates under the supervision of the Ministry of Commerce & Industry (MCI). An industrial firm is any firm whose main objective is to transform raw or primary materials into finished or semi-processed goods. . or to transform intermediate products into fully manufactured goods. supervising the enforcement of product specifications. separating. and collects rents on industrial sites and fees for managing industrial areas. Definitions All individuals and corporate bodies who own or manage industrial firms in Kuwait or who carry on industrial or vocational trades are subject to the Industrial Law. All departments within the MCI that were once concerned with industrial matters have been transferred to the PAI. entering into contracts for the use of industrial plots and industrial service sites. . devising rules and procedures for the grant and cancellation of industrial licences. . allocating industrial plant and industrial service sites. blending. Industrial processes include mixing. . filling and packing or encasing products. re-forming. . . conducting studies into industrial activity. devising and implementing safety measures in industrial installations and areas. . and . it charges for the services it renders. and as to how local industry can best be supported and domestic products protected. issuing building permits for industrial plants and industrial service installations.136 Business Laws . . . operating and maintaining industrial sites and service areas. The functions of the now defunct Shuaiba Area Authority and the management of other existing industrial areas have also been transferred to the Authority. Industrial licensees and those with vocational trade licences (such as industrial craftsmen and artisans) must be registered with the Authority. . developing. forming.

and confirmation that the project will comply with all regulations governing the protection of the environment and public security. however. evidence that the products to be made will conform with the standard specifications for those products. though the PAI may lay down the elements that must be discussed in any particular feasibility study. The study must discuss the project’s source of raw materials. may now obtain industrial licences under the free trade zone rules and the new foreign direct investment law. a feasibility study. nor may it merge with another firm or be divided into several projects. capacity. a licence must first be obtained from the PAI. costs of production and labour needs. An existing industrial firm may not alter its size. In practice the contents required follow normal commercial and industrial practice. As a general rule. Individuals or companies from other GCC states may also be granted licences provided there is an agreement to this effect between Kuwait and the state concerned. . production processes or location. These licences are given for specific industrial ventures and are additional to any general licences a firm may or must have. . local and overseas marketing possibilities and the amount of capital needed. Both industrial service firms (such as repair shops) and individuals (such as industrial craftsmen and artisans) are subject to the Industrial Law. proof of membership of the KCCI. unless a permit to do so has been obtained in advance from the Authority. . industrial licences are only granted to Kuwaiti individuals or companies. An analysis of a project’s environmental impact is always required.Industrial Law 137 An industrial or vocational trade encompasses any activity connected with production or maintenance where manual and technical skills are used in conjunction with simple tools or machinery to produce a result that is not standardized. An application for an industrial licence must be made on the prescribed form and must be supported by: . Feasibility studies and industrial consultants A comprehensive feasibility study is necessary to support an application for an industrial licence. Foreigners. It is a sine qua non that to gain a permit the proposed industrial project is shown to be technically and economically feasible. . Industrial licences To establish an industrial firm or industrial services firm.

138 Business Laws Under the MCI’s Ministerial Resolution 158 of 1995. If a project is rejected as not being feasible. the study may not be reworked and resubmitted. To avoid rejection of a study. however. It also considers the government’s economic and social policy objectives. an industrial feasibility study can only be submitted through an industrial consulting firm that is registered with the Industrial Development & Studies Department (IDSD). A foreign industrial consultancy may only carry out a local assignment through a Kuwaiti industrial consulting office with which it has an agreement and through which it has been registered with the IDSD. studies submitted to the PAI become the property of that Authority. In addition. the PAI takes the export potential of the project or the likelihood of import substitution into account. A fresh application may also be submitted following rejection. the reasons must be stated. A study undertaken by foreign consultants may only be submitted through a Kuwaiti industrial consulting office and must be accompanied by a certified letter stating that it was conducted jointly by both offices. a decision on the acceptability of a project must be made within 60 days of the feasibility study being submitted. and the consulting firm’s office must be equipped with an adequate information system and database for collecting industrial and other relevant statistics and must be staffed with competent full-time professionals. it is usual for the project to be discussed in depth with PAI officials during the conduct of the study so that feedback on the acceptability of particular aspects may be incorporated in the final report. Where an application is rejected. In this regard the role of local consultants may be crucial. and if a decision is not made within 60 days then the application is deemed to have been rejected. may use the services of specialists on a subcontract basis as necessary. . The decision whether to grant or refuse an application must be made within 60 days. To register. When deliberating the matter. the firm. in the case of a company. or with suppliers or manufacturers of equipment or machinery. Issue of industrial permits The issue of an industrial permit is subject to the PAI’s recommendation. An industrial consulting firm may not have any direct or indirect relations with contractors. the owner of the firm must be a Kuwaiti or. An appeal against a rejection may be made within 30 days of the decision or the lapse of the 60-day period. Hint for entrepreneurs . must be subject to the provisions of the Commercial Companies Law. It should be noted that industrial consultants who prepare a feasibility study are required to represent the project investors at the PAI and are responsible for the data shown in the study. Under MR158 of 1995.

they have the right to seize records. unless a reasonable cause acceptable to the PAI is shown. or . the disposal is suspended until the matter is resolved. the land on which the industrial installation is sited is used for a purpose other than its assigned purpose. production processes or location without obtaining a permit to do so. The resolution must be published in the official gazette. is liable to a fine of up to KD 3. Disposal of industrial interest The disposal of an industrial firm or industrial services company.Industrial Law 139 Where an application for an industrial permit is approved. whether by sale. An objection may be raised within a specified time of publication. it is established that the licence was granted on the basis of false information. the PAI will specify the conditions under which it is granted and these conditions are recorded on the licence. or has assigned the licence to a third party without observing the required procedures. Where it appears that licensing or other regulations are being breached. the licensee has violated any of the conditions of the licence. The disposal must be published in the official gazette. succession or by renting it. An appeal against cancellation can only be made to the board of directors. capacity. In addition.000 and/or imprisonment for up to three years. assignment. or . A firm whose licence has been cancelled may . the industrial firm or the head office of an industrial services firm may be closed if the required licence is not secured. Any person who establishes an industrial firm without a licence. whose decision is final. or who alters its size. either by agreement or by a court ruling. They always include a time limit within which the project must be established and a requirement to join the Kuwait Industries Union. is not valid and enforceable against a third party until the disposal has been properly entered on the industrial licence. A licence can be cancelled only by resolution of the board of directors of the PAI. Withdrawal of industrial permits Officials from the PIA have the right to enter the premises of industrial firms and industrial service companies for purposes of inspection. construction or production does not begin within the time-period specified on the licence. Licensing conditions cover a variety of factors. Where an objection is raised. or . An industrial permit may be cancelled if: .

equipment and spare parts. until it has been entered in the Register. and preference in government purchases. The 1996 Law does not specifically mention this incentive.140 Business Laws apply to have the licence reissued once the reasons upon which the cancellation was grounded have been rectified. Industrial privileges and incentives The extent to which industry is encouraged in Kuwait is generous. Exemptions from fees and charges Upon the recommendation of the PAI. . the MCI may: . Incentives include exemptions from fees and charges. Under the Industrial Law of 1965 a new industrial firm could be exempted from existing and future taxes (including income tax) for up to 10 years. However. low-cost land. exempt industrial firms totally or partially from all or some existing fees and charges for a fixed period or periods. tariff protection. and . infrastructure and utilities. Industrial Register The Industrial Register is maintained by the PAI. . new industrial firms should be able to negotiate a tax-free holiday as these are now available under the new direct foreign investment rules and companies operating in Kuwait Free Trade Zone are tax exempt. An industrial firm may not commence production. exempt machines. All industrial firms must be entered in this register and registration certificates must be renewed from time to time. raw materials and semi-processed goods or intermediate products needed for production from import duties. Registration includes details of the firm’s industrial licence and any subsequent amendments to the licence must also be entered in the Register. The detailed information contained in the Register is confidential.000. nor may an industrial services firm commence business. soft loans. exempt exports of locally made products from export charges and fees. A civil servant who divulges information available to the PAI about an industrial firm or industrial services company is liable to imprisonment for up to one year and/or a fine of KD 1.

type and quality. as most things in Kuwait are negotiable. the extent to which privileges and incentives. Utilities such as gas. Tariff protection The rate of customs duty on imports that are similar to locally produced goods may. infrastructure and utilities Under the Industrial Law of 1965 firms could be granted plots of land upon which to build a factory and related structures subject to the agreement of the MCI. . Concessionary finance for industrial purposes The PAI is obliged to arrange financing and credit facilities through banks and other institutions under special or easy terms in accordance with the government’s economic development plan. however.750 a square metre per annum. Free infrastructural facilities are also provided or grants are given where industrialists have to build their own access and other facilities. The government is anxious to encourage inward investment and.per square metre per annum for 5. however. . The separate system of preferential tariffs that used to be applied to all locally made products is gradually being phased out as the GCC’s customs union comes into effect. This privilege is not specifically mentioned in the new Industrial Law of 1996. be increased for a certain period of time by decree.000-squaremetre plots in Shuaiba. in financial projections. and the interests of consumers are not adversely affected. electricity and water are also provided in industrial areas at concessionary rates. In practice. may be granted is usually flexible. which may be as low as a nominal KD 0. land for industrial use is granted in industrial areas at concessionary rents. The availability of these tariffs will be affected as Kuwait comes closer to joining the World Trade Organization (WTO). Low-cost land.Industrial Law 141 Hints for entrepreneurs . where practicable. Subject to what is allowable under the Industrial Law. on the recommendation of the PIA. Gaining these privileges. provided the local products being accorded this protection are satisfactory as to quantity. The PAI is currently (January 2004) charging KD 3/. may take some time as they may require Council of Ministers approval. privileges should be discussed with the PAI when the feasibility study is being researched and incorporated. This protection may be extended where the economic circumstances of the local industry concerned so require. such as tax and duty exemptions and tariff protection.

provided these are equivalent in type. though it is up to the IBK to determine the terms and conditions of its loans. while the rates on loans . the PAI is expected to propose that a fund to support exports be established. but it may also grant loans to existing industrial firms for the purpose of expanding capacity or product range. The minimum loan is KD 50. Contributions to export drive The PAI is obliged by law to support Kuwait’s export drive for nonhydrocarbon industrial products. The PAI may recommend that particular industrial service firms that have been established through its support be given work by public authorities and finance on easy terms. Locally made products also have a pricing preference. an industrial loan from the IBK is about 50 per cent of the total fixed assets and pre-operating expenses of a project.142 Business Laws The financing that can be arranged includes long. especially by assisting industrial firms in their foreign marketing. currently 10 per cent. government departments and other public institutions are obliged under the Industrial Law to give preference to items made locally.000 and the maximum is 10 per cent of the IBK’s capital base. when tenders for public sector contracts are being evaluated. In the near future. In December 2003 the National Assembly was considering a proposal to increase this 10 per cent pricing preference to 15 or 20 per cent. Preferences in government contracts When purchasing supplies of materials and products. quality and price to foreign products. The IBK’s interest charges on loans for new projects are usually a few points above the Central Bank’s discount rate. or for replacing worn-out plant and machinery. Other incentives The 1996 Industrial Law provides for the establishment of subsidies for national industries and production incentives to encourage creativity and exports through subsidiary legislation. The Bank usually requires industrial loans to be secured by a mortgage on real estate or on fixed assets located on land and/or by a pledge of commercial assets. Soft loans from the IBK The Industrial Bank of Kuwait (IBK) is primarily concerned with financing new industrial enterprises.and short-term loan financing as well as equity participation from conventional and Islamic institutions. Industrial loans are usually given at concessionary rates of interest. On average.

. These ratios are also used when determining a client’s repayment schedule.5 per cent. and especially its ability to service its new and ongoing debts. are examined. 4. Commitment fees are 1 per cent.5 per cent or the Central Bank’s discount rate plus 2. and 5. The PAI may take the following actions against a firm that violates the provisions of the Industrial Law or any of the regulations issued under it: 1. However. Industrial loans are usually repaid in half-yearly instalments. though this may vary depending on the forecasted cash flows of the project. notification of breach. suspension of activities. The IBK uses normal commercial criteria when assessing a request for an industrial loan.5:1. to be at least 1. The purpose of industrial loans is to enable an industrial enterprise to purchase long-term assets and these funds cannot be used as working capital. partial or total deprivation of privileges. Regulatory compliance Industrial firms granted licences and privileges are obliged to comply with certain regulations. The commercial and financial viability of the project. 2. to be provided by the government. Loans for working capital must normally be obtained from the commercial banks. The IBK usually requires main accounting ratios. warning. The grace period begins to run after the pre-operations period. such as tariffs. cancellation of licence. Interest on delayed repayments is the lower of 9 per cent or the discount rate plus 2. 3. The IBK may also provide finance in the form of an equity participation in a new industrial company. ie the time during which a factory is being constructed or machinery sourced and installed. or from the IBK’s Corporate Finance Department.Industrial Law 143 to expand capacity or replace equipment are usually 1 per cent higher. Loans to restructure the financial position of industrial firms are usually charged at the lower of 7. the debt service ratio (ie the number of times the firm’s net operational cash inflows cover repayments on all its long-term debt) and fixed assets cover (ie the extent to which the firm’s long-term debt is covered by its fixed assets). the IBK allows an initial grace period of 12 months.5 per cent. though the Bank will also take into consideration any protective measures. such as the current ratio. which provides a full range of working capital facilities.

If the board does not determine the appeal within 60 days then the appeal is deemed to have been rejected. the PAI may reduce the percentage or exempt a firm from the requirement to employ Kuwaitis. whose decision in the matter is final. It must also supply the PIA on request with any data. and the reasons for the suspension must be stated.144 Business Laws The firm may apply for its privileges to be restored only after it has rectified the violation. Where an industrial firm or industrial services company suspends all or part of its activities. Kuwaiti-ization and personnel development Industrial firms and industrial service companies are obliged. In practice the percentage of Kuwaiti staff members in an industrial company is seldom more than 3 per cent. Product standards Industrial firms are required to ensure that their products comply with the criteria issued by the Specifications and Standards Department at the MCI. Compliance reporting An industrial firm or service company must submit its annual financial statements to the PIA. This machinery and equipment may not be disposed of or used for any purpose except that for which it was originally imported. 4 and 5 may be lodged with the board of directors of the PAI within 30 days and the appeal must be determined by the board. information and statistics in the form required by the Authority. efficiency studies. Appeal against actions 3. But where sufficient Kuwaitis are not available. Industrial firms are also obliged to participate in vocational training programmes. . under the Industrial Law. Materials imported duty free An industrial firm importing machinery and equipment exempt from duty must keep records of these imports in the form prescribed by the PAI. and industrial research programmes conducted by the PAI. The proprietor or manager of an industrial firm or industrial services company that disposes of machinery. equipment and/or materials imported wholly or partially duty-exempt contrary to the purposes for which the exemption was given is obliged to pay the customs duties originally exempted and is liable to a fine of up to three times those duties. the MCI and PIA must be notified within 30 days. within 60 days of the appeal. to ensure that at least 25 per cent of their staff are Kuwaiti. The firm may also be deprived wholly or partially of its industrial privileges.

Industrial Law 145 Any person in charge of an industrial firm or industrial service company that adulterates the quality of its products. and paper. All members of the PAE’s nine-member board of directors are professional environmentalists. In addition. The Council’s brief is wide and includes creating general policies concerning the environment. contingency planning for environmental crises. The PAE has a Higher Council consisting of members from the Ministries of Health.000 and/or imprisonment for up to three years. The firm is also liable to a fine equal to the benefit obtained from the adulteration or deviation from standard. the firm may be shut down temporarily or its licence may be cancelled. Shuaiba Industrial Area. Commerce & Industry. Shuwaikh Industrial Area tends more to light assembly-type industries such as furniture. General legislation to protect the environment has only been in force since Law 62 of 1980 was promulgated. Environmental regulations Industrial plants and factories may only be established in designated industrial areas. is liable to a fine of up to KD 3. the PAI also issues regulations affecting industries in particular areas. The board has the power to demand information from any place where an activity that might carry a risk of pollution is being carried on and . Public Works. Before a development project can be approved. its environmental impact must be studied and the results must be deemed acceptable by the board. is for heavy industry and the area includes plants turning out bottled gases. eg there is a code of practice and environmental guidelines that govern the quality of air emissions and waste water by factories in the Shuaiba Industrial Area. The formulation of policies and regulations to protect the environment is the responsibility of the Public Authority for the Environment (PAE). The board has the power to impose particular rules to protect the environment on any industrial site or industrial activity where there is risk of pollution. or produces goods that do not comply with standard specifications and measurements. Detailed regulations have been issued under this law mainly by subsidiary legislation. planning environmental protection. assembly and repair shops. as well as Kuwait’s refineries and petrochemical factories. lime. Planning. chaired by the first deputy prime minister. In addition. and defining pollutants and drafting regulations to protect the environment. pre-cast concrete. which was established under Law 21 of 1995. cement. iron and steel products. The PAE has its own environmental inspection and control centres and laboratories. for example. insulating materials. and Energy plus three appointed non-ministerial environmental experts. Different industrial areas cater for different types of industry. glass and plastic products.

The court may also order the closure of a place of work that is the source of pollution for up to three months.000 and imprisonment for up to one year. The court may order the confiscation of things causing environmental damage and order the offender to pay the costs of rectifying the damage.146 Business Laws any person who refuses to provide the information demanded is liable to imprisonment for up to six months and a fine of not more than KD 500. is liable to a fine of up to KD 10.000 and/or imprisonment for up to three years. . Authorized staff of the board have the right to enter any place that is a source of pollution for inspection purposes. that carries a risk of pollution. Anyone who fails to carry out the directions of the board with regard to the rules it has imposed concerning a particular site or activity. and anyone who prevents them from doing so is liable to a fine of up to KD 1. for a repeat offence. or prohibit the use of any tool or material. The board has the power to suspend any activity. or who continues to carry out an activity prohibited by the board. Detailed regulations are usually issued as ministerial resolutions. or for longer if a court order is obtained. Safety at work The Private Sector Labour Law lays down general rules governing safety at work and working conditions. initially for up to a week but this may be extended for a further week. the court may order the cancellation of a firm’s industrial or commercial licence.

the Labour Law for Government Employees regulates the employment conditions of civil servants. so this chapter only reviews the regulations governing employment in that sector. . Persons in domestic service. in which case Kuwaiti law applies. and the Labour Law of the Private Sector governs employment conditions in private businesses. unless the employer has a branch in Kuwait that concluded the contract with the employee. the Labour Law of the Oil Sector protects those who work in the oil industry. A fixed time may not exceed five years. Expatriate businessmen who are employees in Kuwait are most likely to be in the private sector and foreign businesses operating in Kuwait will definitely be part of the private sector. such as maids and chauffeurs.6 Labour Laws There are three main legal codes governing labour conditions in Kuwait: . Contract of employment An employee’s terms of service are contained in his or her employment contract.2. though statutory benefits are much more generous in these sectors. persons on temporary contracts of less than six months are excluded from the scope of the private sector labour law. The rules in the civil service and the oil sector are similar. . . which may be for a fixed time or may be indefinite. Labour regulations in the private sector are enforced by the Ministry of Social Affairs & Labour (MSAL). Where an employer’s head office is outside Kuwait. the labour law of the country where the employer has its head office governs expatriates working in Kuwait. The scope of the private sector labour law Along with domestic servants. are not covered by any particular code and must rely for protection on general principles of law and their employers’ sense of equity.

. Note for employers . Employers who fail to do so face a fine equal to the cumulative arrears of salaries not paid. In either case. An employee may not be put on probation more than once by the same employer. If the contract is in writing. A translation into another language may be attached but should there be a discrepancy between the two language versions. Piece-workers and those on hourly or weekly wages must be paid every two weeks. Probation An employee may be hired on probation for up to 100 days only. . and if a clause in his or her contract gives an employee a lesser benefit than his or her right under the law. Salaried employees must be paid at least once a month. the date of appointment. Where a contract is verbal in the event of a dispute either side can use circumstantial evidence to prove what is in it. though accrued indemnity but not holiday pay must be paid. it must be in Arabic. Payment of a bonus is obligatory if it is stipulated in the contract of employment or in the by-laws of the firm or it has been paid in the same amount regularly every year. Under regulations implemented in 2003 employers must now pay all employees (including unskilled labourers) by lodging their salaries into their personal bank accounts. and its duration (if fixed). total remuneration includes basic pay. Remuneration and deductions There is no minimum wage. it must show at least: (a) (b) (c) (d) the remuneration payable. gratuities from third parties and allowances from which the employee benefits (such as housing allowance). a description of the nature of the job. he or she is entitled to the minimum benefit specified by law for that particular term. incentives. As legally defined. Minimum terms of service The labour law specifies the minimal benefits below which terms of service may not fall. obligatory bonuses.148 Business Laws An employment contract may be verbal or in writing. the Arabic text is authoritative. but excludes allowances on account of expenses and profit shares. During this time he or she may be terminated without notice. commissions. rather than paying them in cash as was previously the norm (art 15 of Law #19 of 2000).

The traditional day off in Kuwait is Friday. Employees may not be obliged to buy products made by their employer. Public holidays An employee has a right to eight public holidays a year with full pay as follows: one day on Hijri New Year’s Day. These standard hours may be increased or decreased by the MSAL in certain cases. and one day for National Day. the deduction is limited to 25 per cent of his or her salary. Rest periods are not included in the calculation of working hours. the outstanding salaries and termination benefits of his or her employees must be paid before his or her other creditors.Labour Laws 149 An employee’s total remuneration must be used when calculating terminal indemnity or compensation on account of injury. but this is not a legal requirement. Persons working for a subcontractor who has failed to pay their salaries may demand payment from their employer’s superior contractor to the extent that the latter owes their employer money for work done. two days each for Eid Al-Fitr and Eid Al-Adha. Where an employee is paid on a time basis the last salary payable is used for these calculations. When an employer goes bankrupt. Holidays An employee is entitled to one full day off a week without pay. such as hotel workers. Where an employee’s salary is attached on account of debts to third parties. If they owe their employer money then not more than 10 per cent of their salary may be deducted to pay off their debt and they may not be charged interest. provided he or she has completed one year . Working hours The working hours of an adult are limited to 8 hours a day and 48 hours a week. Annual leave An employee with up to five years of continuous service is entitled to 14 days’ leave a year on full pay. but if he or she is paid on a piece-work basis then the average wage paid for his or her actual work during the previous three months is used. Liberation Day is not yet a statutory holiday in the private sector. one day on Ascension Day. A rest break of at least one hour must be allowed after 5 consecutive hours of work. one day for the Prophet Muhammad’s Birthday.

an employee is entitled to sick leave for: . Overtime An employee may be required to work overtime provided it is necessary and the employer’s order is in writing. Overtime rates are: . Female employees A woman performing the same work as a man must be paid equal remuneration. . and next six days without pay. and 180 hours a year. and payment for the accumulated leave must be calculated on the basis of the last salary payable on the date of termination. and twice the basic hourly rate for all hours worked on public holidays. . . . . If an employee’s services are terminated then he or she is entitled to a cash payment in lieu of accumulated leave. An employee has the right to refuse to work overtime. next six days on three-quarters pay.25 times the basic hourly rate for excess hours worked on ordinary days. 6 hours a week. 1. next six days on half pay. 1. Overtime may only be worked on 90 days in a year and is limited to 2 hours a day. and 21 days after more than five years of continuous service. next six days on one-quarter pay. Official holidays and days of sick leave may not be counted as part of annual leave.150 Business Laws of service. The standard working hours for women are the same as for men. irrespective of the number of years of leave due. . The employer has the right to fix the date of leave.50 times the basic hourly rate for all hours worked on the weekly day off. Sick leave Subject to a satisfactory medical report. the the the the the first six days of illness on full pay. . Employees must be given their holiday pay before they go on leave and the last salary payable before the holidays must be used to calculate the amount due. This entitlement is the total entitlement in one year and not per period of illness.

Thereafter she may be absent from work without pay for up to 100 consecutive or nonconsecutive days. And a woman who marries while she is an . Night-time working hours may be extended by the MSAL during Ramadan and on Eids and other public holidays. or who die are entitled to full indemnity. subject to a limit of one year’s remuneration. airline and tourist offices. but the total indemnity is limited to one and a half years’ remuneration. They may work up to midnight in cooperative societies and public utilities. One who resigns with between 5 and 10 years’ service is entitled to 50 per cent indemnity. pharmacies. One who resigns with more than 10 years’ service is entitled to full indemnity. hotels. In both cases part-years are calculated pro rata. Termination benefits When his or her employment is terminated. banks and offices. beauty salons. The annual leave entitlements of a woman who makes use of her maternity leave privileges in any year are forfeit on a day-per-day basis until her annual leave entitlement for that year is extinguished. Maternity leave A woman is entitled to maternity leave to a maximum of 30 days prior to delivery and 40 days after delivery on full pay. restaurants. nursery schools. Pay per day is calculated by dividing the monthly salary in the final year of employment by 26. For those paid monthly. provided she presents a medical certificate stating that she is ill as a result of gestation and parturition. homes for the handicapped. theatres and Entertainment City. the indemnity is 10 days’ remuneration for each complete year of service for the first 5 years. and 15 days’ pay for each complete year beyond 5 years. who are disabled at work. Employers are obliged to arrange transport for women working at night. daily or weekly basis. tailoring shops. an employee is entitled to a lump sum payment called termination indemnity. termination indemnity is 15 days’ remuneration for each complete year of service for the first 5 years and 30 days’ for each complete year beyond 5 years. An employee who resigns with less than 5 years’ service is not entitled to indemnity. But employees who are made redundant (irrespective of length of service).Labour Laws 151 Women may not work at night (7 pm to 6 am) except in clinics. The monthly salary used to calculate daily pay must include the elements mentioned under ‘total remuneration’ above. For piece-rate workers and those paid on an hourly. who reach retirement age.

. only one punishment may be inflicted for each act of misbehaviour. . if the employee: . in lieu of notice. An employer has the right to terminate an employee without notice. Penalties must be progressive and are limited as follows: . a penalty cannot be imposed for any act once 15 days have elapsed since the act was proved or since the usual date for the payment of wages. Where it is the employee who quits.152 Business Laws employee and who resigns within six months of marriage is entitled to full indemnity. compensation is limited to the wage the employee would have earned from the day of termination to the expiry of his or her contract. Termination Where an employment contract is for a fixed period. Where an employment contract is for an unlimited period. a pay deduction cannot exceed 5 days’ pay a month. either party may terminate it by notifying the other in writing at least 15 days prior to termination (where the employee is paid monthly) or 7 days before termination (where the employee is paid more frequently). Miscreant employees may be penalized provided the employer issues regulations specifying the acts that are punishable. and without paying indemnity and compensation. Either party may pay the other 15 or 7 days’ salary. compensation is limited to the employer’s actual loss. a suspension from duty cannot exceed 10 days a month. . Disciplinary notices and penalties All employee-related regulations must be issued as circulars or bulletins in Arabic. Where termination is made by the employer. . as appropriate. . a penalty cannot be imposed for an act committed outside the workplace unless it was related to work. it is deemed to be renewed indefinitely under the same terms and conditions. repeatedly disobeys the instructions of the employer. it terminates automatically at the end of the period but if both parties then continue to implement it. commits a wrongful act resulting in serious loss to the employer. If one party terminates the contract before the end of the fixed period (and there is no clause in the contract to cover this) then the party terminating the contract must compensate the other. and .

and place them visibly within reach of employees. the new owner must settle the indemnity. . Where the firm is sold or inherited. . fails to carry out his or her obligations under the terms of his or her contract or the labour law. or to continue in work would endanger his or her health. adequately lit and in sanitary condition. . An employee’s contract is automatically terminated if his or her firm goes into liquidation or merges with another. An employee has the right to quit without notice before the expiry of his or her contract. antiseptics and bandages. In all these cases his or her indemnity must be paid. though the employee may continue in service with the new owner while reserving his or her right to indemnity for his or her previous service. the employee has been assaulted by the employer or his or her agent.Labour Laws . . or the firm is sold or inherited. well ventilated. assaults a fellow employee. Employers must supply first aid kits containing medicines. has been convicted of a crime affecting honour. and to collect his or her indemnity and not pay compensation. Detailed standards in these matters are contained in resolutions issued by the MSAL in consultation with the Ministry of Health. 153 disobeys his or her employer’s instructions concerning safety at work on a single occasion. or reveals any secrets relating to his or her employment. . . . It may be terminated if he or she fails (without fault) to perform his or her work or he or she exhausts his or her entitlement to sick leave. honesty or morality. if: . . . An employee’s contract is terminated if he or she dies. his or her employer fails to abide by the provisions of his or her contract or the labour law. has used fraud to obtain work. . Health and safety Employers are obliged to take precautions to protect their employees against physical hazards and occupational diseases at work. and in all cases the employee is entitled to his or her termination indemnity. or there is a lockout. has been absent from work for more than seven consecutive days without due cause. the employer or his or her agent at work or on account of work. They are also required to ensure that places of work are clean. commits an act against public morality in the workplace.

stating the period of treatment required. provided they did not injure themselves intentionally or were not guilty of gross malpractice (such as expressly contravening safety regulations). For total permanent disability.000 days’ pay or (b) one and one-third times the legal blood money. The law lays down particular procedures for solving labour disputes. Accidents at work If an employee is injured at work. any disability resulting from the accident and the employee’s fitness to continue in work. it is the greater of (a) 1.154 Business Laws Transport and accommodation Employees who work in areas not serviced by public transport must be provided with suitable transport. Labour relations In Kuwait. it is the greater of (a) 2. they (or their family) will be entitled to compensation even if they were guilty of gross malpractice. A doctor’s report. the formation and activities of trade unions are strictly controlled. During treatment. an injured employee is entitled to full pay for the first six months and half pay thereafter. must be obtained. An . If they work in localities far from populated areas. the employer must report the matter to the local police station and the MSAL.500 days’ pay or (b) the legal blood money (currently KD 10. in any government hospital or private clinic as the employer deems suitable. a person must (a) be at least 18 years of age and (b) have a certificate of good conduct from a competent authority. potable water and the means to obtain supplies. But where their injuries have made them more than 25 per cent disabled or they have died of them. Compensation Employees have the right to compensation for work-related injuries without having to prove that the employer was at fault. at the employer’s expense. until he or she dies or recovers or is proved to be permanently disabled. The injured employee has the right to be treated. Trade unions Only one trade union may be established for workers of any firm or profession and a person may not join more than one union. compensation is calculated as a percentage of what would be due for total permanent disability.000). For partial permanent disability. Compensation varies with the severity of the injury. Where death has occurred. the employer must provide suitable accommodation. To join a union.

Expected changes Regulations under the private sector labour law are issued at fairly irregular intervals. Expatriate members only have the right to delegate one of themselves as their representative to express their views before the executive board. the following procedures are mandatory. The Ministry must call the two parties together and try to settle the matter amicably. If no settlement is reached. the MSAL must refer the dispute to the Labour Court. the official gazette. the evidence of the parties and the Ministry’s own comments. Individual labour disputes The private sector labour law also lays down specific procedures that must be followed by individuals pursuing claims against their employers. The employer (or his or her representatives) and representatives of the employees may appear before this committee to a limit of three representatives each. Labour cases are exempt from the usual court fees but if the employee loses then the court may order him or her to pay a nominal amount on account of costs. . The committee’s decision in the matter is final and binding. along with a summary of the matter. The dispute must be submitted to the MSAL before a lawsuit is started. The time limit for filing cases is one year after employment is terminated.Labour Laws 155 expatriate must also (c) have a valid work permit and (d) have been in Kuwait for 5 consecutive years. within two weeks of being asked by the employee. The case is heard in a summary manner. The right to vote in the general assembly of a union or to be elected to its executive board is restricted to Kuwaitis. Collective labour disputes If a dispute arises between an employer and all or some of his or her employees regarding terms of work. then. If the MSAL fails to settle the dispute within 15 days. it must be registered with the MSAL within seven days. If no agreement is reached then the parties should request the MSAL to intervene. They only become effective when published in AlKuwait Al-Youm. Within three days the court must fix a date for a hearing and notify both parties. it must refer the matter to the Labour Disputes Arbitration Committee in the courts. Direct negotiation must take place between the employer and the employees. If an agreement is reached.

are thus not allowed. The Council has not. and obliges employers in certain industries to insure their workers. In August 2003 the MSAL finally submitted a new draft law to the Council of Ministers. . a reduction of working hours during Ramadan to 36 hours. a doubling of the notice period required for termination from 15 to 30 days. Casual and part-time work. In case of dispute. always seek legal advice. an increase in maternity leave from 40 to 45 days. . Before Kuwait can join the World Trade Organization (WTO). . The draft law also introduces educational leave. It also denies the employer the right to terminate workers while they are on holiday and authorizes the MSAL to set minimum wages for various professions. The International Labour Organization (ILO) has made several recommendations to the government on changing the sponsorship system (see Chapter 6. An employer cannot cancel an employee’s residence unless all dues and indemnities have been paid in full. an increase in public holidays from the present 8 to 12 days a year.156 Business Laws Hints for expatriate employees . . as of the time of writing in late 2003. . It is illegal for a foreigner to work in Kuwait except on a work visa and for their own sponsor. . though widely practised. Amendments to the existing Labour Law of the Private Sector have been discussed ad nauseam for the last several decades. An employer cannot give notice of termination during an employee’s sickness or injury. an increase in sick leave from the present 30 to 60 days in a year. . pilgrimage leave and mourning leave for women on the deaths of their husbands. major changes are required to its labour laws. a provision whereby female employees will have the right to collect their indemnity if they resign within one year of getting married. The bill contains 27 articles and includes the following improvements to the rights of employees in the private sector: . instead of the present six months.1) and proposed alternatives include allowing expatriate employees to sponsor themselves. . an increase in annual leave from 14 to 21 during the first five years and from 21 to 30 days in subsequent years. . . submitted the proposed legislation to the National Assembly. except for government employees who have a permit from the MSAL.

Under the legislation the Council of Ministers is empowered (art 9) to determine the percentage of Kuwaitis that must be employed in various economic sectors by occupation or profession. by issuing the requirements for each sector. which was referred to the Council of Ministers in September 2003. . Companies that hire land from the government will be required to pay an additional annual rental if they do not hire their quota of Kuwaitis (art 8). exceed 10 per cent. One of the criteria for deciding whether a company is eligible for government support. For example. if a company had 100 employees and 10 per cent were required to be Kuwaiti but it was only employing three Kuwaitis. to ensure that a certain percentage of their workforce is made up of Kuwaiti nationals. Companies with fewer than 50 employees are exempt. financial or otherwise. The minimum percentage of Kuwaitis that has to be employed by private firms currently varies from sector to sector. The MSAL then began inspecting company payroll records. oil sector or military contract (art 6). The government began implementing the law in September 2002. is whether that firm is employing its quota of Kuwaitis (art 7). Penalties In late 2003. the Kuwaiti manpower quota system is being enforced as follows: . whether local or foreign. .000. In addition to the fines. a hefty amount. companies that failed to employ the requisite number of employees were being fined KD 100 for every expatriate employee exceeding the permitted percentage. Companies that fail to hire their quota of Kuwaitis cannot be awarded any public sector. The quota of Kuwaitis that must be employed by a company (under current regulations) does not. It is also empowered to decide the fines that will be imposed on employers who fail to hire the requisite number of Kuwaitis. then 70 per cent of its expatriate employees exceeded the permitted percentage and it would have been fined 70 6 100 = KD 7. though it is as high as 39 per cent in the communications sector. .Labour Laws 157 The MSAL’s work plan for 2003 to 2007. contains a proposal to oblige companies with more than 100 employees to establish cre`ches and nurseries for female employees. generally speaking. Local Manpower Support Law Law 19 of 2000 obliges employers.

In January 2004. in order to fund these incentives. but had not done so by January 2004. a proposal was being debated in the National Assembly to reduce the various quotas to a standard quota of 1 Kuwaiti employee for every 25 expatriate employees in excess of 50. The Council of Ministers has the power to increase the costs of commercial and industrial licences.158 Business Laws The fine for providing false information relating to a company’s employees is a maximum of KD 1. The government is also obliged (art 5) to contribute a percentage (unspecified) of the training costs of employees who are Kuwaiti. it is understood that discussions are taking place between the MSAL and the Public Authority of Applied Education & Training (PAAET) as to the nature of work-related courses that will be offered free to Kuwaitis in the near future. These incentives are being partly funded by a 2. certain incentives were introduced in the legislation.5 per cent tax on the profits of companies listed on the Kuwait Stock Exchange. Possible changes The law has been moderately successful in forcing private sector companies to hire nationals but many firms have been unable to hire their quota because of a lack of suitably qualified Kuwaitis. which are due mainly to their expectation of high salaries for moderate effort. The government is to pay citizens working in the private sector social and child allowances (art 3) on the same basis as for their compatriots in the civil service. which can be coupled with up to one year in gaol. Though they have not as yet done so. and also the costs of obtaining work permits for expatriates.000. and to increase the fine to KD 500 for every expatriate exceeding the permitted percentage. Palliatives In order to offset the additional costs Kuwaiti workers impose upon their employers. .

There are three ways in which an unfavourable court judgment may be appealed: . In practical terms. . There are local courts for settling civil and commercial disputes between individuals where the value of a claim does not exceed KD 5. the Courts of First Instance. The legal system The courts are divided into six main divisions: family. arbitration as a means of resolving disputes has long been a tradition in Islamic jurisprudence. These courts are located in the Ministry of Justice building in Kuwait City. including litigation in which a state agency or a public institution is a party. The Civil Court hears disputes between individuals and the Commercial Court considers all commercial matters. However. appeal by cassation. civil. Within the system there are three levels of tribunal: . . and for settling disputes between landlord and tenant. There are also special courts.2. .7 Litigation and Arbitration Kuwaiti courts have the power to decide all cases. it may also avoid harmful publicity. and request for a rehearing. and the Court of Cassation. arbitration may save the time and expense of litigation and. the High Court of Appeal.000. including commercial disputes with the government. . criminal. leases and administrative. . appeal to the Higher Court of Appeal. commercial. ie ordinary courts whose jurisdiction is limited to certain types of cases. which prefers compromise to confrontation. because arbitration is considered a private matter in Kuwait. The Courts of First Instance All cases are first tried in a Court of First Instance in the appropriate division. such as the Labour Court and the Traffic Court.

Court procedures Litigation is governed by Law 78 of 1980. though again the final decision on the facts rests with the judge. a case is not reheard. But there is a Department of Experts whose role is essentially consultative. A request for a rehearing may only be made following a final judgment. But the judge is not bound by the expert opinion he receives. This form of appeal involves the case being tried again in the Higher Court of Appeal and the verdict is final.160 Business Laws All judgments rendered in a Court of First Instance may be appealed to the Higher Court of Appeal provided they are not final. but the right to act on behalf of a client in open court is restricted to Kuwaiti lawyers. The report is sent to the judge. Instead a petition for a verdict to be annulled. on the grounds that it was improperly rendered or that the law was incorrectly applied. is made to the Court of Cassation. If the judge or either of the disputing parties is not satisfied with the report. In financial disputes they normally have an . In some special courts. but not decisions in a Court of First Instance unless they are final. Experts are usually chosen so that their field of expertise is related to the matter in dispute. A request for a rehearing is a petition to have a case sent back to the court where it was originally heard so that mistaken appraisals of fact or law may be corrected. In an appeal by cassation. Cases are heard in public. Proceedings are in Arabic but the courts may hear the evidence of those who do not know Arabic through an interpreter who has taken the oath. but may be held in camera where public order or morality makes this necessary. Unlike in common law systems. All judgments by the Court of Appeal may be appealed by cassation. Parties to litigation may appear in person or they may be represented by a lawyer acting under a power of attorney. An expert in this department reviews the facts of a case as presented by the disputing parties in their memoranda and supporting documents and prepares a report accordingly. such as the Labour or Traffic Courts. it can be referred to a committee of three experts who review the memoranda and documents a second time and produce a majority report. Litigants and witnesses must testify under oath. but the sum awarded is usually converted into Kuwaiti dinar at the rate as advised by the Central Bank of Kuwait. litigants and defendants are often heard in English. Judges alone decide both the facts of a case and questions of law. The courts have the power to render judgments in a foreign currency. the Civil & Commercial Procedures Law. who forms a view of the case by applying the law to the facts as determined by the expert. there is no jury.

but it may be reinstated within three months without paying additional court fees. a legal action is commenced by filing a writ in the court setting out the basis of the dispute and the relief sought. Kuwaiti courts have jurisdiction where a foreign party is not domiciled or resident in Kuwait if: . the action may be dismissed. In this writer’s experience. A Kuwaiti court may rule on prior matters that would not normally be within its jurisdiction if a ruling is needed to enable it to judge a case which is within its jurisdiction. Kuwaiti domicile has been elected. is then served on the defendant by officials from the Ministry of Justice. The writ. which will contain a date two to four weeks hence at which the parties are to make their first appearance before the judge. Once the initial memoranda of both parties have been submitted. notably in accounting matters. Conflict of laws When passing judgment. or the subject matter is an obligation that arose. the level of expertise. the judge will transfer these to the . is low. or the claim relates to real estate or movables in Kuwait. But in cases involving a foreign element the courts may apply a foreign substantive law. If the defendant fails to appear on the appointed day and provided notice was properly served. or one of the litigants is a Kuwaiti or a foreign resident in Kuwait. . At the first session the defendant invariably requests and is granted an adjournment of two to four weeks for time to prepare his or her own memorandum and supporting documents. Jurisdiction Kuwaiti courts have jurisdiction in respect of all matters except sovereignty. If the plaintiff fails to attend. . was executed or was to be performed in Kuwait. The courts have jurisdiction over all claims against a Kuwaiti national (even claims originating abroad) and all claims against a nonKuwaiti who is domiciled or resident in Kuwait (except for claims involving real estate outside Kuwait).Litigation and Arbitration 161 accounting background and in construction matters. Kuwaiti courts normally apply Kuwaiti law. provided there are no overriding laws. . an engineering background. international treaties or public policy considerations. Litigation As in other countries. the judge may proceed with the case in his or her absence.

The department issues a summons requesting the defendant to carry out the decision of the court within a specified time. The judge has total discretion to grant or refuse the request and is not obliged to give any reasons for his decision. with whom a certified copy of a final judgment and a request for execution need to be filed. Once received in court. Temporary orders Where a matter is urgent. if this also fails then a further application may be made to the Higher Court of Appeal. have the order cancelled.162 Business Laws Department of Experts for an opinion on the facts. by showing good cause. Enforcement of local judgments Court judgments are enforced by the Department of Execution. Where he refuses the order. A judge considering an application for this kind of order would not delve too deeply into the issues involved but would take a quick decision in his chambers. Proceedings in the Department of Experts usually involve a long series of sessions arguing over factual details. If he fails to do so. The application must be accompanied by a receipt for court fees from the Ministry of Justice showing that a substantive action has been filed regarding the same matter. ie without the defendant being present. An appeal must be made within 30 days from the day a decision is officially notified to the parties. Finally the judge will reserve the matter for a decision. it may be several weeks before a judgment is officially available for notification. an application may be made to another judge. The usual first step is for the defendant’s bank accounts to be seized and if execution is still unsatisfied then other methods of enforcement. execution can be made by force. Enforcement of foreign judgments A judgment rendered in a foreign court against a person in Kuwait may be enforced provided there is a treaty for the recognition of such judgments between Kuwait and the state in which the judgment was . The main factor in determining whether such an order may be granted is the existence of some kind of threat that requires immediate intervention by the Court to provide protection to the plaintiff. such as attachment and the sale of assets (and ultimately bankruptcy or liquidation). Owing to a typing backlog in the Ministry of Justice. the expert’s report is likely to be challenged by one of the parties. are employed. a plaintiff may apply for a temporary restraining or preventative order. Where an application is granted the defendant may. The application may be made ex parte.

including court appearances. Once a foreign judgment has been recognized in Kuwait. the lower the percentage. it is executed in the same manner as a local judgment.5 per cent for the first KD 10. a copy of the judgment. a translation of the judgment into Arabic. Costs and time There is no legal aid in Kuwait. or has been rendered by a court lacking jurisdiction. attested by the Ministry of Justice in Kuwait.000 of the amount in dispute and 1 per cent thereafter. The amount of a lump sum payment will depend on the nature of a particular case and the status and experience of the lawyer. Fees in the commercial court are 2. he or she may opt to have the value of the claim assessed by the Department of Experts at a cost of KD 5. was rendered by a court with the necessary jurisdiction and is enforceable in the country where it was made. the following inter alia must be submitted: . . a case must be filed against the defendant in a Court of First Instance. To obtain recognition for a foreign judgment. Where chances of success are high. certified as true by the court where it was made and the Kuwaiti consul in that country. a few lawyers may take a case on a pure contingency (success only) fee basis. are based either on a lump sum or more normally on a percentage of the value in dispute and are a matter of negotiation during preliminary discussions. Costs are on a par with international norms and the time taken to bring a case to its conclusion is no longer than elsewhere.Litigation and Arbitration 163 obtained. Lawyers’ fees for good-quality advice range from KD 80 to 100 per hour. fees at the full rate are payable. ie to the extent that the foreign state in which the judgment was obtained recognizes Kuwaiti judgments. To do so. . once this has been decided. about on a par with London. Fees for handling a case. or conflicts with Kuwaiti law or morals or public order. but will charge 25 to . Percentagebased fees vary from 10 to 15 per cent of the value of a claim and normally the higher the amount in dispute. But a Kuwaiti court will refuse to recognize a foreign judgment if it conflicts with a decision made by a Kuwaiti court. a Kuwaiti court may recognize a foreign judgment on the basis of reciprocity. and evidence that the judgment was final. a down-payment of half the fee is expected. Where there is no treaty. Where this value is not known or a plaintiff wishes to avoid paying the whole amount in advance.

Litigation is likely to be slow. expensive and time-consuming. A reasonably simple commercial case. Court proceedings are seldom short. however. is unlikely to take less than a year. so arbitration is often preferable in commercial cases. they do not include lawyer’s fees and each party effectively bears its own legal costs. Many international law firms have affiliations with Kuwaiti firms and there are several English-speaking Western lawyers working with local firms from whom advice should be sought long before litigation is contemplated. Arbitration facilities and procedures General rules governing arbitration are contained in Law 78 of 1980.164 Business Laws Hints for entrepreneurs . Case records are kept only according to their sequential reference numbers and not by the names of the parties involved and there is no way to check whether a particular party is or has been involved in litigation without the reference number for a particular case.000) and funds to cover their out-of-pocket expenses such as court fees. Though judgments do refer to ‘legal expenses’ being awarded. may take several years to reach a final judgment. much depends on the complexity of the dispute. the Civil & Commercial Procedures Law (CCPL). and may attract unwelcome publicity. this compares favourably with the High Court in London where simple commercial matters take on average three years from issue of the writ to the hearing. But where the defendant is a government entity. . . A judge considering whether to grant a temporary order may be influenced by several factors in practice. A judgment in a Court of First Instance. . Payment by the plaintiff of full court fees in advance for the main action will suggest that the action is not frivolous and could be a positive factor. . Because each side effectively bears its own costs and lawyers charge on a percentage basis. . Before executing major contracts. such as the commercial court. the assumption that they will be good for their obligations should the decision in the main action go against them may suggest that the matter is not really urgent or that the order sought is not really necessary to secure the plaintiff’s rights. the appeals system tends to be used to the fullest possible extent. such advice is essential. the volume of documentation involved and the extent to which appeals are made. 30 per cent of the amount eventually awarded and require a downpayment (often KD 1.

The Kuwait Chamber of Commerce & Industry has a permanent Council of Arbitration. ie they are empowered to decide on a compromise that may not be strictly in accordance with the rules of law. The court system includes an Arbitration Committee. The agreement to submit to arbitration Unlike a court appearance. etc. which will consider any commercial dispute provided one party is a member of the Chamber. Arbitrators can only decide on matters within the scope of the agreement between the parties. and not the validity of the contract itself. To agree to arbitration a party must have the legal capacity to enter into a contract and must also have the capacity to dispose of the rights that are the subject matter of the agreement. There are also specialized tribunals within the system. The Kuwait Society of Engineers (KSE) has a permanent Committee of Arbitration with specialized rules for resolving disputes in the construction industry and related areas requiring technical expertise. Arbitrators usually have the authority to conciliate. such as the Labour Disputes Arbitration Committee. arbitration must entail voluntary submission and prior agreement. If one party to an agreement commences proceedings in court then the other may stay his or her action on the grounds that an agreement to submit to arbitration exists. amount of damages. performance. The latter rules must. only the mandatory CCPL rules governing arbitration are mentioned and not the specific procedural rules of the arbitration services provided by particular institutions. this is usually limited to matters arising out of the contract. such as matters relating to public order. a valid arbitration agreement can only be revoked by the mutual consent of both parties or by the courts. of course. such as its interpretation. for particular types of dispute. where compromise might not be permitted. But arbitration is not allowed in situations. In the discussion below. which is competent to consider any dispute between parties who have agreed to refer their dispute to the Committee. except to state that it must be in writing. Disputants do not need to use these facilities and arbitration may be conducted under ad hoc arrangements. Either way. The CCPL does not lay down any particular form for the agreement.Litigation and Arbitration 165 Arbitral tribunals in Kuwait There are several institutions that provide arbitration services in commercial disputes. An agreement to submit to arbitration may consist of a clause in a commercial contract or it may be an ad hoc agreement to refer a particular dispute to arbitration. . conform with the CCPL.

The number of arbitrators must be odd unless the parties agree to a single arbitrator. If the award has already been made or the hearings are over. (b) the date when the ground for the challenge arose. or a close relationship with one of the parties. or a prior involvement in the dispute (eg as an adviser upon the matter). Arbitrators must accept their mission in writing.166 Business Laws Arbitrators All adults. the arbitration agreement is deemed to include a provision that the two arbitrators shall appoint an umpire immediately after their own appointment. on the application of either party in the presence of the other party (or in his or her absence if he or she has been summoned). or if one or more of the agreed-upon arbitrators have declined to act or are unable to act or have been removed. Arbitrators do not have to be citizens or residents of Kuwait. Where only two arbitrators are appointed. A challenge to an arbitrator must be made within five days following: (a) the date upon which his or her appointment is notified to the party making the challenge. appoint the arbitrators. Where a dispute goes to arbitration but the parties have not agreed on the arbitrators. then the court will. Arbitrators appointed by the parties themselves may not be challenged unless the reason for the objection became known after their nomination. They may also be challenged during proceedings on the grounds that they are hostile or partial to either party. or (c) the date the objecting party became aware of the ground for the challenge. If they fail to carry out their task without good reason. no challenge is allowed even if the grounds for objection only became known after these events. They may agree that the arbitrators be nominated by a third party. If arbitrators are appointed by the parties themselves or by a court then they can be removed only by a court order on the grounds of . they may be held liable in damages. may be appointed as arbitrators. though particular agreements may require arbitrators to have a certain expertise. Once they have accepted. such as accounting or engineering experience. such as a successful challenge from one of the parties. they are bound to proceed and cannot withdraw without a legitimate excuse. Arbitrators may be challenged on the grounds that they have a personal interest in the dispute. with the exception of undischarged bankrupts and persons deprived of their civil rights following criminal convictions. It is up to the disputants to decide on how the arbitrators are to be appointed. The law does not require them to have special qualifications.

The parties usually specify the place of arbitration in the arbitration agreement. The arbitrators must also fix a timetable for the presentation of memoranda. such as treating all parties equally. Oral hearings are not necessary under the CCPL. the arbitration comes to an end and the dispute may only be resolved by litigation. no particular form is required so long as the arbitrators make sure that the parties are actually notified. Procedures During arbitration proceedings the arbitrators are not bound by the rules that apply to judicial proceedings. It is usual for the parties to decide their own procedural rules. it is determined by the arbitrators. once the timelimit has passed. the arbitrators must make their award within six months following the date upon which the last party was notified of the date of the first session. however. However. Arbitrators must adhere to the fundamental principles of a fair hearing. If the parties have not agreed on a time-limit for making the award. then. But if one of the parties does not appear at the hearings. may extend the period of arbitration. provided he or she is notified. though they may be required under the arbitration agreement. often by adopting the standard procedures of international arbitral bodies. Hearings may be heard at any place and time convenient to the parties. then.Litigation and Arbitration 167 misconduct. Where the parties fail to designate the place of arbitration. there are certain fundamental rules with which the procedures used by the tribunal must comply. All sessions must be minuted and all evidence noted. Within 30 days of their appointment. Once removed by the court they are not entitled to any remuneration for their services up to the time of their removal. . not taking steps without the knowledge of both parties and not hearing evidence from one side in the absence of the other. documents and oral argument. even if some of the arbitral sessions are held elsewhere. either expressly or by implication. this is the place the award will be officially delivered. The parties. though the proceedings must follow basic principles of fairness. An award must be made in Kuwait if it is to be considered a domestic award with full rights of local enforcement (see page 169). the arbitrators must notify the parties of the place and date of the first arbitration session. and may also delegate the power to do so to the arbitrators. If the arbitration agreement does not state the procedures to be followed then these are left to the discretion of the arbitrators. But if the arbitrators have no right to extend the time and the parties fail to agree to an extension. the arbitrators may proceed in his or her absence and consider only the arguments of the party who does attend.

. this fact must be stated in the award. Unless prevented by the arbitration agreement. But prior written notice must be given to the arbitrators and the other party. If they do. Experts with special knowledge. a summary of the parties’ arguments. A dissenting arbitrator may attach his or her opinion to the award. the arbitrators must apply for a court order to compel submission of the documents. . . this becomes the final award. . Once approved and signed by the arbitrators. However. the tribunal may make an interim award in which various issues (such as limitations on some of the claims) are decided while other issues (such as the amount of damages) are left to be dealt with in the final award. accountants and engineers. Since its power is defined by its agreement with the parties. the signatures of the majority of the arbitrators. They can be cross-examined but the arbitrators are not bound by their advice. are allowed to give advice and may be called by the arbitrators or by either party. the date of the award and the place where it was made. the reasons for the award. Should one of the parties to the dispute or a third party refuse a request for documents. they must suspend proceedings until the query has been settled by a competent court. if one or more of the arbitrators refuses to sign. the arbitrators may survey locations. the tribunal’s powers are limited to the dispute in question. consider the testimony of witnesses and interrogate them and if witnesses fail to attend they must apply to the court to order them to appear.168 Business Laws The parties may be represented by a lawyer or layman. Should a query arise (such as a claim that a document is fraudulent). The award must be in writing and must include: . Though the award is valid when signed by the majority. and the arbitrators may adjourn proceedings at which representatives appear if this notice is not given. The arbitral award The parties may settle their dispute by themselves before the tribunal’s decision is reached. a copy of the arbitration agreement. and . they must submit the settlement to the arbitrators. such as lawyers. The final award requires a majority opinion of the tribunal (unless the arbitration agreement requires unanimity).

one of the parties must apply to the president of the court for an order of enforcement. even if the parties are Kuwaiti. The court has the power to order suspension if the court considers that there are good reasons for believing that an award might be set aside (see page 170) and that serious damage would result were enforcement to continue. that the award: . Preventing enforcement is very difficult. Kuwait has ratified the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) subject to the reservation that the Convention would only be applied to awards made in the territories of other contracting states. the president must determine that the time-limit for any appeal (if applicable) has passed and that there is nothing in the arbitration agreement or in the award itself that would hinder its execution. Before granting the order. but he does not examine the merits of the dispute. Some foreign arbitral awards may be enforceable in Kuwait.Litigation and Arbitration 169 Registration and execution of domestic awards An original copy of the award (with an official translation into Arabic if the award was made in another language) as well as an original copy of the arbitration agreement must be filed with the court within 10 days of the date on which the award was made. such awards should be enforceable in Kuwait. Nor has Kuwait concluded any bilateral treaties on the recognition of foreign arbitral awards. but non-filing does not constitute grounds for an annulment of the award. The enforcement of foreign arbitral awards is subject to some general conditions. To enforce a domestic award. namely. Enforcement of foreign awards An award made outside the state is considered a foreign award. the dispute was subject to Kuwaiti law and the agreement was made in Kuwait. But Kuwait has not ratified the Geneva Protocol of 1923 or the Washington Convention of 1965. The president’s order changes the award into the equivalent of a judgment of the court and an execution order is then obtained from the Department of Execution (see above) in the usual way. If the award is not filed on time then the arbitrators may be fined. Where the court orders the suspension of enforcement it may require a deposit or guarantee as security. ie if the state where an award was made enforces awards made in Kuwait then Kuwait may enforce awards made in that state under the same conditions as laid down in that state for the enforcement of awards made in Kuwait. Where an award is not covered by the New York Convention. it may be enforceable in Kuwait on the basis of reciprocity. But a request to have the award set aside does not of itself suspend enforcement.

a losing party may ask the court for a rehearing or to have the award set aside. the award was made in the absence of an agreement to submit to arbitration. one of the circumstances in which the award may be reheard exists. An award may be set aside or cancelled on the grounds that: . Business Laws was made by a judicial body recognized internationally according to Kuwaiti law. The opposing party must be notified and has the right to appear. does not conflict with an award or order previously made in a Kuwaiti court. . and does not contravene public order or morality in Kuwait. Recourse against arbitral awards Arbitration awards are only subject to appeal if the parties have so agreed. . or if the award was made against parties who were not properly represented during the proceedings. if was based on evidence later found to be false. is a final award in the state where it was made. If an appeal may be made then it must be submitted to the Higher Court of Appeal within 15 days of the date the award was originally filed with the court. . a foreign award may only be enforced in Kuwait by applying for an order from the court. or on the basis of a void or defunct agreement. . Notwithstanding the provisions of the New York Convention. The court’s decision on the application is open to appeal in the normal manner. . if the decision appears to be internally inconsistent. . it is unusual for arbitration awards to be expressly subject to appeal. if it deals with a subject that was not requested by the parties. or there was a procedural defect affecting the award. . . if it was obtained through fraud by the party in whose favour it was made. . As the purpose of arbitration is to remain outside official justice and allow arbitrators to conciliate and impose a compromise. or that no arbitration agreement exists. Arbitration awards cannot be appealed by cassation. However.170 . if important evidence that had been withheld by one of the parties is discovered after the award was delivered. . An award may be sent back to the arbitrators to be reheard: . .

where the sum at issue is significant and the amount of documentation is reasonable. followed by an intermediate payment. The construction of an arbitration agreement may be crucial and expert advice on arbitral clauses in contracts should be obtained. and thus cost the parties KD 10. . it may be cheaper and it is also a reasonably confidential procedure. . the fees might total KD 20. the circumstances of arbitral matters differ widely and there is no such thing as a typical case.000 for the chairman and KD 6. arbitration will probably be cheaper than litigation. ie KD 8. Thus. Before accepting their appointment they may request a guarantee for their charges. An arbitrator is usually paid his or her fee in stages: a down-payment on appointment. Hints for entrepreneurs . as in a court case. unless the agreement provides otherwise.000 each. but once they have been appointed they have no power to request this security. Members of a tribunal usually charge a fixed sum for their services. . Where the court decides to set the award aside. The fee charged by an arbitrator will depend largely on the volume of documentation involved and not on the amount at issue. with final payment on delivery of the award. state agencies require the express prior approval of the Council of Ministers.Litigation and Arbitration 171 The court’s decision on an application to set aside can be appealed to the Higher Court of Appeal and thence to the Court of Cassation. the courts will not usually uphold challenges to the arbitration on the grounds of sovereign immunity.000. But before executing arbitration agreements or contracts containing arbitration clauses. the court itself will then rehear the case and decide the issue on its merits. Lawyers will charge for advice and their involvement on the same basis as for court cases. Arbitration is undoubtedly quicker than litigation and is not normally subject to appeal. Costs and fees Unless otherwise agreed. . arbitrators may fix their own fees and expenses. In a case involving a three-person tribunal. as the former do not require a court action.000 each for the other two members. The enforcement in Kuwait of domestic awards is much easier than the enforcement of foreign awards. When state agencies agree to submit to arbitration in commercial disputes. However.

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Part Three Taxation and Finance .

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Funding policies. are conservative and there is almost a complete lack of serious venture capital. gift or inheritance taxes. the annual Islamic wealth tax. A few minor imposts are imposed on shareholding companies (KSCs) as a whole.Introduction: The Financial Framework The financial framework for business in Kuwait is quite simple. There is no personal income tax. However. foreign commercial entities with a presence in the country are taxed on their share of net profits in local commercial enterprises at extremely high rates. Foreign entrepreneurs are expected to bring their own money. however. Some local companies voluntarily pay zakat. Nor are there any property. or any sales or value added taxes. . There is a wide range of conventional and Islamic financial institutions in Kuwait. And duties are levied on imports. To widen the government’s tax base and encourage foreign investment some changes may come into effect in 2004 or 2005.

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The legislative basis for corporate income tax is found in Law 3 of 1955. whether distributed or not. which are liable to corporate income tax. . All tax declarations. whether actually paid or not. The decree is supplemented by directives issued from time to time by the Director of Income Taxes. it is taxed on its income arising in Kuwait. the assessment of liabilities and the payment of taxes are administered and enforced by the Tax Department in the Ministry of Finance. But foreign individuals escape the tax. technical services and management fees. supporting schedules. it is taxed on its share of profit. The term includes foreign partnerships. Where it is a shareholder in a local company. the Income Tax Decree. There is no withholding tax on dividends. financial statements and correspondence must be in Arabic. etc. A foreign corporate body means any business entity. The filing of tax declarations and accounts. formed under the laws of any state. Where a foreign firm operates in Kuwait through a local service agent. royalties. Firms that export to Kuwait have no liability to Kuwaiti tax. and amounts receivable on account of interest. interest payments and royalties.1 Corporate Income Taxes The income tax imposed on foreign companies operating in Kuwait is one of the highest corporate taxes in the world. But foreign corporate bodies carrying on a trade or business in Kuwait are liable to income tax.3. Liability to corporate income tax Kuwaiti-registered companies and companies incorporated in the GCC wholly owned by GCC citizens are not taxed. that has a legal existence separate from that of its owners. ie the Minister of Finance. it is the foreign entity that bears the tax and the Kuwaiti company itself has no liability. Where the foreign firm is a shareholder in a local company. Taxable income includes net profits.

000.000) (147.000) 1.000) Management fees charged 100.000. Where the taxpayer is a shareholder in a local company. less the costs of work incurred in an accounting period. are used to assess income from contract work.630.920.000 Allowable expenses (8. Percentage accounting or completed contract accounting methods are not usually acceptable.000) (14.000) (34.1.000 4.900. dividends and interest.700) (100.1 Taxable profit example Local company Foreign share 49 per cent taxable KD KD Gross revenue 10.1). the foreign element in total adjusted profits is isolated (see Table 3.000 Source: DalCais Consultants Gross revenues Gross income includes all income from business and trade.000) (49. premiums. as well as capital gains on the sale of assets and on the sale of shares by a foreign shareholder.000) Permissible depreciation (70.000) (3. excluding advance payments. But work done outside Kuwait is deemed to be performed in Kuwait where it is part of a contract that also includes activities within Kuwait. Gross billings. .000 (200.178 Taxation and Finance Calculation of net taxable income Net taxable income is computed on the basis of the net profits disclosed in audited financial statements as adjusted for tax purposes.000 (30.1.000 Taxable profit of foreign corporate body 635. Table 3. The source of income is Kuwait if the place where the services are performed is inside Kuwait. a foreign firm is assessable on the full value receivable under the contract.300) Net profit Losses on disposals of fixed assets Losses brought forward 1.000) Agent’s commission (3%) (300.500.000 Foreign head office allowance (2%) 798. eg in a supply and installation contract. including amounts receivable as rents.700 735. royalties. where the source is in Kuwait. including the foreign-supply element.

1). by foreign consultants or contractors operating through a local service agent: 3. . Other provisions. The following may be noted: . As a contribution to a foreign corporate body’s head office expenses. are not allowable.1. But direct expenses incurred by the foreign taxpayer are only allowable provided they are supported by adequate documentation. . Losses brought forward are allowable. provided there has been no intervening cessation of activities. are only allowed when they are actually paid. . Depreciation of fixed assets is allowable but only at particular rates (see Table 3. . Anti-avoidance: Where a foreign firm has more than one activity in Kuwait.5 per cent of the total payable.Corporate Income Taxes 179 Profits on royalties and licence fees are charged to tax at 96. . Management fees receivable by a foreign corporate shareholder in a local company and expensed in the latter’s books are not allowable. . whether specific or general. Interest charges are allowable provided they are payable to a Kuwaiti bank and are reasonable in relation to the business activities carried out in Kuwait. Accounting provisions.2) for different classes of assets on a straight-line basis. But losses in a later period cannot be carried back to an earlier period. Allowable expenses All normal business expenses are allowable on an accruals basis provided they are incurred in the generation of income in Kuwait. Commissions paid to the taxpayer’s local service agent are limited to 3% of revenue. deductions may be claimed as follows: . such as labour indemnities. ie after deducting the usual allowance for head office overheads (see Table 3. Losses may be carried forward indefinitely and deducted from income in later periods. Losses on the disposal of fixed assets below their tax writtendown value are allowable.1. even if its different activities are organized through separate local companies. Bad debts are only allowed once they have proved irrecoverable.5% of revenues (net of amounts payable to subcontractors and reimbursable costs). its income from all these activities must be aggregated for tax purposes.

handling equipment etc) 25 Service station equipment 15 General plant. though FIFO (first-in.5% of net premiums. For example. jetties and wharfs 10 5 Refining plant.000 and the tax payable is KD 7.33 Lorries and trailers 25 Marine craft 7. pipelines. Ministry of Finance Inventory is usually valued at weighted average cost. . if taxable profits are KD 50. by foreign insurance companies: 3.180 . but any valuation method in general use is acceptable.3. These rates are not progressive. Source: Tax Department.000.1. ie tax is charged on all profits at the rate of the level into which total profits reach. Calculation of corporate income tax Once net taxable income has been calculated. Table 3.5 Aeroplanes 25 Office furniture and equipment 15 All rates are applied to cost on a straight-line basis. internal pipelines and small tanks 10 Drilling and clean-out tools 33. first-out) is becoming more popular. Taxation and Finance by foreign shareholders in a WLL or KSC: 2% of revenues (net of amounts payable to subcontractors and reimbursable costs).2 Statutory annual depreciation rates % Buildings 4 Roads and bridges 4 Service station buildings and driveways Tanks. income tax of 15 per cent is levied on the whole KD 50. the tax due to the State of Kuwait is calculated according to the rates shown in Table 3. .500.33 Service replacement plant (construction and road-making equipment. workshops and workshop equipment. machinery and equipment 10 Carts 20 Motorcars and motorcycles 33.1.

000 55 n.250 Nil Nil Not more than 18.500 10 3.250 15 8.000 45 168.750/- Over 375.125/- Not more than 150. Table 3.750 5 Not more than 37. the lower amount becomes the tax payable.000 KD 1.000 @ 20%) 100 per cent of excess over lower rate (76.4).1.000/- Not more than 112.000 40 120.000 – 16.Corporate Income Taxes 181 Table 3.000) Source: DalCais Consultants KD 15.000 – 75.000 .000 35 78.000 KD 3.4 Marginal relief Taxable profit KD 76. 937/500 Source: Tax Department.1.437/500 Not more than 75. Relief is obtained by calculating the total tax payable at the top of the band just below the highest band into which taxable income falls.750/- Not more than 56. Where the resulting amount is less than the tax payable as calculated normally. Ministry of Finance Marginal relief A modicum of relief is available where taxable profits reach marginally into a higher level (see Table 3.750/- Not more than 300. and to the tax thus calculated the whole of the income in excess of this band is added.000 Tax on normal basis (@ 25%) KD 19.000 KD 16.000 30 45.a.500 25 28.000 Tax calculation with marginal relief: Tax at top of previous band (75.000/- Not more than 375.3 Tax rates Total taxable profits KD Tax rate Cumulative payable at top of level % KD Not more than 5.1.000/- Not more than 225.000 20 15.000) Tax payable Tax saved (KD 19.

tax declarations must be submitted by 15 April. . The accounting records that foreign firms are obliged to maintain include a general ledger. 9th and 12th months following the end of the tax period. Tax periods are normally 12 months long. Kuwait companies with foreign shareholders who are subject to income tax need to maintain these records on behalf of their foreign associates. Payments and penalties Tax must be paid in Kuwaiti dinar by a certified cheque drawn on a local bank. but a taxpayer may request another year-end. But if payments are delayed then the tax is payable in a single lump sum. the Tax Department invariably insists on inspecting books of account and original vouchers. A lump-sum payment is also required where an extension of 75 days has been allowed for the filing of audited accounts. Filing declarations and agreeing assessments Taxpayers are legally obliged to submit their tax declarations to the Tax Department without being requested to do so. An extension of 75 days may be allowed if audited accounts are being filed. The usual year-end for tax accounting is 31 December. The deadline for filing tax declarations is the 15th day of the 4th month following the end of the tax accounting period. Tax declarations and supporting documentation must be in Arabic and must be certified by a practising accountant who is registered with the MCI. But disputes are usually settled by negotiation and seldom reach the courts. an expenses analysis journal.182 Taxation and Finance Administrative matters The Gregorian solar calendar is used for tax accounting. These records need not be in Arabic but they must be complete and must be kept in Kuwait. eg a delay of 65 days will mean a fine of 3 per cent of the tax due. eg where the usual end-of-December period end is used. There is no special appeals process and the only avenue of appeal available to an aggrieved taxpayer is through the civil courts. though periods of up to 18 months may be allowed on the commencement of trading. The penalty for tardiness in filing declarations or paying by the due date is a fine of 1 per cent of the tax payable for every 30 days (or fraction thereof) of delay. inventory sheets and stock records. The law is unclear on a number of issues and final assessments are usually agreed by negotiation. and adequate supporting documentation is vital to avoid tedious haggling over allowable expenses. No payment is required until accounts have been filed. Before agreeing tax liabilities. 6th. It is payable in four equal instalments on the 15th day of the 4th.

Ethiopia. does not usually give binding rulings in advance on how tax will be determined in unclear cases and so the scope for tax planning in Kuwait is rather limited. unlike the practice in Western countries. Romania. Azerbaijan. the Ukraine. Both treaties enable double taxation in most areas of personal and business taxation to be avoided. Italy. Greece. .Corporate Income Taxes 183 Tax clearance certificates The final payment due to a foreign contractor. Singapore. the Netherlands. Syria. Poland. Kuwait has signed double taxation treaties with Algeria. Malaysia. the Czech Republic. Jordan. Iran. India. Double taxation agreements were. Bulgaria. Sri Lanka. Foreign firms operating in more than one country in the Middle East may be able to reduce their overall tax bill by taking the provisions of these treaties into account when structuring their presence in the region. Egypt. which must not be less than 5 per cent of the total contract value. the Yemen and Zimbabwe. Belgium. public authorities and private companies (including foreign firms) operating locally until the contractor has produced a tax clearance certificate from the Ministry of Finance confirming that all tax liabilities have been settled. France. Brazil. Germany. The time taken to obtain these certificates can delay final payments. Mongolia. Morocco. together with a copy of the contracts. Turkey and the UK. Serbia & Montenegro. Sudan. Belarus. some of the hints shown in the box on page 184 may be useful in mitigating the eventual tax bill. South Africa. Eritrea. Double taxation treaties Kuwait is a signatory to the GCC Joint Agreement and to the Arab Tax Treaty. Croatia. in late 2003. Finland. Nonetheless. Mitigating the tax bill The Director of Taxes tends to look at the substance rather than the form of transactions and. Pakistan. When assessing liability to tax. Indonesia. but these were awaiting ratification in 2003. public authorities and private companies operating in Kuwait must submit the names and addresses of all companies with which they are doing business as contractors. Korea. Thailand. Cyprus. the Director of Taxes may disallow payments to subcontractors that have not been so reported. Venezuela. must be retained by all ministries. Hungary. Mauritius. Switzerland. subcontractors or in any other form. Canada. Lebanon. Tunisia. under negotiation between Kuwait and Australia. China. All ministries. to the Tax Department. Russia. Kuwait has treaties for the avoidance of double taxation with Austria.

fees payable to individuals as consultants or employees of the local company should be allowable. . Hints for business . the profit on the supply may escape tax.184 Taxation and Finance Japan. the Philippines. under a double taxation treaty. Income from operations outside Kuwait is not taxable provided it has no connection with operations in Kuwait. . So. by executing a wholly separate contract for the supply of the materials. where works to be performed in Kuwait include a supply of materials from outside the country. . Relief may be available. advice from an experienced local practitioner who has a good working relationship with the Tax Department is crucial. Senegal. Macedonia. Because income tax is not charged on the profit shares of foreign individuals. . Moldova. foreign firms holding stakes in local companies through nominees may escape tax. Portugal. . Sweden. on the foreignsupply element of a supply and installation contract provided application for exemption is made before the contract is signed. Though management fees receivable by a foreign corporate shareholder in a local company are not allowable for tax purposes. Uzbekistan and the United States. Because final assessments are usually a matter of negotiation. which makes no reference linking the supply to the main contract.

the standard rate of import duty was increased recently.3. etc. customs use a list of ‘standard’ exchange rates to translate the CIF value into KD. raw materials. Rates of import duty The standard rate of duty is 5 per cent. from 4 to 5 per cent. semi-processed goods. Duty is calculated and must be paid in Kuwaiti dinar (KD). But most goods may be imported duty free. rather than the currency market rate on the date the goods are landed. live animals.2 Customs Duties and Other Imposts Customs duties Kuwait has a liberal trade policy and its customs duties are among the lowest in the region. printed matter. except where these items (such as bread) are manufactured locally. Where importers are invoiced in foreign currencies. . bullion. medicines. Calculation of import duty Duty on imports is levied as a percentage of the CIF value of the goods up to arrival at. though it does impose protective tariffs on some imported goods. New industries are usually exempt from export taxes. Under the implementation of a GCC plan for a customs union. equipment and spare parts for new industrial establishments provided exemption has been obtained. including: . however. essential consumer goods. Kuwait. . but excluding unloading in. food products. These standard rates are now changed once a month and a list of these exchange rates in Arabic is available for 250 fils from the main customs office in Shuwaikh. and the range of goods that may be imported duty free reduced substantially. An export tax of 5 per cent is levied on goods that are exported and have not been subject to import duty.

a local industrial firm must show that it meets. Under the Gulf Cooperative Council (GCC) Customs Union. A list of these items. The remaining 20 per cent of these duties on goods of Arab origin is expected to be eliminated in 2005. The duty on cigarettes and tobacco is 100 per cent. which came into effect on the first day of 2003.1. Kuwaiti or foreign.186 Taxation and Finance Imported hydrocarbon products that are also manufactured locally. are subject to duties of 100 per cent. In 1981 an agreement was signed by members of the Arab League (AL) to create a Pan-Arab Free Trade Area (PAFTA). These goods can then be sent to any of the six countries in the GCC without incurring any further duties. The tariff on protected goods varies according to the value added by domestic production.2. as shown in Table 3.1 Protective tariffs Value added locally Tariffs on consumer goods other goods 20% 10% 15% 30% 15% 20% 40% 20% 25% Source: Customs Other imposts Several other taxes of a restricted nature apply to companies operating in Kuwait. operating in the neutral zone (now partitioned) between Kuwait and . Tariff protection Some locally manufactured products are protected by tariffs.2. at least 40 per cent of the demand in the local market for the products concerned. From 1998 to 2002 Kuwait reduced the standard rate of custom duties on goods that are of Arab origin by a total of 50 per cent in stages. To qualify for protection. These protective tariffs are now being phased out. in Arabic only. In 1997 the AL’s Economic & Social Council decided to implement PAFTA over a 10-year period beginning on 1 January 1998. It then reduced the duty on these goods by 10 per cent on 1 January 2003 and by 20 per cent at the beginning of 2004. such as lubricating oils. the standard tariff for goods entering any GCC country is 5 per cent. is available free of charge from Customs in Shuwaikh. Neutral zone tax Corporate income tax is imposed on all companies. Table 3. with the exception of 417 items. or will be able to meet.

000 pa and 57 per cent where income is in excess of KD 500. Other corporate taxes Some business entities are subject to tax as follows: . All these measures and many more have been the subject of debate in the legislature and between that body and the executive. a sales tax be imposed on local retailers and providers of services. . with no tangible results. . . The tax is applied to all the activities of the company. and the rate of corporate income tax on foreign firms doing business in Kuwait be reduced. Tax rates are 20 per cent where net income does not exceed KD 500. refining.1 for corporate income tax. a sales tax be imposed on imported goods while exempting locally made products: import duties on luxury goods be raised. This tax is assessed and collected by the Tax Department in the Ministry of Finance. All Kuwait Shareholding Companies (KSC). manufacturing. listed and non-listed. . in order to reduce its dependence on oil revenues. encourage employers to hire locals and entice foreign investment into Kuwait. are expected to pay 2% of their annual profits to the Kuwait Fund for the Advancement of Science (KFAS). . corporate income tax be extended to include all Kuwaiti-owned business entities. The tax debate Over the past decade or so.Customs Duties and Other Imposts 187 Saudi Arabia. storage and transport of hydrocarbons and hydrocarbon products. But after the passing of the foreign direct investment law in 2001 it was realized that the retroactive tax rates of up to 55 per cent currently being imposed as corporate income tax on foreign .5% of their net profits as funding for the National Manpower Support Law (Law 19 of 2001). Companies listed on the Kuwait Stock Exchange must pay a tax of 2. personal income tax be imposed on all residents. This tax is assessed by the Tax Department in the Ministry of Finance and assessment and collection procedures are similar to those outlined in Chapter 3. including the extraction. the government has been proposing inter alia that: . that have a concession from the Ruler of the State of Kuwait to extract mineral wealth from the zone. .000 pa. . a payroll tax be imposed on the employment of expatriates.

. At the end of 2003 the government had also drafted two income tax laws but had not introduced them into the National Assembly. In December 2003 a new law concerning the taxation of foreign companies was being discussed by the government and the National Assembly. Where the income arises from an investment in a commercial entity. income from state property and real estate owned by charitable societies that are used for sports. Again the tax payable depends. charitable societies. where the income does not arise directly. The new law includes a proposal to reduce the top retrospective rate of corporate income tax from 55 to 30 per cent. Despite the strong rationale for imposing income taxes on all residents. excluding NGOs. are envisaged – from KD 12. Generous personal allowances. profits from bonds. the maximum tax holiday allowed under the foreign direct investment law. with the express exception of wages and salaries.000 pa for an unmarried man to KD 16. real estate. As the law has actually been drafted it may perhaps be passed in 2004 and come into effect for the 2005 tax year.300 pa for a married man with seven children. or is involved in commercial. The second bill proposes taxing the income of commercial agents. on the taxpayer’s investment in the business generating the income. this bill would certainly catch business consultants in the country on short-term contracts. industrial or professional activities in the country. bank deposits and loans. The income to be taxed includes income from commercial and industrial activities. Where the income arises directly to the individual it will be taxed simply as revenues less costs. Those subject to income tax under the first bill are any individual who stays in Kuwait for 183 consecutive days. and income from certain non-commercial professions. are unlikely to survive the populist Assembly. social activities and scientific research. the tax will be calculated on the net income (after operational expenses) of that entity apportioned according to the taxpayer’s share in the capital of the firm. in this writer’s opinion.188 Taxation and Finance businesses with a presence in Kuwait required amendment in order to induce foreign investors to stay longer than 10 years. however. The first bill proposes taxing the income of individuals. stocks. though it seems determined to do so. these two bills. Should it become law. or who has a permanent house or interests in Kuwait.

one Islamic bank and two specialized banks.1) provide local retail and merchant banking facilities and engage in international finance and investment. The conventional banks Kuwait’s commercial banks (Table 3.1 Kuwait’s banking institutions Banking institution Type of bank Ownership Central Bank (CB) Regulatory Government 100% The National Bank of Kuwait (NBK) Commercial Private majority The Commercial Bank of Kuwait (CBK) Commercial Private majority The Gulf Bank (GB) Commercial Private majority Al-Ahli Bank (AHB) Commercial Private majority The Bank of Kuwait & the Middle East Commercial (BKME) Part government The Burgan Bank (BB) Commercial Part government The Bank of Bahrain Commercial 51% Bahraini & 49% Kuwaiti .3. a stock exchange. money lenders and money changers. The financial sector is supervised by the Central Bank. They include some of the largest banks in the Arab world and operate in modern environments with most of the sophisticated electronic resources found in major banking institutions in the West. There is also a large informal network of merchants.3. registered with the Central Bank.3 Banking and Finance Kuwait has seven conventional commercial banks. interactive kiosks and 24-hour online e-banking facilities. All have ATMs. The financial sector includes 28 conventional and 13 Islamic investment companies and 31 exchange companies.3. Table 3. and 18 insurance companies.

Non-resident clients: Credit facilities in KD extended to nonresidents to finance a contract require approval from the CB where the facilities exceed KD 40m or 70% of the value of the contract. . which are designed to ensure that the risks to lenders are distributed over a broad range of clients. is: . The local banks are also active members of consortia in the financing and underwriting of extremely large infrastructural projects. . Consumer loans: (a) The aggregate of all consumer loans extended by a bank to its clients is limited to 10% of the total private sector deposits held by that bank.190 Taxation and Finance Table 3. including the financing of imports. The nub of these regulations.3. Single clients: Total credit extended to a single client may not exceed 15 per cent of the lender’s capital. Banking supervision and lending restrictions The commercial banks have been closely supervised by the Central Bank (CB) since the stock market crash in 1982. effectively assuming the debts. Charges for commercial services are reasonable and on a par with international rates. Note: The Bank of Bahrain is a GCC bank with a branch in Kuwait. Source: Central Bank These banks also provide corporate customers with a full range of commercial banking services.1 (cont’d) Banking institution Type of bank Ownership Kuwait Finance House Islamic Government 32% & private citizens 68% The Industrial Bank of Kuwait (IBK) Specialist Government & private The Kuwait Real Estate Bank (KREB) Specialist Private In addition. which transformed the balance sheets of the commercial banks. when they found themselves holding an extremely large number of bad debts. In 1995 the CB set up a system of risk centralization for lending by banks and financial institutions.to 20-year maturities. . the London-based United Bank of Kuwait (UBK) is owned jointly by the first six commercial banks listed above and Kuwait’s three major investment companies. In 1992 the CB replaced the non-performing loans held by the banks with government bonds of 10. Letters of credit are subject to regulations issued by the International Chamber of Commerce.

Table 3. assigned Kuwait sovereign ratings as shown in Table 3.3 Moody’s ratings of Kuwaiti Banks (February 2004) Bank Long-term deposits Short-term deposits Financial strength Al-Ahli Bank A2 P-2 D7 Bank of Kuwait & the Middle East A2 P-2 D7 Burgan Bank A2 P-2 D Commercial Bank A2 P-2 D+ Gulf Bank A2 P-2 C7 National Bank A2 P-1 B7 Kuwait Finance House A3 P-2 D+ As can be seen from Table 3.000 or (iii) his or her accrued termination-of-service indemnity. a US credit rating agency.3.Banking and Finance 191 (b) loans to an individual are limited to the lower of (i) 10 times his or her regular monthly income or (ii) KD 10.3. Table 3. . During February 2004 Moody’s assigned ratings for seven local banks (see Table 3.2). many Kuwaiti bankers feel that the agency fails to appreciate the nature of local banking risks and wonder why relatively liquid institutions (which are net lenders on international markets) received comparatively low ratings. long-term deposits in any of Kuwait’s banks are considered secure. with the exception of NBK.3). ruffle local feathers.2. Moody’s perennial somewhat low ratings for the financial strength of these banks. The P-1 rating implies a superior ability to repay short-term debts.3.4 shows the aggregate balance sheets of local banks.3. Table 3.3.2.3.3. Financial strength of local banks Kuwait’s local banks are financially strong (Table 3. In February 2004 Moody’s. and (c) the maximum repayment period is two years.2 Kuwait’s sovereign ratings (February 2004) Government bonds Long-term bank deposits Short-term bank deposits A2 A2 P-1 The mid-A grade ratings suggest that the likelihood of default by Kuwait’s government or banks in the long term is low.

088 988 1.064 7.362 1.402 3.015 5.248 Credit facilities to residents 4.825 Time deposits with CB 75 7 655 1.565 1.628 3.747 8.064 17.807 9.787 1.441 383 359 452 377 390 12.027 2.875 12.917 13.252 6.682 1. Obtaining facilities to finance contracts can take a long time.583 1. .195 1. The Central Bank (CB) sets the discount rate for commercial paper submitted to it by local banks as well as maximum and minimum interest rates on loans from and deposits with local banks.571 2. .788 1. longerterm lending being the preserve of the special-purpose banks discussed on page 194.806 15.064 Source: Central Bank Economic Report 2002 Interest rates The interest rates charged and paid on KD loans and deposits by local banks are legally constrained.734 1. Where Central Bank permission is required the time taken can be very long.193 Claims on the government 4.917 13.140 4.113 890 1. .399 1.208 7.192 Taxation and Finance Table 3. The 15% limit may be relevant when seeking facilities from one of the smaller banks for large credit facilities.204 Domestic investments Foreign assets Other assets Total liabilities Private sector deposits Government deposits 257 195 185 231 299 Local inter-bank deposits 1. The maximum duration of term loans from the commercial banks is five years.032 Other liabilities Total 1. Foreigners usually require local guarantors.4 Aggregate balance sheets of local banks KD million at the end of 1998 1999 2000 2001 2002 Assets Cash & balances with CB 98 141 119 120 144 Local inter-bank deposits 1.470 1.062 3.540 12.953 501 557 619 726 870 1.525 1.125 6.249 1.292 1.969 2.064 17.235 7.254 2.802 5.806 15.520 1.3.084 1.208 1.504 1.875 12. Tips for entrepreneurs .770 Foreign liabilities 1. Overdrafts must usually be cleared within one year.218 Shareholders’ equity 1.

The growth since 2000.7 billion of imports through documentary credits (69 per cent of the total).730 3.764 Agriculture & fisheries Crude oil and gas Public services Other Total Source: Central Bank Economic Report 2002 As well as extending credit facilities in the domestic economy. The credit and loan facilities extended by local banks during the past few years are shown in Table 3.818 4.5.191 1. up from 58 per cent at the end of 2001. are the main providers of credit facilities and loan capital in Kuwait. after a contraction.079 1.3. The figures show the facilities extended to new clients plus the renewal and increase of facilities for existing clients.151 3. consumer loans. increased by more than 36 per cent in 2002! Table 3.Banking and Finance 193 Domestic credit facilities The local banks.150 Industry 170 247 217 319 275 Construction 327 369 262 308 368 11 4 4 21 10 Other financial institutions 180 102 166 434 286 Personal facilities 552 498 642 720 1. During 2002 they financed KD 1. the local banks are also heavily involved in financing imports. Indeed. ie the commercial banks with Kuwait Finance House (the sole Islamic bank) and the specialized banks. other payment orders (20 per cent) and bills for collection (11 per cent). The Institute of Banking Studies The Institute of Banking Studies was established in 1970 and is funded by the banks themselves. after growing 23 per cent in 2001. is impressive. The Institute offers training and diploma .111 Consumer loans 203 180 169 208 283 Real estate 342 522 490 476 686 5 2 12 6 3 13 0 0 0 9 122 148 135 136 583 2.5 Domestic credit facilities extended by local banks KD million 1998 1999 2000 2001 2002 Trade 806 1. Their role as lenders is increasing: utilized bank facilities at the end of 2002 represented about 65 per cent of GDP at current prices.3.125 3.028 1.

It publishes studies and statistics on banking and economic matters from time to time. Its primary goal is to promote industrial development in Kuwait through research and by financing industrial projects on concessional terms. such as real estate. Its activities include providing construction loans on mortgage. operates as a trustee for borrowers in connection with real estate. manages real estate on behalf of third parties. exchanging loan funds and issuing long. These banks are subject to the banking laws in the same way as the other banks in Kuwait. The IBK’s objectives are to participate in the development of a longterm strategy for industrial growth in Kuwait and identify the sectors .194 Taxation and Finance courses for professional bankers as well as organizing seminars and conferences for senior managers in banks and financial institutions. and initiates financial activities relating to interests in real estate. The two specialized banks are the Kuwait Real Estate Bank (KREB) and the Industrial Bank of Kuwait (IBK). KREB’s objectives are to provide long. the Central Bank. industry or agriculture. acts as a deposit-taker for savings under CB supervision. KREB is partly privately owned. though the rules are modified to take into account the particular objectives of the specialized banks. It finances real estate activities both in Kuwait and overseas.and short-term guarantees for real estate purposes against collateral. The Kuwait Real Estate Bank (KREB) Though it was established in 1973 on the initiative of the government. and some insurance companies and large industrial establishments.or short-term loans on mortgage to real estate owners inside and outside Kuwait. the Arab world and other developed and underdeveloped economies. They are deposit-takers but do not normally accept deposits that may be withdrawn on demand. Special-purpose banks The main function of Kuwait’s special-purpose banks is to provide finance for certain sectors of the economy. the commercial banks. The Industrial Bank of Kuwait (IBK) The IBK was established in 1973 on government initiative as a joint venture between the Ministry of Finance. It also participates in projects related to real estate. KREB’s prime purpose is the granting of loans to Kuwaitis for financing the purchase and construction of income-producing properties in Kuwait.

9 per cent of these projects. of which foreign assets comprised about 50 per cent. about half the total assets of the banks.642 million each).to long-term loans for new projects and the expansion of existing activities. these institutions handle more than KD 6 billion of investments on behalf of third parties. It also has an Islamic Portfolio that handles industrial investments on behalf of Kuwait Finance House. IBK financed an average of 49. the equivalent of nearly 60 per cent of total bank deposits. to initiate industrial projects in promising sectors. From 1974 to the end of 2002 the IBK’s cumulative industrial loan commitments were just under KD 520 million in 643 projects that in total cost just over KD 1 billion (averaging KD 1. to bring new technologies to Kuwait and identify foreign partners with the necessary expertise. Investment institutions and funds The aggregated assets of the 27 conventional and 13 Islamic local investment institutions were worth more than KD 4 billion in September 2003. on the other hand. and to support the development of the domestic money and capital markets in cooperation with other financial institutions. including long-term finance. working capital and bridging loans. though the proportion of funds invested overseas has been declining in recent years as international markets have been weak and domestic opportunities have been growing. The total funds managed by these institutions are estimated to be around KD 10 billion. Although the combined assets of these investment companies only represent about 21 per cent of the total assets of the local banks. The Islamic investment companies. to finance projects outside Kuwait (preferably in the Gulf area) where Kuwaiti interests are involved. But the IBK’s main thrust is the financing of industrial projects on a conventional basis. making significant contributions to commercial life in Kuwait. The conventional investment companies invest nearly two-thirds of their total assets overseas. have less than 20 per cent of their assets invested overseas while nearly 45 per cent are invested in local customer financing operations such as murabaha (see page 198) and over 10 per cent in local non-financial investments such as real estate. The IBK provides its industrial clients with many types of banking services. suggesting that these companies have a significant role in domestic investment.Banking and Finance 195 and activities most worthy of encouragement. and it has a Handicrafts & Small Enterprise Financing Portfolio that provides Islamic funding to Kuwaiti nationals wishing to establish small enterprises. . Non-cash facilities such as letters of credit and guarantee are also provided. to provide financing in the form of equity or medium.

Their rates too are not much different from those in the West. Local insurance companies often reinsure through London. including life. in some instances. they are much cheaper. The Credit and Savings Bank The Credit and Savings Bank is a government institution that was set up for the purpose of channelling private savings and government funds into the housing sector. It provides housing loans on easy terms to Kuwaitis. After a net profit of only 4. fire. such as car insurance. of which 24 had total assets of KD 1. as well as five Arab and six foreign insurance companies operating through local agents who pay their sponsors a fixed percentage of their premium income. Over the past six years the life insurance market (including medical insurance) . Though figures are not yet in. while the Arab insurers have 8 per cent and the foreigners 6 per cent.106 million (equivalent to 6. indeed. Other financial institutions There are several other financial institutions of a specialized nature in Kuwait. have about 86 per cent of the overall market.8 per cent in 2001 and 2002.196 Taxation and Finance At the end of 2002 there were 33 investment funds in Kuwait licensed by the MCI and supervised by the CB. Insurance companies Kuwait has seven national insurance companies. and marine and aviation. legal liability. Though there are no restrictions on reinsurance either locally or overseas. All insurance companies. local and foreign. the best of these funds must have scooped the cream in 2003. an insurer that reinsures its risk remains solely responsible to the insured. four of which are quoted on the stock exchange. the combined funds made 8. These funds invest mainly on the Kuwait Stock Exchange and in local real estate. must be licensed annually by the MCI. it is not a bank per se and is not supervised by the CB. 31 and 115 per cent of the total assets of the local banks and conventional and Islamic investment companies respectively). Despite its name. when the stock market rose more than 100 per cent. The 18 conventional insurers offer the same types of service as their counterparts in the West. and their performance in recent years has been excellent.8 per cent on total assets in 2000. motor.8 and 12. but some reinsurance is placed through the Kuwait Reinsurance Company. There are also two takaful companies providing a form of Islamic insurance. The national insurance companies.

istisna’a. mudaraba or musharaka. notably when the banks are closed. has been growing by nearly 20 per cent a year.Banking and Finance 197 Tips for entrepreneurs . Islamic scholars refuse to view money as a store of value or as a commodity that can be traded. A receipt is not normally given when changing foreign currency into KD. The Sharia also requires that commercial transactions be fair to all parties involved and that risks be shared. Islamic financing takes several forms. They do indeed deal with non-Muslim businesses but only on these bases. but the money changers in Suq as-Sarrafeen (just off Fahd Al-Salem Street near the Municipal Garden close by Safat Square) offer rates comparable to those of the banks outside banking hours. It is virtually the same as conventional lease financing. Hotels charge quite high rates to exchange currency. Islamic banking and financing practices Islamic banking and financing practices are based on the premise that money is merely a medium of exchange. The most common are ijar’arah. in hotels and from specialist exchange companies. but the money changer is obliged by law to give a receipt when selling foreign currency. . The market as a whole seems to have been expanded by the entry of the takaful companies and this expansion is expected to continue as the economy picks up as a result of increased government spending and the opening of Iraq. The time value of money is not recognized and the receipt and payment of interest are both forbidden. Money-changers are not allowed to accept deposits and their activities are restricted to foreign-exchangerelated activities. And many currencies not usually available across the counter in banks may be found in this suq. unlike the conventional Western economic view. The Islamic financial institution buys the assets in its own . including the transfer of funds overseas. Exchange companies Currency exchange is available from the banks. Ijar’arah (leasing) Ijar’arah or leasing is used where a customer needs finance in order to acquire fixed assets. Islamic financing and investment Islamic banks and investment institutions only undertake activities that are seen to be in accordance with the Islamic Sharia. and murabaha.

it usually delegates the customer to act as its agent to import the goods. Murabaha (trading) Murabaha is a concept whereby an Islamic bank avoids lending money at interest by trading on its own account for profit. instead of giving him or her credit facilities and charging interest as under conventional banking practice. should these be realized. the financier will receive a share in the profits of the business. then. a customer wishes to import materials for processing or goods for resale and needs financing for a letter of credit. Title in the assets remains with the bank during the lease period. Under this arrangement the Islamic financier accepts risk to the same extent as the owner of the firm. ie it will buy shares in the company or go into partnership with the firm rather than lend money to the business. Mudaraba or musharaka (equity interest) Mudaraba or musharaka is used when a business needs general loan facilities to fund operations. To avoid charging interest the Islamic financing institution interposes itself as the main contractor and the customer acts as its subcontractor to do the actual work. on the other hand. As the bank is unlikely to understand the products technically or to be familiar with sources of supply. for example. Under conventional financing a business that needs funding for general commercial purposes will obtain a loan at a rate of interest that may be either fixed or variable. the bank or other institution will take an equity interest in the business. If. The bank opens the letter of credit in its own name and only after . In Islamic financing. the financier hands the building over to the owner. The financier adds an agreed profit margin to its expenditure on the works. including the Hyundai edifice in Shuwaikh. Instead of charging interest. It is different in form from conventional project financing. who then pays the financier in instalments. In conventional financing a customer who requires funding for a project of civil works is offered a term loan or similar facility on which interest is charged. In Kuwait several major construction projects have been handled under Istisna’a.198 Taxation and Finance name and leases them to the customer. and restaurants such as McDonald’s and Fuddruckers. Kuwait Catering Company’s building in Farwaniyah. Once the project has been completed. the bank itself buys and imports the goods and sells them on credit to the customer. Istisna’a (project financing) Istisna’a or project financing is used to finance particular projects such as construction works.

indeed. All Islamic banks and financial institutions have an in-house panel of religious advisers. as it is trading on its own account. which will include a profit for the bank. the bank buys the machinery in its own name and sells it (at a profit) to the customer. Many Islamic banking products now being developed are opening new frontiers for Islamic finance. Development and supervision of Islamic banking products Islamic banking has evolved as an alternative to conventional banking only within the last generation. they have no lender of last resort and may run the risk of sudden liquidity problems. and then from the bank to the customer either when the customer receives delivery or when all the instalments have been paid. the monies owed to the bank after title is transferred to the client will usually be secured on the asset involved. As these banks do not borrow money on interest. The panel is composed of Islamic jurists trained in Islamic economics and its main function is to ensure that all transactions undertaken by the institution accord with the Sharia. Where a client defaults. Or if a customer needs finance to purchase machinery. The essence of Islamic financing is that the financier must assume risk along with the entrepreneur. Control of Islamic financial institutions There is no international consensus as to how Islamic banks and financial institutions should be regulated. though the number of Islamic banking products is expanding rapidly. In both cases the bank is at risk. which usually has a title such as the Sharia Board of Islamic Scholars or something similar. an Islamic bank may not normally foreclose without assessing the degree to which the customer was at fault (whether through negligence or criminal behaviour) in incurring the losses. many issues remain to be resolved and the development of Islamic banking is the subject of much scholarly dialectics (isjihad) with bankers. A lack of common accounting standards for these banks makes it hard for outsiders to assess the financial strength of individual banks.Banking and Finance 199 the goods are received does title pass from the bank to the customer. who pays in instalments. different groups of scholars hold differing views on the acceptability of particular banking or financial products. These jurists wield immense power within Islamic financial institutions by deciding what is and what is not acceptable practice. but some of these are controversial and the extent to which they will win the approval of Islamic jurists is unclear. the Dallah Albaraka Banking . Ownership passes from the supplier to the bank. The customer then pays the bank according to the credit terms arranged. It is still evolving and. Under istisna’a and murabaha-type transactions.

a central bank may find it difficult to regulate the money supply (which is normally done by managing short-term interest rates) and may have to resort to manipulating the reserve requirements of these banks. KFH has grown strongly in recent years and now has one of the largest customer deposit bases in the country. KFH offers private customers a variety of accounts. but instead imposes a . KFH’s commercial services KFH offers a full range of services in documentary credits both on a conventional basis and on a murabaha basis where credit is required. and sudden liquidity problems seem unlikely. both current and savings. Instead of paying interest. It was established in 1977 and is partly government owned.200 Taxation and Finance Group of Saudi Arabia shut down its UK subsidiary in 1993 because of Bank of England concerns about its lack of a lender of last resort. Most major Islamic banks. It provides an ijar’arah service both on a pure lease and on a lease plus purchase basis. KFH issues letters of guarantee such as bid and performance bonds. unlike conventional banks it does not charge interest according to the value and duration of a bond. It engages in banking. In an economy where Islamic banks are strong. to ensure that Islamic banks can be provided with short-term liquidity during temporary shortages. Kuwait Finance House Kuwait Finance House (KFH) is currently Kuwait’s sole Islamic bank. for example. it has been suggested that liquid Islamic banking products could be modified by central banks so that they can be used as official instruments for dealing with the reserves of these banks. Nevertheless. Islamic banking and financing in Kuwait Kuwait currently has 1 Islamic bank and 13 Islamic investment institutions. Owing to the increasing popularity of Islamic banking. but does not extend overdraft facilities. however. have diverse portfolios of investments and high liquidity ratios arising from their murabaha activities. investment and trading activities on an Islamic basis and is a deposit-taker. the bank shares the profits it derives from its activities with its savings account holders. The profits earned on these accounts are coincidentally rather similar to the rates paid on interest-bearing accounts by the local conventional banks. Islamic banks also have economic effects that central bankers find hard to control. crediting the holders with their share at the end of the financial year. KFH is authorized to carry out all banking and investment operations of a non-usurious nature.

from which extracting payment is otherwise a most tedious affair. hence its name. traders who sell goods on credit may discount the debt due to them from a reputable third party with a factor. and the service is extremely popular with firms that sell to these supermarkets. this effectively gives it the right to bankrupt the business to recover its loan. and later collects the amount due from the debtor. Using Islamic financing Kuwait’s sole Islamic bank is quite happy to enter financing arrangements with conventional businesses. This facility is only available to those who supply the cooperatives. Islamic factoring In conventional factoring.5 to 2 per cent. Mixing Islamic and conventional financing In Kuwait. takes title to the debt. which to a bidder for government contracts can be surprisingly cheap or expensive depending on the duration of the guarantee. The cost is a reasonable 1. Under its ‘cooperative marketing’ facility KFH buys the goods from the seller (its customer) and sells them to its customer’s buyer. KFH led the way in 1996 when it joined a consortium of mainly conventional institutions in financing the construction costs of the EQUATE petrochemicals complex through the use of Islamic leasing. Advantages of Islamic financing With conventional financing the lending institution nearly always has security in the form of a charge on its customer’s business assets. KFH also offers equity financing.Banking and Finance 201 fixed commission. if something goes wrong. In the sales transaction the seller-customer acts on behalf of the bank under a limited power of attorney. The factor’s fee is related to the discount rate for bills of exchange. the factor pays them cash less an agreed fee. often a bank. Islamic financing has been refined to the point where local Islamic jurists feel confident that the mixing of Islamic and conventional financing in a single project may be feasible without contravening the Sharia. KFH operates a sort of Islamic non-usurious factoring service for those who sell to consumer cooperatives. The bank pays its seller-customer in cash and allows the end-buyer a credit period. ie those that are also funded by conventional financing. A very real advantage of Islamic financing is . The difference between the bank’s buying and selling price represents its profit and is agreed with its seller-customer.

the supervision of Islamic banks and investment houses is difficult. In November 2002 an Islamic Financial Services Council was established in Kuwait and tasked with devising standards for the supervision and oversight of these institutions. conventional investment companies and exchange companies are tightly controlled by the Central Bank in line with international standards and practices. It does so by. . as money has no time-value.000 and the International Investor. the business is obliged to adhere to Islamic principles for further financing and the benefits of capital leverage are lost. Where an Islamic institution finances an enterprise by taking an equity stake (mudaraba). making investment in government securities mandatory. KFH will not usually consider an investment of less than KD 250. and restraining the loans that can be given to a single borrower. Though working capital can be obtained by offering an equity stake. restricting the retail fees and commissions that can be charged. will not look at a proposal for an investment of less than 1 million dinar. The CB directs and assesses the credit policies of the banks and ensures that their positions meet international standards for liquidity and capital adequacy. no refund of the Bank’s profit is possible because. and advocates of Islamic banking claim that this is much fairer than conventional financing. Supervision of banking The commercial banks. But where KFH has financed purchases under murabaha arrangements. For reasons discussed above.202 Taxation and Finance that the financier shares business risk with the customer. It is not possible to obtain working capital in the form of a loan from an Islamic bank. Disadvantages Most businesses operating on conventional lines finance their long-term capital needs with a mix of equity and debt in order to increase the return to their owners or shareholders. In Kuwait. there is nothing to negotiate. A new law to control Islamic banking was being implemented in early 2004. among other things. limiting the level of consumer loans. capping lending rates. clients who wish to pay off their loan early can usually negotiate a refund of the interest included in the total book value of their debt. Where a conventional bank finances the purchase of stock or fixed assets on an instalment basis. an Islamic investment house. financing trading activities such as letters of credit through KFH can at times be a shade cheaper than post-LC financing with the conventional banks.

However. Foreign banks have had an informal presence in Kuwait for several years in private wealth management. It operates a database that contains detailed information on those who take out loans. The .5m in the country. in January 2004 a bill was being discussed in the National Assembly that would allow branches of foreign banks to be established in Kuwait. the presence of foreign banks in the retail scene is unlikely in the near future because of the intense competition. with a capital of KD 75m. Obtaining financing The National Investment Fund (NIF). The credit status of applicants for loans can be assessed by lenders for a small fee. Now outgoing international transfers of more than KD 10. Its capital of KD 100 million was allocated out of the proceeds of the privatization programme. where they meet on a regular basis with Kuwaiti clients who have surplus funds to invest. provides seed money for small businesses. the economy seems over-served by financial institutions. Yet the number of financial institutions in the country is increasing. particularly NBK and KFH. New entrants With a population of less than 2.Banking and Finance 203 Money laundering has been made more difficult by the provisions of Law 35 of 2002. the balance by public subscription. A new Islamic bank is expected to be launched in 2004. It will be financed 24 per cent by the government. though many of the banks. are also heavily involved in banking overseas. Another Islamic bank will begin operations when one of the smaller conventional banks converts to Islamic banking. established in September 1996. Their representatives have rooms in major hotels. Foreign banks in Kuwait Foreign banks are not allowed to operate in Kuwait. Even if the bill to allow foreign banks to establish an official presence in the country becomes law.000 must be reported by the banks to the CB and transferors may be required to give an explanation for the transfer of funds. as indeed it must if Kuwait is to fulfil its WTO obligations. The Credit Information Network Company was established under Law 2 of 2001. New Islamic banks The demand for banking services based on the Sharia is increasing and the conventional banks have been requesting the CB to allow them to open separate divisions offering Islamic banking services.

204 Taxation and Finance fund is aimed at developing and encouraging small business operations and will target experienced businesspeople in their 30s and 40s. Another source for project funding for foreign entrepreneurs is Kuwait’s Counter-trade Offset Programme (Chapter 4. Because of the low risk involved. the commercial banks will extend project financing to foreign companies that have secured public sector contracts. Personal loans can be used for small enterprises.3). Foreigners are expected to bring their own funds or to make suitable arrangements with their Kuwaiti associates. . security is almost inevitably required for most personal and commercial loans. But its resources are only available to Kuwaiti citizens. A list of offset obligators looking for worthwhile investment opportunities is available from the Programme Executive Office in the Ministry of Finance. there is virtually a complete lack of sources of venture capital in Kuwait. Except for the NIF. The rules that the banks must follow when making loans have been discussed earlier in the chapter and these make for conservative lending policies by Western standards. However. The banks are seldom interested in fresh entrepreneurial ideas and most new businesses are financed by their owners or their families.

Part Four Business Activities .

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Most business opportunities in Kuwait for foreign entrepreneurs and corporations lie in servicing the oil sector and public institutions. Each method of going into business in the country has merits and demerits. though it has been reinvigorated by the rush to rebuild Iraq. or by using Kuwait as a regional base for doing business in Iraq and Iran. establishing a firm in the Free Trade Zone. local partnership or company. with or without local participation. and in supplying the population with consumer goods and services.Introduction: The Marketplace The State of Kuwait’s economic raison d’être is oil. A foreign entrepreneur or firm may do business with Kuwait in several main ways: • • • • • by undertaking public sector contracts: by providing consultancy and professional services. and the most suitable choice will depend on the type of goods or services being offered. a suitable Kuwaiti associate. or setting up a 100 per cent owned foreign entity. Except where a foreign business is exporting to Kuwait. Indeed. This presence may involve having a branch in Kuwait or participating in a joint venture. and the availability of. the country is one of the richest in the world and imports most of its requirements. But despite the apparent limitless opportunities it is not an easy place to do business. . the market strategy envisaged. Its traditional role as a middleman in regional trade is very much diminished. it will have a presence in the country. by setting up a business in Kuwait. by exporting to Kuwait. and any need for.

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Kuwait was one of the most infrastructurally underdeveloped areas in the world. During the 1950s. from Fahaheel and Ahmadi in the south to Jahra in the north.160. The third master plan (KMP3) KMP3 consists of three main sections: the National Physical Planning Strategy (NPPS). This was adequate for the country’s needs up to the early 1990s. The NPPS describes a pattern of urban development designed to accommodate the expected growth in population and employment.000.000 will be Kuwaitis. It .936. 60s and 70s a modern infrastructure was developed. Based on European New Town planning principles. In 1970 a second master plan (KMP2) covering urban planning for the entire country was devised. In 1992 the Ministry of Planning began developing Kuwait’s third master plan (KMP3) and it was issued in 1997. the Metropolitan Area Structural Plan (MASP) and the Kuwait Town Local Plan (KTLP). Kuwait’s third master plan is generating significant business opportunities in infrastructure development and will continue to do so until 2015. The labour force is expected to be nearly 1.000 and expatriates 2.385. and created residential suburbs beyond the old wall and along the coastline.000 by 2015 of which 253. it set the old town aside as a centre for commercial development and government offices. The plan is based on a forecasted population of 3.000 by the year 2015 of which Kuwaitis are expected to make up 1. KMP2 included the development of urban centres along the coast.1 Infrastructure and Business Opportunities Less than a lifetime ago. It laid out today’s pattern of radial and ring roads (see page 212).545. Urban development Kuwait’s first master plan was drawn up in 1952.4. Its settled areas consisted merely of Kuwait Town and a few villages and hamlets with little but arid steppe in between.

. agricultural and marine resources. These towns and cities are intended to be self-sufficient rather than just dormitory areas. The NPPS envisages a limit of 2. the construction of two new university campuses. transport. the ample opportunities in site develop ment and construction are usually restricted to local companies. However.000 jobs in these centres by 2015. with the exception of specialist designers. • Power projects in Kuwait have traditionally generated lucrative opportunities for international firms. • To implement the plans for port expansion in Kuwait. foreign contractors may participate in the construction of housing projects on a finance and execute (F&E) basis. and the expansion of public transport services. employment and recreational facilities for their populations. subcontractors and finan ciers in the Seif Project is open to foreign firms. They will provide commercial. the strategy accords short-term priority to the creation of three major communities west of the existing urban area. the environment. • Major road-building schemes are open to participation by interna tional firms. natural resources.210 Business Activities sets out comprehensive integrated policies for land use. will find few opportunities. the creation of nature reserves. populations and settlements. the preservation of historical sites. • Though housing is one of the few state-funded sectors normally immune to budget cuts. financing and construction of new towns is open to international as well as local firms. To reduce current housing pressures. which will be created by the relocation of government offices away from Kuwait City. recreation.3 million people being set on the present Metropolitan Area so that a population of more than 1 million will need to be accommodated outside the existing urban area. employment and commercial centres. the participa tion of international firms will be necessary. It identifies seven locations as suitable for new towns. In the longer term the NPPS plans for two cities at Khiran and Subiya and two towns south-west of the urban areas at Sulaibiya and Shadadiya. Hints for entrepreneurs • Participation in the detailed planning. The NPPS includes policies for the preservation of mineral wealth. and overseas firms. The NPPS has a target figure of 810. water. designers. utilities and other national facilities. These have been developed. • Most municipal landscaping projects are being undertaken by local firms that have developed the requisite skills over the past few decades. • Participation as architects.

and another 40 per cent will have reached 30 years of age. The government also provides government housing directly for less welloff nationals and Bedouins. the KMP3 noted that 40 per cent of the current housing stock will have reached 40 years of age by that year. and utilities such as water and sewerage disposal. though participation is limited to cash funding and PAHC will not be allowed to obtain shares for payment-in-kind. In January 2004 the Assembly’s Housing Committee approved legislation allowing PAHC to participate as a shareholder in real estate companies or to establish new companies. nearly 486. which administers the provision of plots and housing for Kuwaitis. both to meet the requirements of the expanding population and to replace current stock. now that the threat from Iraq has been removed. owing to population pressures. North-East Sharq. Ninety-five per cent of the land in Kuwait is state-owned and allocations of land for housing purposes are made by the Municipality to the Public Authority for Housing Care (PAHC). When this legislation becomes law it is expected to make the funding for residential house building easier.000 houses would have to be built. only citizens and GCC nationals may own real estate and expatriates must live in rented accommodation. Indeed. and the survey concluded that. Central Sharq and Watya. the rate at which the government has been able to provide loans and housing has been disappointing in recent years. Residential communities are planned for Mirqab. Apartments for expatriates are provided by private landlords. The housing stock is relatively young by Western standards. Housing In Kuwait. It includes strategies for school buildings. traffic and parking. a concerted drive to build housing stock. In its general survey of housing requirements to 2015. However. The government provides Kuwaiti nationals with residential plots and grants to build their own homes and married Kuwaiti males are eligible for soft loans from the Credit and Savings Bank. houses are considered old once they have reached 25 years of age and usually need to be replaced after 40 years. Dasman. Shortages in housing have grown in recent years. The KTLP concentrates on Kuwait City and develops a vision for a new city centre with a balance of commercial and residential communities. is . But owing to the harshness of the climate. ie in exchange for land.Infrastructure and Business Opportunities 211 The MASP is a more detailed plan covering the metropolitan area between Jahra and Mina Abdullah and the western cities proposed in the NSSP.

during business hours. Kuwait is currently experiencing severe traffic congestion on the motorways during rush hours. a state body. This ‘greening of Kuwait’ is an integral part of the state’s urban planning policy. known locally as ring roads (see map). Some of these facilities are run by Kuwait Touristic Enterprises Company. Beside the roads and motorways. especially in the financial district in the City centre. grasses and flower beds relieve the dun monotony of the desert.000 by 2015 and this potential traffic impact has been given a high priority in the MASP. with road improvements and other measures designed to improve traffic flow in the suburbs. A National Park has been created in the Jal al-Zor. marinas and other recreational facilities as well as commercial buildings. Another important constituent of Kuwait’s urban development is the provision of leisure and recreational facilities such as chalets and sea clubs. The country has about 4. a waterfront park stretching from Ras Al-Ard in Salmiyah to the port of Shuwaikh. and some by private companies.212 Business Activities expected from the government in the near future. Urban amenities Suburban Kuwait is surprisingly green and its landscape contains many fine parks and gardens. and in urban areas. There is an emphasis in the KTLP on public transport. plantings of trees. The KMP3 assumes that vehicle trips during peak hours will be at least 450. recreational parks and children’s entertainment centres. Foreign companies will be eligible to participate on an F&E (finance and execute) basis. A series of radial roads fan out from Kuwait City (notionally focused on Safat Square) and these are bisected by transverse roads. One of the most ambitious amenities programmes is the Seif Project. state offices and . The KTLP contains specific proposals for improved traffic flow and access to the centre. In its final form it will consist of beaches. Roads Kuwait’s road network is well designed.500km of public highway. Plans for a National Nature Reserve and various marine protection areas along the coast are currently being implemented. Side streets in the commercial and residential areas are linked to the main roads by distributor roads. of which more than 80 per cent is paved. including a link from the First Ring Road through Jahra Gate to Arabian Gulf Street. bushes. The KMP3 envisages the development of public beaches and forestation areas in Doha and Sulaibiya. and a requirement that property developers must provide full on-site parking for customers and staff.

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A 50-metre corridor has also been reserved for a proposed GCCRailway. Administered by the Municipality. The NPPS gave priority to improving internal transport and recommends a system that segregates public and private modes of transport in the commuter corridors in the Metropolitan Area and for the links to the new towns and the international airport.214 Business Activities housing. and to mainland Subiya and Bubiyan Island. bigger terminal is being planned. The airport has two terminals. Executive jet and private air-taxi services are available at the airport. the project is being built in five phases. passenger . with direct access into Kuwait City by means of fixed-track vehicles or automated buses. deep freeze and heated storage. refrigerated. International airport Kuwait International Airport is located in Farwaniyah. X-ray equipment. Internal transport There are no trains in Kuwait and public transport is limited to buses and taxis. Terminal Two is the main passenger terminal and all long-distance flights depart from and arrive at this terminal. fresh meat inspection. a once-fast 20-minute drive. The KMP3 also recommends passenger ferries linking Kuwait City to Faylacha Island. Nearby cargo handling and storage facilities include equipment for handling heavy or very large cargo. In addition. some of which are already running. This railway would have terminals in Shuwaikh and Shuaiba. as well as various stations in between. It is the only civilian airport in the country and is operated by the Directorate-General of Civil Aviation. it was announced in November 2003 that the airline sector in Kuwait is to be opened up to the private sector and that the cabinet had approved the granting of airline licences for the ‘establishment of air freight companies. is entering the tender stage. about 16. The old Terminal One. security facilities for valuables and dangerous goods as well as air-conditioned. A new. is used for short-haul passenger flights and freight.5 kilometres from the centre of Kuwait City. to service a new town there. The first three have been completed. The long-planned bridge linking Shuwaikh to Subiya. a longdistance coach service is proposed. Aircraft catering is provided by Kuwait Aviation Services Company (KASCO). just west of Terminal Two. Kuwait Airways Corporation (KAC) has its operational headquarters at the airport and hangarage for private aircraft is available through KAC. To provide access to the new towns and rural settlements. The KMP3 delineates land reservations for a rapid transit system serving the coastal corridor and the new western towns.

There are also 10 small piers (total pier length 1. Many shipping companies. refrigerated and general cargoes.055 metres. Shuwaikh Port The port of Shuwaikh.2 million square metres of land area and 1. Commercial seaports Kuwait exports its oil through the ports of Mina Ahmadi. transport companies. • Closed Friday and public holidays. and containerized. The time limit for clearing goods is 90 days and goods not cleared within this time are sold at public auction. KPPA’s complex is located in Shuwaikh at the main entrance to the port area. as well as livestock. with the exception of diplomatic mail. more than 80 per cent by quantity. clearance is available 24 hours. Mina Az-Zoor and Shuaiba. with only 18 per cent arriving overland and less than 1 per cent by air.2) is next to the KPPA in the Shuwaikh port area. Kuwait’s Free Trade Zone (Chapter 2. Shuwaikh has 21 main berths with an aggregate length of 4. 7 days a week. The commercial ports are operated by Kuwait Ports’ Public Authority (KPPA).5-metre draught at minimum tide levels. Kuwait also has three commercial seaports for handling imports and non-oil exports: Shuwaikh. handling and marine insurers have offices within the complex. which would be allowed to compete with the loss-making KAC. Berth depths range from 6. about a 10-minute drive west of the city centre. samples and personal effects. • 07:30–14:00 on Thursday. which are operated by Kuwait National Petroleum Company (KNPC). For perishable goods. comprises 3. Customs hours for general cargo are: • 07:30–20:00 Saturday to Wednesday. shipping agencies.2 million square metres of water basin. Where all customs documentation formalities have been completed in advance. Most civilian goods are received through Kuwait’s seaports.190 metres) inside the north . Customs clearance at Kuwait International Airport Consolidated shipments are not accepted by the Kuwait customs authority. Mina Abdullah.7 metres to 10 metres.5-metre draught at high tide and a 7.Infrastructure and Business Opportunities 215 transport and no-frills airlines’. The port can receive vessels with a 9. the only registered airline in the country. The port handles cement and grain in bulk. Shuaiba and Doha. Freight can only be cleared at the cargo terminal. clearance in 24 hours is possible. Customs clearance may be done by an agent.

and open storage (485. the rest for other cargoes. The Kuwait Flour Mill Company. where up to 30 containers on trucks can be inspected at the same time. with a cattle pen of 257. Additional storage is available nearby at Doha. as well as several conveyors for exporting urea directly from PIC’s factory and moving sulphur and petroleum coke from .5 metres. Four of the berths are used for container vessels and RO/RO vessels. Shuaiba port is bounded on its north side by the south pier of Ahmadi port and by Mina Abdullah to the south. which have gantry container cranes of 40 tonnes capacity each. Berth depths range from 10 metres to 14 metres. The port has 20 commercial berths with a total length of 4. A 26-hectare container terminal is located just outside the port to the north-west and all incoming containers go through this terminal after being offloaded in the port at berths 12 and 13. The port also has an oil pier with a depth of 16 metres operated by KNPC.700 square metres).000 square metres.300 square metres in 26 units). Shuaiba Port Located 45 kilometres south of Kuwait City.000 square metres and two open storage areas with a total area of 59. have their own unloading and storage equipment. The terminal is equipped for handling refrigerated containers. There are also two mobile cranes that can handle heavy lifts up to 100 tonnes. as well as improving facilities for container and general traffic. the Kuwait Portland Cement Company and the Refrigeration Industries Company. A detailed development plan for Shuwaikh port is due to be unveiled sometime in 2004. silos and cold stores next to the berths. pilot boats and port service craft. basin for berthing tugs. Storage facilities inside the port consist of warehouses (170. The customs and security inspection area for containers is just south of the container terminal.which is used for unloading livestock. Close by the port there are five warehouses with a total area of 13. Customs procedures for other cargoes are initiated in the buildings outside the port and across the road from the KPPA complex.000 square metres near berth 21. such as suction elevators. KPPC’s plans for Shuwaikh port in the medium term include deepening the existing navigational channel and building a second channel with a depth of 10.216 Business Activities Hint for entrepreneurs • Non-Arabic speakers are likely to find the procedures for clearing cargoes through the port of Shuwaikh confusing and are firmly advised to employ a local agent.100 metres. all local companies.

3 metres and nine piers (total length 2. Outside the port there is a storage area with four warehouses (10.1 Kuwait’s crude and product export facilities Terminal Berths Export of North Pier 4 Crude oil South Pier 8 Refined products & LPG Single Point CALM buoys 2 Crude – VLCC capable Single Point Mooring Buoy 1 Crude – VLCC capable Shuaiba Pier 4 Refined products Mina Abdullah Sea Island 2 Refined products Mina Al-Ahmadi Doha Port Doha Port. Table 4. An up-to-date development plan is expected to be published in 2004. increasing the stacking capacity for empty containers. The main basin has a depth of 4.250 square metres). Since 2002 the US military have had exclusive use of some of these berths. The customs inspection platform has facilities for inspecting 16 containers at one time.000 sq m each).000 square metres of open storage. and building internal stores for general cargo. . This external storage is used by traffic from Shuwaikh port. which is delivered alongside vessels. is a small coastal port used by dhows. and 560.000 sq m of parking for loaded and unloaded trucks. The terminal is supported by a 9.600 metres).500 square metres and a reefer stacking area with electrical points for refrigerated containers. 4 covered sheds (total 4. four covered sheds (10. KPPC’s plans for Shuaiba port in the medium term include constructing a new container terminal building and control gate. located on an isthmus just west of Shuwaikh. Support areas for this ‘cargo direct delivery’ system are outside the port and include 130. Shuaiba has 16 berths for general cargo.7-hectare stacking area outside the port area for empty containers. Shuaiba’s 31-hectare container terminal includes two LCL ware-houses with a total area of 14.100 square metres).100 square metres) and livestock pens (total 3.000 square metres each).Infrastructure and Business Opportunities 217 KNPC’s loading areas.1. The port also has two small craft and barge basins with a total of seven piers. increasing the holding capacity for refrigerated containers. barges and other light vessels operating mainly between Kuwait and Iran and some ports lower down in the Gulf. Doha port has 11 warehouses (total 8.

000 tonnes dead-weight) and a transfer system to convey vessels to repair-bays on land. In order to be able to deal with companies in the hydrocarbon sector. registration is required (Chapter 4. and there are smaller industrial areas in Sulaibikhat. Jahra and Ahmadi. however. both large and small. only a preliminary study has been made. a politically sensitive topic. in the supply of goods and services and the performance of works. The yard has a 190 metres-long floating dock with a clear width of 32 metres and an immersion height of 8 metres above the keel block. which is partly government owned. Once approved.2). especially in the manufacture of light plastic products. which put most of their requirements out to tender. KSRC also has a Syncrolift (capacity 5. are located in Doha.218 Business Activities Ship repairs and naval construction Kuwait Shipbuilding & Repairyard Company (KSRC). operates a ship repair and building yard on the northeast side of Shuwaikh port. Shipbuilding and repair facilities for traditional Arabic ships. In January 2004 the Council of Ministers approved in principle a project to build a seaport on the island of Bubiyan near the Iraqi border. the olefins complex and the aromatics plant will provide local businesses with plenty of downstream opportunities. . So far. though a full feasibility study is going ahead. which can accommodate vessels of up to 35. The largest are in Shuwaikh.000 tonnes deadweight. Industrial areas Industry in Kuwait is restricted to industrial areas. The range of opportunities is wide and details of various schemes may be available from the Industrial Bank of Kuwait. for some time. A company may find opportunities in subcontracting from a principal with an oil sector contract. but the widest range of possibilities arise in direct dealings with the state-owned oil companies such as KOC and KNPC. to expand and modernize its port facilities. such as dhows. Hydrocarbon sectors Kuwait’s oil and related industries have been described in Chapter 1. The hydrocarbon sector is a mainstay of the private sector in Kuwait and provides innumerable opportunities for firms. Shuaiba and Subhan. construction is expected to begin quickly in order to service the re-export boom to Iraq and forestall requests by the Iraqi Governing Council for the leasing of Bubiyan Island. and no time-line or costs for the project were available at the time of writing. The polypropylene plant. New ports The US government and military have been pressing Kuwait.6.

gas oil or (in an emergency) crude oil. The Authority allocates sites and provides roads. Shuaiba has its own police station. Hazardous industries. gas bottling. Shuwaikh industrial area now extends beyond al-Rai. post office. During the 1980s it was rationalized and upgraded. Shuaiba South and As-Subiya. Roads and parking facilities were improved and the overcrowding of small plants was reduced. but Doha West and Shuaiba South can use four different types of fuel: tail gas from an LPG plant. sewerage and fire-fighting facilities. it is close to the airport and residential areas. brick-making. Az-Zoor. Shuaiba Port serves as the main outlet for the area’s industrial exports and as a conduit for the import of equipment and raw materials. The plants run on gas or oil. The area is administered by the Public Authority for Industry. which works closely with KISR (the Kuwait Institute for Scientific Research) on pollution-related studies and issues environmental guidelines and industrial codes of practice. Attractively laid out. banks and a medical centre. and diverse wholesale and retail sectors. . Doha West. telecommunications. Water. an amalgamation of the former Ministry of Electricity & Water (MEW) and Ministry of Oil (MOO). including the petrochemicals industry. natural gas. Shuaiba industrial area Shuaiba industrial area contains most of the country’s heavy industries. Subhan industrial area Subhan industrial area is a light industrial area consisting of assemblytype plants and warehousing. were relocated and consolidated into particular districts within the area. Doha East. Shuaiba also has an environment protection centre. sea-water cooling. with laboratories for monitoring air and water pollution. Shuaiba is close to the oil installations that provide its feedstocks and energy. such as asbestos. several large plants producing modern construction materials. Kuwait has six major power stations: Shuwaikh. oxygen and industrial gases. batteries. Electricity and water The utilities sector is run by the Ministry of Energy (MOE). electricity and fuel gas are available at concessionary prices. The area began growing in an unplanned manner around the port of Shuwaikh in the early 1960s. almost as far as Omariya.Infrastructure and Business Opportunities 219 Shuwaikh industrial area Shuwaikh industrial area is a mixed-use area. with many small workshops. lime.

the current expectation is that phase one of the project. Saudi Arabia. and allow trading in electricity. demand for electricity has shown a steep and persistent rise for three main reasons: the advent of air-conditioning. but they have not yet reached the tender stage. Bahrain and Qatar.220 Business Activities Local sources of natural sweet-water are minuscule and there is a firm linkage between the production of potable water and power. Saudi Arabia US $348 million. will get the go-ahead in 2004 and that this phase may be operational by 2008. The total cost of phase one will be about US $870 million. The country has five water distillation plants adjacent to the power stations in Doha. Water Fresh potable water consists of desalinated sea-water with 10 per cent brackish water added to improve mineral content and taste. Bahrain US $99 million and Qatar US $129.5 to 4 billion. the increase in population. which came on stream in 2000 at a cost of US $2. provide additional capacity during periods of excess demand. In 2001 the MEW approved the construction of three new power plants: • a 2. only relieved the pressure for more capacity in the short term. The 2. and • a 400MW gas-fired facility in As-Subiya. and subsidized pricing. Shuwaikh and Shuaiba. However. The scheme was hampered by difficulties in deciding pricing issues and technical standardization.400MW plant at As-Subiya.000 MW between now and 2015 at a probable cost of US $3. In the mid-1980s the member states of the GCC began discussing the creation of a regional power grid that would unify their transmissions systems in order to make better use of generating capacity.2 billion. • a 600MW gas-fired plant in Shuaiba South. Electricity Since it first became generally available in the 1950s. It is pumped from the distillation plants to reservoirs in residential and . The other two plants are together expected to cost a further US $1 billion. The Az-Zour plant is expected to become operational in 2006 or 2007 at the cost of US $1 billion. linking Kuwait. of which Kuwait will contribute US $294 million. Total electrical generation capacity is about 9.500MW steam turbine station at Az-Zour. It is estimated that the country will need to increase its generating capacity by a further 3.2GW but demand in recent years has been growing at 7 to 9 per cent pa and is expected to continue increasing at this rate for the foreseeable future.

463 29. Ministry of Planning . The water is distributed to consumers from these towers. The country’s potable water production capacity is more than 260 mig a day.981 Production 26. It is used for livestock watering (after blending with distilled water). In February 2004. Brackish water is distributed through a separate network of pipes from underground supplies in Wafra. A local bottling plant has a daily production capacity of 3. From there it is pumped to elevated ‘mushroom’ towers. Umm Qadir.099 Consumption 26.2). The famous Kuwait Towers on the Seif are also reservoirs – each has a capacity of 1 million gallons and maintains pressure to tall buildings in the City.329 Electricity (kWh) Water (gallons million) Potable Brackish Source: CSO.249 23. while demand was about 240 to 250 migd in 2002 (see Table 4. The distribution system works remarkably well and supplies of water are never a problem.323 34.Infrastructure and Business Opportunities 221 industrial districts.2 Electricity and water 1999 2000 2001 Generated 31.204 30.214 88.962 27.1.885 82. about 12 million 1. and could supply about half the country’s annual consumption of bottled mineral water. But actual output is restricted to half a million gallons a day so as to preserve the country’s only reserve of naturally occurring pure water. which are normally replenished in times of low demand.800 mig. Thus new water distillation plants will have to be built alongside the new power plants as a matter of urgency. Treated waste water is also used for irrigation. the Minister for Energy stated that Kuwait was producing 316 migd while demand was 320 migd and that the country’s strategic reserves of 1.085 28.000 imperial gallons to maintain network pressure and satisfy demand peaks. each of which has a capacity of about 600. Sulaibiya and Shigaya. Abdali. Kuwait’s sole source of sweet water is in ar-Rawdhatain and Umm alAish.475 85.273 Production 84.5-litre bottles a year. street cleaning and irrigation. Table 4.121 28.113 84. were no longer being refilled.1. which are sited so that more towers may be added to each group as the need to expand distribution in a particular area rises.018 Consumption 77.5 million gallons.504 Domestic consumption 26.576 32.

which are connected to three Intelsat (one over the Atlantic and two over the Indian Ocean). but international calls are relatively expensive. Mobile Telephone Communications Company (MTC) and Wataniya (NMTC). in Shuwaikh. Most international connections. the regional standard.000 landlines – only about 70 per cent of capacity – in use in 2001. the system is no longer overburdened by free local calls. With recent upgrading and expansion. which is linked by fibre-optic cables to earth stations at Shuwaikh. which owns the basic telecommunications infrastructure. The centre for the operation of international circuits is in Kaifan. local calls are free. Charges are KD 20 a year. National telephone network Kuwait’s national telephone network is operated by the MOC.222 Business Activities Telecommunications Telecommunications are controlled by the Ministry of Communications (MOC). Switching equipment is mostly Ericsson AXE digital technology. both of which supply services on GSM 900/1800 networks. Kaifan. open wire and fibre-optic cable. are via satellite. however. Local transmission is by microwave radio relay. Charges are reasonable by international standards. coaxial cable. The system. while FOG (the fibre-optic Gulf cable) provides links to Bahrain. A majority of the local exchanges rely on Ericsson AXE digital technology but other technologies are in use. At least a quarter of the total population has mobile telephones and the system is becoming overloaded. one Inmarsat (over the Atlantic) and two Arabsat satellites. Jabriya and Umm Al-Hayman. GPT System X and Fujitsu Fetex. Both numerical and alphanumerical pagers are available. Mobile network A mobile telephone service is provided by two suppliers. South Sabahiyah and Mishref. Other services Kuwait’s only pager service is run by MTC. Mishref. The core of the system is four transit exchange centres built in the mid-1980s. excluding the purchase cost of the pager. These services include some of the most advanced in the world. Hitachi D10. which had nearly 473. Services are provided partly by the MOC and partly by other bodies. . such as Alcatel E10. The system is linked to Saudi Arabia by coaxial cable and microwave radio relay. is quite reliable overall. Annual charges for a line are cheap. Qatar and the UAE.

Business services are becoming increasingly sophisticated and Kuwait has a high-quality public data network (PDN). to develop a fully integrated e-government strategy. Kuwait is the third-largest IT market in the Gulf region. computer accessories and hotel bookings. OurGulf. chaired by the Minister of Planning. wholesaling and government services persist. with over 60. After Saudi Arabia and the UAE. Local telephone calls are free. The number of subscribers and users is expected to increase by 10 to 15 per cent a year. flowers. are provided by the MOC. Commerce One Kuwait (C1KW) began providing general B2B and B2C services in January 2001. But changes are likely in the near future because of major private enterprise and public initiatives currently being implemented. such as PABXs. which covers most of Kuwait 24 hours a day. But in spite of the relatively high penetration of IT and Internet services. and hardware and software sales are estimated to be growing at about 25 per cent pa.com is now providing B2C services through the first local bilingual e-commerce site. The prospects for e-commerce are good for several reasons: • High home use of PCs: About 50 per cent of Kuwaiti families have home computers. . The number of e-commerce sites is small and the types of products available are quite limited. sharing between them about 100. consisting mainly of books. and about 20 per cent of the total population regularly accesses the Internet. E-business KEMS is the MOC-designated administrator of the Internet but access is provided by several service providers. a joint venture between Sprint (of the United States) and GulfNet (owned by local investors). so charges are reasonable at KD 5 a month for unlimited access using an ordinary telephone line.000 consumer products for sale. The government has established a committee of IT experts.Infrastructure and Business Opportunities 223 Hand-held radios are still fairly common and the MOC operates the largest trunked radio system in the Middle East using EDACS (enhanced digital access communication system). But services that rely on the public telephone network or on the PDN are rendered by Kuwait Electronic Messaging Services (KEMS). Large-scale telecommunication services.000 accounts. e-commerce in Kuwait has not taken off yet and traditional patterns of retailing. software. • High commercial use of PCs: Nearly all medium-sized firms are using PCs linked by LANs for various office and accounting routines. with access to e-markets throughout the world.

the law protecting rights in domain names. electronic signatures. In this writer’s view. These include: • Lack of a suitable legal framework: Kuwait lacks rules concerning coding security. The Ministry of Interior has over 15. • Limited payment gateways: Though Kuwait’s banks have been reluctant to connect with international payment systems. software and services is about to take off. This realization is beginning to give ownname makers from that part of the world an edge in the market. impediments also exist. and similar matters relating to e-commerce. • Adverse cultural preferences: Local consumers prefer to ‘see and touch’ before making a buying decision. and it will be difficult to change this attitude. However. punters are already trading happily online on the local stock exchange (Chapter 1. . brands. • Intellectual property rights difficulties: As described in Chapter 2. and being able to obtain reasonable compensation for breach. • Restrictions on orders fulfilment: Local agents (Chapter 2. • High Internet penetration. the market in Kuwait in e-commerce hardware. they are also very price sensitive and have begun to realize that the components inside US-made PCs are likely to have been manufactured in the Far East.4. well informed about IT products. this situation is changing. and they believe that US products offer superior technology. In spite of these advantages.3) of international suppliers of consumer and other products are not usually allowed to sell these products in other countries in the Gulf. etc is very good but enforcement. Consumers in the country are. where there are usually other agents for the same goods. However. on the whole. • Relatively low Internet fees. Thus there are likely to be problems with order fulfilment when customers in a neighbouring country order from an e-commerce supplier in Kuwait.6) and there are large numbers of active Internet ‘day traders’ around town.000 PCs and is a leader in e-government. is an ongoing problem. especially as regards clothing and other personal items. • Lack of technical support: The trained technical support personnel required for successful e-commerce are still rare in Kuwait. trademarks.224 Business Activities • High government investment in IT: The ministries are major endusers of computer equipment.

unless the value of a particular order does not exceed KD 5. while the Ministry of Finance negotiates costs of procurement. But no matter who administers a tender. administers the evaluation of bids and officially awards the contract. such as tender announcements. such as Kuwait Airways. And all activities relating to public tenders. Though the client body (ie the public body requiring the service) draws up the specifications and particular conditions it requires. a public authority may only buy equipment and commodities. an independent agency attached to the Council of Ministers. invitations to pre-qualify. have their own tendering procedures. issues the tender. reviews pre-qualifying companies and evaluates bids technically. Public Authority for Housing Care. Tenders for consultancy services are administered by the Consultants Selection Committee at the Ministry of Planning. and commission the performance of works. the CTC defines general contractual terms. . Administration of tenders Tendering procedures for the supply of goods or equipment and the performance of works for most public institutions are administered by the Central Tenders Committee (CTC). Law 18 of 1970 and Law 81 of 1977 as amended. Kuwait University.2 Public Tendering and Contracting As a general rule. The Ministry of Defence evaluates recommendations from its military commanders for military equipment. some public institutions. by way of an independently administered tendering process. Public contracting is governed by Law 37 of 1964.000 and a contract for the same items or works is not made more than once in a month. the Municipality and the Ministry of Housing. the procedures are in essence the same as CTC procedures. Public Ports Authority.4. Kuwait National Petroleum Corporation (KNPC) and Kuwait Oil Company (KOC) and the Ministry of the Interior administer some equipment and material tenders themselves. However.

Eligibility to participate A tenderer for a public contract must be a Kuwaiti merchant who is registered with the KCCI and the MCI. planning and execution of infrastructural works using its own funding and then transfers the developed land back to the client body. BOT-type financing was first tried in 1994 with phase three of the Seif project. A local variant on the BOT idea is the finance and execute (F&E) scheme for land development projects under which a contractor undertakes the design. have been tried and the private sector is being drawn into financing public contracts. and who is registered as an approved supplier or contractor. 3. such as credit facilities supported by export credit agencies (ECAs) and build–own–transfer (BOT)-type schemes. Where the state finances particular contracts for the purchase of goods and services through buyer credit facilities supported by export credit agencies (ECAs). the firm is pre-qualified. 2. it has a Kuwaiti agent or partner.226 Business Activities Foreign participation A foreign firm may not participate directly in bidding for a public contract unless: 1. the majority of public projects in Kuwait are still financed directly out of state funds. the tender is open to foreign participation. and amendments to conditions and specifications. which negotiates the terms and conditions of buyer credits with ECAs and financial institutions. . Though the use of various supplier financing schemes may increase in the future. the agency agreement or partnership is registered with the MCI. pre-tender meetings. the financing is arranged by the Kuwait Investment Authority (KIA). while capital for major projects is provided by the government. and 4. the official gazette. CTC regulations require bidders to state whether the goods and services they offer for a particular tender are in principle eligible for ECAsupported financing. Where this scheme is used. In recent years other forms of financing. Financing public contracts Funding for purchases of materials and equipment and minor projects usually comes from the client body’s budget. are only published in Al-Kuwait Al-Youm. which sells it and uses the proceeds to pay the contractors.

is made on the form available from the CTC. the main requirement for suppliers is that they be Kuwaiti merchants.000 if. though the client . The CTC also maintains lists of approved contractors for works.2. An application. Table 4. The size limit for the first three categories represents the cumulative size of all public contracts being undertaken at the same time by a contractor. Pre-qualification Participation in some public tenders is restricted to firms that have been pre-qualified.000. it is already undertaking projects with an aggregate value of KD 200.1 Size of project(s) in KD Minimum Maximum Category (1) 500.000 Classification is carried out by the CTC’s Classification Committee.2. pre-qualified contractors are sometimes invited to exploratory meetings with the client body. Application for registration is usually made with the client body. However.000 Category (4) nil 250. ie judged capable of undertaking the particular project. To get on the lists. at the time of its bid. work expertise and performance on projects already executed.000. To pre-qualify. The criteria used to classify contractors are their financial and technical status. A contractor may apply for reclassification in a higher category one year after being classified. Before getting on these lists a contractor must be classified according to the size of projects it is deemed capable of undertaking (see Table 4.000 Category (3) nil 500. eg a category (4) contractor cannot bid for a contract worth more than KD 50. accompanied by the prescribed supporting documentation.1). On very large projects. a firm submits a standard set of documents outlining its financial and technical capabilities to the CTC.Public Tendering and Contracting 227 Registration of suppliers and contractors The CTC and client bodies maintain lists of approved suppliers of equipment and materials. Foreign companies are not classified as they are required to pre-qualify each time they bid for public sector contracts.000 none Category (2) nil 1. and once they have been classified they are registered on the approved list for their category. before the tender documents are issued. local firms that have foreign shareholders or partners must be classified and registered if they are to bid for contracts. to define the scope and conditions of the tender.

and the details shown in the announcement are usually enough to enable experienced bidders to decide whether it is worth buying the documents. Bidding procedures All forthcoming tenders. • the documents needed to acquire the tender documents. • the place where the bid is to be submitted. These companies tend to replace their lists of approved suppliers at regular intervals and all firms. depending on the size of the contract. whether administered by the CTC or by another committee.228 Business Activities body assesses the firm’s capabilities. and • a list of the pre-qualified firms (if any). even those that are already pre-qualified. financial status. The official invitation shows: • the tender number. pre-qualification as a form of registration for the supply of particular goods or services is necessary. Separate sets of documentation giving details of a firm’s previous projects. Fees for tender documents vary from a few dinar to several hundred. To do business with the state-owned oil companies. A written request in Arabic plus the fee – for which a receipt. and products and services must be completed for both KNPC and KOC. • a brief description of the service required. their applications may only be submitted by their Kuwaiti agent and must be accompanied by an officially authenticated copy of the agency agreement. is given – is needed. are announced as invitations to bid in Al-Kuwait Al-Youm and are posted in Arabic in the main office of the committee administering the tender. which must be retained for various purposes. • where and when the tender documents can be obtained. • the closing date and time for the submission of bids. • the fee required for the tender documents. Tender documents can only be collected at the place and time shown in the announcement. • the initial guarantee. • the validity period for offers. • the name of the client body. Foreign firms are obliged to prequalify each time they bid for a public contract. are required to undergo pre-qualification procedures to get on the new lists. A registration card is issued to a pre-qualified firm. Sometimes a registration card from the issuing body must be .

When this happens. The tender documents are expected to be submitted without erasures or corrections. site visits and tender amendments In order to clarify the detailed terms of a particular tender. which can only be collected on production of the original receipt for the tender documents. The client body normally arranges site visits where necessary. Pre-tender meetings. a bid will not be accepted unless it is accompanied by either the samples or a receipt showing delivery of the samples to the authority specified in the documents. A firm’s memorandum and articles of association may sometimes be required. The bid must conform to the tender terms exactly and any amendments. and to be signed by the bidder’s authorized signatory and stamped with the firm’s seal. the administering committee issues a formal addendum. If samples are required. but if the sites are in a restricted area. A bid that contravenes any of these conditions risks rejection. The scope of work may be amended after the tender documents have been issued or after a pre-tender meeting. Notice of pre-tender meetings and tender amendments are announced in Al-Kuwait Al-Youm and those who have purchased tender documents are seldom advised directly. Preparation of bids A bid may only be submitted on the original official tender documents issued to the company making the bid.Public Tendering and Contracting 229 shown. Where corrections must be made. Where a tender allows alternative offers to be submitted. bidders are required to provide a . and all prescribed supporting documentation. must be appended. security passes usually have to be obtained from a body other than the client body or the administering committee. firms that have purchased the documents may be invited to pre-tender meetings with the client body. These amendments serve to alter the original terms of the tender and must be complied with fully if a bid is to be acceptable. they are usually required to be made in red ink. Where financing is to be arranged by the KIA through credit export facilities supported by ECAs. Sometimes these are mandatory and bidders who do not attend find themselves excluded from the tender. All parts must be completed in full and the documents may not be altered in any way. tenderers must buy a separate set of documents for each offer they submit. with each bid clearly marked to show that it is an alternative offer. Sometimes the results of tests by a public authority must be submitted. A foreign firm must also show an authenticated copy of the agreement with its local agent.

the price may not be lowered (except during direct negotiations). Pricing and pricing preferences Contracts must usually be priced on a lump-sum fixed-price basis. and alternative terms are never acceptable. nor may it be increased. An unconditional bank guarantee for the entire period of the initial period of validity. If a bidder is successful but refuses to sign the contract. but if the goods in question are not manufactured in Kuwait then GCC goods have a 10 per cent advantage. Unsuccessful bidders have their initial guarantees returned once a contract has been awarded. without exception. goods made in Kuwait may be priced up to 10 per cent higher than comparable items made abroad and be deemed the lowest priced. issued in Arabic by a Kuwaiti bank. the contract may be awarded to the next lowest bidder. though unit pricing is normal in maintenance type contracts. where KIA will be negotiating buyer-credit facilities supported by ECAs. Once a bid has been submitted. Bids that do not have a valid guarantee attached are. be awarded to the bidder that offers the lowest price provided its bid conforms with technical requirements and it has adequate financial resources. The contractual terms and conditions shown in the tender documents are never negotiable. where a firm has submitted an artificially low bid and it appears that it will be unable to finish the work to the required standard. must be submitted with the bid. Goods made in other GCC countries have a 5 per cent price preference. Prices must be stated on a cash-basis. Pricing is normally in Kuwaiti dinar. . However. Local manufacturers have a price advantage. the bond is forfeit. Bid bonds A bidder’s offer must be irrevocable until the end of its period of validity. Local contractors for the performance of works do not enjoy any pricing preference. for each OECD country of origin. even where KIA will be negotiating buyer-credit facilities supported by ECAs. These bonds vary from 2 to 5 per cent of the value of the bid. However. whether the bid is eligible in principle for ECA-supported financing. the CTC has the power to amend contractual terms to conform with the requirements of the ECAs. by law.230 Business Activities breakdown by country of origin of the total value of the goods and services they are offering and to state. Public sector contracts must. Subject to technical acceptance. In early 2004 there was a proposal before the National Assembly to increase the 10 per cent pricing advantage. which initially cannot be more than 90 days. excluded from consideration.

Submission of bids Tender documents must be signed by the bidder and stamped with its seal. If they wish to do so then the bid bond must also be extended. Submission check-list  Original receipt for the tender documents  Initial guarantee  Tender documents properly completed  Alternative offers clearly marked as such (if made)  Tender documents signed. Usually all pages must be stamped and initialled but sometimes all pages require a full signature. stamped and initialled in the same way as the original. If a foreign firm submits a bid directly. Actual requirements vary from tender to tender. To show that the firm will not be acting ultra vires if it takes on the contract. The documents will state what has to be done and these requirements must be followed exactly to avoid rejection. several extensions of 30 days each may be requested. to extend their offers. The name of the bidder may not appear on the envelope. If the tender documents include a bid envelope then this envelope must be used to submit the bid. nor any mark identifying it. and a damaged envelope is . stamped and initialled  Power of attorney of signatory  Memorandum and articles of association  Stamped by local agent (if submitting directly)  Supporting documentation of a technical nature  Receipt for samples or test results (if relevant)  Notarized copy of agreement with local agent  Statements of origin (for ECA-supported financing) Proof of the signatory’s capacity to irrevocably bind the bidding firm is always required and this usually takes the form of a notarized power of attorney.Public Tendering and Contracting 231 Bidders are often asked. rather than through its local agent. If additional copies of the bid are to be lodged. notarized copies of the memorandum and articles of association of the bidding firm may also be required. towards the end of the initial period of validity. both its stamp and its local agent’s stamp must appear on every page. In practice. these must usually be signed.

however. bidders may get a copy in Arabic of the list of bidders and their prices from the CTC’s Sharq office. Bidders may be invited to answer questions during technical studies. Though the tender conditions will state exactly what is to be submitted. But there is usually no formal channel for acquiring such a list from other tender committees. bids must usually be submitted in the CTC’s office in Sharq. Where the CTC is administering the tender. the award is made without further ado to the bidder with the lowest price. especially the bid bond and original receipt for the documents. the CTC may only consider the bid if it decides unanimously that to do so is in the public interest. The envelope must be sealed with wax. by showing a copy of the original receipt for the documents. these consultants usually study the bids on behalf of the client body. about a week or so after bidding closes. a study to ensure that bids comply with the required technical specifications is needed and this is usually carried out by the client body. foreign bidders may find the checklist in the box useful. They may be invited to discuss their offer orally or may be sent a list of . Technical studies and clarifications In most cases. Bids that fail this examination cannot go forward for detailed evaluation unless the committee members agree unanimously that this would be in the public interest. The notice on the box is invariably in Arabic only. on the roundabout opposite the police station. The closing time is usually 1:00 pm and the box is always sealed with wax the very second time is up. If the envelope is unacceptable. The bid is submitted by placing the envelope in the box designated for that tender. Evaluation and award The administering committee first reviews tenders to ensure that they do not contain any obvious discrepancies or inconsistencies that would invalidate them and are accompanied by all supporting documentation. Where the CTC is administering the tender. Where a tender is simple and a technical study is not needed. Where the specifications were originally prepared by consultants.232 Business Activities never acceptable. KNPC and KOC occasionally publish details of bids for major tenders in the local newspapers. Delivery Bids must be submitted to the CTC or other tender committee at the place and on the date and time stated in the tender conditions. The Ministry of Defence has a policy of not revealing bidders and their prices.

a successful bidder must replace its initial guarantee with a final guarantee or performance bond from a Kuwaiti . firms that have submitted bids may be shortlisted by the client body. The winner is invited to sign the contract and if it fails to do so within a specified time it is deemed to have withdrawn. Once technical studies and pricing reviews are completed. questions that require a written reply. and it may also be liable to other penalties imposed by the CTC. Pricing review Before awarding a contract. its initial guarantee is forfeit. generally speaking. The reasonableness of unit prices is reviewed by comparing the unit prices in the bid with market prices and with prices accepted in recent tenders. The rules by which it does so favour the client body as. such as removal from a list of approved suppliers. Contract The administering committee notifies a successful bidder in writing. any internal inconsistencies (such as discrepancies between prices in words and figures or mistakes in multiplying quantities by unit prices) must be resolved by taking the lower price as the offer price. ie the committee always asks for prices that are unreasonably high to be reduced but prices that are unreasonably low may not normally be increased. these must be amended within the limits of the total price of the offer. and direct negotiations between the client body and these bidders may be sanctioned. If it is found that some prices are not reasonable.Public Tendering and Contracting 233 Direct negotiations On large contracts. but the latter does not have any contractual rights until it has signed its contract with the client body. a contract is awarded on the basis of price from among the remaining bids conforming to the tender specifications. the administering committee must review the pricing of an otherwise successful tender. The purpose in either case is to clarify the technical aspects of their bid and bidders are not allowed to alter their specifications unless asked to do so by the client body. These negotiations can take on the characteristics of a Dutch auction as the scope of work is expanded or the price reduced by rival bidders in successive stages until only the hardiest remains. If a successful bidder withdraws or is deemed to withdraw for any reason. Performance bond Before signing the contract.

including a maintenance period. • Consider hedging exchange rate risks if substantial amounts of equipment and materials must be sourced from overseas. • When pricing bids. • Obtain a reliably accurate translation of the contract where this is in Arabic. A contractor that fails to present this guarantee is deemed to have withdrawn. • Make enquiries about security passes for site visits as soon as possible. site visits and tender amendments.234 Business Activities Hints for hopeful expat bidders • Exporters to Kuwait should ensure that their local agent registers their products with as many public bodies as possible as a matter of course. Take advantage of pricing preferences by sourcing materials locally. • To avoid delays when submitting bids. Do not submit a bid more than an hour in advance and stay until you see the box being sealed. such as inadvertent marks on the documents. invitations to tender. make sure you know the exact place and time. If corrections are necessary. exercise caution to avoid errors as these are usually resolved in favour of the client body. This is typically 10 per cent of the contract value and must be valid for the duration of the contract. • Tender documents are usually in Arabic (except in the oil sector) and a completely accurate translation of all conditions and specifications is vital. follow the stated procedure for making them meticulously. • Ensure that contracts with suppliers and subcontractors are 100% backto-back. and bring someone who can read Arabic along to make sure that the bid is lodged in the correct tender box. • Pre-tender meetings are good opportunities for weighing up the opposition. make regular enquiries so that initial guarantees can be released as soon as possible. • As an unsuccessful tenderer is not officially informed of its rejection. use photocopies of the original documents as working papers when preparing a bid. • Check the official gazette regularly for announcements of invitations to pre-qualify (and re-pre-qualify in the oil sector). • Contractors who import specialist equipment to carry out works should ensure (before signing the contract) that they will be able to re-export the equipment at the end of the contract without paying export duties. pre-tender meetings. bank. • Because bids containing extremely minor discrepancies. may legally be rejected. .

However. the contractor usually receives a provisional completion certificate. for Westerners can be expensive. Most contracts allow the client body to retain 10 per cent from work-in-progress payments until the end of the contract and to recoup the advance pro-rata from work-in-progress payments as these are made. a profit may be possible provided human resources. This final certificate releases it from further liability and enables it to claim its final payment. But before it may receive its final payment. which is replaced by a final acceptance certificate at the end of the maintenance period. Public sector contracts always contain penalty clauses. equipment and materials. in the case of works. If a contract is secured. Civil. and minor delays and faults in execution usually result in penalties being imposed. Completion and maintenance Public sector contracts normally include a maintenance period of one year. and the performance bond or a separate bank guarantee. The actual percentages may vary from contract to contract. Stage payments on account of workin-progress are also made. a contractor is not always held liable for unforeseeable events beyond its control. so that during the maintenance period the client body is holding a retention of 10 per cent. such as accommodation and transport. owing to the residency rules. Practical considerations Bidding for public contracts consumes energy. a foreign contractor needs to obtain a tax clearance certificate (Chapter 3. When a project of works is completed. under the rule of force majeure. electrical and mechanical engineering skills are available from reliable local contractors are usually prepared to sign subcontracts on the same terms and conditions (‘back-to-back’) as the main contract. time and money. Advance payments and retentions Contractors for the performance of works usually receive an advance 10 per cent to cover mobilization costs. The period is covered by a retention. and financing were considered carefully prior to bidding. Support costs. so costs can be high compared to the skill levels available.1). .Public Tendering and Contracting 235 Performance Suppliers and contractors are expected to carry out their bargains meticulously. during which the contractor is liable for any faults in the equipment or works. normally has to be subcontracted from a local company. Unskilled labour may be available on a casual basis but.

Bidding is usually necessary. An active bidder will have several bid bonds in play simultaneously and. must be registered with the MOP’s Consultants and Physical Planning Department. if it strikes lucky. a bid that includes some local input has a greater chance of success and foreign consultants often tie up with local practices on a project-byproject basis. but in the case of non-resident bidders this may require Central Bank approval if the facilities needed exceed either KD 40 million or 70 per cent of the contract value. which forms the basis on which consultants are invited to bid for contracts. Project financing is available from local commercial banks once a contract has been awarded. consultants. Because bids must usually be priced in Kuwaiti dinar and as it takes at least three months for a contract to be awarded. which are similar to those governing tenders for works.236 Business Activities The financial costs of public contracting can be heavy. though if a foreign consultancy has a permanent presence in the country. To be considered for assignments. However. whether local or foreign. exchange rate risks need to be considered when pricing bids. so the total value of bonds outstanding at any time will represent heavy opportunity costs. . Consultancy services Consultants are active in the public sector in Kuwait. Foreign consultancy firms may bid for public contracts without going through a local agent. Consultants should ensure that their details are kept up to date. when equipment and materials are sourced overseas. are administered by the Consultants Selection Committee at the Ministry of Planning (MOP). This department maintains a database of consulting firms. it is often stipulated that bids for particular tenders should be made by local consultants in association with international firms. and procedures. it requires a local agent. will have to furnish performance guarantees. Naturally.

offset expenditures amount to about 10 per cent of a contractor’s supply contracts. a separate office within the Ministry. . the business must be officially approved. in one fiscal year. This ‘offset business venture’ (OBV) does not have to be related to the foreign contractor’s principal supply contracts. Definition of foreign obligator Under the rules. a foreign contractor is a government or private business entity that: . The operating rules were amended in January 2002.4. The contractor earns ‘credits’ for its capital investment in the OBV and when the sum of these credits equals 35 per cent of its supply contracts it has fulfilled its obligation. is not registered or does not operate under the laws of Kuwait. Actual expenditures will be much less than 35 per cent because most investments earn credits at a rate greater than 1:1. It is administered by the Offset Programme Management (OPM). The offset obligation is nominally 35 per cent of the value of those contracts. all of which is recoverable when the obligator exits the business. Administration Kuwait’s offset programme was established in 1992 and is the responsibility of the Ministry of Finance.3 Counter-trade Offset Programme Under Kuwait’s counter-trade offset programme. foreign contractors that sign contracts to supply government institutions with goods or services that are cumulatively worth. or . In practice. or represents a prime or subcontractor that is either a foreign business entity or a foreign government or governmental institution. more than KD 1 million (for defence contractors) or KD 10 million (for civilian contractors) incur an offset obligation that requires them to set up a business beneficial to Kuwait. Before a contractor may embark on its OBV.

Business Activities provides goods or services to the government of Kuwait under a supply contract in which these goods or services are defined as foreign-produced under Kuwaiti law. where the start date for the principal supply contract is more than 90 days after the signing of that contract. or 2. once the obligator has started implementing its OBV.238 . or 3. In addition. At that point it will be requested by the OPM to present a concept paper on a proposed project or to participate in an approved offset project or in one of the programme’s funds (see later in the chapter). At the discretion of the OPM. ie when it is put on the shortlist of bidders for that contract. provided the OPM agrees. To ensure fulfilment. by implementing a project suggested by the OPM. depending on the nature and size of the OBV. and on any delays that may occur that are not the fault of the obligator. may be deemed to be foreign contractors for the purposes of the programme. However. The contractor’s commitment to implementing a specific project is a prerequisite for the granting of the principal supply contract. Penalties Contractors that refuse to participate in the programme or cease to participate or otherwise fail to fulfil their obligations under the offset programme incur a penalty of 6 per cent of the value of their supply contract(s). either in whole or in part. Overall timing A contractor’s obligation begins before it signs the supply contract that creates it. by implementing a project of their own. offset obligators are obliged to lodge an unconditional and irrevocable bank guarantee of 6 per cent of the supply contract. The offset business venture (OBV) Foreign contractors may fulfil their offset obligation in three possible ways: 1. the time allowed need not begin to run until that start date. or that are formed in order to circumvent the obligations of the programme. ie the contract that creates the obligation. Kuwaiti business entities acting on behalf of foreign businesses. The bank guarantee can be released. the OPM may agree to a different timeframe for implementation. . The total time allowed from the date a foreign contractor signs its principal contract of supply to when it must begin the physical implementation of its offset project is 12 months. by participating in one of the offset funds established under the offset programme.

2). and to develop the capabilities of nationals through training and education. ie technology. to open up channels of investment in the country. There are six stages or periods to the process: . to create job opportunities for Kuwaiti nationals. In addition.2) and is registered with the MCI. an OBV must fulfil its quota of Kuwaiti employees as required under Law 19 of 2000 (Chapter 2. especially within the private sector. or (b) it may establish an OBV under Kuwait’s direct foreign investment programme. An OBV may involve participation in an established business provided participation by the foreign obligator will result in the expansion or development of that business. the contractor has two choices: (a) it may establish an OBV in conjunction with Kuwaiti businesses. The offset process Kuwait’s offset programme is clearly focused and its administration is friendly and cooperative. . and (c) attract foreign investment for development. In the case of (b) the entity must also comply with Law 8 of 2001. . (b) contribute to the creation and development of high-skill jobs for Kuwaiti nationals.Counter-trade Offset Programme 239 As regards (1) and (2). which regulates direct foreign investment in Kuwait (see Chapter 2.6). entrepreneurs or private citizens as equity partners. Objectives and evaluation criteria The programme’s overall aim is to provide sustainable economic benefits for the country by encouraging projects that (a) transfer modern technology to Kuwait and facilitate its assimilation into the local economy. To this end the stated objectives of Kuwait’s offset programme are: . In either case the OBV may be a company. to promote and stimulate the private sector in Kuwait. to attract modern technologies. These objectives provide the essential criteria by which proposed OBVs under the programme are evaluated and approved. . The OPM gives particular support to projects that can generate foreign income through export sales or import substitution using domestically produced goods. labour and capital. These objectives concentrate on three factors that benefit Kuwait. provided it exists and operates under Kuwait’s Commercial Code (see Chapter 2. a partnership or other legal business entity. . It also supports projects that can grow by reinvesting their profits in Kuwait and that enhance the role of the private sector in the economy.

and the number of Kuwaiti nationals who will be employed and the training that will be given to them. The MOA will specify the value of the contractor’s offset obligation and the project(s) it will implement to extinguish that obligation. In either case the foreign . Descriptions of the product or service showing customer benefits. The benefits the project is expected to bestow on the State of Kuwait must be itemized and must show. Memorandum of agreement Once the foreign contractor has had its concept paper approved or has otherwise agreed with the OPM as to how it will fulfil its offset obligation. business plan. or whether it will implement a project of its own. it signs a memorandum of agreement (MOA) with the OPM. sales and marketing strategies should be outlined briefly. mobilization period. . The concept paper should briefly detail the proposed business. At this point it needs to decide whether it will fulfil its obligation by participating in an offset fund or in an approved offset project. Business Activities concept paper stage. This approval must be obtained before the award of the principal supply contract is decided. . or it may be signed prior to that. any competitive advantages and future development potential must also be mentioned. The OPM is usually quite quick in evaluating concept papers. in particular. products and economic sector. . the technology that will be used. including its scope. . the value-added by the business. . memorandum of agreement. It should also state the expected corporate structure and ownership of the business. another concept paper for a different proposal can be submitted. approval stage. A well-thought-out concept paper is usually accepted. it must submit a concept paper to the OPM and obtain approval for it. The MOA is usually signed at the same time as the principal contract is awarded.240 . Production. Concept paper The concept paper stage begins when the foreign contractor is shortlisted as a bidder for a government contract that will trigger its obligation. Where a potential obligator decides it will fulfil its obligation with a project of its own. Where a concept paper is refused by the OPM. and the International Standard Industrial Classification category (see page 242) into which its activities fall. implementation. any proprietary position.

It should describe the business and the industry in which it will operate. The critical risks to the project must be analysed and a financial plan. must be included. The product or service must be examined in detail. Business plan The business plan must be submitted to the OPM within four months of signing the principal supply contract. The business plan must be fully detailed and must cover at least the first five years of the project. It should be based on a professional feasibility study. A detailed market analysis and marketing plan must be included. including its strategy. Mobilization period Once the business plan has been approved. If the business plan is not approved. and the technologies that will be transferred inward. as well as a full description of the company’s operations. The required detail is similar to international norms. and this examination should cover any proprietary position and the technology involved. The economic benefits to Kuwait must be described in detail. its management team and how the firm will be organized. with projections for at least five years and sensitivity analysis. Evaluation criteria As well as being assessed on the benefits that will accrue to the economy of Kuwait. These must cover a detailed description of staffing requirements distinguishing between Kuwaiti and non-Kuwaiti staff. The plan must include a mission statement and a business philosophy statement. competitive advantages and future development potential. An estimate of how offset credits may accumulate is also required. any scientific research activities that will be undertaken. the education and training that will be provided. The general impact on the economy of Kuwait must also be estimated. technical and financial viability. During this time it may call for further information. the obligator is required to submit a revised plan or submit a new business plan for a different project. This will involve securing all required .Counter-trade Offset Programme 241 contractor’s actual obligation does not arise until it has signed the principal contract. the obligator has six months in which to establish the project. Approval stage The OPM is required to evaluate the business plan within two months of receiving it. the proposed OBV must pass normal evaluation criteria for commercial.

a factory KD 10. this time-limit will be found to be rather tight.000.1.242 Business Activities licences and permits and. Where the obligator has to acquire approval under Kuwait’s direct foreign investment regulations (Chapter 2. obtaining a lease of land. Where a project is expected to provide extraordinary economic benefits. the OPM may decide to give that project a higher or lower multiplier than the one shown in the box.2 are not set in stone. As can be seen from Table 4.1 Calculation of offset credits Value of principal supply contract KD 100.000 To decide what the multiplier should be. These classifications are based on the International Standard Industrial Classification of All Economic Activities (ISIC) of the United Nations.000 Multiplier (Category I.2). The calculation is based (under the new system) on the capital the obligator invests in an approved project.000. certain broad activities. Revision 3. eg if it is expected that an inordinately high number of Kuwaitis will be trained .2). the OBV is classified according to its main activity into one of the economic activity areas (EAA) shown in Table 4. During this time the obligator is required to furnish the OPM with monthly reports of its progress in establishing the OBV.3. The OPM has assigned multipliers to different categories of economic activities in accordance with the perceived benefits these activities provide the State of Kuwait (Table 4. appear under more than one category.asp?Cl=17&Lg=1&Top=1.3.org/unsd/cr/registry/ regcst. This is because certain manufacturing activities are of lesser value to the Kuwaiti economy than others.000 3. Manufacturing) Offset credits @ 3. in the opinion of the OPM.5 6 10. etc.5 KD 35. where a factory is to be built.000 Capital investment in OBV to establish.un. The multiplier values shown in Table 4. The full list of activity areas may be assessed on http://unstats.2.2.3. The total capital investment involved is multiplied by an appropriate multiplier to arrive at the offset credits that will be given for a particular project.000. As regards any particular project. The calculation of offset credits The calculation of offset credits is quite simple.000.000. For example: Table 4.3. say. such as manufacturing.3.000 Offset obligation @ 35% KD 35.

negotiable. if they are equal to or greater than its obligation then it is extinguished. Gas & Water Supply (E) Community. Sports & Other Social Services (O) ** 1 Note: * indicates activities that are highly favoured by the OPM. then the OPM may be induced to give the project a higher multiplier.Counter-trade Offset Programme 243 Table 4. Where the project is perceived as only conferring limited economic benefits on Kuwait. ** indicates activities that have a low priority with the OPM. Leisure. subject to the approval of the OPM. this may have a different multiplier from the first project.5 II Manufacturing (D) ** Transport.3. a foreign contractor may designate a third party to fulfil its offset obligation. the OPM may give it a lower multiplier. Foreign contractors may fulfil their offset obligations through an OBV whose capital base and principal business activities are outside Kuwait. . Where they are less than its obligation then it will either have to invest additional capital in that project or initiate another offset project. in advanced technology under the project. Where another offset project is proposed. Storage & Communications (I) ** Wholesale & Retail Trade (G) Public Administration & Defence (L) 1.8 III Agriculture. as multipliers are assigned individually to projects. though the contractor remains responsible for fulfilling the obligation. Real Estate & Leasing (K) ** Community. Hunting (A) * Fishing & Fish Farms (B) Mining & Quarrying (C) Electricity. Third-party and offshore fulfilment Subject to PEO approval. When the credits are deducted from the contractor’s obligation. Real Estate & Leasing (K) * 2. These ‘surplus’ credits may not be transferred to other contractors. Sports & Other Social Services (O) * 2. any credits generated by its investment that are not needed to meet its current obligation may be carried forward and set against offset obligations arising from future supply contracts it signs. Hunting (A) ** Construction (F) * Transport. to some extent at least. Leisure.2 IV Agriculture. After a contractor has satisfied its obligation. The multiplier is.2 Economic activity multipliers Category Multiplier category description Value I Manufacturing (D) * Education (M) Health Services & Social Work (N) 3. Storage & Communications (I) * Financial Intermediation (J) * Business Activities.6 V Hotels & Restaurants (H) Construction (F) ** Financial Intermediation (J) ** Business Activities.

Effect of offset programme When foreign contractors secure substantial projects in Kuwait. ie were already operational or were in the preliminary stages of implementation. coupled with accelerated spending on government projects. . designed according to its nature and size. and given to the obligator when its business plan is approved. such as the employment and training of nationals. balance sheet and historic cash flows. The introduction of direct foreign investment. the related concept paper and business plan must clearly indicate congruence between the activities of the offshore OBV and Kuwait’s economic development objectives. out of which nearly KD 430 million ($1. such as job creation and export growth. The purpose of the offset programme is to ensure that these long-term economic development benefits are shared equitably with Kuwait. however. The offset programme has been in operation for more than a decade. The business plan must also provide a quantification of the economic benefits that will accrue to the State of Kuwait. are now becoming more noticeable. must also be reported.492 million) of projects were ongoing. By the end of 2003. The economic benefits to the State of Kuwait that are of concern to the OPM. The OBV’s financial statements. must be attached to the OPR. these give rise to direct economic effects. It had little impact on the economy or on inward investment during the first few years of its operation. Customized OPRs are provided for each OBV. that accrue to the home countries of the contractors. including income statement. Its economic effects.244 Business Activities provided that they generate foreign income flows for Kuwait and are conduits for the development of domestic technology. The audited financial statements must also be attached once a year. human resources and business. foreign contractors had incurred offset obligations in excess of KD 600 million (US $2 billion). OVB compliance reporting Once it has begun implementing its offset project. suggests that the economic effect of the counter-trade offset programme will become more significant over the next few years. the obligator is required to file quarterly offset progress reports (OPR) with the OPM. In order to be approved.

Import licences Commercial importers require import licences issued by the MCI. wallets and shoes). jewellery and precious stones. Special licences are needed to bring in ‘regulated’ products such as arms. These import licences must be renewed annually. ethyl alcohol. Prohibited goods and origins To protect local morals. pigs. weights and weighing machines. These licences too must be renewed annually. prohibited. but detailed regulations governing particular products are found in various ministerial resolutions.4 Import and Export Regulations and Standards Importing into Kuwait is fairly easy provided regulations are complied with and documentation is in order. alcoholic beverages and materials used in making them. Special licences are also needed to import industrial equipment and spare parts. The basic rules are contained in Law 43 of 1964. To . pork and pigskin products (such as handbags. drugs. among other items. Importers The right to import goods into Kuwait on a commercial basis is restricted to Kuwaiti individuals and firms that are members of the Kuwait Chamber of Commerce & Industry (KCCI) and that are registered as importers in the Ministry of Commerce & Industry (MCI). vintage and classic cars. pesticides and insecticides. These are issued to industrial firms upon the recommendation of the Public Authority for Industry and are valid for a single use only. ammunition and explosives. General licences authorize registered importers to bring in any amount of a variety of general products from any country any number of times. subject to the exceptions discussed below. pornographic and subversive materials are. etc. pork. narcotics and associated plants and seeds.4.

a minimum of four documents are needed: . . mode of transport. . for siding with Iraq during the occupation of Kuwait. official delivery order. . type of goods. items such as vehicles over five years old and goods manufactured locally (such as wheat flour. . . . port of export. type of packing. Import documentation To clear goods into Kuwait. such as air-guns. Tunisia. net and gross weight. mode of transport. number of parcels in consignment. asbestos and cyclamates. and which was only enforced erratically. . contents of each parcel including details of colour. packing. Items injurious to health. are also banned. . . etc) are also prohibited. unit and total prices. . detailed description of gods. measurements. packing list. name of the carrier. shipping marks. Commercial invoice: . number of goods as on manifest. . certificate of origin. name and address of the manufacturer and/or exporter. . . the Yemen and Mauritania. Sudan. . country of origin. . has been lifted. The required content of these documents is listed below: 1. oxygen. . 2. etc. commercial invoice. . . trade marks.246 Business Activities protect local trade and industry. Official delivery order: . The trade embargo in force against Iraq and against Jordan. . Imports from Israel are banned absolutely.

It must be shown inside a triangle on the packing and must also be shown on the letter of credit and the bill of lading. . such as timber and iron. must be cleared by customs. Goods that cannot be marked easily. . bales. value of goods. Shipping marks The packing of items shipped to Kuwait must be imprinted with a shipping mark. clearing is fairly quick . or crates). cartons. boxes. . contents of each package. name of manufacturing plant. . the country of origin should also be affixed firmly to each packing unit. type of packing (ie.Import and Export Regulations and Standards 247 3. name of freight forwarder. . As well as being shown on the packing list. 4. . gross and net weights of each package. value of each package. Customs clearance All goods. . The shipping mark must consist only of the cable address and the package number of the person who opened the letter of credit. name of producing company. trade mark. Provided all documents are in order. whether subject to import duty or not. place of origin of the goods. clear statement that goods are not of Israeli origin. type of packing. do not have to be marked. preferably a joint local– Arab chamber. . mode of transport. . country of origin of each packing unit. . certificate of origin and the delivery order (bill of lading or airway bill) must be in three original copies and must be certified by a chamber of commerce in the country of export. gross and net weights. . Packing list: . . and certified by the Kuwaiti consulate in that country. Certificate of origin: . the consulate of Saudi Arabia (preferably) or any other Arab country is acceptable. If the importing merchant did not open the letter of credit then his or her mark may be added outside the triangle. If there is no Kuwaiti embassy in the exporting country. The invoice. .

many products must be accompanied by additional certificates if they are to clear customs in Kuwait. have to be sent for testing. a set of common standards being devised under the GCC’s Unified Economic Agreement. motors and appliances is 220–240 volts. apply. If there is no KSS covering a particular product then the general rule is that Gulf standard specifications (GSS). Goods that fail to clear customs must be re-exported within a month. single phase and these ratings must be mentioned on the letter of credit opened to import electrical apparatus.248 Business Activities and delays usually arise only when goods. as well as locally made. be fit for human consumption. eg foodstuffs and some veterinary medicines and insecticides must adhere to standards issued by the Food and Agriculture Organization (FAO). the product must adhere to international standards. Most of these concern health and safety and are required under regulations issued by the Ministry of Public Health. 50 cycles. conform with Islamic Sharia (ie be a permissible food slaughtered in the correct manner). foods and computers. items must comply with Kuwaiti standard specifications (KSS). . the Municipality and the MCI. and if there is no suitable GSS. For some years Kuwait has been harmonizing its standards with those of the other GCC states and since 1995 many GSS have been incorporated as KSS or have been issued as optional standards alongside extant KSS. Additional certificates and other regulations As well as the four documents described above. . food products must: . Foodstuffs To be cleared into Kuwait. . . . have an acceptable expiry date. comply with FAO standards. Standard specifications All imported. Electrical appliances The KSS for electrical tools. and comply with labelling requirement (see box). Intra-GCC discussions on common standards have included input from EU industrial groups and the US National Institute for Standardization and in some cases international standards have replaced local standards. such as medicines.

Import and Export Regulations and Standards 249 Labelling requirements for foodstuffs All cans. Pharmaceutical products Medicines and pharmaceuticals must be registered with the Ministry of Public Health before they can be imported. and they usually do not come into effect until they have been published. . country of origin. bottles and boxes must be labelled clearly in Arabic showing: . are published in Al-Kuwait Al-Youm. whether issued by the MCI. cadmium (500 mg) and mercury (100 mg) are strictly enforced. . Registration involves submitting a complex set of documents relating to the manufacturer and the product. expiry date. chrome (250 mg). The Arabic label may be superimposed over the original label provided it is firmly affixed. Limits on the amount of lead (250 mg). metric net and gross weights. Children’s toys Children’s toys are required to be non-inflammable and made mainly of textiles or plastics. It can take five years. including clinical studies and complete samples for testing as well as reference samples of the active ingredients and preservatives in the product. Regulatory details and updates Changes relating to import licences and regulations. . the official gazette. even longer. the Ministry of Public Health or the Municipality. . net volume in litres (liquids). . name of the food. . to register a medical product. ingredients.

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Business Activities
Hints for entrepreneurs
. Up-to-date lists of regulated and prohibited items may be obtainable
from the MCI.
. Kuwait’s standard specifications are in a state of flux, but up-to-date
information on specifications should be available from the
Specifications & Standards Department at the MCI, though it may be
simpler to obtain the latest regulations from a local clearing agent.
. The KCCI has booklets in English detailing the regulations for
particular products, which it hands out free to inquirers.
. When importing a food for the first time, prior approval should be
obtained by sending samples, packed exactly as the food will be
imported, to the Department of Food & Nutrition at the Ministry of
Health.
. The KCCI has a booklet in English containing very useful information
on Islamic slaughtering methods and the religious supervision required
in abattoirs, and Halal labelling requirements.
. The latest regulations governing medicines and pharmaceuticals are
available from the Ministry of Public Health.
. As the personnel in customs do not speak English and the customs
declaration must be filled out in Arabic, clearing is best left to
professional agents. Charges are reasonable.
. Exporters should check the latest regulations with their importing
agent in Kuwait as regulations can change at short notice.

4.5

Marketing, Advertising
and Promotions
Kuwait is not an advertising agent’s dream market. Many local businesspeople do not appreciate the value of advertising and the total annual
spend is only about a sixth of the level in Phoenix, Arizona, in the United
States, which is comparable in population size to Kuwait.

Market research
There are several local market research firms. However, with a sole
exception, their research techniques can be charitably described as 20
years out of date. They are also, with that same sole exception, less than
trustworthy in the collection of data.

The advertising market
The emphasis, in local advertising, is on below-the-line marketing
activities, such as sales incentives and point of sale promotions, rather
than above-the-line advertising in the mass media. This focus on shortterm tactics instead of long-term strategies to build brand identities and
market shares is a result of several factors:
.
.

.

.

There is intense competition among local businesspeople.
Advertising is viewed as an expense rather than an investment and
there is an apparent lack of understanding of how brand building
sells products.
Nearly two-thirds of local residents are transient expatriates and
businesses are unwilling to spend on building loyalty among people
who are only passing through.
The diverse ethnic make-up of the country and lack of a common
language ensures that any advertisement cannot reach a portion of
the population.

Rather than being results-driven, ie based on the return a particular
campaign will provide, the advertising market is price-driven. This is
because the Kuwaiti economy is basically a non-manufacturing import

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Business Activities

market, so that most merchants do not have a sense of ownership in the
products they are selling and do not see any need to enhance brands.
In the consumer market there is a lack of differentiation between
products. Without distinct perceived values, all products tend to be seen
as alike, the consumer buys the cheapest, and special promotions
become the only effective form of advertising. This has been aggravated
by the concept of tanzilaat. For two months twice a year, in November
and December and in May and June, it is ‘sales’ time in Kuwait.
Knowing this promotional schedule, consumers postpone their purchases of durables and buy only during tanzilaat, when margins are
low. As a consequence, the price of a product has become more important
than any other marketing aspects, such as positioning. However, things
are changing.
To overcome the reluctance to build brands locally, many foreign
companies supplying internationally known brands oblige their distributors to spend a certain portion (ranging from 5 to 15 per cent) of local
turnover on promotion. They also try to control advertising quality by
providing their own materials and dictating the sort of campaigns that
are run.
Indeed, merchants are now realizing that they need to build on the
recognition and built-in perceived value of the international products
they are importing, and some very astute marketing has taken place in
recent years. Mobile phones are an example. In Europe and the United
states Nokia is just another major competitor, slugging it out with
Motorola, Ericsson, Alcatel, Siemens and a host of Far Eastern brands.
In Kuwait, however, Nokia swept the market because of the savvy job its
agency did locally.
Hints for entrepreneurs
. Western advertising materials must be adapted to local culture and be
correctly focused.
. The best creative people work independently or in tiny agencies and
specialize in servicing clients directly.

Local media
For its size, Kuwait has a wide range of newspapers and magazines in
Arabic, English and Hindi, which depend on advertising for significant
amounts of revenues. But the printed media are relatively unfocused
and not aimed at closely defined market segments. Most women’s magazines, for example, are directed at all age groups and earning levels.
State-run TV and radio services are ‘commercial’. Local TV is not
considered to be a very effective advertising medium because viewers
prefer to watch the programmes they receive via satellite. On the other

Marketing, Advertising and Promotions

253

hand, local FM radio (with several stations in Arabic and English) has a
broad audience, and is effective and cheap (about KD 15 for a 15-second
spot using pre-recorded material). There are several recording studios
in Kuwait where high-quality 30- to 60-second radio spots in final
broadcast-ready medium can be created for less than KD 500 each,
inclusive of script, music and voice-over.
Outdoor advertising is ubiquitous and is regulated by the Municipality. Mupies (back-lit street stands) can be rented for KD 4,500 a
fortnight for 100 faces.

Agencies
The main source of revenue for advertising agencies in Kuwait is the
discounts they receive on media placings, which range from 15 per cent
for the smaller players up to 40 per cent for the biggest agency, but much
of this is expected to be passed on to the client. Media are cheap and the
consequence for agencies is that revenues are depressed and profit
margins are thin. In addition, the costs of running an agency are high
compared to the size of the market and the very low per capita advertising spend. The market is also intensely competitive, as the ‘game’ is
seen by new entrants as requiring little experience or investment.
The fault lies with the original agencies in the 1960s, when advertising was first being introduced in Kuwait. This was a time when, with the
oil era in full flush, everything and anything could be sold off the boat, so
potential clients could see no reason to advertise. To survive in a market
where advertising was not seen as having any particular value, agencies
had to rely on media discounts.
Salaries in advertising are low and those who run agencies are
insensitive to the needs of creative people and are unable to retain even
the most mediocre talent. As a result, visual skills are poor and copywriters produce little more than a mish-mash of poorly understood
cliche´s strung together with inappropriate syntax. In addition, cultural
and religious sensibilities are seen to inhibit what advertisers may do,
even though (with the right creative people) this is not true.

4.6

Researching Opportunities
Though Kuwait has few market research firms, assessing business
opportunities is not difficult. It was one of the statistically better
surveyed countries in the region. Data gathering is relatively good
and there are several reliable sources of business information both
within Kuwait and overseas.

Ministry of Planning
The Central Statistical Office (CSO) at the Ministry of Planning (MOP)
is the main source of official government statistics. The CSO publishes a
comprehensive Annual Statistical Abstract (in Arabic and English),
though unfortunately it does not come out until about 18 months after
the end of the year to which it refers.
The CSO also publishes a monthly digest of statistics (in English) and
short reports (some in English) on particular matters and specific
economic sectors from time to time. Each year the CSO issues a short
Statistical Review (in Arabic and English editions), a colourful and
neatly folded booklet, which is reliable and partly up to date.
The Department of Planning at the MOP also publishes statistical
data from time to time, on a variety of topics, mainly in the form of press
releases.

Kuwait Chamber of Commerce & Industry
The Kuwait Chamber of Commerce & Industry (KCCI) produces a
monthly publication, the Kuwaiti Economist, in Arabic.
The KCCI also produces short informative booklets in English on
local business practices. Its foreign relations department may be able to
give informal advice and up-to-date statistical information to foreign
visitors.

The Central Bank
The Central Bank (CB) has an excellent Economic Research Department, whose reports are issued through its public relations section. All
the reports mentioned below are in English as well as Arabic.

Researching Opportunities

255

The CB’s Annual Report, issued about 10 months after the year-end,
gives a good overview of fiscal matters. The CB’s Quarterly Statistical
Bulletin, issued about four months after the quarter-end, always has a
well-written commentary on trade and general economic matters. The
Monthly Monetary Statistics is a solid review of banking and exchange
rates. The Bank also produces a well-researched Annual Economic
Report on the domestic economy, monetary policy, public finance, the
local securities market and foreign trade.

Industrial Bank of Kuwait
Information on current opportunities in industry is available from the
Industrial Bank of Kuwait (IBK). The IBK’s Annual Report includes a
well-researched survey of industrial developments in Kuwait linked to
events in major Western economies.

Commercial banks and Institute of Banking
The commercial banks have research units, which issue reports of
varying utility from time to time. Some produce quarterly reports on
trade and business conditions, and their annual reports may contain
useful overviews of economic conditions. NBK’s Quarterly Economic
Review is worth reading but only appears sporadically.
The Institute of Banking undertakes surveys of particular economic
and business matters on an ad hoc basis.

Local consulates, associations and consultants
The commercial sections of major foreign embassies in Kuwait are
usually active in gathering data on local opportunities but they tend
to reserve worthwhile information for their own nationals.
Local associations of foreign business people, such as the American
Business Council, the British Business Forum and the Indian Business
Advisory Council, can seldom provide advice on opportunities but they
are good networking facilities. A cost-effective way of gathering local
business intelligence on a case-by-case basis is to use independent
consultants, such as local Westerners who have good connections in
Kuwaiti business circles.

OECD sources
Discrete and aggregated data on exports to Kuwait from OECD countries should be available from government statistical offices in a foreign
businessperson’s own country.

256

Business Activities

Trade promotion agencies and missions
Foreign government trade promotion agencies may have information on
market prospects in Kuwait and often supply updates on plans and
potential new projects. These agencies may also organize trade missions
to Kuwait, a cost-effective way of getting a feel for the place and making
local contacts.
Hints for entrepreneurs
. Business visitors will soon discover that trying to contact some places by
telephone is well-nigh impossible (the switchboard at the MOP seldom
answers calls) and a personal visit to acquire information is necessary. A
well-designed business card and corporate letter of introduction
always helps.
. When coming on a trade mission, bring plenty of corporate literature
(a full suitcase, say). Though most of the contents may never be read,
the locals are always chuffed to receive heavily laden corporate folders.
A short (one-page) summary of corporate products and services is vital.

Kuwait has a well-developed infrastructure. . which will probably be unelected. Iraq’s southernmost city. unlike the mountainous routes that join Turkey to northern Iraq. it has resurged since May 2003. Kuwait is well placed as a base for doing business with Iraq. much earlier than initially expected. The roads north are good and well surfaced. The KFTZ (Chapter 2. However. The Iraqi Governing Council (IGC).4. It is closer to Baghdad than is Amman in Jordan or Tehran in Iran. has overall responsibility for the reconstruction of Iraq. . actually runs the country but its decisions may be vetoed by the ICA as the CPA is the sovereign power. at the end of June 2004. The CPA is due to hand sovereignty over to an Iraqi government. In early 2004 the CPA had three main activities: .2) has an office in Abdali. when the war to liberate Iraq officially ended. and reconstruction. and there are no customs charges on goods and equipment that transit on the way to Iraq. which is composed of unelected representatives of most major political groups in Iraq. humanitarian aid. This transit-trade picked up remarkably during the Iraq–Iran war of the 1980s but ceased almost entirely after August 1990. Kuwait City is only a two-hour drive from Basra. headed by Paul Bremer. . the Interim Civil Administrator (ICA) for Iraq.7 Doing Business through Kuwait: Looking North Kuwait’s traditional role as a middleman on the international trade routes between South Asia and Europe declined during the late 19th century and became economically irrelevant with the advent of oil. civil administration. the Kuwaiti town on the border with Iraq. The organization of Iraq’s reconstruction The Coalition Provisional Authority (CPA). and has devised a simplified system of paperwork for processing re-exports imported through the Free Zone.

religious affairs and foreign affairs. water and medicines. by the government of Kuwait. and the Web sites of various NCOs. energy and fuel management. UK and Kuwait. a retired chief-of-staff of the Kuwaiti army. The HOC coordinates the work of international non-government organizations (NGOs) operating in Iraq through Kuwait. the ICRC and UNICEF. the succour and resettlement of refugees. the treasury. January 2004. These operations are being wound down at the time of writing. It has strong links with the CPA and with the US and UK armed forces. but the ever-present threat of a humanitarian disaster in Iraq arising from a deteriorating security situation means that they could be reactivated at any time at short notice. . The HOC was established. Though some of these Web sites are listed at the end of this chapter. the easiest way to find information is to Google on the key words humanitarian operations centre kuwait. and opportunities for the supply of humanitarian goods and services. oil. under the direction of Lt Gen Ali Al-Mumin. trade and industry. such as Oxfam. is also quite informative. mainly for consultants who specialize in the reorganization of large state bodies. It is directly involved in security and law enforcement. and mine clearance. The Web site of the American Council for Voluntary International Action (InterAction). The activities of the HOC. may be reviewed through Web sites run by the United Nations Office for the Coordination of Humanitarian Affairs (OCHA) and its subsidiary Humanitarian Information Center (HIC) for Iraq. Its 50 or so staff consist of aid experts from the United States. Persons visiting Iraq as representatives of a humanitarian organization or project must obtain prior permission and a pass from the HOC.258 Business Activities Civil administration The CPA’s involvement in civil administration includes supervising the national and local governments. Humanitarian aid through Kuwait is coordinated by the Humanitarian Operations Center (HOC) in Khaldiya. and is funded. The main aid activities are the supply of food. Opportunities for foreign entrepreneurs in the supply of goods and services in these areas exist. an alliance of US-based international development and humanitarian non-governmental organizations. The opportunities are diminishing as the Coalition occupation of Iraq approaches an end. Humanitarian aid The humanitarian aid being extended to Iraq provides significant commercial opportunities for foreign suppliers of goods and equipment. It is attempting to reshape local and national governance.

Thus the best option for non-US companies is to bid for subcontracts. Iraqi and non-US firms are allowed to bid for subcontracts. The CPA coordinates contracts for the reconstruction of Iraq. now called UK Trade and Investment. which. or that have experience with. contracts available and bidding procedures are available on USAID’s Web site. Major contracts have been placed to date through USAID. US $18. transport.4 billion of this money is coming from the US taxpayer. assess damage and rebuild the oil sector. repression and sanctions. of which there are and will be many. Companies with existing relationships with. which gives that department control of reconstruction funds as well as funds for humanitarian aid. require reconstruction almost from the ground up. Brown & Root. airports. water and sanitation. However. The role of the Department for International Development (DFID) in the UK is limited to the distribution of relief funds. The US Army Corps of Engineers was given two separate contracts.Doing Business through Kuwait: Looking North 259 Reconstruction Liberated Iraq. . worth US $1 billion. but it does not have the funds to emulate the role of USAID in the reconstruction of Iraq. contracts that involve spending these funds must be awarded to US-based companies. a US government department. Two-thirds of the US $18. is fairly easy to navigate. Trade Partners UK (TPUK). is the UK government department responsible for reconstruction. and under Federal law. including power generation and distribution. health and agriculture. to extinguish oil fires.4 provided by the United States is expected to be committed during 2004. The UN Oil for Food Programme has been separately revising and renewing its contracts since UN sanctions on Iraq were lifted and updates on the latest position may be found on its Web site. through its Programme Management Office (PMO) in Baghdad. though the US government has also announced that countries that did not participate in the war to liberate Iraq will be excluded. These were to be given to companies from countries that supported the US-led invasion of Iraq. which it has subcontracted to Kellogg. education. though vast. A further US $6 billion of contracts for non-construction schemes were to be awarded sometime later and bids on these were to be open to all countries regardless of their support for the war. US companies may have an advantage. after years of wars. seaports. The international community has pledged US $33 billion towards this effort. major parts of the economy. is not quite an economic basket-case. Details of contracts awarded. The cost of rebuilding Iraq is estimated to be as high as US $150 billion over 10 years. However. In March of that year the PMO was due to award 17 contracts (10 for construction and 7 for support activities) worth a total of US $5 billion.

foreign companies cannot do business in Iraq unless they have local partners. irrigation channels and transport links. in this writer’s experience. Bechtel refuses to accept manual registration at its office in Kuwait and the only alternative way to register is at the company’s office in Amman. legal basis. International companies with reconstruction contracts with the CPA or as subcontractors with principals whose contract is with the CPA (such as Bechtel) are covered under US and international laws and should not experience difficulties with the validity of their contracts. funding. there are three basic problems in doing business with Iraq: . this position might change. In 2003. which Bechtel claims may be done online. California. and is limited to major contracts. and the rebuilding of hospitals. Funding from other sources is . when sovereignty is handed back to Iraq at the end of June 2004. Jordan. through the PMO. . However. electrical grids. the dredging. a company has to be registered with Bechtel. Funding Most funding for reconstruction is provided by the CPA. The only way to get a contract in these areas is as a subcontractor to Bechtel.260 Business Activities Bechtel of San Francisco. schools. to use it for this purpose. Businesspeople visiting the country are expected to bring their own security. though obviously Coalition forces will intervene in cases of actual trouble – if they are nearby. airport facilities. Legal basis Under the business laws currently in effect in Iraq. its Web site is full of inactive links and it is impossible. Three basic problems Beside difficulties in registering for work. . It is unlikely that direct foreign investment will be allowed by law until sovereignty passes to a legitimate Iraqi government. repair and upgrading of Umm Qasr seaport (near Basra in southern Iraq). has the overall contract to rebuild Iraq’s power generation facilities. To do so. Security Security is very poor in parts of Iraq and personal risk is high. security. municipal water and sewage systems. However. several travellers from Kuwait through southern Iraq were killed by bandits and many were robbed at gunpoint. At times the position seems to be deteriorating and at other times improving. government buildings.

Aircraft . Cranes & port equipment . contracts are on hold because the funds required are not available. this will therefore cost US $1.1. Specialized fencing . Fire monitoring systems . Train signalling systems .25 billion a year. In addition. Communications software . and many worthy. Airport equipment . Masts & antennas . and these are usually purchased by aid agencies. Humanitarian supplies Experience in the Balkans suggests that basic humanitarian assistance costs about US $500 per person per year. Security In the short to medium term. Track maintenance equipment . Opportunities Whatever the difficulties. Surveillance systems .7.1 Commercial opportunities in Iraq Security Communications Transport . significant opportunities for suppliers of the key elements of any security and emergency service infrastructure exist. though foodstuffs will be the main item. ie 2. Access control systems . even essential. Passenger vehicles . Intruder control systems . personal protection services for local dignitaries and foreign entrepreneurs are currently in high demand. Computer security systems . Crowd management .Doing Business through Kuwait: Looking North 261 very limited. Most kinds of humanitarian assistance will be required in an emergency. Cables & connectors . Radio communications . there is a wealth of opportunity in Iraq. require assistance. Flight control systems . Satellite services . Airport services . Table 4. Police equipment . Consulting & engineering . Fire-fighting equipment . Commercial vehicles . Workshop facilities .7. GSM mobile phones . Some of these opportunities are listed in Table 4. ID card systems . The estimate of the numbers requiring assistance may be low.5 million people (a low estimate). the development of the country will depend to some extent on the security situation. Rolling stock . Public telephone systems . If only 10 per cent of the population of Iraq. Fingerprint systems . PABX systems . In the current lawand-order vacuum. Infrastructural products .

Exploration services .1 (cont’d) Hydrocarbons Water & sanitation Education . Cable and wiring . Production technologies . Educational content providers . Rubbish collection vehicles . Portable generators . Presentation technology . Water bowsers . Power stations . Diagnostic equipment . Laboratory supplies . Refining technologies . Security & safety systems . School furniture . Environmental know-how . Hospital equipment . Reservoir management . Drilling equipment . Maintenance equipment . Intensive care units . Switch and control gear . Maintenance services . Control systems . HVAC systems . Water & electricity systems .7. High-voltage transmission . Rehabilitation equipment . Emergency equipment . Electrical engineering . Educational consultancy . Eye care supplies . Laboratory equipment . Educational tools .262 Business Activities Table 4. Power plant equipment . School laboratories . Construction tools . Scientific equipment . Exploration equipment . Marble and granite . Transformers . Academic publishing . Distribution networks . Cesspool emptying systems . Water treatment plants . Electro-mechanical equipment . Water treatment chemicals . Pharmaceuticals & vaccines . Construction technologies . Water tankers Electricity Construction Healthcare . Eye examination equipment . Sewer cleaning equipment . Testing equipment . Training services . Civil engineering expertise . Monitoring systems . Pipeline engineering . Surgical appliances . Building materials . Finishing materials . Dental chairs & equipment . Portable power generation . Hospital furniture & supplies . Power protection . Pumps and UPVC pipes .

Office automation . Catering equipment . will be required. Water technology . Agricultural machinery .Doing Business through Kuwait: Looking North 263 Table 4. which has suffered under years of neglect and sanctions. Lighting. Multilingual software . Interior decor & design . ISP solutions . Business networking . ASP business hosting . Security services . Cutlery & crockery . This work is ongoing. Industrial refrigeration . Mobile computing . will require at least US $1. when the UNDP calculated that it would cost . Crop production know-how . Agro-processing & packaging .7. Office technology .900 MW in 1990. Feeds and additives . Restaurant equipment .1 (cont’d) Hotels & catering Agriculture Computer related . Computerized registration . Electrical power Iraq had 126 power station units capable of generating 8. Fertilizers . Livestock expertise . Storage equipment . Graphics products & services . Dairy farming expertise . Cleaning & laundry services . Meat processing equipment . Power systems . Horticultural equipment . E-business & Web technology . Hotel equipment and furniture . Hospitality projects . and the government is expected to open the industry up to Western oil firms. Landscaping expertise . according to the UN. Housekeeping products . Grain mills . Consultancy and training Hydrocarbons The rehabilitation of Iraq’s oil industry. WAP technology . but this capacity had fallen to around 3. Vehicles for transporting food . linen & curtains . Trolleys & trays . Full rehabilitation in the long run may cost several billion dollars more.500 MW by 1999. Office furniture . everything from equipment to training. Storage technology . A large range of items. Irrigation technology . IT systems & components . Restaurant supplies . Food service equipment . Cold storage equipment . Poultry production expertise . Greenhouse equipment .5 billion to bring it back to its pre-1990 capacity of 3 mbpd. Consulting & design services . Card technology .

500 MW. the commissioning of new plant and the extension of the distribution system to the 55 per cent of rural areas that have no supply will cost more than US $1 billion. The population. Central and southern Iraq once had a well-developed water and sanitation system. Water and sanitation Since 1990 access to drinking water in Iraq has been reduced by 50 per cent in urban areas and 67 per cent in rural areas. There are opportunities for the supply and installation of electromechanical and other equipment (Table 4. the installation of additional capacity is needed to ensure that demands for power can be met. which is growing at a net rate of more than 3. an estimated 3m out of 4.1.7.7. In May 2003 most of Iraq’s wastewater plants and sewage pumping stations were inoperable. Nevertheless. drugs and ambulances (Table 4. Factories producing a range of drugs and training for specialist staff will also be needed in the long run. But there are still plenty of openings for engineering consultants. The UN has estimated that the refurbishment of non-functioning plant.3m Iraqi children under the age of five were vaccinated in the second half of 2003. Education After liberation in May 2003 it was estimated that around 80 per cent of all schools in Iraq required substantial repairs and that many of the . load growth and poor maintenance.264 Business Activities US $7 billion to restore capacity.5 per cent pa.1). Much of this work is already under way and power capacity in October 2003 was more than 4. which has contributed to health problems and environmental pollution. Increasing power generation will be essential to the reconstruction effort. with over 200 water treatment plants for urban use and 1.5 million in 2010. Some of the equipment that will be required is bulleted in Table 4. courtesy of UNICEF. Besides the rehabilitation of existing plant.7. Health Iraq’s infant mortality is one of the highest in the world. Considerable investment will be required for all types of medical equipment. is expected to rise from a predicted 28. New clinics and hospitals will have to be built throughout the country. Many of these problems are being addressed. the entire healthcare system needs to be reformed. The distribution network is failing because of a lack of investment.200 compact plants in rural areas.1).5 million in 2005 to 32. Government clinics and hospitals are seriously run down and drugs are in short supply. and an extensive distribution network.

1). The UN then approved 83 contracts worth US $71 million for Alcatel and Sagem. they would only satisfy about 25 per cent of Iraq’s requirements and . However. The list of agricultural requirements shown in Table 4. lack of machinery and skills.000 lines. In addition to its agricultural needs. laboratory equipment and training courses (Table 4. recycling technology and oil pollution clean-up and control technology.7. as France opposed the US-led invasion of Iraq. Iraq also has an urgent need for plant. The draining of the marshlands in southern Iraq left land unfit for agriculture. filtration services. Reinvigorating agriculture to make the country self-sufficient in basic commodities is essential in order to reduce the import bill for food and enable spare revenues to be channelled elsewhere. these funds had not appeared at the time of writing. Iraq is a net importer of food. In 2001 the International Telecommunications Union (ITU) stated that the country’s entire telecommunications infrastructure had deteriorated seriously. Yet many of the schools in use are filled to over-capacity. Agriculture is underdeveloped owing to poor management and maintenance. However. as well as hazardous waste handling equipment.Doing Business through Kuwait: Looking North 265 remainder were lacking basic equipment. These contracts are unlikely to be carried out now. and labour shortages arising from urban migration. equipment and services related to the protection of the environment. even if they were undertaken. in January 2004 funds for the rehabilitation and development of the agricultural sector were not available and though there had been talk that the Iraqi Agricultural Bank would soon be extending credits to farmers for the purchase of seed. sewage treatment. including the installation of nine digital central office exchanges with a total capacity of 280. which will require all types of educational equipment. The UN estimates that adult and female literacy has regressed to mid-1980 levels.7. Communications Most of Iraq’s telecommunications infrastructure was originally installed by Alcatel of France. However. supplies and equipment.1 is extensive. Much of it was destroyed by the allies in 1991. The CPA has rebuilt and refurbished some schools since then. These include environmental monitoring equipment. The priorities are to improve primary and secondary education and establish vocational training schemes. school enrolment for all ages is currently only 53 per cent as children are required to work to supplement household incomes. Agriculture Despite abundant land resources.

three international GSM service providers were granted licences to establish mobile networks on a for-profit basis. needs new aircraft as most of its existing fleet is unserviceable. there may be many business opportunities for the supply of automotive products. specialized transport.000 tonnes of grain at the port. The port of Umm Qasr was badly damaged in 1991 but has been repaired since liberation. construction materials. it may again be a focus of development. Airports need to be upgraded and this is under way. when it was virtually destroyed. factories. antennas. there are still many opportunities for sales of all types of transport equipment and services. cables and connections). schools. workshop equipment. Construction The number of roads. approximately 60 non-military flights were arriving at and departing from Baghdad International Airport every day in late 2003. as well as paper and chemicals. access to the Internet was restricted and owners of fax machines had to be licensed. and water and sewage plants requiring rebuilding or rehabilitation suggests that the construction industry will be very busy for years to come. There is thus a heavy need for the full range of telecom equipment such as infrastructural products (masts. for example. The country’s three main railway lines require upgrading. repair equipment and PABX systems. Iraq Airways. In 2003. These activities are mainly being handled by Iraqi and Arab . and in November 2003 a bulk carrier unloaded 52. houses. If the money ever becomes available this will offer significant opportunities for major equipment vendors and operators. as well as communications software. the manufacturing sector had been given high priority by the government and it had developed far beyond the capabilities of most of Iraq’s neighbours. In liberated Iraq.266 Business Activities it is estimated that at least a further US $1 billion is needed to establish a comprehensive telecommunications network. consultants and engineers. hospitals. Transport Except for roads. Under Saddam’s regime. power stations. But the rebuilding of the sector was hampered by a lack of raw materials and spare parts. refrigeration equipment and road-building equipment. Nevertheless. The main tanker terminals in the south are undergoing rehabilitation. Manufacturing Before 1990. though it will be a long time before a manufacturing infrastructure is built. Meanwhile. Iraq’s transportation infrastructure has not recovered much from the devastation it suffered in 1991.

to alleviate Iraq’s unemployment rate. and the new sovereign government is expected to insist on similar requirements. as the economy picks up and Iraq’s middle class. paper production. plastics technology (including moulding machines and PVC pipes). cosmetics. Foreign suppliers of building materials will find plenty of openings. Iraq will be receiving hordes of foreign entrepreneurs for long afterwards. such as household goods. Catering for the military is currently being supplied by a range of international camp caterers but their activities will decline somewhat over the next few years even as foreign companies open up camps in the country to undertake large projects. regains spending power. These will include a demand for auto parts and tools. Much of these demands will be met through neighbouring countries such as Kuwait. desktop publishing. Hotels and catering Assuming all goes well with the transfer of sovereignty in 2004. either through sales or in joint ventures. In the longer term it is likely that international fast food and restaurant franchises will become important. security systems. there are plenty of opportunities for foreign consultants and specialist service companies. leisure and tourism opportunities. and a complete range of consumer goods and services. .Doing Business through Kuwait: Looking North 267 construction companies and indeed several well-known Kuwaiti construction companies are already establishing offices and staff in Iraq. Demand for the complete range of modern office software. mobile computing and multilingual software is expected to be considerable in the future. as its economy reaches higher levels of activity. Other goods and services Over the longer term.7. printing and publishing technology. All these opportunities assume that Iraq will avoid a civil war and not break up into three or more separate countries. there will be a constant and growing need for all the goods and services of a normal modern economy. A new hospitality sector is urgently required and products currently being sourced in major cities include the items shown in Table 4. Information technology Though not a priority. which currently exceeds 50 per cent.1. Iraq will require. to establish local factories for building materials. information management. the full spectrum of IT solutions and e-business products. Nevertheless. packaging equipment and material. Contracts with the CPA require that local labour be used as much as possible. multimedia. which was reduced to penury during the decades of Saddam’s rule.

Language difficulties are overcome and many Kuwaitis have relatives and other connections in southern Iraq. so it is best to take ample petrol for the return trip. Establishing a presence in the KFTZ and then going into partnership with a Kuwaiti firm or individual gives the best of both worlds. Business associations in Kuwait.org. such as the British Business Forum. . Contacts Humanitarian aid HOC (Humanitarian Operations Centre) in Kuwait Tel: (+965) 532 9870/1/2 OCHA www. The security situation should be checked before travelling.int/w/rwb.268 Business Activities Hints for entrepreneurs .reliefweb. which is currently being expanded to cater for the rush. . However. A Kuwaiti who acts merely as a facilitator would expect to get 5% to 10% of the gross. . . However. . Most businessmen with interests in Iraq make one-day trips. They are also masters in the art of circumventing red tape. as is the case in most countries in the region. you should only join a convoy provided all the cars seem to be in good condition.nsf HIC for Iraq www. It is difficult to do business in Iraq without making some visits to the country. lest you be delayed en route through the breakdown of others. organize convoys or bus trips to Basra and other places from time to time. . Doing business in Iraq for the small or medium-sized foreign enterprise will probably be just as difficult as it is in other countries in the region.agoodplacetostart. Most major embassies in Kuwait have Web sites in which travel advisories are prominent. . . Informal convoys assemble at Abdali early in the morning and undertake to travel together. But it would be extremely foolish to drive alone. . there are several good reasons for having a Kuwaiti partner. . Petrol is still scarce in Iraq and queues at filling stations can stretch for hours. Incidents of plain banditry are common and joining a convoy is only common sense. crossing the border at Abdali at first light and returning before dark. Travelling from Kuwait to Basra and other places in southern Iraq is easy by road. Kuwait is a good base from which to serve projects in Iraq and a presence can be established with 100% foreign ownership in the Free Trade Zone (KFTZ) in Shuwaikh.

UK Department for International Development (DFID) www.uk Iraq Business Development Group Convenor Vic Annells Tel: (+965) 6601637 E-mail: vic@businessiniraq.gov.tradepartners.org.bechtel.reliefweb.gov.com.un. British Business Forum (BBF) Web site: www.bbf.gov. CPA representative: Graham Rowcroft (+965) 9724692 London: Claerwyn Hamilton-Wilkes (Country Manager) Tel: (+44) 207 215 8893 & 207 7215 4708/4833 Fax: (+44) 207 215 4831 E-mail: claerwyn.dfid.gov/iraq/ activities Bechtel www.mcintyre@shownetmail.gov.uk/text/iraq/profile.int/w/rwb.uk or vic@araborient.usaid.kw E-mail: kwt_bbf@yahoo.org (or) sue. UN Oil for Food Programme www. British Embassy Tel: (+965) 2403324/5/6 ext 329 E-mail: bernie.bechtel.org/depts/oip UK Trade and Investment www.co.Doing Business through Kuwait: Looking North InterAction 269 www.uk Kuwait: Bernie Wilson.uk.org . First Secretary Commercial.hamilton-wilkes@ tradepartners.nsf www.interaction.usaid.uk Philip Upson represents DFID in Kuwait: (+965) 978 2859 Reconstruction USAID www.co.wilson@fco.gov (or) www.org/iraq InterAction’s Sue McIntyre is based at the HOC: E-mail: smcintyre@interaction.com.com site for potential subcontractors: https:// supplier.

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Part Five Business Behaviour .

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ie having a good product or service to offer. though there is a much greater emphasis on price. are no different from anywhere else. but once expatriates understand how this determines local business motivation and behaviour they will be in a position to turn this knowledge to their advantage. as in any unfamiliar country.Introduction: Social Aspects The first-time visitor to Kuwait is sure to find local business behaviour a trifle perplexing. . But the fundamentals of doing business successfully in Kuwait. Society is still clan based. is a willingness and ability to transcend cultural differences through respect and understanding. The perceived differences in behaviour are reflections of local culture. Perhaps the only secret to doing business successfully in Kuwait.

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In the pre-oil era economic enterprises were family owned and run. could not survive. to ensure cooperation between clans. in Kuwait’s paternalistic and hierarchical social structure. and. Islam has an all-pervading influence on Kuwaiti life. and his loyalty to his extended family overrode all other loyalties. In return. Today.5. and the country’s trading traditions in the Indian Ocean. socially and in business. The clan basis of organization The Kuwaiti of the pre-oil era survived through a mix of finely honed skills and a highly developed social organization based on family. which is considered normal in the West and Far East. the extended family provided the economic and political support without which a person. emotional and moral shock. is incomprehensible to most Kuwaitis. and the family name is . not least. not to embarrass the family. in the notion of face. The Kuwaiti child learned from an early age to serve and protect older family members and. most businesses are still family owned. and in the importance given to virtues such as loyalty. as individuals and in groups. In the harshness of the desert or sea. The original qUtub were Bedouin from the interior of Arabia who changed to a settled way of life on the coast. The separation of religion. hospitality and generosity. faith in God is so fundamental to an individual Kuwaiti’s sense of identity that encountering an agnostic or atheist causes an intellectual. The main sources of modern Kuwaiti culture are the Bedouin tradition. whether he was a nomadic herder. Persia (Kuwait lies on the Arab side of the border between Arab and Persian societies). Islam.1 Behavioural Background How Kuwaitis behave. business and politics. This is reflected in the strength of family life as the basis of society. social and personal. In fact. except for public companies founded with government assistance. The Bedouin tradition has been reinforced over the centuries by the constant migration of tribes through Kuwaiti territory. a caravan driver or a sailor. has its roots in the diversity of their traditions and the rich collection of cultural influences to which they are heirs. the individual gave unquestioning service and loyalty. clan and tribe. which brought the Kuwaitis of yore into contact with a diverse range of cultures.

by the time he is six or seven years old. and if a leader shows inadequacy or loses face because of some upset. To an adult. Leadership depends ultimately on face. face is the consensus a group makes about a particular member’s capabilities. face is extremely difficult to regain. ie it is a peer merit award that can only be increased (or decreased) by a person’s own actions. which is highly developed among all Kuwaitis. except that face has an intensity and pervasiveness about it that is almost inconceivable to a Westerner. and a youth is considered mature once he views his own success as being synonymous with the success of his family. Though these businesses. Because a person seen as personally successful is usually acknowledged as fit for leadership. But this consensus is not permanent. and he must have this recognized by general consensus. aspirations to leadership status are powerful motivating forces in Kuwaiti business behaviour. It can be as strong a motivating power as money (though becoming rich is one way to achieve face) and explains why many Kuwaitis will hang on to a lossmaking business long after a more economically rational Westerner would have thrown in the towel and walked away. This skill. Once lost. a person must demonstrate that he has the best ability to serve and benefit the group. the notion that face belongs not just to the individual but also to the group begins to take hold. not least of which is the ability to achieve consensus through group consultation. The concept of face has the same meaning as respect and reputation in the West. it is notable that these employees are almost exclusively nonKuwaiti.276 Business Behaviour displayed proudly in their titles. are now staffed by non-family members. A successful leader in Kuwait has several highly honed skills. This sense of face lies behind much business and investment behaviour in Kuwait. Leadership Leaders are the pre-eminent members of a family or any other group who can represent that body to its best advantage. having outgrown the pool of family skills available. A Kuwaiti spends his life building face. Face The degree to which the young Kuwaiti learned to serve his family was reflected in the amount of ‘face’ he earned. no . loss of face within the family is often punishment enough for misbehaviour. the consensus may shift in favour of another person. The building of face begins as soon as the child is old enough to understand and. As he gets older. To achieve leadership status.

some are very successful indeed. until the Iraqi invasion Kuwaitis felt little historical affinity with the West and today they are still suspicious of what they see as moral confusion in Western society. No matter how strong the impression to the contrary. cultural affinities are limited to material rather than spiritual values. and they are seldom interested in modern complexities. The fact that they are a minority in their own country seems to have heightened individual Kuwaitis’ sense of nationality and of belonging to an elite group. which is reflected in music. poetry. whether you are dealing with a private company or a government department. despite their tribal traditions. and those who were educated in the West (of whom there are many among the upper classes) feel comfortable with Western organization and management practices. never underestimate the general shrewdness. song and drama and is reinforced by the media and the educational system. financial astuteness and business acumen of a Kuwaiti. On the other hand. which was reinforced by the events of 1990/91. the clan ethos is always present in the relationship between a foreign businessman and his local associates. . has its roots in the Bedouin diwaniyah and the Islamic political principle of Shura. view commerce as a simple matter of buying and selling. These Kuwaitis. the ministerial day is short and seldom over-taxing.Behavioural Background 277 matter what their rank in life. despite any impression to the contrary. Kuwait has become dependent on the West for its independence. since liberation. The diverse groups within Kuwaiti society are bound together by their common history. National identity Kuwaitis. Kuwaitis admire the success of the strong and are avid consumers of the fruits of Western technology. Never forget that. The fundamentals Every Kuwaiti considers himself to be a natural-born businessman. On the one hand. and though. obtaining contracts by hook or by luck or acting as sponsors for expatriate firms. who run the vast majority of local businesses. Hints for entrepreneurs . Before the Iraqi occupation Western policies in the region were criticized often. This national identity is expressed in an ambivalent attitude to the West. Though they may be semi-amateurs. as shown for example in the breakdown of family life. have a strong sense of nationality. . Though the vast majority work for their government. and in the evenings many have offices whence they carry on ‘general trading and contracting’ or act as ‘agents for commission’.

This extraordinary ability to unite instantly and tightly for the common good despite internal rivalry was seen at its best during the Iraqi aggression in 1990/91. clan and the state. though Kuwaitis compete extremely aggressively among themselves. Local competition across clan lines is very fierce. when it comes to dealing with non-Kuwaitis they will usually unite to a man. They are also familiar with the latest business practices in the West. These include the owners of Kuwait’s most successful private enterprises and the chairmen and chief executive officers of the large corporations in the joint sector. These boundaries of competition and protection are not simply a matter of concentric rings across the limits of which Kuwaitis will compete aggressively while protecting the interests of those within. where many of them were educated in elite business schools. Competitive and protective circles A Kuwaiti’s basic loyalty is. The most obvious example is the Kuwait Chamber of Commerce & Industry. in order of primacy. though further examples can be seen in other areas such as the legal profession. Personal relationships In Kuwait there is no such thing as a pure business relationship. These businessmen are also prominent in the public sector.278 Business Behaviour There is also a minority of full-time businessmen whose vocational skills rival the best in the world. A Kuwaiti will seldom do business until he ‘feels comfortable’ with the person with whom he is dealing and it is extremely unlikely that he will do a sudden deal with a comparative stranger no matter how attractive he finds a proposal. But. tough and ruthless negotiators is wholly deserved. Kuwaitis are extraordinarily hierarchical in their view of the world and their own society and this view gives rise to protective rings that are not concentric with the simple rings defining family. and against outsiders a Kuwaiti will view his role as being to compete furiously while protecting the interests and reputation of his compatriots. These entrepreneurs and civil servants are fully conversant with local business behaviour. to his family. Outside his immediate family circle a Kuwaiti will see his role as being to compete with other Kuwaitis while protecting the interests and reputation of his clan. Their renown as astute. as under-secretaries in the ministries for example. where they view their role as being to provide a business service on behalf of the state. . clan and state. Within an extended family there will naturally be some jockeying for face and leadership based on a member’s ability to get things done on behalf of the group.

a Kuwaiti needs to feel that the friend-to-be understands what it is to be a Kuwaiti and is genuinely interested in and sympathetic to the Kuwait view of life. Business approach Kuwaitis have a rather laid-back approach to life and in business matters find the aggressive hard-sell approach very off-putting. pleasantries and patience are vital. product and service videos. is always offered to an office visitor and to refuse the first cup would be quite impolite. polite and quite conservative and a visitor’s dress. Businesswomen Women make up a significant percentage of the workforce in Kuwait and lady secretaries and executives are common in Kuwaiti offices. Tea or coffee. it may be a signal that a meeting is about to end. A well-designed card printed on high-quality paper creates a superior impression. Pleasantries and patience are not mere trimmings and hospitality is very much an integral part of local business behaviour. When coffee is served after most of the business has been discussed. neatness and cleanliness are paramount. low-key presentations. . samples. If neither tea nor coffee is offered to a visitor in an office it is most likely a sign of a total lack of interest either in him or in the products or services he is offering. Hints for entrepreneurs . The gastric effect of those endless rounds of gahwa and chai is something that goes with the territory. . at the very least. Personal behaviour Life in Kuwait is gentle. Though dress codes are somewhat more informal than in the West. But friendship with a Kuwaiti needs a lengthy trial period before the outsider gains the trust that underpins true friendship. general courtesy and deportment are all important. Business cards are used by Kuwaitis to arrive at a first view of a visiting businessman. To be able to offer real friendship. But. Attractive brochures. . This stems in part from a suspicion that friendship may be a ploy to develop useful connections or that the foreigner may not really regard the Kuwaiti highly.Behavioural Background 279 Time initially spent building strong and relaxed personal relationships is a crucial part of a successful business approach.

. Business meetings with a Kuwaiti in his office are likely to be interrupted by the telephone and a continuous coming and going of office staff. Shorts should be confined to the villa or beach and never worn to an office or diwaniyah. Kuwaiti women dress in Western clothes. Kuwaitis rather enjoy exchanging business cards. The local press is quite open and freedom of expression is cherished. Bedouin women usually complement the abaya with a burga. Expatriate ladies in revealing dresses are likely to attract stares and unwelcome attention from local males. In public many wear the traditional abaya. For other women there are no hard and fast rules and Kuwait is relatively liberal.280 Business Behaviour Hints for entrepreneurs . . any comments on Islam or indeed any religion lest an insult be caused. a head-to-toe silky black over-cloak. . Business visitors should dress in formal attire in keeping with their national background until such time as they are sure that a more informal mode is appropriate. is expected and expatriate women are advised to wear clothes that stretch down to mid-calf and do not reveal the shoulders and upper arms. Conversational limits Though Kuwaitis are extremely tolerant of foreign foibles. But a visitor should avoid remarks about the ruling family and. Kuwaitis are by nature a very gregarious and voluble lot. informal behaviour or crude language that might be acceptable elsewhere may cause offence. including politics. a short black veil that leaves the eyes and forehead exposed. nonKuwaiti Muslim women wear long-sleeved floor-length garments and a hijab (headscarf) that conceals the hair but leaves the face uncovered. Local culture considers a male who walks around with bare legs insulting. They are accomplished talkers and will discuss almost anything under the sun. Modesty. Visiting expatriate businesswomen are extremely rare and indeed are unlikely to be effective in Kuwait’s male-dominated business environment. above all. . In public and in offices. So bring plenty and hand them out at every opportunity. however. Any show of irritation at the time wasted and the need to repeat oneself is unlikely to be appreciated. few senior civil servants or senior corporate executives are female. Never refuse an invitation to visit a diwaniyah. though there are noticeable exceptions. .

but not invariably. An expatriate will soon notice the situations where. Decisions are usually made only at the top and little decision making of importance is entrusted. Confusing conversations The ubiquitous term Insha’Allah means ‘by the Will of God’. as this will cause severe loss of face to the recipient of his ire. a Kuwaiti entrepreneur will expect the representative of an overseas firm to be empowered to make decisions. In Kuwaiti culture a blunt ‘no’ is. When ‘yes’ is used to punctuate another person’s conversation. an emissary with due seniority. not permitted as it may cause offence. However. as a matter of respect. But where things have not gone so well. after a business meeting at which things have gone well the phrase ‘I’ll see you tomorrow morning’ may be answered with ‘Insha-Allah’ meaning ‘Yes. For example. which provide much of the motivation underlying business behaviour. however. Kuwaitis who wish to give a negative reply in English often use the phase ‘why not?’. A person whose mistakes or lack of knowledge is pointed out in public will feel that he or she can only recover the loss of face by inflicting a similar or worse humiliation in return. to persons lower down on the scale. which usually. whatever happens. ensure that delegation is an unpractised managerial art. and the frequency with which. . This is not because he expects to be dealing with an equal – there are few in his view of the world – but because he requires a foreign company to send. Decision making The concepts of face and leadership. happens because of God’s Will. According to Islamic doctrine. The interjection of the word ‘yes’ while listening to an explanation does not necessarily signify agreement by the listener with what is being said.Behavioural Background 281 An expatriate should never lose his temper publicly or reprimand anyone in front of others. the use of the term in everyday conversation goes beyond a simple indication of submission to God’s Will. is appended conversationally to all statements concerning the future. It takes a little time but in the end an expatriate will learn to discern the actual meaning intended when ‘Insha’Allah’ is used in different contexts. in the private and public sectors. the answer ‘Insha’Allah’ may mean ‘all things are possible’. as a general rule. the term is used. signifies a refusal. as well as to say ‘no’ or ‘not now’ indirectly. God willing’. The phrase Insha’Allah. On the other hand. and the phrase is often used to say ‘yes’. This is not pre-destiny as such because man makes his own decisions. it often simply means ‘I hear you’.

Wasta Wasta is a local term denoting connections or influence. the use of personal influence to get things done. . If. It is not bribery. with two upright chairs positioned in front. Tea will usually be served. an offer of more tea is made. mean that he is unlikely to receive an abrupt rejection. If he suggests a further meeting when things are quieter and then brings a friend or business manager to this meeting. and the difference between wasta in Kuwait and in the West (where it is much more common) is that in Kuwait wasta is much more open. The essence of wasta is colleagueship and the use of relationships to get things moving. it means he is seriously contemplating the business proposed. this is a sign that the Kuwaiti wishes the conversation to continue so he can obtain further information. Business visitors to Kuwait must be empowered to make reasonably major decisions. the friendly. Its meaning is akin to the British ‘old school tie’ concept. Hints for entrepreneurs . The impressions given at every level are important as they act as a sieve for the persons above and usually decide whether the visitor progresses up to the final decision-maker. though wasta has a broader. A Kuwaiti’s office invariably contains a large desk behind which he sits surrounded by piles of paper and his communication facilities. after some time. Opposite the desk will be a set of sofas. For the first-time business visitor. armchairs and another coffee-table. A person who has to constantly refer back to an overseas head office will be considered an annoying time-waster and could damage his company’s reputation. Perennial curiosity about all novelties. this means that his interest has been seriously aroused. and local etiquette.282 Business Behaviour Evaluating an interest A visiting businessman’s first contacts in a medium-sized Kuwaiti company will probably be with a non-Kuwaiti office manager and he will have to work his way up through several layers until he meets the actual decision-maker at the top. If he closes his office door to his staff or suggests sitting together on the sofas so that the visitor’s papers can be spread out in comfort. For . a coffee table between them. less inbred meaning. Visitors are first invited to sit on the high-backed chairs to make their initial presentation. hospitable way in which he is received and the leisurely pace of negotiations make it difficult to decide whether there is a genuine interest in the goods or services he is promoting.

As a Kuwaiti goes through life he spends a lot of time building up and maintaining wasta. something that needs positive cultivation. And once a deal has been struck. eat innumerable lunches and attend diwaniyahs. business is a form of pleasure. The local pace Although Kuwaitis are seldom slow to recognize possibilities for profit. and a visiting businessman must be prepared to socialize. his ability to get things done through his connections. But once they have made up their minds. which is conducted between friends. Wasta is granted as a favour and is a two-way flow. The use of wasta will reduce the time to just a day or so. In this way wasta is closely related to the Kuwaiti concept of face and is one of the practical ways in which a Kuwaiti can demonstrate his qualifications as a group leader. For Kuwaitis. After the first deal is made.Behavioural Background 283 example. They do not expect to be hurried when evaluating proposals. regular visits to Kuwait are essential to consolidate a long-term relationship. . they expect an expatriate businessman to carry out his side of the bargain meticulously and with exemplary promptness. they are patient in their evaluation of business opportunities and tend to bide their time while these mature. In the normal course of events this might take a week or so to achieve as stamps are accumulated on various bits of bureaucratic paper. a permit may be required. they move very quickly to conclude a deal.

Before. Even when he does have an appointment a visiting businessman should be prepared for the possibility that his Kuwaiti associate will not keep it. It is thus not easy to make firm appointments to see people. Yet there are several practicalities worth noting before entering the fray. Kuwait is an expensive place to do business. He should also be prepared to sit around for quite a bit before the meeting begins while the person he is to see finishes whatever business he has to hand. Many years ago the hotels formed an association to protect their interests. and shrewd expatriate businessmen who made regular trips to Kuwait found it easy to negotiate substantial discounts on posted room rates. As it is almost impossible to adhere to a pre-planned series of meetings or to visit more than two or three companies in a single working day. Time-frames Few Kuwaiti businessmen keep diaries. however. The business cycle is protracted and it can take several months to turn an initial enquiry into a firm order. This makes it hard to succeed with a series of short visits. Hotel business centres are also expensive. the cartel became more cohesive and the major hotels are expensive by international standards. at least in the initial stages when the ground is being broken. this is usually self-defeating. . during and after the campaign to liberate Iraq the hotels were full and discounts became almost impossible to obtain. Rushing through Foreign businessmen very often come to Kuwait as part of a tour through the Gulf and work to a fixed schedule.2 Practical Points Doing business in Kuwait on a company-to-company basis is similar to anywhere else in the world. Before the invasion this cartel was ineffective.5. The locals tend to place a lot more emphasis on the personal side of doing business than is the norm in the West and during the initial phases a Kuwaiti businessman is probably assessing the expatriate rather than (or as much as) his products or services. After liberation in 1991.

may be decreed in the near future. working hours in the public sector and banks are officially shorter. During Ramadan.Practical Points 285 Businessmen can do themselves a grave disservice by cutting short their visit just because they have a plane to catch.1 Office hours Daily hours Weekly holidays Apr–Oct 7:00 am to 2:00 pm Thursday & Friday Nov–Mar 7:30 am to 2:30 pm Thursday & Friday Government Ramadan 9:30 am to 1:30 pm Thursday & Friday Oil companies 7:30 am to 3:00 pm Thursday & Friday State companies 7:30 am to 3:00 pm Thursday & Friday Office hours 7:30 am to 2:30 pm Thursday & Friday Retail branches 8:00 am to 1:00 pm Friday & Saturday Banks & insurance companies 5:00 pm to 7:00 pm (except Thursday) Private companies 8:00 am to 1:00 pm Friday only 4:30 pm to 7:30 pm (except Thursday) Or 2:00 pm to 5:00 pm (except Thursday) Ramadan 7:30 pm to 10:30 pm Note: Proposals to change the weekend in the government sector to Friday and Saturday. The tradition of a long break in the afternoon (the so-called ‘split-shift’) is still strong but is gradually giving away to the ‘straight’ day. from Thursday and Friday. The hours shown in the box for the private sector are only indicative and vary from business to business. This not only reduces costs by avoiding hotel business-centre charges but also gives an overseas businessman a sort of ‘presence’ in the country even when he is absent. Local working hours It is virtually impossible to do business in offices outside local working hours (see Table 5. Table 5.2. it is noticeable that the most effective visitors do not normally work out of hotels but make informal arrangements with local companies to use their offices as a base.2. and in the private sector businesses only open for three or four hours in the morning but are also open for three or four .1). Where only brief visits can be managed.

beginning about two hours after sunset. During the festivals business life closes down entirely. When a holiday falls on a weekend. timings are published in the daily newspapers or the hotel can advise. As noted in Table 5.2. current practice is for the holiday to be deferred until the following weekend.3. unless lunch is being provided. Islamic festivals have been briefly described in the box in Chapter 1. except for retailing and entertainment. when most of the invitees will finally wander in.2 Public holidays Secular Islamic New Year’s Day 1 January (every year) National Day 25 February (every year) Liberation Day 26 February (every year) Eid Al-Fitr 15. 23 & 24 Jan (in 2005) Rass Al-Sana Al-Hijria 11 Feb (in 2005) Mawlid Al-Nabi 22 Apr (in 2005) Lailat al-Isra’ wa al-Mir’aaj 12 Sep (in 2004) Note: The dates shown for Islamic Eids in 2004/2005 are only approximate because the actual beginning of any holiday depends on when the new moon is sighted. an extra day is usually tacked on to the weekend. The time differences between Kuwait and some major international cities are shown in Table 5. Seminars and presentations Running all-day seminars in Kuwait is not practical. In 2004 Ramadan will run from approximately mid-October to mid-November. Presentations scheduled for an 8:30 am start are unlikely to get under way much before 9:15. When an Islamic holiday falls in the middle of the week. the audience will most probably get up and leave. Table 5. the dates of these holidays cannot be fixed in advance with absolute certainty.2. . Breaks should be timed to coincide with prayer times. International time windows Kuwait is three hours ahead of GMT (Greenwich Mean Time).2) include both secular and Islamic festivals. 16 & 17 Nov (in 2004) Eid Al-Adha 21.286 Business Behaviour hours in the evening. Presentations should aim to end by 1:00 pm or so as otherwise.2.3. 22.2.2. Official holidays Public holidays in Kuwait (Table 5.

00 Zurich – 02.00 Stockholm – 02.00 Taipei + 05.00 Istanbul – 01.00 Note: + means later than Kuwait.00 Los Angeles – 11.00 00.00 Kuala Lumpur + 05.00 Vienna – 02.00 00.00 Tehran + 00.00 Khartoum – 01. and – means earlier than Kuwait.00 Amman – 01.30 Dhahran Abu Dhabi + 01.30 Riyadh Islamabad + 02.00 Chicago – 09.00 Sydney + 07.30 Sharjah + 01.00 Paris – 02.30 Aden 00.3 Time differences in hours between Kuwait and major cities worldwide Abadan + 00.00 Rio de Janeiro – 06.00 New York – 03.00 Buenos Aires – 06.00 Doha 00.00 Benghazi – 01.00 Frankfurt – 02.00 Damascus – 01.00 Addis Ababa 00.00 Cairo – 01.00 Bangkok + 04.00 Ankara – 01.00 Muharraq 00.30 Brasilia – 06.00 Shiraz + 00.00 Beirut – 01.00 Muscat + 01.00 Oslo – 02.30 Bergen – 02.00 Prague – 02.00 + 05.00 Algiers – 03.00 Medina Caracas – 07.00 Moscow 00.00 Tripoli – 01.00 Ras al-Khaymah + 01.Practical Points 287 Table 5.00 Rabat – 03.00 Mecca Toronto – 08.00 Canberra + 07.00 Athens – 01.00 Montreal – 08.00 Milan – 02.30 Bucharest – 01.30 Lagos – 02.00 Umm al-Qaiwain + 01.00 Salalah + 01.00 Fujairah + 01.00 Lisbon – 03.00 Brussels – 02.00 Karachi + 02.00 Sana’a 00.00 Wellington + 09.00 00.00 Ajman + 01.00 New Delhi + 02.00 Manama Calcutta + 02.00 Amsterdam – 02.00 Jeddah Seoul + 06.00 Kabul + 01.00 00.2.00 Bombay + 02.00 Belgrade – 02.00 Berne – 02.00 Ottawa – 08.00 Gothenburg – 02.00 Edinburgh – 03. .00 Helsinki – 01.00 Copenhagen – 02.00 Washington – 08.00 London – 03.00 00. Summer (daylight-saving) time is not shown.00 + 03.00 Tokyo + 06.00 Isfahan + 00.00 Bonn – 02.00 Dubai + 01.00 + 05.30 Manila 00.00 Tabriz + 00.00 Madrid – 02.00 Baghdad 00.00 Singapore + 05.00 Hong Kong + 05.00 Dublin – 03.00 Tunis – 02.00 Basra Beijing 00.00 Dhaka Accra – 03.00 Rome – 02.00 Jakarta + 04.00 Nairobi 00.

Hawalli. but with a Kuwaiti ministry it only has a three-day weekly window (Monday to Wednesday). Postal and courier services The General Post Office is in Fahd al-Salem Street in downtown Kuwait City.288 Business Behaviour Hints for entrepreneurs . Prices are very cheap. A Californian may just have time first thing in the morning to telephone his Kuwaiti counterpart before the latter’s office closes. If you then take international time-differences into account. it is already lunch-time in Kuwait. On a normal working weekday. enquire about and note their office hours. By the time New York wakes up it is evening-time in Kuwait. most mail is delivered to post office boxes. When first making contact with a local company. when London is getting ready for business. . There are main post offices in Safat. . where it has to be picked up by the recipient. . Appointing a resident expatriate as a local representative is a costeffective way for an overseas firm to reassure its local customers of its bona fides while its executive is out of the country. you will be surprised at the restricted time window there is for telephoning between your head office and Kuwait. most Kuwaiti businessmen and senior ministry officials are happy to give their private telephone numbers to Western businessmen. A Western company with a two-day weekend (Saturday and Sunday) has four working days a week (Monday to Thursday) in which it may communicate with Kuwaiti private sector and oil companies. Though there is a form of postal delivery service using private contractors. Jahra and Fahaheel. The time windows for international communications with Kuwait narrow even further when weekly days-off are considered. even from overseas. Fortunately. And when international time differences and office hours are taken into account. provided the office hours of the Kuwaiti company are based on the traditional ‘split-shift’. local delivery takes about 25 days on average. Business communications Communications in Kuwait are relatively sophisticated and reliable. 150 fils a letter. Take a current calendar and mark off weekends and public holidays in both your home country and Kuwait. the time window narrows to a mere slit. Salmiyah. with the exception of the postal service. In this writer’s experience.

Prices are again cheap by Western standards. and mail sent by Mumtaz has priority both in Kuwait and in the country of delivery. and the size limit is 42 inches in length or 72 inches in length and girth combined. . KD 5 or KD 10. along with civil ID or passport. Mumtaz Post is part of the worldwide EMS network.Practical Points 289 All international mail goes by air. where the parcel is opened and inspected before it can be taken away. about 350 fils for postage and registration. The weight limit is 15 kilograms. Overseas calls can also be made from telephones that do not have international dial facilities by using an international call card. is illegal. The first half-kilogram costs KD 5 to Arabic countries and KD 6 to all other countries. provided the telephone has tone dialling. All freight forwarders are local companies and some are quite reliable. international calls can be made from kiosks in the Telecommunications centre and the post offices using magnetic cards purchased at the counter for KD 3. in the airport and in some supermarkets and shopping malls. Special Mumtaz envelopes must be used. Many of these will air-freight in spare parts. Most major courier companies are represented in Kuwait. All packages must have a customs declaration attached. registered mail less than a week. the recipient is notified by a green postcard in his or her post office box. Mail to most parts of Western Europe and North America takes 7 to 21 days. Parcels can be sent from main post offices. Some offer a worldwide air-freight service for items of any size. The weight limit is 20 kilograms. must be taken to the parcels office in Kaifan. including the repatriation of household effects. Mail from Europe and the United States may take a week or so to reach Kuwait. To make an overseas call. There are few in the streets. each additional half-kilogram costs KD 2 to any country. Telephone and fax There are only about 250 telephone kiosks in the entire country. which is about 80 per cent cheaper. However. This notification. and these are located in the Telecommunications centre in Safat and at main post offices. Making cheap international calls through Internet cafe´s. Registered and express delivery (which gives priority in sorting and delivery only in the country of destination) is available. but then it enters the local delivery system. When a parcel arrives from overseas. a telephone must have an international dial facility (for which resident expatriates must deposit a surety of KD 500). These call cards are available from some supermarkets and stores for KD 3. The service is available from the General Post Office and main post offices. KD 5 or KD 10.

America or the Far East. Photoshop. . Kuwait has innumerable translation bureaux that describe themselves as ‘government certified and sworn translators’. .290 Business Behaviour Hints for entrepreneurs . So that the content and meaning of a crucially important document in Arabic are clearly understood. and the most common DTP applications used in Kuwait are PagerMaker. Word and Excel on Windows are handled with ease. . Prices vary considerably between different firms for various destinations and it pays to shop around. Regular business visitors often have informal use-of-office arrangements with local companies. The Telecommunications centre in Safat provides overseas fax. . courier agents are a bit cheaper. who will pass on most of the discount and charge customers only KD 4 or 5 for a half-kilogram to anywhere in the world. These can handle software for both Macintosh and IBM compatibles. . Regular heavy users of couriers can get massive discounts – up to 85%. telex and photo-telegram services. Visiting businessmen who write a report or proposal on a laptop may have a high-quality printout made at business centres. for sending original documents where speed of delivery is not critical or the postal service in the country of destination is reliable. Though the style of English used in translations from Arabic is seldom wholly unambiguous. Charges are sophisticated. UPS. There are several good photocopying shops in Kuwait City. charges are reasonable. First price for B&W A4 photocopying is 100 fils a page (compared to 200 fils in hotels) but this can usually be negotiated down to 50 fils and with luck to . Illustrator and Freehand. etc) through courier agents. However. TNT. Using hotel business bureaux is uneconomical except for small volumes. Fax services are also available at main post offices. Mumtaz Post is a useful alternative to couriers. Business services The major hotels have business centres that provide a range of secretarial services. it is advisable to have it translated into English twice by separate bureaux and to compare the English drafts closely. There are also several business bureaux that provide a wider range of services at more reasonable prices. Courier companies charge anything from KD 15 to KD 25 for up to half a kilogram of documents sent to Europe. QuarkXPress. Occasional users can also get these discounts by dealing with the major courier services (DHL. which can copy engineering and architectural drawings to a high standard.

. check that it has actually been received.Practical Points 291 Hints for entrepreneurs . including photocopying the original. AC. For this reason important letters are often delivered by hand. Persons with modems are legally obliged to obtain an annual licence from the MOC and computers imported into Kuwait are rigorously examined for modems. The art of communication As the postal service within Kuwait is thoroughly unreliable. Mobiles can be rented on a temporary basis from several business bureaux. The electricity supply in Kuwait is 220–240 volts. . . . so confidentiality is never assured. 35 fils for large volumes. single phase. Owing partly to language problems. Hotels charge at least double the MOC rate for overseas calls but international call cards usually work from the telephones and fax machines in hotel bedrooms. . But most offices have informal arrangements for collecting and delivering incoming faxes and e-mails. If in Kuwait for more than a week. fax and email are widely used for written communications where speed is required. . Charges per hour are 500 fils up to 4 pm. 750 fils thereafter. The standard plug found in most hotels and apartments is the three-pin square type. . The shops also bind reports – prices for half a dozen copies of a 20-page A4-sized report are a reasonable KD 5 or 6. most shops allow brief telephone calls to be made without charge. As local telephone calls are free. Kuwait has plenty of Internet cafe´s. including visiting businessmen. Visitors should consider bringing suitable transformers and adaptors. Hints for entrepreneurs . After sending a letter by hand. but various other types are still found in older buildings. But businessmen on visit visas seldom have their laptops checked at the airport. rent a mobile telephone. usually by office messengers. Tap water in Kuwait is perfectly safe to drink. messages conveyed through the reception desk in hotels are often incomprehensible when they reach their intended recipient. 50 cycles. though domestic filters are usually used to remove impurities and colour picked up during distribution. Most Kuwaiti businessmen carry a mobile telephone and expect instant access to their associates.

so that major decisions are of necessity heavily influenced by others.292 Business Behaviour Identifying those who influence decision-makers Very often the Kuwaiti owner or manager will be the actual decisionmaker in all major and minor matters. there are few West Europeans and . titles are not much help. It is quite likely that a final decision will be heavily influenced by a trusted employee who will do much of the work of dealing with a visiting businessman. it is likely that he will have some influence and the trick is to identify exactly the degree of persuasion he has with the final decision-maker. Diwaniyahs are the nodes in Kuwaiti networks. certain family names crop up again and again in business circles and networking is a highly refined art. The time this person has available to ponder major concerns is often curtailed by the innumerable trifles that distract his attention. Expatriate networks The vast majority of employees in a private sector company are expatriates and most companies contain persons from several different nationalities. In one company the administration manager may be the trusted right-hand man of the owner and be very influential in the final decision-making process. A person’s prime loyalty is usually to his family and national group. Unfortunately. the employee. But identifying those who influence the decision-making process in a Kuwaiti business can be difficult. Identifying and using networks Kuwait is a truly multinational society but it is not a melting pot. Kuwaiti networks Among Kuwaitis. few companies in the private sector employ Kuwaitis who are not members of the family that owns the business. it is likely that they are related. may be a nephew by the owner’s sister. That employee may be merely a go-for for the ultimate decision-maker. But. there are few ‘company-men’ and all internal corporate networks extend across company boundaries. Because a Kuwaiti’s first loyalty is to his family. and family ties will always transcend company loyalty. However. except at senior levels. Even where a Kuwaiti employee’s family name is different from the surname of company’s owner. But even where a visitor interfaces with one particular employee he should not assume that that person contributes a powerful input into a decision. while in another he may be little more than the owner’s personal assistant. for example. with little influence on decision making. Consequently.

near and distant. at the very least. Visiting businessmen should listen carefully for the family names of the Kuwaitis they are dealing with. Discounts are likely be . Visiting businessmen should be conscious of internal networks in large companies and avoid getting too aligned with any one group in a particular company. . . Bahrain. The country also has many confessional communities. which. Many of these sects are nominally Shia. the latter led by the Aga Khan. In Kuwait they can create useful connections across corporate boundaries for those who manage to get friendly with them. The easiest way to collect business cards is to hand out your own. pressure to reduce prices always starts very early on. in southern Iraq. and Poles or other East Europeans. Lebanese. Expatriate networks also extend across company boundaries and can therefore be very good sources of new contacts. They form self-help groups and business networks that span continents. At these gatherings most of the persons grouped around the host will be related by blood or marriage or. Indians. . and even further down the Gulf whose joint business efforts transcend national boundaries with ease. Konkani and Ismaili Khoja. When a Westerner proffers his card. Community members pay a tithe to their leaders and often intermarry among themselves. into Africa. Saudi Arabia. Examples are the Bohri. These nationalities tend to form their own cliques. develop into internal networks. Collect as many of their business cards as possible. Filipinos. Americans and the most common nationalities encountered in day-today business are Egyptians. the members of whom are adherents of a particular religious sect. An invitation to a diwaniyah where one is likely to meet more influential members of a Kuwaiti’s extended family should never be refused. most Kuwaitis feel obliged to offer their own in return. in larger companies. Kuwaitis and other Arabs often have cousins. through Arabia. . These networks can be surprisingly strong and extend into other companies with the same nationalities. Syrians. Price bargaining Though the local market is slowly beginning to realize that the lowest price does not necessarily represent the best value for money. Kuwait also contains various tribal communities. . from India. Pakistanis.Practical Points 293 Hints for entrepreneurs . by strong friendship.

3 to 6 per cent being the norm. Getting paid Contractors in Kuwait’s public sector seem to experience few problems in extracting payment from their principals provided they fulfil their side of the bargain to the letter. that is executed by a ministry or other government department. Public sector commissions In the public sector gifts may be requested. It is best to assume that the owner of the company will make the final decision and a final price should not be put on the table until it is felt that the ultimate decision-maker is comfortable with all other aspects of the deal. Kuwait Municipality. or any other public corporation. or any commercial company in which the state or a public corporation holds at least 50 per cent of the share capital. . authority and institution. commissions for buyers are less prevalent than in other parts of the world but they do exist. If discounts are agreed before the final decision stage is reached. However. These are strictly against the law and the advice is obvious. The contract must contain a statement as to whether the second party has paid or is to pay a middleman or broker any benefit in cash or in kind or of any other nature. must be publicly revealed. It is not unusual for a private sector company buyer to receive a commission on purchases. except that under Law 25 of 1996 they may not be hidden. Law 25 of 1996 requires that commissions payable in respect of a contract with a value of not less than KD 100. each ‘final’ offer becomes the starting point for a new round of price negotiations. The Law applies whether the contract is one of supply or purchase of materials or for the performance of works and irrespective of whether it is made through public tender or by direct negotiation. in the private sector suppliers and contractors often experience payment problems and agreements should always be structured to include suitable guarantees and downpayments.294 Business Behaviour requested at every stage as a caller works his way up the hierarchy to the person with the final say at the top. Commissions and gifts In Kuwait. But the legal position as regards commissions for services rendered is less certain. An indication that a discount is available may be given early on but it should not be quantified until absolutely necessary.000. These buyer’s commissions are openly recorded in the accounts of suppliers but they should not be offered unless they are requested.

fail to arrange them. of an overseas company pays a visit to Kuwait. however. they expect their joys and sorrows to be shared to an extent that would make a Westerner or Easterner cringe. unlike their French and Japanese rivals. The local expatriate executive is never sure as he ushers his boss through the doors of a customer’s office that the person they have come to see is actually in the country. the benefits of making such calls far outweigh the difficulties. Again. To avoid misunderstandings when inviting Kuwaitis overseas. Though it may require at times a very understanding chief executive. chairman or president. let alone in his office. that day. Expressing profuse gratitude Persons in the Arab world are more demonstrative and expressive than persons in the West or the Far East and. despite the benefits. Timing these visits with a degree of confidence. many American. such offers can be a powerful way of creating good references for a product or service in both the public and private sectors. Yet. Dealing with ministries Business success in all sectors in Kuwait depends firmly on a bed-rock of strong personal relationships. An overseas company making its first . Suitable words and gestures are long remembered. German and other European companies. British. Senior executive visits Kuwaitis are always appreciative when the most senior executive. Playing host to an important foreign personage boosts a Kuwaiti’s standing with his compatriots. It is a good idea to openly thank and flatter everybody in the buying company once an order has been achieved. Indeed. the advice is obvious. especially if it is in Europe. indeed. ensure that responsibility for entertainment and similar expenses is clearly agreed upon in advance. California or the Far East or some other place they consider exotic. can be difficult. Overseas invitations Kuwaitis are only too happy to accept an invitation for a trip to an overseas head office or manufacturing plant.Practical Points 295 Hint for entrepreneurs . Elaborate schemes using offshore companies to channel secret commissions for obtaining favourable decisions are at times mooted and these are naturally illegal.

A foreign company looking for business is advised to begin by analysing the needs of an institution that might be interested in its products or services. The trick then is to have these solutions accepted by the institution concerned. . Visiting these diwaniyahs is an immense help in building up relationships within ministries and a serious businessman is advised never to refuse an invitation.296 Business Behaviour foray into the public sector market is advised to make a direct approach to the institutions with which it is interested in doing business rather than wait for a tender to be issued. Choosing a Kuwaiti associate wisely is one of the critical factors for success. Senior officials in public institutions constitute an informal social club. which in turn will keep the company abreast of current thinking within the ministry. someone who will enthusiastically push the overseas supplier’s idea for a particular product or service. When an idea is accepted it may have to be put out to public tender and obviously the originator of the idea has an inside track during bidding (arising not least from the uniqueness of the specifications). Competition for senior positions within ministries can be intense amongst the ambitious and it is unlikely that a senior official with his eye on an under-secretaryship will risk political embarrassment by championing a particular idea unless he is entirely convinced that it is sound and viable. sponsor or equity partner. though these are not always clearly defined or articulated. But even where a particular idea never comes to fruition. gaining a champion-on-the-inside will solidify the company’s relationships and lead to a continuous interplay with senior officials. Relationships and demand creation Most public institutions have a number of requirements for products and services. Kuwaitis are at their most relaxed and loquacious in their diwaniyahs and expatriate businessmen of a certain standing are always welcome. unless he is investing under the direct foreign investment rules. an expatriate entrepreneur or company needs an agent. Choosing a Kuwaiti associate In order to do business in Kuwait. But finding a champion is not as easy as it may seem. In this way its name will become known and it will begin the process of building up a series of personal relationships within that institution. and tend to visit each others’ diwaniyahs regularly. It should then isolate any requirements where it has a particular expertise and devise appropriate solutions. To do this a champion-on-the-inside is required.

Because locally there is no such thing as a pure business relationship. . However. An expatriate is strongly advised to refrain from signing with an agent until he has made several trips to the country. If a foreign firm’s products or services are directed to a particular ministry or business area then a potential associate’s personal connections and wasta with the main decision-makers in that field require thorough evaluation. his overall business experience. One of the most important criteria in choosing a Kuwaiti associate is his standing in the local business community and in government circles. and is fully satisfied as to the suitability of a particular associate. Practical issues such as the availability of the licences needed to carry on the particular business and how control over day-to-day management and business assets is to be shared should never be overlooked. and his experience in the proposed products or services. Other factors that must be considered are the associate’s financial resources. The Kuwait Chamber of Commerce & Industry can provide foreign businessmen with information on the reputations of local businessmen and companies.Practical Points 297 Hint for entrepreneurs . the extent of his current operations. an overseas businessman will soon discover that many individuals and firms habitually present themselves as having more wasta than they do in fact have in a particular area and caution needs to be exercised in evaluating offers of sponsorship. knows some of the main decision-makers in the areas in which he is interested. the reliability and depth of the personal relationship are very important when choosing a Kuwaiti associate.

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Part Six Life in Kuwait .

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Night-life is conservative.Introduction: Personal Aspects Kuwaitis are by nature a welcoming and very hospitable bunch of people. Visiting and living in the country can be stimulating and enjoyable provided attempts to understand local culture and sample its delights are made. The resident expatriate will find that the standard of living as regards food. and medical and educational services far exceeds levels found in most overseas postings. accommodation. but for the visiting businessman with a little time to spare there is plenty to see and do. .

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All other foreigners require either a visit visa or a residence permit. A visit visa costs KD 3. however. US citizens. An applicant for a visit visa must be sponsored by a Kuwaiti individual or company. while entry permits are free. however. copy of the visitor’s passport. ie a treaty permitting Kuwaitis to enter their country without a visa. These persons. a Kuwaiti sponsor will require: . . or a resident foreigner who is a relative of the visitor. may be granted reciprocal rights in Kuwait. But a foreigner whose country has a visa abolition treaty with Kuwait. Technically the visa application is made by the sponsor (or ‘guarantor’). To obtain a visit visa for a business visitor. Citizens of other GCC states have a right to enter and live in Kuwait without undergoing any particular immigration formalities. copy of the sponsor’s signature as registered for business purposes. may obtain visit visas without a sponsor. International airlines have been instructed by the Kuwaiti authorities not to board passengers for Kuwait unless they have valid visas or entry permits. and indeed much less time-consuming and frustrating than the rigours a person from the Far East must undergo in order to live in a European country or enter the United States. . and copy of a letter of invitation from the sponsor to the business visitor stating the purpose of the visit. who is responsible for the visitor while he or she is in Kuwait.1 Getting In Immigration procedures in Kuwait are relatively easy. visa application and security form completed by the sponsor. Visit visas Visitors require a visit visa or entry permit. These are valid for entry within 90 days of issue and then for a stay of up to 30 days after entry. Entry permits are acquired in the same way and under the same procedures as visit visas.6. . . may require an entry permit.

Western businessmen seem to obtain them without too much difficulty. which. must be paid at the Immigration Department in Shuwaikh during government working hours and not at the airport. Multiple-entry visit visas. A rather pleasant solution for business visitors wishing to extend their stay beyond 30 days is to obtain a second visit visa in Kuwait. US citizens (but not other Westerners) can obtain one-year multiple-entry visit visas. inconveniently. unless this is done. Exceptionally. A US citizen needs merely to apply for a visa at any Kuwaiti mission overseas. A temporary residence is cancelled if the holder leaves the country. This may allow them to stay for up to one year. One is taken up on arrival. The fee is KD 2. The actual visit visa consists of two sheets of paper. Though these are usually only given to visitors with personal emergencies such as illness. a Kuwaiti sponsor can use a faxed copy of a visitor’s passport to obtain the visa in Kuwait. valid for a maximum stay of 7 days. A transit visa. Normally business visitors will go to a Kuwaiti Embassy overseas to have their passport stamped before travelling to Kuwait. Retain it carefully. Obtaining a visit visa takes about two working days. Visitors need to take along two passport photos and a letter of introduction from their company stating the purpose of their visit. Visit visas cannot be extended and the fine for staying more than 30 days is KD 10 a day. The cost is KD 10. expect the visitor to stay with them on arrival. can be obtained from a Kuwaiti consulate abroad or from a Port Authority in Kuwait. visitors may spend an enjoyable day in a Bahraini hotel lounge and then return to Kuwait in the evening. Applicants must have a valid visa for their next country . however. The sponsor then faxes a copy of the visa to the visitor (to enable him or her to travel to Kuwait) and meets him or her at the airport with the original visa. The other must be handed in when the visitor is leaving.304 Life in Kuwait Hints for entrepreneurs . Hotels can also arrange visit visas for businessmen but they take about a week to do so. flights are invariably missed. may be paid a few days in advance and. which allow holders to enter the country any number of times within a 12-month period. and. Alternatively. expatriates may obtain temporary residence once their visit visa has run out. naturally enough. By leaving on a morning flight. Fines. A round trip (40 minutes’ flying time) only costs about KD 45. may be available to business visitors sponsored by the Ministry of Defence. A visitor whose visa has expired is not allowed to leave until he or she has paid the fine. travel to Bahrain and re-enter Kuwait on the new visa.

on which they state where they are going to stay. visitors fill in an entry form at the airport. though of course the latest advice should be obtained before travelling. Residence permits To live permanently in Kuwait. a confirmed onward ticket. Hotel managers are obliged to inform the Ministry of the Interior whenever an expatriate checks in or out and do so routinely. unless they are working on a ship or airline. however. for a business visitor this will probably be a hotel.Getting In 305 of destination and. with or without being permitted to work. To take up a job. Persons from areas where there has been an outbreak of certain communicable diseases may be obliged to undergo a medical examination a few days after arrival. though travellers arriving from areas infected by cholera and yellow fever may need proof of inoculation. for all of which a sponsor is required. sponsor their own residence. dependant (art 22) and servant visas (art 20). . Address in Kuwait When entering Kuwait. Employment Persons in Kuwait on a visit visa are not permitted to take up paid employment. Expatriates may (under article 19). A person discovered without a valid iqama is fined and deported. Kuwait is as disease-free as Europe and North America and no particular precautions are recommended. expatriates other than GCC citizens must have a residence permit (iqama). Visitors who change their address in Kuwait must inform the Immigration Department within 48 hours of doing so. The latest position may be checked with Kuwaiti consulates abroad before travelling. The three main types are work visas (articles 17 and 18). provided they have lived in Kuwait for many years and have substantial financial means. In January 2004 the Ministry of Social Affairs announced that it was planning to abolish residence under article 19. a residence visa is required. There are different types of iqama. vaccination certificates are not required. which are known colloquially by the article numbers in the immigration regulations. Vaccinations As a general rule.

A working wife cannot sponsor her husband as a dependant. If both spouses are working. their iqama lapses automatically unless permission has been obtained in advance from the Ministry of the Interior. Once these have been obtained the employee will be given an entry visa for Kuwait. Their current sponsor must also be agreeable. If residents remain outside Kuwait for more than six continuous months. Dependants and servant visas Once he has his own residency a male employee may sponsor his wife and children to live with him in Kuwait. A private sector sponsoring employer must then obtain a no-objection certificate (NOC) from the General Administration of Criminal Investigation at the Ministry of the Interior. under current regulations. The Kuwaiti sponsoring employer then applies to the Ministry of Social Affairs and Labour for a work permit. their salaries can be combined to calculate these minima. NOC and a declaration from their sponsor must be presented to the Ministry of the Interior. Employees have two months after their arrival to process their residence. Dependent family members may not work without transferring to a work visa. supported by an authenticated marriage certificate in the case of a wife and an authenticated birth certificate for a child. passport. Once they have entered the country the formalities for a dependant’s resident visa are similar to those for a work visa and include medical tests and fingerprinting. after which their medical and fingerprint certificates.306 Life in Kuwait Work visas Work visas are iqamas granted under articles 17 (for public sector employees) and 18 (for private sector employees) of the immigration regulations. The fee for an 18-visa is KD 12 a year. they have been with their current sponsor for at least one year. An entry visa for a dependant is obtained in the form of an NOC from the Ministry of the Interior using a photocopy of the dependant’s passport. This involves undergoing medical tests conducted by the Ministry of Public Health and having their fingerprints recorded by the Ministry of the Interior. To obtain residence on a work visa an offer of employment must first be accepted. for which the sponsor needs a copy of the employee’s passport. Fees are KD 100 per dependant in the first year and KD 10 a year thereafter. . work permit. expatriates on 17-visas need an exit visa but not those with 18-visas. To leave Kuwait for any reason. Expatriates cannot change their job and transfer to another sponsor unless. though adult daughters may. which he does by submitting the employee’s personal details. Residences are issued for up to five years. provided he is earning at least KD 400 a month. and sons over 21 years cannot be sponsored as dependants.

5 centimetres. The fees per year are KD 50 for employees.Getting In 307 Resident expatriates may employ and sponsor one full-time servant.1. a civil ID card. but if a person habitually wears spectacles then the photographs for a driving licence must show them being worn. or a security pass. while for a driving licence the overall length of the face must be within a range of 2 to 2. .2 to 2. Civil ID card Within one month of obtaining his or her iqama.5 cm (min) Civil ID card 3. A civil ID card must be renewed whenever an expatriate changes sponsor.0 cm (max) 3.0 6 4. The regulation sizes for official purposes are shown in Table 6. A male expatriate must be married and his wife must be living with him if the servant is female. all expatriates are obliged to take out health insurance with the Ministry of Health before processing their resident visas.0 cm For a civil ID card the overall length of the face must be within a range of 2. renews his or her residence or changes the address at which he or she lives.1.5 6 4. Photographs Personal head-and-shoulder-type photographs are required on innumerable occasions: when obtaining a visa or residence permit. The circumstances in which a photograph will be needed are not entirely predictable and it is best to carry a stock. On most occasions. In addition.0 6 3.25 centimetres. Table 6.1 Photograph sizes Passport size 4. an expatriate must also get a civil identification (ID) card from the Public Authority for Civil Information (PACI). a driving licence.0 cm Driving licence 2. The procedures are similar to sponsoring family dependants. Once this card has been issued the holder’s civil ID number remains the same indefinitely even if he or she changes sponsor or leaves and comes back on a different residence visa. KD 40 for wives and KD 30 for children and servants. The fee is KD 200 in the first year and thereafter KD 10 a year. The photograph for a civil ID card must show the face without spectacles.0 6 5. passport-size photographs are acceptable.1.

. Some know the regulations but all welcome a customer who returns for a second set because the first set was the wrong size. Those found without acceptable identification are detained at the local police station until it is presented on their behalf. Make sure a local photographer is aware of the particular purpose for which a set of photographs is required. Expatriates are advised to carry a photocopy of their passports or civil ID cards on their person at all times as the police occasionally check personal identities.308 Life in Kuwait Hints for entrepreneurs . .

A 15 per cent service charge is added to all prices. Before mid-2002. A buffet lunch will cost about KD 3/500 a head extra. To conduct a morning seminar. including complementary beverages and light snacks. and there is no service charge. however. have very good conference and seminar facilities and prices are very reasonable. including a transit hotel at the airport. Many of the hotels. health clubs. There are more than two dozen hotels. Accommodation Accommodation for business visitors ranges from five-star hotels to executive apartments. Long-term rates are negotiable. tennis courts. hiring a room with public address and projection facilities and seating for several hundred will cost about KD 100 in total. Prices per day in two-star hotels are about KD 20 for a single room and KD 25 for a double. shops and business centres. KD 100 for an executive suite (including a desk and work area). Prices per day in five-star hotels are about KD 75 for a single room. Unfurnished executive apartments in good locations cost KD 450 to 650 a month but the standard is high. but the presence of senior officers and advisers of the Coalition forces since then has meant that these hotels are usually full nowadays and discounts are hard to negotiate. A few of these offer similar services to a hotel but at cheaper prices. Facilities at the better hotels include swimming pools.6. . With the exception of the cost of accommodation.2 Tourists and Residents Visiting and living in Kuwait can be stimulating and enjoyable. a 50 per cent discount could often be negotiated for stays of more than 29 days. The business centres in the five-star hotels are well equipped and staffed but offer poor value for money. life in Kuwait represents good value for money for those who do not need the constant stimulation of noise and bright lights. A number of buildings in Kuwait City have been converted into furnished apartments.

. Fares. Fares also increase substantially at night. the other by the privately owned City Bus. which are booked by telephoning the company’s office. where they pick up several passengers going to a particular area and then follow set routes. usually keep a few bits and pieces in the back and pick up passengers anyway. . either when the cab is booked or at the end of the trip. and use the same route-numbering system. Orange cabs also operate from ranks. Fares are 150 fils a person inside the City. Fares start from about KD 1/250. Both services follow the same bus stops and routes. KD 1 for a trip originating and ending within the same area.310 Life in Kuwait Hints for entrepreneurs . Fares get progressively more expensive as trips extend across area boundaries. Orange cabs operate from outside the main hotels and the airport. Bus services Two bus services operate in metropolitan Kuwait. though all have meters. Orange cabs are available from a rank just outside the main arrivals hall. the front seats of their buses being reserved for women. Taxis There are several types of taxis: orange cabs. They beep their horns when offering their services. and riding in them can be fun. and should be negotiated in advance. though there are no trains. however. one run by the stateowned Kuwait Transport Company (KTC). . are cheap. Call taxis are radio-controlled 24-hour cabs. from KD 4 to Kuwait City up to KD 20 for Salmi. Transport Kuwait is well served by public and private transport. At the head of the taxi rank there is a notice board showing the fares in Arabic and English. Visitors who have to clear samples through customs that failed to clear on arrival are advised to take along an Arabic speaker because personnel in customs do not speak English and the customs declaration must be in Arabic. Wanettes (pick-up trucks) with red number plates are only authorized to transport goods and to carry passengers accompanying goods. based on distance. Fares are fixed. Both operators practise gender segregation. Most. blue on government vehicles. The actual fare is decided by the driver’s controller over the radio. call taxis and wanettes. reddish-orange on commercial vehicles and a sort of dun colour on military vehicles. Number plates are coloured white on private vehicles. Kuwait’s major hotels provide courtesy cars to and from the airport. Fares are a bit cheaper than orange cabs.

though an extra charge per hour grants unlimited mileage. Obtaining discounts from the posted rates was always difficult at the hire desks in the hotels. but was once easy at the main car hire offices. are available from the bus stations.Tourists and Residents 311 Most buses are air-conditioned and fares range from 150 to 250 fils per person per trip. but non-GCC nationals may not drive on a GCC licence. the minimum period. Special week-end rates are available. and leasing is suitable for those who are on shorter (six months to one year) contracts. There are also plenty of hire firms that hire out three. with the first 100 km a day free and excess mileage charged at 10 to 30 fils per km depending on the size of the car. down to as low as KD 65 a month for six months.1).2.2. Table 6. Expatriates on a . Season tickets.1 Average car hire rates in 2003 All figures in KD Size Small Per day Insurance per: Per week Per Per km Unltd month km Excess hours Day Week Month 8 48 168 -/010 1/- 1/250 1/500 9/- 30/- Medium 15 90 315 -/020 1/- 2/500 3/- 18/- 40/- Large 26 156 546 -/030 1/- 3/500 3/- 18/- 60/- Insurance is extra. Route maps and timetables are available from KTC’s head office in Murqab or from the City Bus drivers. Rates are usually a combination of time and distance. since senior members of the Coalition forces began accepting the listed prices. Hire rates are reasonable by international standards (see Table 6. Car hire There are plenty of car-hire firms in the country. Driving licences GCC nationals may drive a car in Kuwait on their home-country licence. However. Charges are based on a 24-hour day and an hourly charge (excess hours) for late returns is made.to four-year-old small cars for as little as KD 3/500 a day. or less than KD 100 a month. with discounts. and foreign residents must have a Kuwaiti licence (see below). To rent a car. bargaining has become more difficult. Terms are reasonable. Those using an international driving licence must have their licence validated through an insurance company at a cost of KD 9 a month. many affiliated to international companies such as Hertz and Budget. including insurance. All the car hire companies also lease cars on a long-term basis. foreigners on visit visas need an international licence.

they are taken to the police station. The overall speed limit is 120 kph. flyovers and loop roads. If they cannot do so. Some motorways have minimum speeds of 50 or 80 kph. such as Westerners. Driving in Kuwait The roads are very good and. At only 60 fils a litre for unleaded premium. Penalties for driving offences are heavy and include gaol terms. Driving conditions are excellent except during rain. Driving licences are only given to expatriates who are resident in the country. again extremely cheap by Western city standards. Parking lots usually cost a modest 100 fils for the first two hours and 25 fils an hour thereafter. Petrol stations. fined and held until someone brings them on their behalf. may obtain a Kuwaiti driving licence on the strength of their national driving licence only. Driving is on the right. are quite plentiful in the Metropolitan Area but are few and far between in remote desert regions. Speed limits are 45 kph in urban areas and 60 kph on urban dual carriageways and all bridges. many of them self-service. and not on their home-country or international licence. Kuwait’s roads are well maintained. Parking is free on the patches of desert found in built-up areas. Radar cameras are positioned on motorways and some main roads and at nearly all urban traffic lights. not to visitors. fuel – one-sixth the price in Europe – is the cheapest in the world. driving in Kuwait is a pleasure. Other nationalities. spilt oil. and a licence issued in their home country is not acceptable. Driving licences lapse automatically when an expatriate’s residence runs out and become valid again as soon as residence is renewed or obtained under another sponsor. Speed signs are in English as well as Arabic. are obliged to pass a driving test. getting from one area to another is easy. but on some motorways the limit is 100 kph.312 Life in Kuwait visit visa may only drive on an international driving licence for the period of validity of their visa and any extension. Drivers who are jailed by the traffic court for a major offence may find that they are barred from renewing their residence and are thus effectively deported. Drivers are obliged to show their driving licence and daftar (vehicle registration) when asked by the police. Some residents. Once the licence runs out it may be renewed in less than a day at the Traffic Department that originally issued it. Kuwaiti driving licences are issued for periods of up to 10 years depending on the age of the driver. Resident expatriates may only drive on a Kuwaiti licence. For those with verve. when an emulsion of dust. even if they have a driving licence from their home country. as signposts are in both Arabic and English. fuel and water .

Locating an address Getting around Kuwait is easy and quick provided you know your way. But all office buildings have names. and the location of an office is usually indicated on business cards by the name of the building in which it is situated. block number and area. and the problem is the mix of national driving styles. Finding an office can prove difficult.1). Surra. Streets inside the block are signposted by their numbers (often in English). but they constitute less than half the drivers on the roads. But it seldom rains. however. The key to surviving on Kuwait roads is to cultivate the art of defensive driving. are known. Out in the suburbs it is relatively easy to find an address provided the house number. most road signs are in English as well as Arabic. though many streets are not signposted. Many of the smaller streets have no names and an office may be described as being in a particular street when in fact it is several small side-streets away. while Westerners and Easterners are unsympathetic towards nationalities. The main road will usually contain a large signpost showing a diagram of the area. eg house number 2. suggesting that the human factor is predominant in most road accidents. The Kuwaitis themselves are great drivers in the Italian manner. as the whole of the Metropolitan Area is laid out in a conical grid-like pattern of main roads. The locals fail to appreciate that other road users may lack their superbly developed skills. In addition. is not in use in all areas of Kuwait. block 4. The road in which the sign is placed is shown in the middle of the diagram and all the blocks into which the area is divided are numbered.Tourists and Residents 313 can make the surface extremely slippery. The blocks adjacent to the sign are highlighted. who tend to drive sedately in the middle or fast lane. It is easy to orientate yourself using the sign and then find the correct block. This excellent signposting system. . such as Indians and Egyptians. The rest are foreigners with a variety of driving perceptions. and the houses too are usually numbered. feeder roads and local roads (see map in Chapter 4. yet the country has perhaps the highest accident rate in the world.

Standards are reasonable. Expatriates are also obliged to take out health insurance with the Ministry of Health. or with approved insurance companies. with an excess of 20 per cent. in an emergency. A new hospital to cater for expatriates insured by the state is under construction. KD 2 in hospitals. Obtain international medical insurance with acceptable levels of cover in your home country before coming to Kuwait. Out-patient charges in government clinics are KD 1 a visit. Private medical insurance is available locally. Check the cover provided. medications included. Private clinics are usually KD 6 for registration and KD 8 to 10 for an examination. . patients are usually taken to the nearest public hospital. procedures and medications being charged extra.314 Life in Kuwait Hints for entrepreneurs . The locations and telephone numbers of those open on particular nights are shown daily in the local newspapers. supervised by the Ministry of Public Health. each of which has a government-run general hospital. Home visits by doctors are rare and. Most major hotels have doctors on call but charges are exorbitant (minimum US $100 per attendance). Emergency treatment is free at government hospitals and business visitors may avail themselves of these services. at a cost ranging from KD 30 to 50 pa. A range of specialist hospitals is located in the Shuwaikh-Sulaibikhat area. though a full range of services is not always available in the privately run establishments. Group insurance for a minimum of 15 persons may cost KD 75 a person for an annual cover of KD 5.000 for both in-patient and out-patient treatment. Primary healthcare is provided through a network of polyclinics. the exclusions and age limits of local insurance schemes carefully before making a commitment. and standards are high by European and US public health norms. The cost for an individual is about KD 125 a year. Visitors going to a hospital in an emergency should take their passports (or a photocopy) along as usually either a passport or civil ID card has to be shown. . There are also several private hospitals and clinics. Health services Kuwait is divided into five health regions. Until a few years ago expatriates enjoyed free medical services on a par with Kuwaitis but are now charged for some procedures. There are plenty of pharmacies in Kuwait and in each major area at least one pharmacy stays open all night on rotation. .

Modern Kuwaiti cooking is a synthesis of the traditional cuisine and the styles of Lebanon and Egypt. shaurba (thick soups). umm ali (hot bread pudding). a phenomenal choice that is reflected in ethnic shops. seafood has always been prominent in the local diet. daqqus (tomato and garlic sauce) and the palate-relieving rob (yoghurt relish). most of which use nuts or yoghurts as basic ingredients. Many pastries are soaked in shearer. kharoof (mutton). aish (rice). . kna’afah (string pastry). maashee (stuffed vegetables). the doctor may write a prescription for expatriates so they can buy the medicine themselves. As in all Arabic cuisine. The cost of medicines sold by private pharmacies is government controlled and reasonable by international standards. a very sweet caramelized syrup of rosewater. These serve a variety of hot and cold foods and though the cooking is not exclusively Arabic. Indian and Eastern Mediterranean influences. muhallabeeya (chilled fragrant milk pudding). Traditional native cooking is a unique me´lange of Bedouin. some drugs are reserved for Kuwaitis and may not be given to expatriates. Prices are a bit cheaper in local pharmacies compared to the pharmacies attached to private clinics. now a series of dishes such as samboosa helwa (sweet pastry fried in oil). Mezza (hors d’oeuvres). Dessert (hello’wa). mutton has a special place and. prices are reasonable even if quality does not always match expectations. Gastronomy The poly-ethnic diversity of the country’s population is evident in the vast range of foodstuffs available. for a fixed price. cardamom. Hotel restaurants range from coffee-shops to exclusive dining rooms where international ‘haute cuisine’ is served. lemon juice and sugar. . saffron. Though medication prescribed by an attending physician is free at government pharmacies in public hospitals and clinics. owing to the country’s location. reflecting the country’s history. on private dinner tables and in innumerable restaurants. its tribes and immigrants. . guests may gorge themselves without limit. Visitors and residents find themselves well fed.Tourists and Residents 315 Hints for visitors Kuwaiti culinary delights include: . Every hotel has a buffet where. America and Japan. Compared to Europe. Persian. samak (fish). traditionally a simple offering of fresh dates. However. Persons intending to indulge should perhaps first take out comprehensive dental insurance. bagalaw’wa (baked pastry). and its international desert and marine trading traditions.

where unaccompanied males are not allowed to sit. . Indian. For those with unadventurous palates. most of whom prefer to eat sitting in their cars parked in front of the restaurant. These are found mostly in residential areas and usually have just a few seats for customers. Outside the hotels there are thousands of restaurants. In places where ethnic communities congregate at weekends. fruits and juices) and other triumphs of Arabic casual dining. Traffic jams outside Arabic restaurants. Diwaniyahs Diwaniyahs are not only excellent opportunities for making good business contacts. juices. hummus. samadi (a mix of ice creams. such as sh’wermas. Shoes are taken off on entering. Persian and Chinese restaurants. provide a take-away service. are a good indication of quality. Bench-type seating along the walls is often provided. Every street has several small sandwich shops with a few seats and a mainly take-away clientele. Visitors who fail to sample some of the Arabic and Eastern foods in the smaller restaurants are doing themselves a gastronomic and cultural disservice. but this becomes quite comfortable after a time and there are usually cushions for leaning on. samboosas and felafel. Those to which a visiting businessman may be invited range from large formal gatherings down to small diwaniyahs where an informal club atmosphere reigns. The best local restaurants are the kebab houses selling kebabs. Some Arabic restaurants are reserved for men only. If not. Most of the Arab. sitting cross-legged on the floor is necessary. where substantial meals can be enjoyed at very reasonable prices. the homogeneous burger is available almost everywhere. along with the usual range of pizzas. Tea and other beverages as well as small snacks are often served. one for every four residents. they do offer excellent introductions to Kuwaiti cuisine for the inexperienced. even the larger ones. and a filling collation may be enjoyed for half a dinar. Most sell Arabic snack foods. but also pleasant social gatherings. . there are small take-aways selling a variety of national delicacies.316 Life in Kuwait Hints for visitors . A full meal may cost as little as KD 1/500 per head. Others have family sections for families and women. . especially at weekends. shish kebabs. Prices range from about KD 5 to 15 a head.

rolled into a ball in the hand and then propelled into the mouth using the thumb. In the more informal diwaniyahs a meal may be served late at night. such as the Green Island and Entertainment City. the right hand only. This is usually spread out in dishes on newspaper on the floor and everyone gathers round to eat from the communal plates. . Many of these activities are organized by state-funded sea clubs and sports clubs. horse riding. archery and the martial arts. an insult in local culture. Places of interest There are many other places of interest in Kuwait. There are also several family-oriented recreational parks and carnival-type amusement centres. jet skiing. Sports and resorts In Kuwait. football. cricket. Several amusement parks and leisure centres are under construction by private companies. basketball. head and eyeballs of a sheep. sea-sports reign supreme and every water-sport imaginable – swimming. which is good for a whole day out. A sensitive soul who refuses a helping of bacher.Tourists and Residents 317 Hints for business . At the end of the meal everyone washes and it is not only good manners but socially expected for the host to be thanked profusely. will not necessarily be considered impolite. enough to keep a visitor busy for at least a week. diving and fishing – can be enjoyed to the full. . When sitting on the floor in a diwaniyah. Kuwait’s answer to Disneyland. make sure that you do not point your foot directly at another person. Along the southern part of the coast there are several resorts with a sporting emphasis where chalets may be rented for the weekend or longer. a marag (stew) of the feet. wind-surfing. as well as occasional camel racing and falconry. iceskating. sailing. bowling. Burping politely is interpreted as a sign of satisfaction. The food is scooped out of the communal pot with thumb and fingers. Other organized sports include golf. Most food is eaten by hand. water skiing. boating.

. The Old City Wall Gates. which were deliberately demolished by the Iraqis during the invasion in a bout of cultural cleansing. They are situated on a promontory on Arabian Gulf Street and. There are several other old pre-oil houses along the waterfront which have been renovated and preserved. TEC has an information and booking centre on Arabian Gulf Street. is being restored and some exhibits are open to the public. Next door is Bayt al-Badr. have been rebuilt and are worth a quick look out of historical interest. Muhallah II. . The Taraq Rajab Museum in Jabriya is a privately owned museum specializing in Islamic arts and crafts. are enormous concrete needles with pierced blue balls. musical instruments and manuscripts. The planetarium too is open again. the As-Sabah collection of Islamic art. the House of Weaving. with access by high-speed lift.318 Life in Kuwait Hints for visitors . is a fine example of a pre-oil era merchant’s townhouse located on the waterfront in which Bedouin camel bags and decorations. contain a revolving observation area and a restaurant. including the old British Political Agency. the replacement for and exact replica of the magnificent trading dhow from the 1930s that graced the front yard of the museum before it was burnt by the Iraqis. Bayt Lothan is a cultural and craft centre in Salmiyah on Arabian Gulf Street that has some pleasant tea-rooms. There are several dhow harbours along the coast. though driving in Jahra. the museum has a very worthy collection of Islamic and ethnic silver jewellery. These are working ports where dhows for fishing trips may be hired. The Red Fort at Jahra (Qasr Al-Ahmar) is famous for several historical battles and may be worth a visit. Kuwait’s National Museum. 90 per cent of which was returned from Iraq. has been constructed on site and is open to visitors. including the Dar Al-Athar Al-Islamiyah. manages many leisure facilities. which was thoroughly looted during the Iraqi occupation. The Science and Natural History Museum on Abdullah Mubarak Street contains some good displays on the petroleum industry. tent dividers. Kuwait’s most famous landmark. The Touristic Enterprises Company (TEC). an old house built prior to 1850 that has some good examples of the famous front doors of old Kuwait. a state body. Sadu House. The Kuwait Water Towers. as well as ceramics. as well as being water reservoirs. cushions and carpets are exhibited and Bedouin women can be seen weaving. A full round-up of leisure facilities and things-to-do for adults and children can usually be obtained from the front-desk of most hotels.

Around the City. as memory fades. Star TV and the BBC. Al-Qurain House was the scene of a fire-fight just before Liberation between the Kuwaiti resistance and the Iraqis and is now a museum and monument to those who died. transmitting a wide selection of live and pre-recorded events from around the world. Around the country there are several other Liberation memorials in a discreet understated style. with voice-overs in Arabic and English. . KTV2 is the local English language station. several 19th-century mosques are still in use. There are four local TV channels.7 broadcasts current hits with occasional input from a local DJ. world music and other adult styles. jazz. Great Arabic music (modern and folk) can be heard round-the-clock on FM 87. The ubiquitous satellite dish means that TV programmes from all over the world can be received. Most hotels rooms and many apartments are linked to communal dishes. for sports-lovers it is excellent. both very fine examples of modern mosque architecture.Tourists and Residents 319 Hints for visitors .9 and 103. opposite the Seif Palace. which. modern technology has been used to combine several traditional Islamic styles while both retaining local characteristics and preserving the Islamic tradition of calligraphy. The media The media are either state-run or supervised by the Ministry of Communications. sadly. . such as a pyramidshaped mosque in Ras Salmiyah and the Fatima Mosque in Abdullah Al-Salem. Channel 3 is a sports channel.7.5 transmits a superb selection of oldies in rock. once the intersection of three major caravan routes. The state-run radio stations are excellent. and it sometimes shows quite good late-night movies. while FM 92. FM 99. In the Grand Mosque. Both provide local and foreign news updates several times a day. should be approached with caution. Kuwait contains several interesting mosques. Channels 1 and 4 broadcast a comprehensive selection of programmes in Arabic. are beginning to decay. There are two English language 24-hour music stations. Both the daily What’s On pages in the Arab Times and the Happenings column in the Kuwait Times carry details of events and activities. Christians may enter mosques but should remove their shoes and must exercise due reverence. including CNN.

.000 a year in kindergarten to well over KD 2. and two in English. Arabic. The latter cost 150 fils each at local newsagents. The BBC. all private schools are supervised by the Private Education Department at the Ministry of Education. Contact details are shown in the What’s On section of the Arab Times.asp Kuwait also boasts some very competent amateur theatre groups and many clubs and societies. PBC and AIR can be received on short-wave and most embassies have booklets with frequencies and timings. VOA. and standards. Fees at these schools range from about KD 1. as public education is only provided free to Kuwaiti children. Schooling The children of resident expatriates need to be educated privately. However. and transport by school bus at about KD 200 a year. the Arab Times and the Kuwait Times. An eclectic variety of films are shown. However.320 Life in Kuwait There are no private radio stations in Kuwait. Programmes for the day are published in the Arab Times and Kuwait Times. especially in schools that follow US. extracurricular activities such as sports. five in Arabic. Extras include school uniforms (KD 50 to 100). Indian and Western. Kuwait has 16 cinemas. the American Armed Forces Radio broadcasts from Doha on FM 107. Seven daily newspapers are published.kncc. slightly more expensive than in Western Europe. Programming for the month may be assessed on: http://www.com/ showtimes.000 in secondary or high school. English and French curricula. are quite high. Prices begin at KD 2/500 a person. International magazines are also available at the better bookshops. Quite a few of the schools achieve good results in public examinations. Some of these are quite modern and comfortable.2. There seems to be a club covering most activities and ethnic groups. though there are moves afoot to rectify this lack. all run by Kuwait National Cinema Company. Most foreign quality papers are available from hotel kiosks and larger bookshops (‘libraries’) but they tend to arrive a few days late and are expensive.

Part Seven Appendices: Further Sources of Information .

.

18 The Ridings.org Web site: www. NW.kuwait-info. Al-Bader & Partners PO Box 4207. Cobham. 20037. Safat 13043.com Legal advice The Law Office of Al-Essa.com Professional firms and associations Business consultants Dal Cais Consultants (DCC – Management Consultants) PO Box 24005. Kuwait Tel: +965 243 8033/4 / 243 8020-2 Fax: +965 243 2272 Contact: Kevin Burke . UK Tel: +44-1372 843 267 Fax: +44-1372 844 437 E-mail: asaconsult@btinternet. USA Tel: (+1) (202) 338 0211 Fax: (+1) (202) 338 0957 E-mail: questions@kuwait-info.Appendix 1 Useful Contacts General information on Kuwait Kuwait Information Office 2600 Virginia Avenue. Washington DC.com Web site: kuwait-kennedy. Surrey.com ASA Consulting (Specialists in the Middle East) Fernbank. Suite 404. KT11 2PU. Safat 13101. Kuwait Tel: +965 242 1694/7 Tel: +965 955 0275 Fax: +965 242 9497 E-mail: paulkpg@hotmail.

324

Appendices

Market research
Focus Marketing Consultancy Ltd
PO Box 9650, Salmiyah 22097, Kuwait
Tel: +965 2424058 / 2422506 / 2431128
Fax: +965 2401595
E-mail: focus@qualitynet.net
Contact: De Camille Gideon
Accounting
Kuwait Accountant Auditing
Adel Mohammed Al-Sanea & Co
Certified Public Accountants
PO Box 2688, Safat 13129, Kuwait
Tel: +965 240 3205
Tel: +965 978 0862
Fax: +965 244 9454
Contact: Mr Abdul Hameed
Agriculture, horticulture and fisheries consultants
House of Development for Agricultural Contracting Co WLL
PO Box 28870, Safat 13150, Kuwait
House of Development is the leading agricultural, horticultural and
veterinary company in Kuwait. HOD represents many agricultural and
veterinary products in Kuwait.
Head Office: Tel: +965 2421694/7; Fax: +965 2421713
Shuwaikh: Tel: +965 4722719; Fax: +965 4729079
Ahmadi: Tel: +965 3987687; Fax: +965 3987681
E-mail: hodag@qualitynet.net
Contacts: Mr Hamad Al-Anjari; Mr Sree Kumar
Translations
Abdul Kareem Rafiq Al-Said
Tel: +965 683 7573
Tel: +965 246 2193
Fax: +965 561 0357
E-mail: afnan2004@hotmail.com
Business associations
American Business Council – Kuwait: The ABC-K serves as the local
chapter of the US Chamber of Commerce. It is a non-profit organization
whose purpose is to bring better awareness of the Kuwait market to the
United States so as to improve the competitiveness of American goods

Appendix 1: Useful Contacts

325

and services in the Kuwait market and to enhance the business climate
for US businesses and businesspersons resident in Kuwait. The organization produces a newsletter, Correspondent, periodically. The ABC-K
is very security conscious and initial contact seems to require a visit to its
neatly designed but slow-to-open Web site.
Web site: www.abc-k.org/
British Business Forum: The BBF is a non-profit-making association
of British business people in Kuwait that aims to foster British interests
and win more business for the United Kingdom. Working closely with
the British Embassy, the Forum provides an opportunity for the British
business community to meet on a regular basis, supports the creation of
business networks, facilitates discussions with business people and
VIPs visiting Kuwait and liaises with overseas trade agencies in the
United Kingdom. A meeting with a guest speaker and refreshments is
held at 19:30 on the evening of the second Monday in each month.
Members may bring their partners and guests to these meetings and
other social events.
Web site: www.bbf.org.kw
Tel: +965 5621701 ext 138
Fax: +965 3901760
E-mail: enquiries@bbf.org.kw
Telephoning Kuwait
The country code for Kuwait is 965. There are no area codes. To
telephone Kuwait from another country, you should:
DIAL
Overseas Access Code / 965 / Telephone Number
The telephone numbers shown in the directory are switchboard numbers
except where otherwise indicated.
Emergencies:
The telephone number of all emergencies (police, fire, ambulance, etc) is:
777

Indian Business Advisory Council: The IBAC promotes economic
and commercial relations between India and Kuwait. Most prominent
Indian businessmen in Kuwait are members. The IBAC meets periodically to discuss business matters. Prominent Kuwaiti businessmen, as
well as well-known visiting Indian entrepreneurs, are invited to meetings to exchange views on economic and commercial matters. Initial
contact is made through the Indian Embassy in Kuwait. Tel: 253 0600;
Fax: 257 1192.

326

Appendices

Kuwait Association of Accountants
& Auditors
Kuwait Society of Lawyers
Kuwait Economics Society
Kuwait Graduates Society
Kuwait Contractors’ Union

Tel: 484 9799

Fax: 483 6012

Tel: 253 2422
Tel: 484 7979
Tel: 244 5780
Fax: 246 7480
Tel: 242 4827
Fax: 243 7824

Fax: 252 3518
Fax: 483 4048
Tel: 244 6592
Tel: 243 7823

State, government, and legislative institutions
The
The
The
The
The

Amiri Diwan
Diwan of the Crown Prince
National Assembly
Council of Ministers
Municipal Council

Tel:
Tel:
Tel:
Tel:
Tel:

539 8888
80 00 00
245 5422
244 8271
244 9001

Fax: 539 3069
Fax: 539 4060
Fax: 240 6190
Fax: 240 8519

Governorates
Kuwait City
Hawalli
Farwaniya
Jahra
Ahmadi
Mubarak Al-Kabir

Tel:
Tel:
Tel:
Tel:
Tel:
Tel:

244
262
489
457
398
398

5560
7000
4000
7177
8888
8888

Fax: 242 2662
Tel: 262 8000
Tel: 488 2639
Tel: 457 7188
Tel: 398 7777
Tel: 398 7777

Fax: 262 5707
Fax: 489 0055
Fax: 398 6333
Fax: 398 6333

Ministries
Awqaf and Islamic Affairs
Commerce & Industry
Communications
Defence
Education
Energy (Oil, Electricity & Water)
Foreign Affairs
Finance

Higher Education
Interior
Information

Tel: 246 7300

Tel: 246 6300
Fax: 244 9943
Tel: 246 3600
Fax: 243 6832
Tel: 481 9033
Fax: 484 7058
Tel: 483 2084
Fax: 484 1031
Tel: 483 6800
Fax: 483 7829
Tel: 489 6000
Fax: 489 7484
www.moo.gov.kw (bilingual)
Tel: 242 5141-9 Fax: 241 2169
Tel: 246 8200
Fax: 240 4025
Arabic Web site:
www.mof.gov.kw
English Web site:
www.mof.gov.kw/index11.html
Tel: 240 1300
Fax: 245 6319
Tel: 243 0500
Fax: 243 6570
Tel: 241 5221-8 Fax: 241 9642
www.kuwait-info.com

Appendix 1: Useful Contacts

Justice
Planning

Public Health
Public Works
Social Affairs & Labour

327

Tel: 246 5600
Fax: 243 3750
Tel: 242 8200
Fax: 240 7326
Arabic Web site:
www.mop.gov.kw
English Web site:
www.mop.gov.kw/MopWebSite/
english/default.asp
Tel: 246 2900
Fax: 243 2288
Tel: 242 9904
Fax: 242 4335
Tel: 246 4500
Fax: 242 1412

Note: Very few ministries have their own Web sites but general information about most ministries is available on www.kuwait-info.com
Departments and public authorities and institutions
Department of Legal Advice &
Legislation
Government Audit Bureau
Higher Planning Council
Kuwait Institute for Scientific
Research (KISR)
Kuwait Investment Authority (KIA)
Kuwait Foundation for the
Advancement of Sciences (KFAS)
Kuwait News Agency (KUNA)
Public Authority for Civil
Information (PACI)
Public Housing Authority (PHA)
Public Authority for Agricultural
Affairs and Fish Resources
(PAAAFR)
Public Authority for Applied
Education and Training (PAAET)
Public Authority for the
Environment (EPA)
Public Authority for Industry (PAI)

Tel: 244 8271

Fax: 245 9258

Tel: 242 1036
Tel: 487 7081
Tel: 483 0125

Fax: 242 2576
Fax: 484 6891

Tel: 243 9595
Tel: 242 5898

Fax: 241 5365

Tel: 482 2000
Tel: 639 5377

Fax: 263 4113

Tel: 433 0055
Fax: 431 9110
Tel: 476 1115-7 Fax: 476 5551

Tel: 256 4960

Fax: 256 1651

Tel: 482 1285-7
Tel: 431 8920

Tel: 431 8312

Non-government business organizations
Kuwait Chamber of Commerce
& Industry
Foreign Relations Department
Kuwait Society of Engineers
Kuwait Industries Union

Tel: 243 3854-7 Fax: 240 4110
Tel: 241 7825
Fax: 243 3858
Tel: 244 8975/7 Fax: 242 8148
Tel: 266 3453/4 Fax: 266 3452

328

Appendices

Regional government organizations
Gulf Cooperation Council – Joint
Programme Institution
OAPEC (the Organization of Arab
Petroleum Exporting Countries)
AFESD (the Arab Fund for
Economic & Social Development)
IAIGC (the Inter-Arab Investment
Guarantee Corp)
API (the Arab Planning Institute)
ATO (the Arab Towns Organisation)
ICRC (Red Cross/Red Crescent)
UNDP (UN Development
Programme)

Tel: 532 7164-7 Fax: 532 7162
Tel: 484 4500

Fax: 481 5747

Tel: 484 4500
Tel: 484 4500
Tel:
Tel:
Tel:
Tel:

484
484
532
532

3130
Fax: 484 2935
9705/6
2061/2
9870

Commerce and industry
Central Tenders Committee (CTC)
The Municipality
General Enquiries
Information
Director General
Municipal Engineering
Municipal Services
Ministry of Planning
General Information
Central Statistical Office
Population Statistics
Economic Statistics
Commercial Statistics
Prints & Publications
Projects & Experts Department
Registration of Consultants
Ministry of Commerce & Industry
General Information
International Relations
Department of Inspections
Companies Administration
Commercial Registry
Commercial Licences
Research & Studies Dept
Industrial Licences &
Registration
Industrial Supervision

Tel: 240 1200

Fax: 241 6574

Tel:
Tel:
Tel:
Tel:
Tel:

244
240
241
243
572

9001
9237
0725
5207
1480

Fax:
Fax:
Fax:
Fax:
Fax:

241
245
240
243
574

4910
2360
3853
9560
8030

Tel:
Tel:
Tel:
Tel:
Tel:
Tel:

243
243
565
242
242
243

0439
7057
2292
7572
7574
7023

Fax:
Fax:
Fax:
Fax:
Fax:
Fax:

240
243
565
243
243
243

7326
0464
2085
0464
0464
0464

Tel: 243 0437

Fax: 242 7820

Tel:
Tel:
Tel:
Tel:
Tel:
Tel:
Tel:
Tel:

Fax:
Fax:
Fax:
Fax:
Fax:
Fax:
Fax:
Fax:

246
242
240
245
243
241
243
244

9130
0207
0562
7462
5436
3379
1168
0878

Tel: 241 1062

245
246
245
240
241
241
240
246

1140
2798
1136
0543
8581
0978
0549
5781

Fax: 245 1141

Appendix 1: Useful Contacts

Industrial Studies &
Development
Legal Affairs
Department of Statistics
Specifications & Standards and
Weights & Measures

329

Tel: 240 0569

Fax: 246 9563

Tel: 241 2294
Tel: 246 6976
Tel: 246 5101

Fax: 242 9477
Fax: 243 6823
Fax: 245 1141

Ministry of Social Affairs & Labour
Labour Inspection
Research & Statistics

Tel: 240 9190
Tel: 246 4500

Fax: 241 9877
Fax: 241 9877

Ministry of Defence
Local Supplies
Overseas Supplies
Special Contracts

Tel: 484 1351
Tel: 484 6797
Tel: 484 5233

Fax: 483 7244
Fax: 483 7244
Fax: 483 7244

Ministry of Interior
General Information
Purchasing Department
Tenders Department
Planning Department
Statistical Department
Research & Studies

Tel:
Tel:
Tel:
Tel:
Tel:
Tel:

241
481
483
471
472
240

0051
6244
7390
4341
8212
7925

Fax: 243 5487

Immigration Departments
Kuwait City
Hawalli
Farwaniya
Jahra
Ahmadi

Tel:
Tel:
Tel:
Tel:
Tel:

484
574
434
477
398

9902
3612
9911
5911
6765

Ministry of Information
Press & Information Bureau
Government Printing Press
Department of Censorship
FM Radio
Studios
Advertising

Tel:
Tel:
Tel:
Tel:
Tel:
Tel:

242
243
242
245
240
241

1940
3038
1700
7558/9
4669
5221-8

Public Authority for Industry (Shuaiba)
Switchboards
Tel:
General Information
Tel:
Consultancy Department
Tel:
Project Management
Tel:
Buying Department
Tel:

326
326
326
326
326

0406-66 Fax: 326 2728
1760
Tel: 326 2759
0353
2309
2757
Tel: 326 0126

Fax: 243 4715
Fax: 243 4715
Fax: 242 6515
Tel: 241 2949
ext 30620

330

Appendices

Research & Studies

Tel: 326 2802
Tel: 326 2813
Tel: 326 2782

Planning & Development
Environment Protection Centre
General Manager
Water Pollution Control
Air Pollution Control
Research & Coordination

Tel:
Tel:
Tel:
Tel:

Ministry of Finance
Income Tax Department

326
326
326
326

Tel: 326 0017
Tel: 326 2834
Fax: 326 1557

2725
2804
2734
2712

Tel: 242 2856
Fax: 242 0144
E-mail: tax@mof.gov.kw
Tel: 241 9268
Fax: 242 5965
E-mail: offset@mof.gov.kw
www.mof.gov.kw/offset

Offset Programme Management

Kuwait Investment Authority
Switchboard
General Information
Managing Director
Investment Departments
Local & Arab
American
European
Asian

Tel: 243 9595
Tel: 240 3559
Tel: 242 5135

Fax: 245 4059
Fax: 245 4281
Fax: 245 4059

Tel:
Tel:
Tel:
Tel:

Fax:
Fax:
Fax:
Fax:

246
240
244
242

4139
4656
7138
2917

240
246
243
246

8803
8847
4394
8848

Ports and customs
Kuwait Ports Public
Authority
Directorate General
of Civil Aviation
General Department
of Customs
Inspection & Control
Northern Sea Ports
Southern Sea Ports
Airport
Land Borders

Tel: 481 2662

Tel: 481 2712

Fax: 481 9714

Tel: 433 4499
Tel: 484 3490

Fax: 483 8056

Tel:
Tel:
Tel:
Tel:
Tel:

Fax:
Fax:
Fax:
Fax:
Fax:

484
484
398
473
467

9326
1904
6053
2352
8097

483
481
398
473
467

8056
0468
7439
6082
8098

Banks, financial and investment institutions
Institute of Banking Studies
www.kibs.org
Credit and Savings Bank

Tel: 245 8460-5

Fax: 246 6430

Tel: 241 1301

Fax: 245 5516

abk-kuwait.banktijari.gulfinvestmentcorp.gov.net www.ibkuwt.kuwait-fund.gulfbank-online.cbk.com Tel: 241 9518 Fax: 244 www.com.kw www.gov.com Tel: 244 9501 Fax: 244 www.com Public Institution for Social Security Tel: 241 9547 Fax: 241 8467 Investment Office Gulf Investment Corporation Tel: 222 5000 Fax: 244 8894 E-mail: gic@gic.kuwaitse.com Tel: 242 2011 Fax: 240 www.com 4870 0937 1430 1148 1050 6126 9235 Special purpose banks Industrial Bank of Kuwait Tel: 844 446 Kuwait Real Estate Bank Tel: 245 7661 Fax: 246 2057 www.com.bkme.com Tel: 245 8177 Fax: 246 2516 Conventional investment institutions Kuwait Stock Exchange Tel: 242 3130-9 Fax: 241 3538 E-mail: borse@qualitynet.burgan.nbk.com Tel: 241 1001 Fax: 245 www.kw www.org .Appendix 1: Useful Contacts Central Bank of Kuwait Switchboard General Information Economic Research Dept 331 Tel: 244 9200-19 Fax: 244 0887 Tel: 242 9014 Tel: 240 1756 Fax: 243 3461 E-mail: cbk@cbk.kw www.com Tel: 243 9000 Fax: 246 www.com Tel: 802 000 Fax: 246 www.kse.com KFAED Investment Department Tel: 246 8800 Fax: 241 9090 www.kw Conventional banks Al-Ahli Bank Bank of Bahrain & Kuwait Bank of Kuwait & Middle East Burgan Bank Commercial Bank of Kuwait Gulf Bank National Bank of Kuwait Tel: 240 0900 Fax: 241 www.bbkonline.

com Tel: 483 1274 Fax: 481 www.com Fax: 245 5135 Fax: 240 6649 Oil.com Tel: 434 3666 Fax: 431 www.q8.332 Appendices Islamic financial institutions Kuwait Finance House The International Investor Tel: 244 5050 www.com.com.com.pic.kw www.tii.com Tel: 433 0507 Fax: 433 www.com KPI [Kuwait Petroleum International] Head Office (Kuwait) Tel: 240 4087 Europoort + 31 181 Tel: 251 911 London + 44 (0) Tel: 207 451 4700 Rotterdam + 31 10 Tel: 4072 085 Belgium + 32 3 Tel: 241 33 00 France + 33 1 Tel: 4112 2600 Germany + 49 Tel: 2102 9685 0 Italy + 39 06 Tel: 5208 81 Luxembourg + 352 Tel: 45 02 03-1 Spain + 34 91 Tel: 576 43 00 Thailand + 66 2 Tel: 661 9520 www.kufpec.kockw.kfh.com.com.com 0559 7159 7872 3661 6101 5719 1521 0405 0475 1022 2557 Fax: 240 7533 Fax: 262 926 Fax1784 419299 Fax: 455 33 Fax: 241 34 00 Fax: 4602 2910 Fax: 2102 9685 9 Fax: 5208 8655 Fax: 44 43 45 Fax: 577 73 99 Fax: 661 9550 .com.kw Tel: 242 2141 Fax: 240 www.kotc.chevrontexaco.com Tel: 243 7070 www.equate.kw Tel: 398 9111 Fax: 398 www.kw Tel: 395 0444 Fax: 395 www.kafco. gas and petrochemicals Supreme Petroleum Council KPC [Kuwait Petroleum Corp] Information Office KOC [Kuwait Oil Co] KNPC [Kuwait National Petroleum Co] PIC [Petrochemical Industries Co] KOTC [Kuwait Oil Tanker Co] KUFPEC [Kuwait Foreign Petroleum Exploration Co] KAFCO [Kuwait Aviation Fueling Co] SAT [Saudi Arabian Texaco] EQUATE Petrochemical Company Tel: 242 0771 Fax: 243 Tel: 245 5455 Fax: 246 Tel: 240 0960 Fax: 240 E-mail: info@kpc.kw Tel: 242 1677 Fax: 242 www.knpc.kw Tel: 245 5455 Fax: 240 www.kpc.

Appendix 2 Embassies Foreign embassies accredited to Kuwait Afghanistan Albania (Riyadh) Algeria Argentinia Australia (Riyadh) Australia (Dubai) Austria Bahrain Bangladesh Belgium Bhutan Bosnia & Hercegovina Brazil Bulgaria Burkina Faso (Riyadh) Burundi (Riyadh) Cameroon (Riyadh) Canada Chad (Riyadh) Chile (Riyadh) China Coˆte d’Ivoire (Riyadh) Cyprus Czech Republic Denmark Djibouti (Riyadh) Egypt Eritrea Ethiopia Finland France Gabon (Riyadh) Gambia (Riyadh) Germany Ghana (Riyadh) +966-1 +966-1 +971-4 +966-1 +966-1 +966-1 +966-1 +966-1 +966-1 +966-1 +966-1 +966-1 +966-1 Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: 532 456 251 532 488 313 255 531 531 572 533 539 532 531 465 464 488 256 465 462 533 456 243 252 534 454 251 531 533 531 257 463 456 252 464 9461 9728 9220 3014 7788 444 2532 8530 6042 2014 1506 2637 8610 4458 2244 2125 0022 3025 7702 0481 3340 6943 3075 9018 1005 3182 9956 7426 4291 2890 1061 2664 0273 0827 1383 Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: 532 456 251 532 488 314 256 533 531 574 533 539 532 532 465 465 488 256 465 462 533 453 240 252 534 456 256 531 533 532 257 406 456 252 462 6274 2522 9497 3053 7973 729 3052 0882 6041 8389 8959 2106 8613 1453 3397 9997 1463 4167 7702 4368 3341 0528 2971 9021 1007 9168 3877 7429 1179 4198 1058 7664 0273 0763 3089 .

334 Appendices Greece Guinea (Riyadh) Hungary India Indonesia Iran Ireland (Riyadh) Italy Japan Korea Lebanon Libya Malaysia Mali (Riyadh) Malta (Riyadh) Mauritius (Cairo) Mexico (Riyadh) Morocco Nepal (Riyadh) Netherlands New Zealand (Riyadh) Niger Nigeria Norway (Abu Dhabi) Oman Pakistan Philippines Poland Portugal (Riyadh) Qatar Romania Russia Rwanda (Cairo) Saudi Arabia Serbia & Montenegro Senegal Singapore (Riyadh) Somalia Spain Sri Lanka Sweden Switzerland Syria Tanzania (Riyadh) Thailand +966-1 +966-1 +966-1 +966-1 +20-2 +966-1 +966-1 +966-1 +971-2 +966-1 +20-2 +966-1 +966-1 Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: 481 488 532 253 483 256 488 481 531 533 256 257 534 465 463 347 476 531 402 531 488 565 532 211 256 532 532 531 464 251 484 256 709 240 532 257 465 539 532 533 252 534 539 454 531 7101 1121 3901 0600 9927 0694 2300 7400 2870 9601 2103 5183 2091 8900 2345 0929 1200 2980-1 4758 2650 7988 2943 0794 221 1956 7651 9318 1571 4688 3606 5079 0427 947 0250 7548 3477 7007 4795 5829 9140 3588 0172-5 6560 2833/9 7530 Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: 481 382 532 257 481 252 488 481 532 531 257 257 534 465 463 345 478 531 403 532 488 564 532 213 256 532 532 531 464 251 484 252 711 242 532 254 465 539 532 533 257 534 539 454 531 7103 6757 3904 1192 9250 9868 0927 7244 6168 2459 1682 5182 1783 7567 3993 2425 1900 7423 6488 6334 7912 0478 0834 313 1963 8013 9319 1576 4419 3604 8929 4969 479 0654 7568 2044 2224 4829 5826 9154 2157 0176 6509 9660 7532 .

Kuwait embassies and consulates abroad Algeria Argentinia Austria Bahrain Bangladesh Belgium Brazil Bulgaria Canada China Czech Republic Denmark Egypt Ethiopia France Germany Greece India (New Dehli) India (Mumbai) Indonesia Iran Italy (Rome) Italy (Milan) Japan Jordan Kenya Korea Lebanon Libya 213-2 54-1 43-1 973880-2 32-2 55-61 359-2 1-613 86-10 42-02 453 20-2 25-11 33-1 49-228 30-1 91-11 91-22 62-21 98-21 39-6 39-2 81-3 962-6 254-2 82-2 961-1 218-21 Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: 693 704 782 8697 405 5646-9 534 040 882 700 647 7950 248 1633 962 5689 780 9999 6532 2181 243 11966 961 1420 360 2661 615 411 472 35425 378 081 647 3593 688 4066 287 1897 520 2477 878 5997 807 6651 8646 1633 345 50361 567 5135 767 144 749 3688 822 515 444 0281 Fax: 693 470 Fax: 788 9880 Fax: 408 5600 Fax: 536 475 Fax: 883 753 Fax: 646 1298 Fax: 248 0969 Fax: 968 3415 Fax: 780 9905 Fax: 6532 1607 Fax: 243 11972 Fax: 961 0677 Fax: 360 2657 Fax: 612 621 Fax: 472 03359 Fax: 378 936 Fax: 677 5875 Fax: 687 3516 Fax: 204 8180 Fax: 522 4931 Fax: 878 6003 Fax: 807 9545 Fax: 7200 1170 Fax: 345 50598 Fax: 568 1971 Fax: 767 053 Fax: 749 3687 Fax: Fax: 361 6222 .Appendix 2: Embassies Tunisia Turkey UAE Uganda (Riyadh) UK Uruguay (Riyadh) USA Venezuela Vietnam (Cairo) Zambia +966-1 +966-1 +20-2 Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: 252 253 252 454 240 462 539 532 701 562 6261 1785 8544 4910 3336 0739 5307-8 4367-9 494 1517 Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: 252 256 252 454 242 462 538 532 349 562 335 8995 0653 6382 9260 6799 0638 0282 4368 6597 1491 Note: While many of these embassies have a physical presence in Kuwait. others have their nearest embassy in neighbouring countries.

336 Appendices Malaysia Mauritania Morocco Netherlands Oman Pakistan (Islamabad) Pakistan (Karachi) Philippines Qatar Russia Saudi Arabia (Riyadh) Saudi Arabia (Jeddah) Senegal South Africa Spain Sri Lanka Sudan Sweden Switzerland Syria Tunisia Turkey UAE (Abu Dhabi) UAE (Dubai) UK Ukraine UN Mission (New York) USA (Washington) Venezuela Yemen Zimbabwe OAC 60-3 222212-7 31-70 96892-51 92-21 63 2 9747-095 966-1 966-2 22 1 271 2 34-46 34 1 249-11 46 8 41-22 963-11 216-1 90-312 971-2 971-4 44-171 38044 1-212 1-202 58-2 967-1 263-4 20 2 Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: 241 254 751 360 699 279 587 897 832 147 488 660 824 433 572 582 773 450 918 611 754 445 446 221 590 243 973 966 235 268 733 354 0033 111 775 3813 627 413-6 3805 7751-5 111 4441 2401 1836 1723 534 0162-4 428 184-5 9980 0100 7644-5 811 0576 888 900 3400 6194 4300 0702 4234 876-9 352 4937 Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: Fax: 245 254 753 365 600 279 587 897 832 956 488 665 825 342 579 597 773 450 740 611 767 446 444 239 823 219 370 364 239 268 726 354 6121 151 591 8398 972 411 4710 7757 042 6032 3682 0515 0899 0876 6350 957 180 9955 2155 7647 659 6839 109 160 1712 3586 1733 2868 3127 875 312 1327 .

com Tel: 392 4407 Fax: 392 4409 Tel: 461 0033 Fax: 461 0031 E-mail: hotel.kw www.com Tel: 562 4111 Fax: 562 9402 E-mail: roomresp@messilah.com Tel: 299 7000 Fax: 299 7001 www.kcontl.carltontowerkwt. Restaurants and Places of Interest Hotels.com www. motels and executive apartments Carlton Carlton Towers Courtyard (Marriott) Crown Plaza Four Points (Sheraton) Hala Motel Imperial Kempinski Julaia Hotel & Resort Kuwait Continental Kuwait Residence Marriott Messillah Beach Mirage Hotel Apartments Motel Burgan (furnished apartments) Mo¨venpick Hotel Tel: 242 3171 Fax: 242 5848 Tel: 245 2740 Fax: 240 1624 E-mail: crltntwr@ncc.marriott.com/kuwait Tel: 256 2303 Fax: 256 2304 Tel: 252 8766 Fax: 252 0144 E-mail: imperialhotel-kw@yahoo.moc.net Tel: 246 5860 Fax: 246 7562 Tel: 245 5550 Fax: 243 8391 www.kw www.messilah.marriott.Appendix 3 Hotels.com www.movenpickhotels.com Tel: 844 444 Fax: 328 3601 E-mail: concierge-julaia@ kempinski.com.kw Tel: 242 2055 Fax: 244 9106 www.kempinski-kuwait.com Tel: 474 2000 Fax: 473 2020 E-mail: hotel@crownplaza.com Tel: 252 7300 Fax: 252 9373 www.miragekuwait.com Tel: 575 0001 Fax: 575 2277 E-mail: hotelmirage2000@hotmail.kuwait@moevenpick.fourpoints.com.com .com www.

safir.com/kuwait Tel: 572 5050 Fax: 572 7999 E-mail: res@shiik-flamingo.com www.kw www.com Tel: 821111 Tel: 571 0301 Fax: 571 9520 E-mail: sphotl@qualitynet.kw www.com Tel: 246 5489 Fax: 246 5490 Tel: 572 8000 Fax: 572 3109 Tel: 565 6000 Fax: 575 0155 E-mail: reservation.com.338 Appendices New Park Oasis Regency Palace SAS (Radisson) Safari House Safir Airport Hotel Safir International Safir Palace Salmiya Palace Second Home Sheraton SHIIK Flamingo Hotel & Resort Spring Continental Swiss Inn Plaza Hotel Tel: 563 4200 Fax: 563 4858 E-mail: nphotel@qualitynet.kw Tel: 244 3136 Fax: 244 3537 Tel: 472 5000 Fax: 472 2621 Tel: 253 0000 Fax: 256 3797 E-mail: sik@safirhost.net www.net Tel: 253 2100 Fax: 253 2381 Tel: 242 2055 Fax: 244 8032 E-mail: central@dns.com www.newpark-hotel.com www. Safir Palace Hotel Riggae Louzan International Cuisine Steak Palace American Steakhouse Al-Jawaher Indian Diwan El Beik Oriental Tent Cappuccino Cafe´ Snacks & Pastries Safir International Hotel Bneid Al Gar Bamboo Shoot Thai Food Shirin Banu Iranian Sea Breeze International Espresso Lounge Cafe´ & Pastry Shop Tel: 821111 Tel: 2530000 .luxurycollection.com Tel: 574 2410 Fax: 574 2612 Tel: 243 6686 Fax: 242 8169 E-mail: reservations@ swissinnkuwait.swissinnkuwait.com A few hotel restaurants Some of which are worth a visit.com.kuwait@ radissonsas.radissonsas.sheraton.shiik-flamingo.com.safirintl.

Marriott Hotel La Brasserie Terrace Grill Cafe´ Royal Hilton Kuwait Resort Teatro Songbird Kuwait Regency Palace Al Saliah Mo¨venpick Bay’s Cuts Al Dente The Lagoon Tea Lounge Kuwait Continental Hotel Darbar Gardenia Kuwait City International Persian Arabic Italian Salwa International Arabic Julaia International Seafood Kuwait City International Kuwait City International American Coffee Shop Mangaf International 339 Tel: 242 2055 Tel: 565 6000 Tel: 844444 Tel: 2436788 Tel: 2455550 Tel: 3725500 Gulf Road Continental/Arabic Shuwaikh International American Italian Tel: 5728000 Bneid Al Gar Tel: 2527300 Tel: 4610033 Indian Continental A few selected restaurants Casual dining (international) Applebee’s Chilis TGI Fridays Fuddruckers Pizza Hut Gulf Road Gulf Road Gulf Road Gulf Road Multiple locations Tel: Tel: Tel: Tel: Tel: 2407536 2452200 2544300 2460110 2465050 . Restaurants and Places of Interest Sheraton Hotel Al-Hambra Bukhara Le Tarbouche Riccardo SAS (Radisson) Hotel Al-Boom Al-Bustan Kempinski Julai’a Hotel & Resort Avenue Restaurant Seashell Swiss Inn Plaza Hotel Shook Restaurant J.Appendix 3: Hotels.W.

340 Appendices Casual dining (Arabic) Chicken Tikka Multiple locations Deek Al-Roumi Multiple locations Just walk down any street – don’t be afraid! Tel: 5731340 Tel: 2619307 Casual dining (Indian) Bombay Chowpatty Salmiya Tel: 5657795 Salmiya Mahboula Salwa Kuwait City Salmiya Fahaheel Tel: Tel: Tel: Tel: Tel: Tel: Gulf Road Tel: 805050 Salwa Tel: 5715124 Chinese cuisine China Town China Express Caesar’s 5652541 3722700 5653230 2431100 5733044 3920343 French Le Notre Paris Greek Zorba the Greek Taverna Indian Mughal Mahal Sharq Salmiya Marina Mall Fahaheel Fintas Farwaniya Jahra Tel: Tel: Tel: Tel: Tel: Tel: Tel: 2425131 5722223-4 2244523 3915588 3900026-7 4726126 4565111 Mughal Mahal serves what is probably the best Indian food in the world. Japanese Edo Kei Maki Shaab Kuwait City Salmiya Tel: 2659590 Tel: 2455550 Tel: 5733561 . reasonably priced too. Dawat Khyber Bneid Al Gar Kuwait City Tel: 2411685 Tel: 2454255 The Khyber is the writer’s local eatery.

Restaurants and Places of Interest 341 Korean Koreakwon Kuwait City Tel: 2452740 Gulf Road Tel: 2460456 Lebanese Mais Al-Ghanim Food at Mais Al-Ghanim has gone downhill since they changed location. Persian Baba Taher Sharq Tel: 245 6241 Mangaf Sharq Tel: 2653307 Tel: 3716113 Tel: 2420620 Kuwait City Tel: 2424228 Thai Blue Elephant Marina Thai Mohalab Vegetarian Caesar’s (Indian) Some places of interest Touristic Enterprises Company – 24-hour Info Centre Bayt Al-Badr Bayt Lothan Educational Science Museum Entertainment City Kuwait National Museum Kuwait Oil Company – Display Centre Kuwait Towers Al-Qurain House Sadu House Scientific Centre Taraq Rajab Museum Tel: 562 1542 Tel: Tel: Tel: Tel: Tel: Tel: 242 575 242 487 245 398 9158 5866/77 1268 9455 1195 2393 Tel: Tel: Tel: Tel: Tel: 244 396 243 848 533 4021 0343 2395 888 9063 Tel: 562 9642 .Appendix 3: Hotels.

airmail extra Web site: www.kuwaittimes.Appendix 4 Further Reading Periodicals Al-Kuwait Al-Youm (the Official Gazette) A weekly update on laws and regulations and tender details.arabtimesonline. Subscriptions: US~$240pa E-mail: focus@qualitynet. which is a must for those who are serious about doing business with Kuwait.com E-mail: arabtimes@arabtimesonline.net E-mail: info@kuwaittimes. Highly informative. contains plenty of statistics and analysis of trends.com Tel: (+965) 4849144 Fax: (+965) 4818267 Kuwait Times Local daily newspaper published in English Subscriptions: KD~45 pa for individuals KD~75pa for companies. Subscriptions to English language editions are available from major translation offices.net Tel: (+965) 4833199 . Middle East Marketing Intelligence Report Monthly newsletter summarizing marketing developments in Kuwait. the GCC and wider Arab world. airmail extra Web site: www. with an emphasis on Kuwait.net Tel: +965 2424058/2422506/2431128 Fax: +965 2401595 Arab Times Local daily newspaper published in English Subscriptions: KD~45 pa for individuals KD~ 75 pa for companies.

1982 A fair amount of detail. these are quite good though they appear to accept official statistics with an uncritical eye.6.uk Books The Economy of Kuwait by Khouja & Sadler. . economic and political development of Kuwait. Hutchinson. a little charm goes a long way. McGill University. E-mail: kwt_bbf@yahoo. Macmillan Press. Web site: www. 1979. The Modern History of Kuwait by Abu Hakima.meed. many ministries have departments for compiling statistics. Statistical sources The main statistical sources have been discussed in Chapter 4. 1989 Lays out the behavioural principles of Islam.co. Refuses electronic-only subscriptions and insists that Internet subscribers also take hardcopy subscription. ISBN 0-333-22561-9 Now thoroughly out of date. Claims to have 70. 1990. In addition. News on Kuwait seems to be culled mainly from locally published sources. Dispatches Quarterly publication of the local British Business Forum that incorporates the newsletter of the Commercial Section of the British Embassy in Kuwait. The Lawful and The Prohibited in Islam by Yusuf al-Qaradawi.Appendix 4: Further Reading 343 MEED (Middle East Economic Digest) Weekly magazine covering the region that contains some good articles. ISBN 0-09-1736048 An excellent portrait of the social. politically. in a simple and clear manner. but provides a good idea as to what drives Kuwait socially. enviably well written in such a way that a wealth of detail is easily absorbed. economically.com Subscriptions: subscriptions@meed-dubai. Kuwait – Vanguard of the Gulf by Peter Mansfield. including business ethics. Sometimes inaccurate and its breaking news is usually stale. International Islamic Federation of Student Organizations.000 readers worldwide in 70 countries. but little interpretation. and commercially.com Tel: (+9714) 390 0045 Annual Country Profiles and Quarterly Country Reports From the Economist Intelligence Unit.

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288 capital holdings. 117–21 agents 93. 280. 182. 268. 156. 69. 21. 16–18. 228. 117–21. 251–53 advisory councils 18 agency agreements 23. 96–97 Islamic 197–202 special purpose 195–96 supervision 202–03 banks 255. 309 calendar(s) 37. 275 bidding. 124 breach of commercial contracts 94–95 breach of copyright 132–33 Britain. tenders for public works 229–35 BOOT (build-own-operatetransfer) 69 BOT (build-operate-transfer) 69 Boycott Office 108. 296–97 need for 226. 182 agents 118–19 addresses. businesses 99–100. 229. 254–56 business organisations. 24 American Business Council 255 Amir 10–13. 250. business 112. Iraq 258 Al-Kuwait Al-Youm 18. addresses 327 business services 288–291. 293 business ethics 36–40. 139. choosing 296–7 associations. contacts with 12. 277 business opportunities 209–14. 255. 309 accounting compliance 106–07. 254–55 central government 17–21 Central Tenders Committee 225–28. 268. contacts 323–32 advertising 52. 17 British Business Forum 255. 249 Al-Sabah family 10–13. 35. 226. 91 arabic 41–49 arbitration 23.Index NB: page numbers in italic indicate figures and tables accommodation. 189–95 cheques 95. Kuwaiti 79–81 business cards 279. 233 Civil Code (Law 67 of 1980) 93–134 clans 275–78 climate 5–6. 234. 330–31 bargaining 293–4 Bedouin 13. business (elements) 95–96 associates. 324–26 Audit Bureau 22 audit compliance 107 Bahrain 72. 164–71 assets. 293 balance of trade 81 banking 16. 232. 32. 220. 325 budget. 229. 218. 16. 107 Central Bank of Kuwait 16. 234. local for businesses 106. 288 tax through 177 Ahmadi 65 aid channels. 223–36. 8 . 109.

126–34 corporate management 102–04. 14–17. 185–88 debts 95 decision making 281–83. 197. 296. 291 embassies. 193 Credit and Savings Bank 196 Crude Export Facilities Project 66 currency and exchange rates 70–71. 247–48. 276 employment law see law. 25–26 counter-trade offset programme 69. 303 customs duties 73–74. 119–20 contracts 23. 122. 107 Commercial Agencies Register 121–22 Commercial Code (Law 68 of 1980) 93–134. 113. 292–93 definitions five pillars of Islam 31 foreign obligator 237–38 industrial firm 136–37 Islamic democracy 34 revenues 178 Direct Foreign Investment Law. addresses 333–36 employees. 93–134 Commercial Registry 94 commission agents 117. 101. 105. 115. 276–77 Constitution 29. 323–32 contract agents 117. 108–09 Council of Ministers 18. 144. 55–56.346 Index closed Kuwait shareholding company 99–100. 22 Commercial Companies Law (Law 15 of 1960) 40. 102. 101–02. 96 commissions for 294–95 employment 147–53. 62–88 education 13. 35 construction contracts 23–24 consultancy services 137–38. 236. 141. 157–68. (Law 26 of 1995) 93. 293. industrial interests 139 disputes. 237–44 credit facilities 190–91. 117 direct investment. 290. 320 electricity supply 219–21. 316–17 double taxation treaties 183–84 driving 8. 155–56 Free Trade Zone 112 Iraq reconstruction 259–60 language 42 offset obligations 237 public 225–36 conversations 280–81 copyrights 123. 19–20. labour . 106–07 compensation payments 120. 154 conflict of interest rules 104–05 consensus 32. foreign companies 114–16 directors 103–05 disposals. 285. 109–13. local 56–59. 311–13 e-business 223–24 economy 3. 239 Commercial Companies Code 18–19. 120–21 commissions 294–95 communications 288–91 companies with limited liability (WLL) 99. 236 customs clearances 215. 277. 323–24 consumer cooperative sector 63. 38–39 commercial 94–95. law 159–71 distributors 117 districts 19 diwaniyahs 11–12. 69–70 contacts Iraq opportunities 268–69 local 282. 144.

182 Five Pillars of Islam 31 food 315–16. 177–84. 303 health insurance 70. 63. 147. 325 industrial areas 218–19 . 7. 161 spending power 60 tendering for pubic contracts 226–28 347 Free Trade Zone 69. 25–26 expatriates see foreigners expenses 294 allowable for tax 179. 109–113. 303–05 Gulf Cooperation Council (GCC) 72–75. 182 tax liabilities 175. arranging 141–43 financial sector 189–204 fiscal year(s) 79. 107–09. 327 citizens’ rights 50. definition 237–38 foreign trade 81–84 foreigners addresses for 305 employed 56–59 employing 60. 248 health services 13. 332 gazette see Al-Kuwait Al-Youm GDP 75–79 geographical overview 3. 117. 106. 245–50 incentives industrial privileges 140–42 marketing 251 income. 230–31. 314 health and safety regulations 153–54. 308 immigration procedures 303–08 imports 23. 17–21. 257 gifts 294 governance 3. 236 executive members of government 18. 10–17 holidays 285–86 hospitality 279. 70 Higher Advisory Committee for Labour Affairs 18 historical overview 3. 67. 317 foreign banks 203 foreign companies direct investment 114–16 executive visits 295 management 102–04. 62. 93. 277 exchange rates 70–71. 74. 5. business 36–40. 82-83.Index English. 24–25 Government Audit Bureau 22 governorates 19. 186–87 see also business opportunities Foreign Investment Office 114 foreign obligator. 98–105. 326 greening of Kuwait 14. 155–58 engineers 24 rights of 13. 301 hotels 337–38 housing development plans 211–12 identity cards 51. 184 exports 83–84. 248 face 276–77 families 275–78 feasibility studies 137–38 finance. 307. 212 Gross Domestic and National Products 75–79 guarantees 116. 117. 185–186. usage 42 Environment Protection Law (Law 62 of 1980) 135 environmental regulations 145–46 ethics. 268 friendship 278–81 gas industry 6. 144. 108–09. 197. local 59–60 Indian Business Advisory Council 255. 307. 93. 33.

255 industrial firm. 100. 84–87. 327 Kuwait Institute for Scientific Research 22 Kuwait International Airport 66. 121–22. 331–32 Islamic law 31–32 see also law joint ventures 14. 331 labour force 56–59 languages 41–49. 214–15 Kuwait Investment Authority 21–22 Kuwait National Petroleum Company (KNPC) 64–65. 275 Islamic democracy. definition 136–37 Industrial Law (Law 56 of 1996) 135–47 Industrial Register 140 see also registration information and communications technology 222–24 information sources 254–56 Insha’Allah 281 Institute of Banking Studies 193–94. 327 Kuwait Finance House 200–01 Kuwait Foundation for the Advancement of Sciences (KFAS) 23. 277 Islam 3. definition 34 Islamic festivals 286 Islamic finance 197–202. 93. 147–58. 113. 296. 80 Kuwait Petroleum International Ltd (KPI) 64. 194–95. 294. 165. members of business entities 98–100 . 86. 64 Kuwait Oil Tanker Company (KOTC) 65–66 Kuwait Petroleum Corporation (KPC) 14. 75. 68. 303 Iraq contacts 268 law 17–19. 196–97 intellectual property rights 123–25 interest. Islamic financing 197–98 leisure activities 8. overseas 295 Iran 67 Iraq 257–69 aid channels 258 business opportunities 261–69 contacts with 293 governance 257–58 trade with 69 Iraq war 2003 87 Iraqi invasion 8. 250. 106. 66 Kuwait Ports Authority 80 Kuwait Real Estate Bank 194 Kuwait Society of Engineers 23–24. 216. 317–20. 105 judiciary 18–19 Khilafa 33–35 Kuwait Chamber of Commerce 23. 254. 99–100. 63. 280–81. 137.348 Index Industrial Bank of Kuwait 142–43. 331 invitations. 192. 215 Kuwait Oil Company (KOC) 13. 197 international time differences 287 investment institutions 195–-96. 144. 29–36. 341 liabilities. 68–69. 187 Kuwait Fund for Arab Economic Development 14 Kuwait Industries Union 24. 64–68. charging 95. 255 insurance industry 39–40. 239 leadership 276–77 leasing. 327 Kuwait Stock Exchange 69. 31–32 business 91–134 disputes 159–71 industrial 135–47 labour 115. 15–17. 98.

307. 100. Kuwaiti government 62. 332 photographs 8. 102. 327 349 office hours 285–86. 187. 63. 7. 81 nationalities 50–55 networking 292–93 neutral zone 5. 50–55 future envisaged 209–11 ports 65. 107–09. 14. Kuwait Stock Exchange 85 loans 95. 142–43. 186–87 newspapers 319–20 non-nationals see foreigners OAPEC (Organization of Arab Petroleum Exporting Countries) 63. 290 Municipality 81 names. 330 postal service 288–89 power stations 219–20 prayers 286 prices paid for contracts 230. 96 driving 311–12 free trade zones 110–12 importing 23. 223–26. 294 performance bonds. 81 open Kuwait shareholding company 99–100. 332 Oman 72 OPEC (Organization of Petroleum Exporting Countries) 7. 219–21 mobile telephones 222. 209–11 politics 24–28. 144. Kuwaiti 11 National Assembly 13. 64. 105. 296–97 partnerships 40. 157–58. 101–02. 237–44 oil industry 6. 108. 291 mosques 319 Mumtaz Post 289. 13–14. 254–56 overseas investment. 217. 74. 130. 67–78. business 209–14. 87. visas petrochemicals industry 64. 293–94 . 220. 146 insurance companies 196 modems 291 owning 93. 108. 284–86 Kuwait shareholding companies 103–04 ministries 288. 218. 98–99. 288 Official Gazette see Al-Kuwait AlYoum offset programme 69. 137 patents 126 listing. 308 planning 23–24. public contracts 233–34 permits see licences. 113. 68. 288. 177 passing off 124 patents 96. 215. 95–96. 62–68. 75. 63. 107 opportunities. 245–46 industrial 137–40. 143–44. 239 Majlis al-Umma see National Assembly marketing 251–53 media 252–53. 63. 33–36 population 9. need for 93. 81 ownership rights 93. 215–18. 211 Partitioned Neutral Zone 5. 203–04 Islamic financing 201–202 Local Manpower Support Law (Law 19 of 2001) 115. 233. 145. 24–28. 16–18. 125–26 payments 234–35. 295–96. 186–87 partners (Kuwaiti). 319–20 meetings 278–81.Index licences 94. 106. 190–03. 326–27 Ministry of Energy 63.

35 qUtub 10–11. 101. 211 refining 65–67 registration 23.350 Index production statistics 63 products. 275 radio stations 319 Ramadan 285–86 real estate. 35 religious networks 291 religious political groupings 25–26 Reserve Fund for Future Generations 81 residence permits 50–51. 305–07 resorts 317 restaurants 315–16. standards of 144–45 prohibitions 33. 95–96. 295. 249–50 relationships 278–81. 327 Public Authority for Civil Information 22. 125–26 safety regulations 146 salaries. 31–32. 343 religion 3. 275 religious business practices 36–40 religious holidays 286 religious law 18–19. 245–46 project financing Islamic financing 198 public works 226–36 Project Kuwait 66 public authorities 21–23. 72 Quran 31–32. 317 . 74. 177 shareholding companies 99–100. 53. local 59–60 Saudi Arabia 72. 141. definition 178 rights 35–36 agents 119 copyright 126–34 importing 245 ownership 93. 32–33. 94. 107–09. imports and exports 245. 121–22 arbitration decisions 169 tenderers for public contracts 226–27 trademarks 123–25 regulations. 101–05 Sharia see religious law Shias 30. 50. 216–17 Shura (consultation) 11. 342–43 Qatar 67. 29–31. 53 Shuaiba area 67. 296–97. 114. 292. ownership rights 21–22. 338–41 retail sales 69–70 revenues. 219 public contracts 226–36 public finance 79–81 public holidays 286 publications for business opportunities 254–55. 35. 245 agency agreements 118. 293 schooling 320 security forces 20–21 Seif Project 212 servants. 93. 51 Public Authority for the Environment 145–46 Public Authority for Industry 135–46. 95. 113. 140. 277 Shuwaikh 215–16. 275–86. 37–38. 211 patents 96. visas for 306–07 service agreements 121 service industries 68–69 services Free Trade Zone 112 Iraq 267 for visiting businessmen 288–291 shareholders 102–04. 219 see also Free Trade Zone signatures 109 social customs 19–20. 219 Shuaiba Port 215.

303–07 vocabulary 43–49 Wasta 282–83. 150–51. 248 state institutions. 235 future possible changes 187–88 neutral zone 186–87 personal 113. 123–35 trading. 70 women. 177–84. 187. 291 welfare system 13. 62. 63 tariffs see customs duties.Index sole traders 40 standard specifications 144–45. 60. 284–86 trade. Islamic financing 198–99 training 55–56 translations 42. 256 telephone service 289–90 television reception 319 tendering for public authority works 225–35 terminations of arrangements 105. 114. GCC states 72–74 trade barriers 62 trade promotion agencies 256 trade unions 154–55 trademarks 96. immigration requirements 304 venture capital 175. 119–20. 95. 126 World Trade Organisation 93. tax tax compliance 106–07 corporate 113. 297 water supply 8. 279–80. 123. 290 transport 212. 151–53. 53 Supreme Petroleum Council 18. 122. 157. 156 . 140. 222–24. 214–17. 175 taxis 303 telecommunications 75. 141. 310 working hours 285–86 World Bank 1993 report 71–72 World Intellectual Property Organization 123. 156 time differences 287 351 time frames 278–79. bids for public works 235–36 Subhan industrial area 219 Sunnah 31–32 Sunnis 30. lives of 16. 204 visas 51. 220–21. 33. addresses 326–27 stock exchange see Kuwait Stock Exchange sub-contracting. 310–313 unemployment 60–61 United Arab Emirates 72 urban planning and development 23–24. 209–13 usury 39 vaccinations.

O.S. Recruitment Consultants x–xi .Index of Advertisers Ahli United Bank xvii–xxi JW Marriott Hotel Kuwait City 4 Kuwait Petroleum Group 208 PKF Bouresli & Co x–xi Shell vi Sheraton Kuwait Hotel v S.

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