Over
the past three years, Kuwait has witnessed a raft of new regulations and
legislations aimed at making doing business in the country easier and
transparent. Some of the recent key legislations are recorded in the table
below –
Year
|
Legislative Authority
|
Brief Commentary
|
2010
|
Kuwaiti
Parliament
|
Privatization
law passed
|
2010
|
Kuwaiti
Government
|
Labor
Law for the private sector that details the procedures to be followed along
the full employment spectrum, right from recruitment to separation
|
2010
|
Central
Bank of Kuwait (CBK)
|
A
set of regulations was passed, in an effort to increase transparency,
accountability and overall health of the investment sector
|
2010
|
Kuwaiti
Parliament
|
Kuwait
Capital Markets Authority (CMA) comes into being
|
2012
|
CBK
|
CBK
issued new guidelines on governance at banks in Kuwait
|
2012
|
Kuwaiti
Government
|
Companies
Law passed in order to make doing business in Kuwait more attractive
|
2013
|
Kuwaiti
Parliament
|
A
law was approved to establish a SMEs fund, with a capital of KD2 billion (~$7
billion)
|
2013
|
CMA
|
Passed
a resolution on corporate governance rules applicable for listed companies
|
2013
|
Kuwaiti
Government
|
Anti-Corruption
Authority (ACA) established to tackle corruption in the handling of public
funds
|
2013
|
Kuwaiti
Government
|
A
new commercial licenses law completed that would reduce the bureaucracy
surrounding new businesses
|
2013
|
Kuwaiti
Government
|
The
maximum amount of home loans available to Kuwaiti women, increased, to KWD
70,000 from KWD 45,000, while the renovation amount that can be financed, has
been increased to KWD 35,000 from KWD 30,000
|
2013
|
Kuwaiti
Government
|
Law
No. 116 released promising a raft of FDI benefits, including 100% equity
ownership, 100% tax exemption for 10 years, partial/full tax exemption on
imports (raw materials, machinery & spare parts), land being made
available etc. The law was passed in order to promote FDI in Kuwait.
|
2013
|
Kuwaiti
Government
|
Kuwait
Direct Investment Promotion
Authority
(KDIPA) set up, as an enhanced successor of Kuwait Foreign Investment Bureau
(KFIB), for promotion of direct investment into Kuwait
|
2014
|
The
National Assembly
|
A
new Public Private Partnership (PPP) law that is essentially a modification
of the 2008 Build-Operate-Transfer (BOT) passed
|
2014
|
CBK
|
Foreign
banks allowed to open multiple branches in Kuwait
|
2014
|
CBK
|
Regulations
issued regarding Basel III Capital Adequacy Standard for banks
|
A
scan of the above list will tell us that the focus of Kuwait has been to
improve business governance within the country and strengthen regulations and
laws that would boost investor confidence. The 2009-2014 five year development
plan of Kuwait has seen only limited success, at best, with many of the
projects being transferred to the new five year plan of 2015-2020[1]. However,
despite the push ahead with multiple legislations and new bodies, there is
evidence that implementing change will not be easy. Media reports indicate that
the CMA is facing lot of pushback against its efforts to encourage corporate
information disclosure and in enforcing rules against excessively speculative
trading[2]. There
has been opposition to some of CMA policies that is causing delay in
implementation. For instance, the reforms deadline on the corporate governance
agenda has been pushed to June 2016[3].
The
case of Kuwait Airways is considered a good example of difficulties of
privatization in Kuwait. The Airline has been making losses for quite some time
and is taking steps such as retrenchment in order to cut down costs[4]. Yet,
privatization plans to modernize the airline and make it a more profitable
venture has elicited resistance from various stakeholders, including company
personnel and law makers[5]. Privatization
is expected to be a matter that would require great acumen and strategic
thinking in order to facilitate effective implementation across various
projects in the country. Closely linked to the theme of privatization is the
deeply felt need to making Kuwait a great place to do business, so that it can
effectively challenge regional and global leaders. In that regard, the relatively
new companies and licenses law are a great boost. However, these institutions
will need to be tied with larger reforms in education and infrastructure in
order for foreign companies and entities to feel enticed in order to benefit
from the tremendous business advantages that Kuwait offers.
On
the FDI front, the independent public authority, KDIPA, has complete control
over its own budget and recruitment process[6].
Kuwait’s Ministry of Finance presides over KDIPA, which among other factors, is
expected to streamline the process of decision making on FDI applications.
There is already some indication of this. In September 2014, Kuwait suspended
its offset obligations programme that compels foreign contractors, who win
sizeable government contracts in Kuwait, to invest in some prescribed fashion
in the Kuwaiti economy as part of a reciprocal gesture[7].
Even
as some broad ranging developments are taking place on the FDI front, there is
hope that Kuwait will see phased liberalization in the financial services
sector, as well, allowing the industry to match regional peers such as Dubai
and Doha . The decision of the CBK in March 2014 to allow multiple branches of
foreign banks, approved on a case by case basis, rather than only one country
branch allowed under the previous regulatory regime, should be seen in this
light[8].
Kuwait
passed an anti-corruption law in 2011, which included articles on money
laundering and financial disclosure[9]. In
June 2013, the anti-corruption body officially got its chief. Since then,
Kuwait’s anti-corruption authority has been steadily expanding its capacity
building and structural development activities[10].
Since the executive structures and administrative capacities of the authority
is in the process of solidification, it would be premature to pass an opinion
on the success of the body. However, the very fact that the body has been
officially created means that the government and the law makers are taking the
subject seriously, with more focus and effort expected in the years ahead in
what will, essentially, be a difficult and persistent exercise.
The
modification to the BOT law of 2008 means that local and foreign investors can
now avail of a project ownership duration of 50 years in comparison with the 40
years under the previous BOT rules[11]. This
is expected to encourage investments into mega projects due to the enhanced
incentive of an increased timeframe to reap the investment benefits. As Kuwait
attempts to develop a more favourable domestic energy mix in order to support
its larger oil revenues strategy, such regulatory developments are likely to
lend immense support. For instance, the Partnerships Technical Bureau (PTB) in
collaboration with Kuwait’s Ministry of Electricity and Water (MEW), are in the
process of developing an Integrated Solar Combined Cycle (ISCC) Plant to
generate power with a capacity of 280 MW[12]. The solar component will be 60 MW of the
total.
With
respect to the National Fund for Small and Medium Enterprises (SMEs)
Development, there is lot of promise in terms of the direction in which it is
moving. The KD 2 billion fund will not only provide finance for eligible
budding entrepreneurs, but will also offer support in terms of necessary
training courses[13].
Also, unlike previous small scale business funding experiments in Kuwait that
focused inordinately on low-risk projects, the new SMEs fund has the mandate to
cater to a calculated risk percentage, which is expected to encourage
entrepreneurs to innovate[14]. Regulatory
support in terms of the labour and companies law is expected to instill greater
confidence in the minds of aspirational entrepreneurs and the employees therein.
The
new institutions and legislations in Kuwait are trying to work in two
concurrent directions. While focusing on promoting the private sector and
foreign investors for economic diversification; there are also efforts at
boosting financial reforms, both in the private (e.g., banks) and the public
domain (government revenues and spending). It is encouraging to note Kuwait
buzzing with institutional building activities. This will surely form the
bedrock for further investments.
