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WORLD TRADE

ORGANIZATION

RESTRICTED

WT/TPR/S/2584 January 2012

(12-0002)

Trade Policy Review Body

TRADE POLICY REVIEW

Report by the Secretariat

THE STATE OF KUWAIT

This report, prepared for the first Trade Policy Review of The State of Kuwait, has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from the State of Kuwait on its trade policies and practices.

Any technical questions arising from this report may be addressed to Mr. Richard Eglin (tel: 022 739 5148), Mr. Ricardo Barba (tel: 022 739 5088), Mrs. Zheng Wang (022 739 5288) and Mrs. Mena Hassan (tel: 022 739 6522).

Document WT/TPR/G/258 contains the policy statement submitted by The State of Kuwait.

Note: This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on The State of Kuwait.

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CONTENTSPage

SUMMARY vii

(1) ECONOMIC ENVIRONMENT vii

(2) INSTITUTIONAL FRAMEWORK viii

(3) TRADE POLICY INSTRUMENTS ix

(4) SECTORAL POLICIES x

I. ECONOMIC ENVIRONMENT 1

(1) MAJOR FEATURES OF THE ECONOMY 1

(2) RECENT ECONOMIC DEVELOPMENTS 1

(3) TRADE PERFORMANCE AND INVESTMENT 4(i) Trade in goods and services 4(ii) Foreign direct investment 7

(4) OUTLOOK 9

II. TRADE AND INVESTMENT REGIMES 10

(1) GENERAL FRAMEWORK 10

(2) TRADE AGREEMENTS AND ARRANGEMENTS 11(i) World Trade Organization 11(ii) Regional trade agreements 12

(3) FOREIGN INVESTMENT REGIME 16(i) Legislative and regulatory framework 17(ii) Direct taxation and incentives for foreign investment 20(iii) Incentives and institutional framework 21(iv) Double taxation arrangements 22

III. TRADE POLICIES AND PRACTICES BY MEASURE 23

(1) MEASURES DIRECTLY AFFECTING IMPORTS 23(i) Customs procedures 23(ii) Tariffs 24(iii) Other fees and charges 28(iv) Free trade zones 29(v) Import prohibitions, restrictions and licensing 29(vi) Contingency measures 31(vii) Standards and other technical requirements 34

(2) MEASURES DIRECTLY AFFECTING EXPORTS 39(i) Procedures 39(ii) Export prohibitions and licensing 39(iii) Export duties, duty concessions, and subsidies 41(iv) Export promotion and marketing assistance 41

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(3) MEASURES AFFECTING PRODUCTION AND TRADE 42(i) Taxation and subsidies 42(ii) State trading, state-owned enterprises, and privatization 43(iii) Government procurement 44(iv) Competition law and price controls 48(v) Intellectual property rights 49

IV. TRADE POLICIES BY SECTOR 54

(1) AGRICULTURE AND FISHERIES 54(i) Main features 54(ii) Policy developments 54

(2) ENERGY 57(i) Petroleum 57(ii) Natural gas 61(iii) Petrochemicals 62(iv) Electricity and water 64

(3) SERVICES 65(i) Overview 65(ii) Financial services 65(iii) Telecommunications and postal services 71(iv) Transport 73(v) Foreign workers in Kuwait, and professional services 75

REFERENCES 77

APPENDIX TABLES 79

CHARTS

I. ECONOMIC ENVIRONMENT

I.1 Composition of merchandise trade, 2006 and 2009 5I.2 Direction of merchandise trade, 2006 and 2010 6

III. TRADE POLICIES AND PRACTICES BY MEASURE

III.1 Breakdown of import duty rates, 2011 27III.2 Tariff escalation by ISIC 2-digit industry, 2011 28

TABLES


I.1 Selected economic indicators, 2006-11 3I.2 Balance of payments, 2006-11 7I.3 Foreign direction investment, 2006-10 8

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II. TRADE AND INVESTMENT REGIME

II.1 Overview of Kuwait's regional trade agreements, October 2011 13II.2 GAFTA trade 15II.3 Requirements for establishing a foreign-invested company in Kuwait, 2010 18II.4 FDI obstacles and proposed solutions, 2011 20II.5 Proportional weight schedule for FDI, 2011 22


III.1 Kuwait's preferential rules of origin, 2011 24III.2 Summary analysis of the MFN tariff, 2003, 2007, 2011 25III.3 Customs duty and fees, 2003-10 28III.4 Import licences, 2004-10 30III.5 Imports requiring special permission 30III.6 Notifications on sanitary and phytosanitary measures, 13 October 2011 38III.7 Products banned from exportation, 2011 39III.8 Export licensing 40III.9 Tax revenue and percentage in total taxes, 2006-10 42III.10 Selected SOEs, 2011 43III.11 Public and private sectors in the economy, 2009-12 44III.12 Government procurement methods and corresponding legislation 45III.13 Government procurement value, 2009-11 46III.14 IPR legal framework 49III.15 Trade marks, 2008-10 52III.16 Intellectual property rights application, 2001-10 53

IV. TRADE POLICIES BY SECTOR

IV.1 Subsidiaries of the Kuwait Petroleum Corporation (KPC) 58IV.2 Exports of crude oil, and refined products, by region, 2009-10 59IV.3 Regulated prices of refined petroleum and gas products, 2011 60IV.4 Gas production and utilization, 2005-10 61IV.5 Kuwait's production capacity of petrochemical products, 2010 62IV.6 Kuwait's petrochemical companies, 2011 63IV.7 Banks, 2011 67IV.8 Securities 69IV.9 Telecommunication statistics, 2000-September 2011 71IV.10 Telecom services providers, 2011 72IV.11 Shipping and maritime transport services, 2010 74

APPENDIX TABLES

II. TRADE AND INVESTMENT REGIME

AII.1 Main trade-related laws, 2011 81AII.2 Main departments/agencies involved in trade policy implementation, 2011 83AII.3 Notifications under WTO Agreements, October 2011 84AII.4 Bilateral economic and commercial agreements, other than investment and

DTA agreements, 2011 87AII.5 Bilateral investment agreements and double taxation avoidance agreements, 2011 90

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AIII.1 Applied MFN tariff averages by HS2, 2011 94AIII.2 Import prohibitions, 2011 97AIII.3 Productions subject to technical regulations ("regulated products"), 2011 99


AIV.1 Bilateral civil aviation agreements, 2011 101AIV.2 Summary of Kuwait's specific commitments in services 104

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SUMMARY

1. The State of Kuwait is implementing a new development strategy centred on a liberal trade regime with the objective of reducing the economy's high dependence on crude oil and natural gas, which accounts for nearly half of GDP, 95% of export revenues, and more than 80% of government income. To this end, steps are being taken to improve the country's business environment, increase productivity growth of the non-energy sectors, and increase the participation of the private sector (local and foreign) in the economy from its current low level of about 25%.

2. Kuwait also needs to further improve its infrastructure and logistics, reduce the State's heavy involvement in many economic activities, make the leasing of land more predictable over the long-term, and facilitate the establishment of new businesses in order to achieve its goal of becoming the international trade, logistical, energy, and financial services hub in the Northern Gulf region.

(1) ECONOMIC ENVIRONMENT

3. Reflecting developments in world oil markets, Kuwait's real GDP grew at an annual average rate of 5% during 2006-08, contracted in 2009 due to the impact of the global economic crisis, and resumed growth in 2010-11 at about 4.5%.

4. Large fiscal surpluses, accumulated over the years from government ownership of the energy sector, reached a record of 40% of GDP in 2007. This has largely obviated the need to levy taxes, although a new comprehensive income tax law is in preparation and the introduction of a VAT by 2014 is under consideration. The fiscal surpluses have been used, in part, to finance social welfare policies including subsidized public utilities and housing. There are concerns that pricing policy for public services reduces incentives to introduce efficiencies and cut waste, and promotes higher consumption than would otherwise be the case. Gradual phasing-out of such high government subsidies would be beneficial in the context of encouraging a more diversified and energy-efficient economy.

5. Kuwait has established reserve funds to ensure inter-generational economic equity in the exploitation of its non-renewable resources.

6. The Kuwaiti dinar is pegged to an undisclosed currency basket (between 2003 and May 2007 it was pegged to the U.S. dollar). In December 2009, Bahrain, Kuwait, Qatar and Saudi Arabia ratified an agreement to establish a monetary union. The date to achieve a single currency is yet to be determined.

7. Kuwait's external accounts reflect the dominance of energy exports and display the volatility created by its reliance on world oil markets. It had large and sustained current account surpluses of between 24% and 45% of GDP during the period under review. The economy is highly dependent on international trade, with the ratio of merchandise and services trade to GDP averaging almost 90% during 2007-09. Kuwait is a net importer of services, with a deficit that rose from about US$2.2 billion in 2006 to an estimated US$5.9 billion in 2010.

The State of Kuwait WT/TPR/S/258Page 55

8. During the last few years, Kuwait has increased its investment abroad; annual FDI outflows averaged some US$7.5 billion in 2006-10. FDI inflows, on the other hand, are still relatively low. This is explained by strict limitations in the past on the sectors in which foreigners could invest, a relatively complex business environment (e.g. extensive licencing procedures, red tape, and out-of-date laws and regulations), and by corporate income tax that is applied only on profits made by foreign companies. Thus, a possible amendment to its 2001 Foreign Investment Law is being evaluated, inter alia, to set up a "one-stop shop" for foreign investors. The Government's intention to encourage more foreign investment is demonstrated by the recent decision to allow foreign partnership, for the first time, in the development of Kuwait's energy resources, specifically natural gas production, which aims to facilitate the acquisition of the technology and know-how necessary to exploit these resources more effectively.

9. An important economic and social challenge, according to the authorities, is for Kuwait to provide more employment opportunities for its citizens. The "Kuwaitization" programme is being implemented to help scale-back reliance on the public sector to absorb domestic labour and encourage more Kuwaitis to seek and find employment opportunities in the private sector. Nonetheless, public sector wages and benefits remain very attractive.

(2) INSTITUTIONAL FRAMEWORK

10. Formulation and implementation of Kuwait's trade policy is the responsibility of the Ministry of Commerce and Industry (MCI), in coordination with other ministries. The private sector participates in trade policy formulation mainly through the Kuwait Chamber of Commerce and Industry.

11. The public sector is the largest employer in Kuwait, and the State has direct and strong influence in the economy. In 2010, a new privatization law was passed based on a process of transferring ownership to the private sector (build-operate-transfer schemes) by identifying suitable partners from home and abroad and issuing shares through initial public offerings. However, a number of amendments to the law might reduce its impact since the healthcare, education, and energy sectors have been excluded. The Government is to retain an important share in all newly privatized companies, and the sale of major stakes in public holdings is expected to take place only slowly.

12. Meeting the objectives of Kuwait Vision 2035 and the Medium-term Development Plan (2010-14), in particular expanding the role of the private sector and attracting foreign investment, will require the Kuwait Government to speed-up the promulgation of new laws to modernize the business environment; and to start tackling excessive administrative and procedural obstacles to doing business, while increasing the transparency, accountability, and effectiveness of government administration.

13. Kuwait became a GATT signatory in 1963 and has been a WTO Member since 1995. It is a signatory to the WTO Information Technology Agreement. Kuwait has participated, as a third party, in one case under the WTO Dispute Settlement Mechanism. Kuwait lowered its outstanding notifications from 44 at the end of March 2011 to 22 by the end of June 2011 as part of its preparations for this first Trade Policy Review.


14. Kuwait participates in two overlapping regional trade agreements, the GCC, and the Greater-Arab Free Trade Area (GAFTA) in which all six states of the GCC participate. Kuwait has been harmonizing trade policies and practices under the GCC. GCC citizens and companies are allowed to exercise all economic activities and occupations in Kuwait as Kuwaiti nationals, with a few exceptions. As a group, the GCC has concluded FTAs with the EFTA states and Singapore, which are in the process of ratification. The GCC is also involved in trade negotiations with Australia, China, EU, India, Iran, Japan, Jordan, Korea, MERCOSUR, New Zealand, Pakistan, and Turkey. In most cases, the GCC is negotiating these FTAs as a group. Nonetheless, some GCC members (e.g. Bahrain and Oman) have also agreed FTAs on an individual basis, notably with the United States.

(3) TRADE POLICY INSTRUMENTS

15. Goods imported are subject only to customs tariffs, since Kuwait does not impose VAT, excise duties or any other internal tax or charge on either domestically produced or imported products. Kuwait started applying the GCC common external tariff in 2003. As a result, the simple average MFN applied tariff declined from 7.7% in 2002 to 4.8% in 2011. On the basis of the WTO definition, tariffs average 5.7% on agricultural products and 4.6% on non-agricultural products; 98.6% of all tariff lines are ad valorem, with 19 mixed tariff lines on tobacco and tobacco products. Kuwait bound all tariff lines, except on oil, petroleum, and petrochemicals. All bound rates are at 100%. Of total tax revenue (about 2% of government revenue), the customs tariff accounts for more than 60%.

16. Kuwait applies the GCC common laws on customs procedures and valuation. It requires documents to be authenticated, and charges consular fees on commercial invoices, certificates of origin, health and halal meat certificates, and manifests for all imports. A "general" import licence is required for all imports from all sources, and special permission from competent authorities is required for specific goods. Kuwait prohibits certain imports for security, health, safety, or religious reasons, or to meet the requirements of international conventions.

17. Kuwait has adopted the GCC Treaty provisions on contingency trade remedies, and notified the WTO that these were amended in December 2010. Kuwait has never imposed any anti-dumping, countervailing or safeguard measures. The GCC Ministerial Committee has not applied any trade remedy measures, although it initiated two safeguard investigations, which were terminated due to lack of injury in both cases.

18. Kuwait and other GCC countries are developing common GCC standards and technical regulations, which will replace the standards and technical regulations of individual GCC member countries. Kuwait standards are based on international standards with limited deviations due to climatic, geographical, and infrastructural conditions.

19. Export procedures are simple, and any natural persons or companies (including foreign ones) may export in Kuwait. Some goods are prohibited from exportation, while other are restricted and require a licence from the competent authority. Kuwait applies no export taxes, charges or levies.

20. In 2010, government procurement accounted for about 12% of GDP. Kuwait's procurement regime allows for a price preference of 10% for local products and 5% for GCC products. Persons who wish to submit tenders must be either Kuwaiti suppliers, or foreign suppliers with a Kuwaiti partner or agent. Also, an offset programme requires foreign firms that win government contracts above certain thresholds to make an investment that will add value to the Kuwaiti economy. Kuwait is not a party or an observer to the WTO Plurilateral Agreement on Government Procurement.


21. Kuwait's competition legislation was approved by the National Assembly in 2007. The Government is preparing its by law, and to set up a Competition Protection Authority. However, the competition legislation does not apply to facilities and projects owned and managed by the State.

22. Kuwait has national laws on some IPRs, while at the GCC-level there is a law on patents and a law on trade marks is in the pipeline. Once the GCC trade mark law is implemented, it will replace the Kuwait national law on trade marks. Both GCC-legislation and Kuwaiti legislation on patents are effective; dual protection is allowed.

(4) SECTORAL POLICIES

23. The oil and gas sector has underpinned Kuwait's economic development. Kuwait is the world's 9th-largest crude oil producer, has almost 8% of the world's proven crude oil reserves, and ranks 18th in global natural gas reserves. The MFN applied tariff on oil, gas, and petroleum products is 5%. Foreign investors may carry out economic activities in industries other than oil and gas exploration and production. Kuwait aims to become a key world player in petrochemicals on the basis of its comparative advantage in natural gas and through joint-ventures with foreign enterprises. The fully state-owned Kuwait Petroleum Corporation (KPC) and its subsidiaries benefit from certain concessionary rights and privileges with respect to oil and gas.

24. Electricity is highly subsidized by the Government. A newly promulgated law allows foreign investment in the electricity and water sectors, through public-private partnership whereby independent water and power projects (IWPP) will be established. Under the IWPPs, private companies may generate electricity and water and sell to the Ministry, which will then sell to consumers. Foreign investors are allowed up to 26% ownership of the projects. The first IWPP is under way.

25. Services is the largest non-oil sector in the economy, accounting for about half of GDP and over 80% of total employment. The sector is dominated by several state-owned enterprises, and in some activities, for example fixed-line telephony, there are state monopolies. Kuwait has opened some services subsectors to foreign investment, including financial services, air transport, mobile telephone services, and professional services.

26. Under the GATS, Kuwait scheduled commitments in 61 subsectors and 8 main sectors: business; construction and related engineering services; distribution; environmental services; health-related and social services; tourism and travel-related services; recreational and sporting services; and financial services. It maintains MFN exemptions under Article II of the GATS on air transport services and the promotion and protection of investment.

27. Despite the presence of a significant foreign working population (over 60% of the population are non-Kuwaitis), Kuwait made no commitments on the movement of natural persons under the GATS, except for entry and temporary stay of managers, specialists, and skilled technicians.

28. Although the share of agriculture and fisheries to GDP is very small and continues to decrease, the sector is important for the economy because of Kuwait's food security objective. Kuwait is a net importer of agricultural products, and food security is mainly promoted through relatively low applied MFN tariffs (3.2%), while private companies are being encouraged to invest in farm projects abroad. Government assistance in agriculture and fisheries is mainly provided through domestic support, such as subsidies and low cost credits to domestic producers.



(1) MAJOR FEATURES OF THE ECONOMY

1. The State of Kuwait has a population estimated at 3.6 million, of which almost 70% are non-nationals.1 GDP per capita is estimated at around US$55,000; Kuwait ranks 47 th (out of 169 countries) in the UNDP's Human Development Index.2

2. Kuwait's economy is based heavily on its energy sector, particularly crude oil production (Chapter IV(2)). Kuwait's crude oil reserves are estimated at 8% of global reserves, among the largest in the world, and its oil fields are projected by the Government to remain productive for at least another 70 years at or around current production levels. Kuwait is ranked 18 th in global natural gas reserves (1,784 billion cubic meters).3 Although gas production is limited at present, the Government plans to expand production significantly in the coming years. Crude oil and gas production account for about half of Kuwait's GDP, 95% of export revenues, and 84% of government revenue.

3. In 2010, outside the crude oil and gas sector, the main contributors to GDP were: community, social and personal services (15.2%); financial services (9.7%); transportation, storage, and communication (8.5%); trade, hotels, and restaurants (4.8%); real estate services (3.4%); manufacturing, excluding petroleum refining (2.2%); and construction (1.6%).4 Less than 1% of Kuwait's land is arable, leaving agriculture a minimal role in the economy (Chapter IV(1)). The public sector is dominant in most activities (Chapter III(3)(ii)), with the private sector accounting for only about 25% of the economy.

4. Notwithstanding Kuwait's extraordinarily rich oil and gas reserves, the Government views the economy as being too dependent on the energy sector. Under Kuwait Vision 2035 and Kuwait Development Plan 2010-145, the authorities aim to promote a more diversified economy with world-class infrastructure attracting business and investment, and private-sector-led, but with continued state support, that can develop Kuwait into a financial and services centre in the region while consolidating values, maintaining social identity and realizing human development (section (4) below).

5. Kuwait started applying the Gulf Cooperation Council (GCC)6 common external tariff in 2003 (Chapter III(1)(ii)). Since May 2007, the Kuwaiti dinar (KD) has been pegged to an undisclosed currency basket, reverting to the exchange system before January 2003.7 In December 2009, Kuwait ratified an agreement with Saudi Arabia, Qatar, and Bahrain to establish a monetary union, details of which (including the target date for the union) are currently under discussion in the Gulf Monetary Council.8

(2) RECENT ECONOMIC DEVELOPMENTS

6. The size and growth of Kuwait's GDP depends heavily on conditions on the world oil market. Fairly steady crude oil production in Kuwait of about 2.5 (mmbd) on average since 2006 and the increase in world oil prices between 2003 and 2008, peaking at an average of US$91 per barrel in

1 Expatriates are employed mostly in the private sector (59%) or as domestic workers (31%), while Kuwaitis work primarily in the public sector (76%).

2 UNDP (2011).3 OPEC (2011).4 National Bank of Kuwait (2011).5 Kuwait's previous Development Plan was passed in 1986.6 The other GCC members are: Bahrain, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.7 Between 2003 and May 2007, the KD was pegged to the U.S. dollar (IMF, 2011a).8 Oman and the UAE are not joining the monetary union.


2008, generated very significant growth of nominal GDP, led by public investment and consumption. Real GDP grew, on average, at 5% a year between 2006 and 2008. However, productivity growth in non-oil sectors of the economy remained sluggish and there was little diversification away from oil and little expansion of the private sector.

7. Inflation rose above 5% in 2007 and accelerated into double digits in 2008 (Table I.1), reflecting imported inflation as well as the effects of excess liquidity in Kuwait's economy, which fuelled high salary increases and booming stock-market prices and real-estate prices.

8. Kuwait's GDP growth was slower from the third quarter of 2008 with the onset of the global financial crisis and of global economic recession, which saw Kuwait's crude oil production fall to about 2.3 mmbd and the average export price fall to US$61 per barrel in 2009. The result was a contraction of 20% in nominal GDP and of 5.2% in real GDP in 2009, with a sharp correction also in the rate of inflation to around 4% (Table I.1).

9. Preliminary data for 2010 point to a return to real GDP growth of about 3.4%, based on increased oil production and higher world oil prices and driven by fiscal policies. The IMF projects that real GDP growth will return to pre-crisis levels of around 5.7% in 2011, while inflation is estimated at 6.2% (up from 4.1% in 2010). For 2012, real GDP growth and inflation are estimated at 4.5% and 3.4%, respectively.9

10. In response to this slower growth, the Government budget for 2008-09 was sharply expansionary, with total expenditure rising from 28.1% to 47.9% of GDP and more than doubling in absolute terms to KD 16.5 billion. The bulk of the increase in public spending was directed in subsidies and social benefits, in particular the recapitalization of the social security fund. The Government did not bail-out troubled banks directly, although in March 2009 Kuwait enacted its new Financial Stability Law, which aims to provide a form of bankruptcy protection and credit provision for financial services companies that have solvency problems but are otherwise deemed to be healthy (Chapter IV(3)(ii)).

11. The strength of the oil sector has enabled the Kuwait Government to consistently accumulate large fiscal surpluses, although these have varied considerably in recent years, from a high of 39.7% of GDP in 2007 to a low of 15.5% in 2008, reflecting primarily variations in the level of government expenditure (Table I.1). The surpluses have been used, in part, to finance social welfare policies including subsidized public utilities (notably electricity and water) and housing. There are concerns that pricing policy for these services reduces incentives to introduce efficiencies and cut waste, and promotes higher consumption than would otherwise be the case. Non-oil revenues (other than investment income) contribute only 6% to total fiscal revenue, leaving Kuwait's fiscal position vulnerable to volatility in world oil markets. Kuwait is taking steps to create a sound and sustainable fiscal position and reduce the proportion of the government budget generated by oil revenues by increasing other sources of revenue. A new comprehensive income tax law is in the pipeline, as well as the possible introduction of VAT by 2014. Gradually phasing out of government subsidies is also critical.

9 IMF (2011c).


Table I.1Selected economic indicators, 2006-11

2006 2007 2008 2009 2010a 2011b

MiscellaneousGDP per capita (US$) 36,560 40,232 50,976 36,683 43,461 55,096GDP at current prices (KD billion) 29.5 32.6 40.0 31.5 38.0 48.4GDP at current prices (US$ billion) 101.6 114.7 148.8 109.5 132.6 171.9Real GDP (percentage change) 5.3 4.5 5.0 -5.2 3.4 5.7Unemployment rate (Kuwaiti nationals; %) 4.0 6.1 4.9 3.6 2.9 ..Consumer price index (average; percentage change) 3.1 5.5 10.6 4.0 4.1 6.2Monetary sector

Broad moneyc 21.7 19.3 15.6 13.4 3.0 16.3

KD 3-month deposit rate (year average; %) 5.0 5.2 3.3 1.4 0.8 ..Stock market index (annual percentage change)d -12.0 24.7 -38.0 -10.0 -0.7 ..Public financese (percentage of GDP)Revenue 66.6 67.8 63.4 61.5 59.2 61.6 Oil 48.0 51.5 52.1 50.1 48.5 51.6

Non-oil 18.6 16.3 11.4 11.5 10.7 9.9Expenditure 34.0 28.1 47.9 33.6 38.4 35.5Balance 32.6 39.7 15.5 28.0 20.7 26.1Investment and savings (percentage of GDP)Investment 15.9 20.5 18.4 13.9 14.1 14.9 Public 2.8 3.3 3.5 4.6 4.7 4.9 Privatef 13.1 16.9 14.9 9.3 9.5 10.0Gross national savings 60.6 57.2 58.9 37.6 42.0 48.4 Public 60.2 55.2 46.4 47.1 45.8 46.2 Privatef 4.5 2.1 12.5 -10.3 -3.8 2.1Savings/investment balance 44.6 36.8 40.5 23.6 27.8 33.5External sectorExchange rate (US$ per KD, period average) 3.45 3.52 3.72 3.48 3.49 ..Real effective exchange rate (percentage change) 0.9 0.3 8.4 -0.5 .. ..Current account (percentage of GDP) 44.6 36.8 40.5 23.6 27.8 33.5International reserve assets (US$ billion) 11.8 15.9 16.7 17.7 18.7 23.1 in months of imports of goods and services 5.3 5.9 5.3 6.8 6.9 7.0Oil production (million barrels; daily average)g 2.7 2.6 2.7 2.3 2.3 2.3Crude oil exports (million barrels; daily average) 1.7 1.6 1.7 1.3 1.4 1.4Kuwait's oil export price (US$, average) 58.88 66.35 91.16 60.68 76.32 104.1

.. Not available.

a Preliminary.b Estimates.c Changes in % of broad money stock.d Unweighted.e Kuwaiti fiscal year ending 31 March, e.g. 2007 refers to fiscal year 2007/08.f Also includes government entities.g Includes share of production from the Neutral Zone between Kuwait and Saudi Arabia.

Source: IMF (2011b), Kuwait: Statistical Appendix, Country Report No. 11/219. Viewed at: http://www.imf.org/external/ pubs/ft/scr/2011/cr11219.pdf; and information provided by the Kuwaiti authorities.

http://www.imf.org/external/


(3) TRADE PERFORMANCE AND INVESTMENT

(i) Trade in goods and services

12. Kuwait's external accounts reflect the dominance of oil production and exports in the structure of the economy and display the volatility created by its reliance on world oil markets. During the period under review, oil and other fuel products accounted for around 90% of total merchandise exports (Chart I.1). Imports of goods and services grew strongly and varied around 25-28% of GDP. This produced a large and sustained current account surplus of between 24% and 45% of GDP during the period under review (Table I.1).

13. Kuwait's economy is highly dependent on international trade: the ratio of merchandise and services trade (exports and imports) to GDP averaged 86.6% during 2007-09. In 2010, Kuwait ranked 29th among world merchandise exporters and 45th among importers (considering the countries of the EU together and excluding intra-EU trade). In services trade, Kuwait ranked 38 th among exporters and 32nd among importers.10

14. In 2009, oil exports shrank sharply, by 40%, and even though imports of goods and services fell also, by almost 25%, Kuwait's current account surplus declined from 40.5% to 23.6% of GDP. The return to growth in 2010, and to higher oil prices and output, saw the current account surplus increase again, to 27.8% of GDP. The IMF projects that this share will continue to rise in 2011, to 33.5% of GDP (Table I.1), and to 30.4% for 2012.11

15. Since 2006, over 75% of Kuwait's exports (mainly oil and other fuels) have been destined for Asian markets, led by Korea (Rep. of), Japan, India, and China (Chart I.2). Non-oil exports, representing around 5% of the total in normal years, are composed primarily of petrochemicals and some re-exports of automotive products to other GCC countries.

16. Manufactured goods make up the bulk (around 80%) of Kuwait's merchandise imports, with the composition of imports reflecting Kuwait's high per capita income and comprising in particular automotive products, machinery, office machines and telecommunication equipment, and inputs for Kuwait's booming construction industry. Kuwait imports practically all of its food and other agricultural needs, which account for around 16.5% of the value of merchandise imports.

17. In 2010, Kuwait sourced 63.8% of its merchandise imports from Asia and Europe (Chart I.2), although their respective shares have changed in the past five years; imports from Asia have become increasingly important and those from Europe have declined in terms of percentage share. Imports from other GCC countries also represent a sizeable share.

18. Balance of payments data indicate that Kuwait is, increasingly, a net importer of services, with a deficit that rose from about US$2.2 billion in 2006 to an estimated US$7.2 billion in 2011 (Table I.2). Transportation services went from a surplus of 0.2 billion to a deficit of US$2 billion during the same period, while the deficit of travel services averaged US$6.7 billion.

10 WTO Statistics database, "Trade Profiles: Kuwait". Viewed at: http://stat.wto.org /CountryProfiles/KW_e.htm.

11 IMF (2011c).


Chart I.1Composition of merchandise trade, 2006 and 2009

2006 2009

(a) Exports, including re-exports (f.o.b.)

Other fuel33.4

Total: US$56.0 billion Total: US$51.9 billion

(b) Imports (c.i.f.)

Chemicals8.6

Iron and steel9.9

Manufactures80.7

Office machines & tele-

communication equipment

4.9

Other electrical machines

4.8Automotive

products16.1

Other agriculture

0.8

Food14.4

Other consumer goods

9.3

Other manufactures

7.4

Other consumer goods10.5

Agriculture16.5

Food16.0

Other agriculture

0.5

Automotive products

13.4

Non-electrical machinery

10.6

Other semi-manufactures

9.2

Other manufactures

9.1Iron and steel4.7

Other0.6

Office machines & telecommunication

equipment6.7

Agriculture15.3

Chemicals9.7

Manufactures79.2


Per cent

Crude oil65.4

Other0.4

Manufactures9.0

Manufactures 4.6

Other electrical machines

5.4

Crude oil57.1

Agriculture0.4

Non-electrical machinery

8.8

Source: UNSD, Comtrade database (SITC Rev.3); and information provided by the Kuwaiti authorities.

Mining3.7

Other semi-manufactures

10.8

Mining3.7

Other0.1

Other fuel29.6

Agriculture0.3


Chart I.2Direction of merchandise trade, 2006 and 2010

2006 2010

(a) Exports (f.o.b.)

Other Asia 4.8

Asia76.1

India12.8

China10.1


(b) Imports (c.i.f.)

Other0.3

India3.9

EU2730.6

U.A.E.3.5

United States14.2

Europe34.1

America16.5

Other Middle East 4.6Africa0.8

EU2722.4

Europe26.5

America15.9

Other Europe4.1

Africa1.9

Syria2.5

Japan6.9

U.A.E.3.5

Other Asia8.4

United States13.4


Per cent

Asia77.2

Other Asia 3.8Middle East

3.7

Japan18.4

Other Middle East4.7

Korea, Rep. of5.1

Korea, Rep. of4.4

United States8.1

Chinese Taipei9.2

India8.0

United States8.4

Source: IMF, "Direction of Trade". IMF online database, August 2011.

China8.9

EU276.1

Middle East 3.1

Asia37.3Asia

30.9

China 5.7

Other0.8

Pakistan3.5

EU279.7

Indonesia 2.9

Japan15.5

Africa3.6

Japan 7.9

Syria 2.5

Africa2.6

Korea, Rep. of16.3

Korea, Rep. of 15.8

Other America2.3

Other America2.5

Other Asia8.9

Pakistan 3.1

Singapore 8.7

Chinese Taipei9.7

Singapore 4.0

Indonesia 2.1

Saudi Arabia

6.9

Saudi Arabia 6.9Other Europe

3.5Middle

East17.5

Middle East17.5

Other0.9

Other0.4

India8.9 China

3.7


Table I.2Balance of payments, 2006-11(US$ billion)

2006 2007 2008 2009 2010a 2011b

Current account 45.3 42.2 60.2 25.9 36.9 57.6Goods (trade balance) 40.2 43.4 64.0 34.4 47.9 69.4

Exports 56.5 62.6 87.0 51.7 67.0 92.5Oil exports 53.2 59.1 82.6 46.6 61.7 85.9Non-oil exports including re-exportsc 3.3 3.5 4.4 5.1 5.3 6.6

Of which: re-exports 0.9 1.2 1.7 1.6 1.8 2.7Imports -16.2 -19.1 -22.9 -17.3 -19.1 -23.1Services -2.2 -3.2 -3.8 -2.5 -5.9 -7.2

Transportation 0.2 -0.1 -0.6 -1.4 -1.7 -2.0Insurance -0.1 -0.1 -0.1 -0.2 -0.2 -0.3Travel -5.4 -6.4 -7.3 -6.1 -6.5 -7.9Other services 3.0 3.4 4.3 5.1 2.6 3.0

Investment income 11.0 12.4 10.7 7.0 7.9 9.2Receipts 12.5 16.3 14.0 8.6 9.6 10.4

General governmentd 7.1 8.5 8.8 6.3 7.4 7.8Other sectorse 5.4 7.8 5.1 2.3 2.2 2.5

Payments -1.5 -3.9 -3.2 -1.6 -1.8 -1.2General government 0.0 0.0 0.0 0.0 0.0 0.0Other -1.5 -3.9 -3.2 -1.6 -1.8 -1.2

Current transfersf -3.7 -10.5 -10.7 -13.0 -13.0 -13.8Capital and financial account -48.8 -33.4 -49.6 -25.3 -32.6 -53.3

Capital accountg 0.7 1.5 1.7 1.1 2.2 2.3Financial account -49.6 -34.9 -51.3 -26.4 -34.7 -55.5

Direct investment -8.1 -9.7 -9.1 -7.5 -2.0 -8.0Abroadh -8.2 -9.8 -9.1 -8.6 -2.1 -8.0In Kuwait 0.1 0.1 0.0 1.1 0.1 0.1

Portfolio investment -29.1 -34.9 -28.1 -8.2 -7.7 -29.9Other investment (net) -12.4 9.7 -14.1 -10.7 -25.0 -17.7

Net errors and omissionsi 7.1 -5.5 -10.0 1.2 -3.3 0.0Overall balance 3.6 3.3 0.7 1.7 1.0 4.4

a Preliminary.b Projection.c Also includes unrecorded oil exports.d Kuwait Investment Authority, Kuwait Petroleum Corportation, Kuwait Fund for Arab Economid Development, Public Institute

for Social Security.e CBK, local banks, investment companies, exchange companies, insurance companies, and the non-financial private sector.f From 2007, based on a new, more comprehensive methodology to estimate outward workers' remittances.g Includes UN war compensation.h For 2010, includes a projection of the net inflow from the sale for US$10.6 billion of a foreign asset owned by a Kuwaiti

company.i Includes other unclassified private sector flows.

Source: IMF (2011b) Kuwait: Statistical Appendix, Country Report No. 11/219, July. Viewed at: http://www.imf.org/external/pubs/ft/scr/2011/cr11219.pdf.

(ii) Foreign direct investment

19. During the last few years, Kuwait has invested increasingly in the rest of the world, with annual FDI outflows averaging over US$7.5 billion in 2006-10. Some of Kuwait's leading companies investing abroad are: Kuwait Foreign Petroleum Exploration Company (KUFPEC), Kuwait Petroleum International (KPI), Petrochemical Industries Company (PIC), Zain (telecommunications)12, Agility Public Warehousing Company (logistics), and National Industries Group Holdings SAK (industry holding company).13

12 Zain is 24.6% owned by Kuwait Investment Authority.13 UNCTAD (2011); and information provided by the authorities.


Table I.3Foreign direct investment, 2006-10(US$ million and %)

2006 2007 2008 2009 2010

FDI inflows 121 112 -6 1,114 81FDI inward stock 778 940 943 6,301 6,514FDI inward stock (% of GDP) 0.8 0.8 0.6 5.8 5.0FDI outflows 8,211 9,784 9,091 8,636 2,069FDI outward stock 4,616 16,884 15,385 19,340 18,676FDI outward stock (% of GDP) 10.7 12.8 10.4 17.7 14.2

Source: UNCTAD (2011), World Investment Report, Geneva.

20. Kuwait's annual FDI inflows rose from an average of US$31 million during 1995-04 to US$284 million over 2006-10, but are still well below other countries in the region and worldwide. Moreover, the stock of inward FDI, as percentage of GDP, is only 5% (albeit up from 0.8% in 2008). On the basis of UNCTAD's Inward FDI Performance Index, Kuwait ranked 135 th out of 141 economies in 201014, while its position in UNCTAD's Inward FDI Potential Index was 37 th in 2009.15

21. FDI in Kuwait has been inhibited by several factors that have limited the role of the private sector (local and foreign) in the economy. Under the Foreign Investment Law, foreign investors have been allowed to own up to 100% of business since 2001. Nonetheless, seeking approval is reportedly a lengthy procedure; the law does not apply to certain economic activities (Chapter II(3)(i)); and foreign portfolio investment through the Kuwait stock exchange may not exceed 49% in any listed company (Chapter II(3)(i)).

22. It is recognized that attention also needs to be given to improving the business environment in Kuwait if the Government is to succeed in increasing the role of the private sector in the economy.16

Kuwait ranks 67th (out of 183 economies) in the World Bank's Ease of Doing Business 2012 Index, but its ranking is lower for "trading across borders" and lower still for "starting a business".17

14 UNCTAD's Inward FDI Performance Index measures the extent to which host countries receive inward FDI, and ranks countries by the amount of FDI they receive relative to their economic size. It is calculated as the ratio of a country's share in global FDI inflows to its share in global GDP.

15 UNCTAD's Inward FDI Potential Index measures the extent to which host countries receive inward FDI, and ranks countries by the amount of FDI they receive relative to their potential. It is calculated on the basis of structural variables, such as country risk, and trade-related measures.

16 Kuwait National Competitiveness Committee (2010).17 The index is based on ten topics (Kuwait's ranking in parenthesis): starting a business (142); dealing

with construction permits (121); getting electricity (57); registering property (88); getting credit (98); protecting investors (29); paying taxes (15); trading across borders (112); enforcing contracts (117); and resolving insolvency (48). World Bank Group online information. Viewed at: http://www.doingbusiness. org/data/exploreeconomies/kuwait/.

http://www.doingbusiness/


23. A positive sign of the Government's determination to increase FDI inflows and the role of the private sector in the economy has been the recent decision to allow foreign participation in the energy sector for the first time, specifically in the development of natural gas production. This is aimed at facilitating the acquisition of the technology and know-how necessary to exploit Kuwait's energy resources more effectively. Moreover, a new privatization law passed in mid-May 2010, sets out a process of transferring ownership to the private sector (build-operate-transfer (BOT) schemes) by identifying suitable partners from home and abroad and issuing shares through initial public offerings, while maintaining a public share ownership (in principle 24%) through the Kuwait Investment Authority (KIA) (Chapter III(3)(ii)). However, a number of amendments to the law might reduce its impact: the healthcare, education, and energy sectors have been excluded and the Government is to retain an important share in all newly privatized companies; and the sale of major stakes in public holdings is expected to take place slowly. New laws are in place also to reform capital markets, and there are plans for new laws to deregulate the insurance industry and to revise the legal environment for commercial enterprises, where current laws are in many cases decades old and not suited to current business conditions.

24. The influential Kuwait Chamber of Commerce and Industry (KCCI) considers that the Government is taking important steps to improve the country's business environment. The KCCI has welcomed the new laws on privatization and BOT, but considers that for them to succeed more attention is needed in improving infrastructure and logistics, making the leasing of land more predictable over the long-term, and facilitating the establishment of new businesses.

(4) OUTLOOK

25. Under its 2010-14 Development Plan, Kuwait aims to foster the participation of the non-oil sector in the economy and achieve minimum annual real GDP growth of 5%. The Plan involves increased participation of the private sector, mainly through BOT schemes, and projected public expenditure of KD 31-37 billion (US$108-130 billion). It includes the new business hub (Silk City) with an estimated cost of KD 22 billion; KD 20 billion is earmarked for expansion of the oil sector, to increase crude oil production to 3.5 million barrels per day (mmbd) by 2015 and to 4 mmbd by 2020; and KD 10 billion on infrastructural projects, including increased capacity at ports and airports, a railway and metro system, and a fourth oil refinery to satisfy domestic demand for fuels (Chapter IV(2)(i)).

26. Given that the oil sector is not labour-intensive and increasing public-sector employment is not sustainable in the long-run, another key objective under the Development Plan is to encourage the participation of Kuwaitis in the private sector through the "Kuwaitization" programme (minimum sectoral quotas for the participation of Kuwaitis). This objective is supported by Law 19 of 2000, which sets out generous government-provided benefits to Kuwaitis in the private sector. Nonetheless, public-sector wages and benefits remain very attractive.

27. Kuwait's long-term strategy also aims to ensure intergenerational economic equity in the exploitation of its non-renewable natural wealth, by saving part of the oil and gas revenues into funds, notably the General Reserve Fund (GRF)18 and the Future Generation Fund (FGF)19 managed by KIA.

18 The GRF, established in 1953, is the main treasurer for the Government; it receives all revenues (including all oil revenues) from which all State budgetary expenditures are paid. The GRF also holds all government assets, including Kuwait’s participation in public enterprises and international organizations (KIA online information. Viewed at: http://www.kia.gov.kw/En/About_KIA/Overview_of_Funds/Pages/default. aspx).

19 The FGF was created in 1976 with a by transfer of 50% of the GRF at that time; 10% of all state revenues are transferred to the FGF annually and all investment income is reinvested (KIA online information. Viewed at: http://www.kia.gov.kw/En/About_KIA/Overview_of_Funds/Pages/default.aspx).

http://www.kia.gov.kw/En/About_KIA/Overview_of_Funds/Pages/


Accumulated transfers to the FGF totalled KD 9.3 billion during 2003/04-2009/10.20

II. TRADE AND INVESTMENT REGIMES

(1) GENERAL FRAMEWORK

28. Kuwait is a constitutional monarchy with a parliamentary system of government. Under its Constitution, which entered into force in 1963, the head of the State is the Emir. The Emir has, inter alia, the power to appoint the Prime Minister, dissolve parliament, initiate/sanction/promulgate laws, and refer bills to the parliament for consideration. The Council of Ministers (Cabinet) forms the executive level of government and advises and assists the Prime Minister. The Emir appoints Ministers and relieves them of office upon recommendation of the Prime Minister.

29. Kuwait has a civil law system; Islamic law is important in personal matters. In descending order of importance, the Constitution is followed by laws and their implementing documents such as regulations, then ministerial rulings. There are two ways to prepare laws in Kuwait: either through the Cabinet, or through members of parliament. Through the Cabinet, bills may be drafted by any Ministry, and then reviewed by the Legal Advice and Legislation Department (FATWA). The Cabinet decides whether it will approve the bill upon recommendations of the FATWA. If the bill is approved by the Cabinet, it will be submitted to the parliament (National Assembly), where it is reviewed by relevant committees. After the National Assembly approves the bill, the Emir takes the final decision to assent to it and issues the law (within 30 days of ratification).

30. Members of parliament may prepare and submit draft laws to the National Assembly for review by relevant committees. After the National Assembly approves the draft laws, they are submitted to the Emir for ratification.

31. According to the authorities, all laws must be published in Kuwait's Official Gazette the Al-Kuwait Al-Yawm. Kuwait has notified that all trade-related investment measures, including laws, decrees and regulatory measures are published in the Gazette1.

32. Kuwait’s judiciary system includes courts of first instance in each administrative district, courts of appeals, Cassation Court (Supreme Court), and the Constitutional Court. Kuwait is a member of the GCC Commercial Arbitration Centre. Courts generally do not exercise jurisdiction on cases with an expressed agreement to refer a dispute to arbitration. Foreign judgments are enforced in Kuwait on the basis of reciprocity, i.e., if the foreign court has enforced a judgment from a Kuwaiti court, or if any bilateral treaties have been signed. Kuwait has signed such bilateral treaties with Egypt and Tunisia.2

33. International agreements do not carry the force of law in Kuwait. They must be transposed into Kuwaiti laws to take into effect. In case of divergence, national laws prevail. However, in case of major divergence and upon complaints by other countries, national laws may be amended. Ratification of the WTO Agreement in Kuwait involved its submission to the Parliament, where it was reviewed by relevant committees. It was approved by the Parliament, ratified by the Emir, and published in the Official Gazette. Following ratification, domestic legislation was enacted to implement different WTO agreements.

20 Global Investment House (2011).1 WTO document G/TRIMS/N/2/Rev.16/Add.1, 31 October 2007; Gazette available at:

http://www.ipd.gov.kw.2 Abdullah Kh. Al-Ayoub & Associates online information. Viewed at: http://www.al-ayoub.

org/index.html [26/01/11].

http://www.al-ayoub.org/index.html


http://www.ipd.gov.kw/


34. As a Member of the Gulf Cooperation Council (GCC), Kuwait applies the GCC common laws on customs procedures (including customs valuation based on the WTO Agreement), contingency measures, and some quarantine requirements at the border. At the GCC level, the Ministerial Council, which consists of commerce and other ministries of each member state, is in charge of the law-drafting process. In case of divergence, domestic laws must be revised or amended to be consistent with the GCC common laws. For a GCC law to take into effect in Kuwait, Kuwait must issue national implementing legislation (often in the form of a 1-page decree).

35. Most trade policies are formulated and implemented by means of laws and their implementing regulations. Major trade laws are listed in Table AII.1. Responsibility for trade policy formulation and implementation lies with the Ministry of Commerce and Industry (MCI). When formulating and implementing trade policies, the MCI coordinates with the Council of Ministers (the Cabinet) and other ministries and trade-related bodies, such as the Ministry of Finance, the Kuwait Foreign Investment Bureau (KFIB), the Public Authority for Agriculture and Fish Resources (PAAF), the Public Authority for Industry (PAI), and the Central Bank of Kuwait (Table AII.2).

36. The private sector participates in trade policy formulation through the Kuwait Chamber of Commerce and Industry (KCCI); the authorities stated that the KCCI is the only channel for consultation with the private sector. The KCCI is a non-profit, self-financed private institution. In accordance with Emir Decree 1959, consulting with KCCI on economic laws and regulations is compulsory before drafting new legislation, or amending/revising existing legislation. The KCCI participates in, inter alia, ministerial committees, WTO meetings, and regional trade agreement negotiations.

37. The objective of Kuwait's trade policy is to help to diversify national income, increase exports of Kuwaiti origin, and develop transit trade (trade through Kuwait to countries mainly in the northern Gulf region), through opening new markets and market development in both Arab and non-Arab economies.3 The authorities intend to achieve these aims by applying an open and liberal trade policy, and supporting open trade policies for its trading partners through, inter alia, participating in multilateral trade negotiations.

(2) TRADE AGREEMENTS AND ARRANGEMENTS

(i) World Trade Organization

38. Kuwait became a GATT signatory on 3 May 1963 and has been a WTO Member since 1 January 1995. In its schedule of commitments on goods, Kuwait bound all agricultural and industrial products at an MFN rate of 100%, with the exception of crude oil, petroleum, and petrol-chemical products, which are unbound. Kuwait scheduled commitments in eight services sectors (business, construction and related engineering services, distribution, environmental, health related and social services, tourism and travel related services, recreational and sporting services, and financial services). It maintains two MFN exemptions under Article II of the GATS, in the areas of air transport services, and the promotion and protection of investment.

39. So far, Kuwait has participated in one dispute settlement proceeding at the WTO, as a third party.4 Kuwait’s trade-related notifications to the WTO are presented in Table AII.3. Based on information from the WTO Central Registry of Notifications (CRN), as of 30 June 2011, Kuwait had 22 outstanding notifications.

3 Ministry of Commerce and Industry (2010).4 Dispute DS379, United States — Definitive Anti-Dumping and Countervailing Duties on Certain

Products from China.


40. As a small and trade-dependent nation, Kuwait values highly its membership in the multilateral trading system. Liberal trade means greater access to world markets, a higher level of employment and a better living standard for Kuwait's population. The authorities considered that Kuwait must participate in international trade negotiations to pursue its commercial interests, enhance the negotiation leverage, and protect its existing rights. Furthermore, Kuwait considers it better to protect its rights through the WTO than through regional and bilateral arrangements. The authorities stated that for a small economy, absence from negotiations would mean Kuwait could not influence the content of the rules affecting its trade relations, nor ensure that its rights are fully respected.

41. In the Doha Round, Kuwait supports a UAE proposal that emphasizes tariff elimination for products of substantive interest to developing countries. In particular, Kuwait considers that the primary aluminium industry, which is one of the most important emerging industries in some GCC countries, would benefit from tariff eliminations as suggested in the UAE proposal.5 In the area of intellectual property rights, Kuwait does not import or export any alcohol, for religious reasons, and considers that participation in the registration system for GIs should be voluntary and without any legal effect.6

42. In September 2010, Kuwait joined the WTO Information Technology Agreement. Kuwait is not a party, nor an observer, to the WTO plurilateral Agreement on Government Procurement.

(ii) Regional trade agreements

43. Kuwait's view is that regional trade agreements and arrangements should be complementary, and not compete with the multilateral trading system. They should be building blocks for liberalization of international trade and must be in conformity with the provisions of Article XXIV of the GATT 1994, the Enabling Clause, and Article V of GATS.

44. Kuwait participates actively in regional trade agreements through its membership in the Gulf Cooperation Council (GCC) and the Greater Arab Free Trade Area (GAFTA). As a group, the GCC has signed free-trade agreements with the EFTA states and Singapore (Table II.1), and is preparing to review the legal text of an FTA with New Zealand. It has ongoing negotiations with Australia, China, the EU, India, Japan, Korea, MERCOSUR, Pakistan, and Turkey. Further, the GCC has received requests for FTA negotiations from ASEAN, Azerbaijan, Cambodia, COMESA (Common Market for Eastern and Southern Africa), UEMOA (West African Economic and Monetary Union), Georgia, Hong Kong, China, Indonesia, Malaysia, Peru, Philippines, Thailand, Ukraine, and Viet Nam.

45. In the resolution of the first Arab Economic and Development Summit held in Kuwait in January 2009, Arab countries decided to create an Arab Customs Union, and accomplish all the necessary requirements by 2015, with the objective of establishing an Arab common market.

46. However, all current negotiations of free-trade agreements have been suspended. In September 2010, the GCC decided that negotiations need to be on hold pending completion of an internal study. According to the authories, this study is in its final stage, and is expected to be submitted to the GCC Ministerial Council for consideration before end 2011.

5 WTO document TN/MA/M/13, 6 Aug 2004.6 WTO document TN/IP/M/19, 19 July 2008.


Table II.1Overview of Kuwait's regional trade agreements, October 2011

GCC Agreement in force

Title Gulf Cooperation Council (GCC)Parties Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab EmiratesCoverage and type Goods and services, customs unionDate of signature/entry into force Free-trade agreement adopted in March 1983, Economic Agreement adopted on 31 December

2001, Customs Union effective 1 January 2003, and Common Market launched on 1 January 2008

Transition for full implementation (goods)

The transition period expires by 2015

Kuwait-specific exclusions NoServices covered YesKuwait's merchandise trade (2009) 11% of Kuwait's imports were from other GCC member states, and 2% of its exports went to

other GCC member states in 2009WTO document series WT/REG276, and WT/COMTD/N/25

GAFTA Agreement in force

Title Greater-Arab Free Trade Area AgreementParties Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libyan Arab Jamahiriya, Morocco, Oman,

Qatar, Saudi Arabia, Sudan, Syrian Arab Republic, Tunisia, United Arab Emirates, Yemen, and later joined by the Palestinian Authority of the West Bank and the Gaza Strip, and Algeria

Coverage and type Goods, free-trade agreementDate of signature/entry into force 19 February 1997/1 January 1998Transition for full implementation (goods)

10 years, but shortened to 8 years (full implementation realized in 2005 instead of 2007)

Main products excluded from liberalization (Kuwait)

Some products excluded for health, religious, or security reasons

Services covered On-going negotiations among Kuwait, Egypt, and JordanKuwait merchandise trade (2010) 13% of Kuwait's imports were from other GAFTA member states, and 3% of its exports went

to other GAFTA member statesWTO document series WT/REG223

GCC–EFTA Agreement signed but not in force

Title EFTA–GCCParties GCC 6 members, and Iceland, Liechtenstein, Norway, SwitzerlandCoverage and type Goods and services, free-trade agreementDate of signature FTA signed on 22 June 2009Date foreseen to enter into force 2011, pending completion of internal procedures by the parties. According to the authorities,

Kuwait ratified in 2011Transition for full implementation (goods)

10 years

Services covered YesMain products excluded from liberalization (Kuwait)

Includes: mixtures of odoriferous substances, retreaded or used pneumatic tyres of rubber, hides and skins of swine; prohibited items include mainly cocaine and crocidolite, and materials containing asbestos

GCC merchandise trade (2010) 1.6% of GCC’s imports were from the EFTA, and 0.0% of its exports went to the EFTA

Table II.1 (cont'd)


GCC–Singapore Agreement signed but not in force

Title Singapore–GCCParties GCC 6 members, and SingaporeCoverage and type Goods and services, free-trade agreementDate of signature 15 December 2008Date foreseen to enter into force Not in force, although Kuwait ratified in 2011

Transition for full implementation (goods)

5 years

Main products excluded from liberalization (Kuwait)

Some products excluded for health, safety or religious reasons

Services covered YesGCC merchandise trade (2010) 0.5% of GCC’s imports came from Singapore, and 0.1% of its exports went to Singapore

Source: WTO Secretariat; WTO RTA Database; and information provided by the Kuwaiti authorities.

(a) Gulf Cooperation Council (GCC)

47. The GCC was created on 25 May 1981, by Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. The main objectives were regional cooperation and integration in all economic, social, and cultural affairs, including trade, industry, investment, finance, transport, communications, and energy. One of the GCC's first achievements was an agreement for free trade among member states in 1983, whereby originating goods have been exempt from customs tariffs.

48. An Economic Agreement between the GCC States, adopted on 31 December 2001, replaced the 1981 agreement. This Agreement aims at enhancing and strengthening economic ties among member states, and harmonizing their economic, financial, and monetary policies, their commercial and industrial laws, and their customs regulations. Based on the Economic Agreement, a GCC Customs Union was launched in 2003,7 and includes: (1) a common external customs tariff; (2) common customs regulations and procedures; (3) a single-entry system where customs duties are collected; (4) elimination of all tariff and non-tariff barriers within the GCC, while taking into consideration domestic laws on agricultural and veterinarian quarantine, as well as rules regarding prohibited and restricted goods; and (5) national treatment for goods produced in any GCC member state. Practical implementation of the customs union lagged behind in certain areas, particularly non-tariff measures. The authorities stated that GCC member states are working to harmonize all customs procedures within the next three years, to have it fully operational by 2015.

49. Kuwait applies the GCC common external tariff of 0% and 5% for most products, and 100% and a specific duty for tobacco products (Chapter III(1)(ii)). As a result of implementing the GCC common tariff, Kuwait's simple average applied MFN tariff was reduced from 7.7% in 2002 to 4.8 % in 2011.

50. A GCC common market, launched on 1 January 2008, removed all barriers to cross-country investment and services trade. In particular, Ministerial Decree No. 272 of 2008 specifies that all GCC citizens are allowed to exercise all economic activities and occupations in Kuwait as Kuwaiti nationals, except: immigration and Umrah services; commercial agencies; opening printing presses and publishing houses; and issuance of newspapers and magazines. In most cases, the GCC negotiates bilateral FTAs as a group, although some GCC members (e.g. Bahrain and Oman) have agreed individual FTAs with the United States.

51. On 15 December 2009, Bahrain, Kuwait, Qatar, and Saudi Arabia announced the creation of a Monetary Council. This aims to increase technical cooperation between the four states on monetary

7 WTO document WT/REG276/N/1/Rev.1, 17 November 2009.


policy, although a single currency is not expected in the near future. The GCC Monetary Council Board had its first meeting in March 2010. The Council is working on completing its institutional and organizational structures. Member countries are working towards improving and coordinating monetary, banking, and financial statistics.

(a) GAFTA

52. The Greater-Arab Free Trade Agreement entered into force on 1 January 1998. Its members include the six GCC countries, as well as Egypt, Iraq, Jordan, Lebanon, Libya, Morocco, Palestinian Authority, Sudan, Syria, Tunisia, and Yemen. In 2005, Algeria participated as the 18 th member. GAFTA contains provisions relating to trade in goods. Duties and other restrictions on substantially all trade between the signatories were to be eliminated by 31 December 2007; in practice duties on all products were eliminated as of 1 January 2005.8

53. According to the authorities, all non-tariff border restrictions have been eliminated. The authorities stated that GAFTA aimed at achieving full liberalization of trade in products of national origin among Arab countries. To deepen and broaden economic integration, member countries are working on liberalizing trade in services, with an aim of establishing an Arab Customs Union and an Arab Common Market. Data provided by the authorities show that between 2004 and 2008, trade among Arab countries grew rapidly, although the share of inter-Arab trade to GDP declined, and the share of inter-GAFTA trade to total Arab-foreign trade was stable (Table II.2).

Table II.2GAFTA trade(US$ billion)

2004 2005 2006 2007 2008

Value of inter-GAFTA trade 68 92 112 135 165Ratio of inter-GAFTA trade to GDP (%) 39% 35% 22% 21% 22%Total Arab-foreign trade 691 909 1,082 1,323 1,752Growth rate of Arab foreign trade (%) 33% 32% 19% 22% 32%Inter-GAFTA trade/ total Arab-foreign trade (%) 9.8% 10.1% 10.3% 10.2% 9.4%

Source: Information provided by the Kuwaiti authorities.

(b) GCC–EFTA

54. Trade between the European Free Trade Association (EFTA) and GCC grew rapidly, on average 25% annually, between 2003 and 2008. A Free Trade Agreement was signed in June 2009, covering trade in goods and services, competition, government procurement, and intellectual property rights. GCC and each EFTA state concluded bilateral agreements on trade in agricultural products. These agreements form part of the instruments establishing the free-trade area. According to t he authorities, the EFTA–GCC Agreement has not entered into force, although Kuwait ratified it in 2011.

55. Under the Agreement, EFTA states shall abolish all customs duties on imports originating from GCC, and GCC countries shall abolish all customs duties on imports originating from the EFTA states, except those listed in Annex VI.9 In accordance with Annex VI, GCC would eliminate duties after a five-year transition period on 37 lines at HS 8-digit level (category B), and prohibit the importation of 7 lines (mainly cocaine and crocidolite, and materials containing asbestos). Another

8 WTO document WT/REG223/N/1, 20 November 2006.9 EFTA online information. Viewed at: http://www.efta.int/free-trade/free-trade-agreements/gcc/rou-

annexes-letters.aspx [27/01/11].


11 lines are not covered by this agreement; these include mixtures of odoriferous substances, retreaded or used pneumatic tyres of rubber, and hides and skins of swine.

56. The agreement has a chapter on services, which closely follows the GATS approach: all four modes of supply of services are covered, and all services sectors are addressed. On the other hand, the agreement does not contain specific provisions on investment. The parties agreed to negotiate on business establishment in non-services sectors within two years after the entry into force of the agreement.

(c) GCC–Singapore10

57. The GCC–Singapore FTA, signed on 15 December 2008, covers trade in goods, rules of origin, customs procedures, trade in services, and government procurement. This agreement has not entered into force yet, although Kuwait ratified it in 2011. Under the Agreement, GCC countries abolish customs duties on 99% of Singaporean exports, with key benefiting sectors comprising telecommunications, electrical and electronic equipment, petrochemicals, jewellery, machinery, and iron and steel-related industry. Tariffs are either eliminated immediately, or after a five-year transition period. The remaining 1% of Singapore's exports are prohibited from entering the GCC market for health, safety, security and religious reasons.

58. GCC and Singapore agreed to liberalize various services sectors beyond their WTO commitments; in particular, Singaporean service suppliers enjoy preferential access in professional services such as legal, accounting, and engineering services, as well as business services, such as construction, distribution, and hospital services. Singaporean suppliers are also given the same price preference of 10% that is given to GCC domestic suppliers for government procurement (Chaper III(3)(iii)).

59. Kuwait and Singapore concluded an Agreement for the Encouragement and Reciprocal Protection of Investment in November 2009.

(d) Other bilateral or preferential trade agreement

60. Kuwait has signed a number of economic and commercial agreements with its trading partners, of which, 33 were trade cooperation agreements intended to promote and diversify bilateral trade in goods and services, such as by providing necessary facilities to participate in trade fairs and international markets (Table AII.4). The authorities stated that these agreements contain no discriminatory or preferential commitments.

61. Kuwait benefits from the Generalized System of Preferences (GSP) of the EU. It does not participate in the Global System of Trade Preferences (GSTP).

(3) FOREIGN INVESTMENT REGIME

62. Kuwait has relaxed its foreign capital equity restrictions since 2001 by allowing 100% foreign ownership in 13 sectors. The Government considers that foreign participation tends to encourage a more active private sector, which could help to diversify the economy. However, despite the tax incentives given to foreign companies and the relaxation of foreign equity restrictions, foreign investment in Kuwait remains low. Foreign companies are subject to a corporate income tax, which is not levied on Kuwaiti (and GCC) companies. Also, foreign investors have to go through complicated

10 Singapore Government online information. Viewed at: http://www.fta.gov.sg/fta_gsfta.asp?hl=32 04/04/2011].

http://www.fta.gov.sg/fta_gsfta.asp?hl=32


procedures to obtain licences. The Government is evaluating a possible amendment to its foreign investment law.

(ii) Legislative and regulatory framework

63. Major legislation relating to foreign investment in Kuwait includes the Commercial Code, and Law Regulating Direct Foreign Capital Investment (Law No.8 of 2001) (Foreign Investment Law) (Table AII.1).

64. The basic principles for carrying out business in Kuwait are provided in Articles 23 and 24 of the Kuwaiti Commercial Code. Article 23 states that non-Kuwaiti citizens may not pursue any commercial activities in Kuwait unless they have a Kuwaiti partner. This partner’s share must not be less than 51% of the company's capital. Article 24 provides that a foreign company may not establish a branch in Kuwait and may not pursue commercial activities in Kuwait, unless it has a Kuwaiti agent.11

65. The authorities do not consider Kuwait to have been very successful in attracting foreign direct investment. The Government decided that Kuwait needs to diversify its economy away from oil. It considers that future growth and diversification require an active private sector, and that foreign participation and involvement will encourage this. On 22 April 2001, the Parliament enacted the Foreign Investment Law, aiming to attract foreign investment by lifting or removing foreign ownership limits. This Law gives an exception to the basic principle in the Commercial Code, by allowing foreigners to own up to 100% of business entities in certain sectors, provided a licence is issued by the Minister of the Ministry of Commerce and Industry. These sectors are:

- industries other than oil and gas exploration and production;

- construction, operation and management of infrastructure enterprises in the fields of water, power, drainage, and communications;

- banks, investment corporations, and foreign exchange companies that the Central Bank of Kuwait agrees to consider incorporation thereof;

- insurance companies that Ministry of Commerce and Industry agrees to incorporate;

- information technology and software development;

- hospital and medicines manufacturing;

- land, sea, and air transport;

- tourism, hotels, and entertainment;

- culture, information, and marketing except for issuance of newspapers, magazines, and opening of publishing houses;

- integrated housing projects and zones development except for real estate speculation;

- real estate investment through foreign investor subscription to the Kuwaiti shareholding companies according to the provisions of law No. 20/2002;

11 Kuwait Foreign Investment Bureau online information: "Investors Guide". Viewed at: http://www.kfib.com. kw/kfibclient/clientpages/Index.aspx?id=64 [10.01.2011].

http://www.kfib.com/


- storage and logistic services;

- environmental activities.12

66. Foreign investors may establish companies in Kuwait, either as a limited liability company (WLL), or a Kuwait shareholding company (KSC) (closed or public) (Table II.3).

Table II.3Requirements for establishing a foreign-invested company in Kuwait, 2010

Limited liability company (WLL)

Kuwait shareholding company (KSC)

Closed Public

Foreign ownership restrictions

Foreign entities may hold a maximum shareholding of 49%

Only Kuwaiti citizens may be shareholders of a joint-stock company, foreigners may own up to 49% of the share capital after approved by the MCI

Foreign shareholders do not need to obtain licence to acquire shares, and may be allowed more than 49% of ownership

Process to form a company

Simple, 3 months 3 months 3 months

Minimum capital requirement

KD 7,500 KD 37,500 KD 37,500; or KD 75 million for banks, KD 10 million for insurance companies

Restrictions May not engage in banking and insurance activities; may not list on the KSE (Kuwait Stock Exchange)

May not engage in banking and insurance activities

May engage in banking and insurance activities

Corporate income tax No Tax levied on profits made by the foreign company as a shareholder in the KSC

Tax levied on profits made by the foreign company as a shareholder in the KSC

Zakat No 1% of profit 1% of profitKFAS (Kuwait Foundation for the Advancement of Science)

No 1% of profit 1% of profit

Kuwait National Labour Support Tax

No No 2.5% of profit

Other requirements At least 10% of profit must be transferred to a statutory reserve until it totals at least 50% of capital

At least 10% of profit must be transferred to a statutory reserve until it totals at least 50% of capital

At least 10% of profit must be transferred to a statutory reserve until it totals at least 50% of capital

Total number of foreign invested companies in Kuwait in 2010:

WLLs with foreign investment in 2003-10:

Closed KSCs with foreign investment in 2003-10:

Public KSCs with foreign investment in 2003-10:

12 0 9 0


67. However, despite the relaxation of foreign ownership requirements, foreigners do not usually own more than 49% of a company in Kuwait. In accordance with Council of Ministers Resolution No. 1006/2 of 2003, a licence may be issued to a closed KSC in which the share of the foreign investor is 100% of its capital, subject to: (1) the company's capital must be sufficient to achieve its objectives and must be fully subscribed to by the founders; (2) the company must fulfil the procedures, rules, and regulations prescribed under the Kuwaiti Commercial Companies Law (No. 15 of 1960); (3) the company must engage in one of the sectors as listed above, and must pursue one or more of the following objectives: transfer of modern technology and administration of practical, technical, and marketing expertise; expansion and participation of the Kuwaiti private sector;

12 Council of Ministers’ Resolutions No. 1006/1 of 2003, No. 738/9 of 2008, and No. 1067/8 of 2009.


creation of job opportunities for national labour and contribution to training; and support of national products exports.

68. Foreigners may enter and conduct business in Kuwait through joint-venture agreements, appointing a Kuwaiti commercial agent, or appointing a Kuwaiti commercial representative. Joint ventures are established by contractual agreements. They provide parties with more flexibility and are more common in relation to specific projects with a limited term. Joint-venture companies do not have legal personalities and cannot be registered with the MCI. A joint-venture may transact business with third parties only through one venturer, who is personally liable for the transactions he enters into with third parties. If the transacting venturer is a non-Kuwaiti, the Kuwaiti venturer in the company must guarantee him in that transaction.13

69. A very popular business vehicle in Kuwait is the commercial agent. Only Kuwaiti citizens may act as commercial agents in Kuwait (with the exception of financial services). A foreign entity that opens an office in Kuwait, and acts through a Kuwaiti agent, must carry out operations in the latter’s name. Commercial agents are protected by various laws and regulations: they must be registered with the MCI; Kuwaiti law is the governing law; foreign principals may not terminate an agreement without proving breach of contract by the agent, unless the foreign principal pays compensation; foreign principals may not refuse to renew the agency agreement when it expires; the agent may sue both the foreign principal and any new agent that the former may appoint if the termination is proved to be the result of their concerted action.

70. Similar to the agent arrangement, a foreign entity may appoint a commercial representative who is a Kuwaiti individual or entity to represent its business interests in Kuwait. The representative may be engaged, compensated, and terminated as agreed by the parties of the commercial representation agreement.

71. Only Kuwaiti courts are competent to consider disputes arising between foreign invested enterprises and third parties. The parties may agree to refer a dispute to arbitration. Foreign enterprises may not be confiscated or nationalized; expropriation may only occur for public interest, with compensation equivalent to the enterprise's real economic value at that time.

72. The KFIB is evaluating a possible amendment to the Foreign Investment Law.14 The Government realizes that, despite various tax incentives and the relaxation of foreign equity ownership, foreign companies still report delays in getting approvals to operate in Kuwait, and the Foreign Investment Law does not appear to have changed the investment climate in any significant way. The authorities have identified six major obstacles to FDI (Table II.4).

73. Amendment to the Foreign Investment Law would focus on removing the overlap in agency arrangement for license issuance, by establishing the KFIB as an autonomous institution. KFIB is working on setting up a "one-stop shop" for foreign investors, which will provide foreign investors a single point of contact with the Government. According to the authorities, the one-stop shop is to be established in the near future. Apparently, land is also an issue of concern to foreign investors. According to the authorities, land is a concern as most land zones lack infrastructure and thus are not available to investors. To address this issue, KFIB is now in charge of 3 zones to ensure land availability for foreign investors.15

13 Abdullah Kh. Al-Ayoub & Associates online information. Viewed at: http://www.al-ayoub. org/index.html [26/01/11].

14 KFIB (2011).15 According to the authorities, the KFIB is currently finalizing the terms of reference and structural

plans to grant the project to a consulting firm to propose feasibility studies; the zones are expected to be set up




Table II.4FDI obstacles and proposed solutions, 2011

Obstacles Proposed solutions

1. Failure of competent government authorities to express their views as quickly as required to investors

- Reduce overlap between government authorities, simplify procedures and complete them electronically

- Oblige the competent government authorities to express their views during a specific period

- Set up e-government- Provide a data base reflecting Kuwait's development plan

2. Currently, under Law No.8 of 2001, it takes 8 months to grant licences to a foreign-invested project

- Modify some articles of Law No. 8 of 2001, to minimize the decision period

3. Inadequacy of the current regulatory framework - Establish a financial administrative association for FDI in Kuwait

- Establish a one-stop shop to facilitate investment procedures

- Establish external representations of the Foreign Investment Office, and visit foreign countries where investment originates

4. Lack of clarity and transparency in terms of economic activities and projects which may be practiced by foreign investors

- Clarify Ministerial decree No.1/1006 of 2003 concerning the activities allowed and determining the investment opportunities Kuwait needs

5. Difficult, out of date, and long procedures to apply and obtain licenses

- Minimize the data and documents required for investment licence

6. Difficulties with regard to the investors' entry into, residence in, and departure from Kuwait

- Coordinate with competent authorities to facilitate the entry and residence of company members and investors

- Help foreign investors to obtain a visa to enter Kuwait through its embassies abroad

- Establish an office to receive investors at Kuwait airport

Source: Kuwait Foreign Investment Bureau.

(i) Direct taxation and incentives for foreign investment

74. Foreign companies are subject to a corporate income tax, which is not levied on Kuwaiti (or GCC) companies. Some other taxes and contributions are imposed, although foreign companies may benefit from various tax or non-tax incentives.

75. Individuals (Kuwaiti and foreign nationals), and Kuwaiti companies do not pay income tax. However, a corporate income tax is levied on profits made by foreign-invested companies according to their share in the KSC (Kuwait shareholding company). In 2007, Kuwait amended its Corporate Tax Decree, and the new tax decree entered into force in February 2008: for tax periods beginning after 2 February 2008, a 15% flat rate tax applies on earnings above KD 5,250 per year (previously, income tax ranged between 5% and 55%).

76. Gains from trading in securities on the KSE (Kuwait Stock Exchange) are exempt from tax. There is no withholding tax. However, investment funds, investment custodians, and companies managing portfolios for foreign entities are required to deduct 15% (or the appropriate percentage applicable under a double taxation avoidance treaty) of the foreign entity’s share of profits and dividends. Also, all government departments, entities, and individuals making payments to parties with whom they have entered into contracts, agreements or transactions are required to withhold 5% of such payments as tax retention. The parties may recover the retained amount, but only after submitting a tax retention release letter issued by the tax department.

in 2 years.


77. Under the Zakat Law No. 46 for 2006 (Law Regarding Zakat and Contribution of Public and Closed Shareholding Companies in the State’s Budget), zakat (tax according to the Islamic Sharia principles) is levied on all Kuwaiti shareholding companies at 1% of their net annual profit.

78. Currently 67% of the Kuwaiti labour force works in the Government sector. The National Labour Support Law (Law No. 19 of 2000) was enacted to support and encourage the national labour force to work in the non-government sector. The Law obliges the Government to share the cost of labour-force training. To cover the cost, Kuwaiti (public) shareholding companies listed in the KSE must pay the national labour support tax, amounting to 2.5% of their net annual profits.

79. In addition to taxation, each KSC company must pay 1% of its net profits to the Kuwait Foundation for Advancement of Science (KFAS), which was established to assist science students and researchers in their education and training for scientific research and development. According to the Government's online information, a KSC company is not strictly obliged to pay to KFAS; however, it has become general practice.16

(ii) Incentives and institutional framework

80. Foreign companies may be exempted from income tax or any other taxes for a maximum of ten years from starting actual operations of the enterprise. Also, they may be exempted from customs duties on imports of: machinery, equipment, and spare parts required for construction, expansion, and development; raw materials, semi-processed goods, wrapping and packaging materials, and such other materials required for production purposes.

81. Not all foreign companies may be exempted from tax for ten years: the period of exemption is determined by the Foreign Capital Investment Committee (FCIC). The Chairman of the Committee is the Minister of Commerce and Industry, and its members include experts representing the private sector as well as the Kuwait Chamber of Commerce.

82. The executive body of the FCIC is the Kuwait Foreign Investment Bureau (KFIB). KFIB receives applications from foreign investors, conducts studies on these applications and makes suggestions to the FCIC. Upon recommendations by the FCIC, the Minister of the MCI issues a commercial licence to the foreign investor, after which the KFIB issues an investment licence. According to the authorities, both licences must be issued within a maximum of four months from the date of application (which can be extended by another four months). In case of rejection, the decision must be justified in writing.

83. When deciding tax incentives, the FCIC follows a "proportional weight schedule"; depending on the different components, foreign companies may obtain different "weight values" (Table II.5). Enterprises with a "weight value" between 50% and 64% are exempted from tax for five years; between 65% and 79% the exemption is for eight years; and between 80% and 100% for ten years. Depending on the documents presented to the FCIC, tax exemptions might be granted for less than five years. All exemptions commence from the date of actual operation of the enterprise.

16 Kuwait Government online information. Viewed at: http://www.e.gov.kw/sites/kgoenglish/portal/ Pages/Visitors/DoingBusinessInKuwait/GoverningBody_OverView.aspx [25/01/11].

http://www.e.gov.kw/sites/kgoenglish%20/portal/Pages/Visitors/DoingBusinessInKuwait/GoverningBody_OverView.aspx

http://www.e.gov.kw/sites/kgoenglish%20/portal/Pages/Visitors/DoingBusinessInKuwait/GoverningBody_OverView.aspx


Table II.5Proportional weight schedule for FDI, 2011

Basic components Weight Notes

1. Technology, modern management methods, practical, operational, technical and marketing experience (20%)

20%

2. Job creation for national labour force:- Share of national labour force (35%)- Training of national labour force (10%)

45% Senior management: General manager, assistant general manager, sector manager, etc.

Middle management (supervisory): Department Head, supervisor, observational manager, etc.

Administrative personnel:Dealer, seller, services provider, etc.

- Internal training: (5%); - external and internal training (10%)

3. Enhance and strengthen the Kuwaiti private sector (15%)- Share of local equity (5%)

20% The enterprise contributes in activating:- 5 sectors, 5%;- 6-9 sectors, 10%;- 10 sectors or more, 15%.Equity share of local partner should not be more than 35% of enterprise’s capital

4. Support the economic development plans and targeted sectors- (10%)a

10% Taking into consideration the nature of the enterprise and the Economic Development Plans

5. Location (undeveloped areas) (5%) 5%

Overall weight of FDI enterprise 100%

a Sectors identified in the Development Plan.

Source: Kuwait Foreign Investment Bureau.

(iii) Double taxation arrangements

84. The authorities consider that double taxation avoidance (DTA) agreements and investment promotion agreements promote investment through creating favourable conditions for economic cooperation, and removing fiscal obstacles and reducing uncertainties. In March 2011, Kuwait had signed 73 DTAs, of which, 46 had been ratified (Table AII.5). Kuwait has also initialled 14 bilateral DTA agreements, and is negotiating with another 17 trade partners. Kuwait has signed 74 bilateral investment agreements to protect and encourage investment, of which, 56 have been ratified. Kuwait has initialled agreements with 15 trade partners, and is negotiating with 6 others.


(1) MEASURES DIRECTLY AFFECTING IMPORTS

(i) Customs procedures

85. The Unified Customs Law of the Cooperation Council for the Arab States of the Gulf (the GCC Common Customs Law) regulates customs procedures in Kuwait. Customs procedures and the documents required are the same for all GCC members.


86. Import declarations are generally made before the goods' arrival. Declarations may be made either by the owners of the goods (and their authorized representatives), or licensed customs brokers (who must be GCC nationals). Non-GCC nationals may work through the office of a licensed customs broker. In Kuwait, 95% of import declarations (including invoices, delivery orders, bills of lading, packing lists of goods, certifications of origin, import licences, and commercial registration certificates) are made through an electronic system. The system automatically identifies goods that are prohibited from importation or require special permission, and whether the goods need to be inspected. Where the importation requires special permission, the system identifies the competent agency for permission. Customs auditors check the particulars of the declaration, determine whether the documents are complete, and assess the value of the goods and the amount of duty to be collected through the electronic system. According to the authorities, if the documentation is complete, the goods may be cleared within a few hours.

87. Kuwait does not have preshipment inspection requirements.

88. Pursuant to Article 22.2 of the Agreement on Implementation of Article VII of GATT 1994, Kuwait notified its legislation related to customs valuation, which includes: Emir decree No. 10/2003 on issuing the GCC Common Customs Law (in particular, Articles 26-29 and 61-62, the explanatory notes, as well as sections IV and VI), and Emir decree No. 200/2003 on issuing the Rules of Implementation of the GCC Common Customs Law.

89. Customs value is determined as the transaction value of the imported goods. If the transaction value cannot be determined, the following alternative methods may be used in sequential order: (1) transaction value of identical goods; (2) transaction value of similar goods; (3) deductive value; (4) computed value. The importer may request that "deductive value" and "computed value" be applied in reverse sequence. If the customs value of the imported goods cannot be determined under these methods, it is then determined by reasonable methods that are in line with the general principles and provisions of the Agreement on Customs Valuation, by referring again to the above methods, with more flexibility of application.

90. A Valuation Committee was set up in accordance with Article 61 of the GCC Common Customs Law, to resolve any value disputes between Customs and the importers.1 This Committee consists of Customs officials of Kuwait and a representative of the Kuwait Chamber of Commerce and Industry. Importers who are not satisfied with the Committee decisions, may appeal to courts. According to the authorities, there has been no dispute regarding customs valuation in recent years, and thus no appeal to judicial authorities.

91. Kuwait does not apply non-preferential rules of origin. Its preferential rules of origins are listed in Table III.1.

Table III.1Kuwait's preferential rules of origin, 2011

Agreement/country Rules

Goods of Arabic origin (GAFTA)

All goods of Arab origin are exempted from customs tariffs if consignments are:

(a) accompanied by a certificate of origin issued by the relevant authorities of the country of production; (b) the added value of the production taking place in the Arabic country is no less than 40% of its final value; (c) the added value resulting from assembly industries in Arab countries is no less than 20% of its final value; (d) the certification of origin must be issued from the producing entity, and be authenticated by the relevant authority of issuance in Arabic country of origin.

Goods of GCC origin Products are generally considered as originating from the country where they are wholly obtained or where they underwent substantial transformation, with at least 40% of local value-added. The country of origin

1 WTO document G/VAL/N/1/KWT/1, 7 December 2007.


Agreement/country Rules

should be written clearly for import clearance.

EFTA Products are generally considered as originating from the EFTA states if they are wholly obtained in the EFTA states; or if they have undergone sufficient working or processing. Sufficient working or processing must satisfy product-specific rules of origin listed in Appendix 2 of the Agreement, where in most cases, the value of all non-originating materials must not exceed 60% of the ex-works price of the product.

Singapore Goods are wholly obtained in Singapore; or have undergone sufficient working or production: if the sufficient working or production (a) satisfies product-specific rules of origin in Annex 3 of the Agreement; or (b) attains a qualifying value added of not less than 35% based on the ex-works price.

Source: Kuwait Chamber of Commerce and Inudstry online information. Viewed at: http://www.kcci.org.kw/. EFTA online information. Viewed at: http://www.efta.int/ free-trade/free-trade-agreements/gcc/rou-annexes-letters.aspx [27/01/11]. Singapore Government online information. Viewed at: http://www.fta.gov.sg/fta_C_gsfta.asp?hl=30 [17/05/2011]; and information provided by the Kuwaiti authorities.

(ii) Tariffs

(a) MFN tariffs

92. Kuwait bound 99.5% of its tariff lines, leaving oil, petroleumm, and petrochemicals unbound. All bound rates are at 100%.

93. Kuwait charges at most MFN duty rates to WTO Members. Tariff revenue accounts for a large portion of total tax revenue: 69.7% in 2010/11, although tax revenue accounts for less than 2% of total government revenue. Kuwait does not have tariff-rate quotas.

94. Under the "single entry" principle, goods imported into Kuwait (or any other GCC State) are subject to customs duty only at the first point of entry into the GCC, with a redistribution system for collected tariffs among the GCC countries. All goods that enter Kuwait are subject to the common external tariff, at 0% and 5% for most products, and 100% and a specific duty for tobacco products, with some GCC-approved specific exceptions for each member state. According to the authorities, Kuwait has no country-specific exceptions.

95. Article 18 of the Industrial Law (No. 56 of 1996) stipulates that Customs duties on imports of products, if similar to those produced domestically, may be increased for a specified duration based on a proposal by the Board of Directors of the Public Authority for Industry (PAI), taking into consideration whether local production is satisfactory as regards quantity, type, quality, and consumer interest. According to the authorities, Kuwait does not apply this article in practice.

96. Based on data supplied by the authorities, Kuwait's 2011 applied MFN tariff consisted of 7,100 lines at the HS 8-digit level (HS 2007) (Table III.2) and AIII.1): 7,001 lines (98.6%) carry ad valorem rates (zero, 5%, and 100%) (Chart III.1). The dispersion in applied MFN rates, indicated by the coefficient of variation, was up slightly from 1.0 in 2003 to 1.1 in 2011, reflecting the increase in the number of duty-free lines.

97. Non-ad valorem rates (mixed tariffs) apply to 19 tariff lines on tobacco and tobacco products.2 The ad valorem equivalents (AVEs) of non-ad valorem tariffs are calculated using average unit prices of import (based on import value and quantity data for 2009), where they exist. Although the bound tariff rates for tobacco products are at 100%, the AVEs calculated for non-ad valorem tariff lines show that eight lines with AVEs of 100%, while three have AVEs of 104.8%, 140%, and

2 Other lines include items prohibited from importation or that require special import permission, and 6 lines with no duty rates.

http://www.fta.gov.sg/fta_C_gsfta.asp?hl=30

http://www.efta.int/

http://www.kcci.org.kw/


534.9% (HS24031090: other manufactured tobacco and manufactured tobacco substitutes; "homogenized" or "reconstituted" tobacco; tobacco extracts and essences – other), respectively. Data for calculating the AVEs for the remaining eight lines, were not available to the Secretariat.

Table III.2Summary analysis of the MFN tariff, 2003, 2007, 2011(%)

2003 2007 2011

Bound tariff lines (% of all tariff lines) 99.5 99.5 99.5

Simple average rate 5.0 4.7 4.8

Agricultural products (HS 01-24) 5.4 5.4 5.4

Industrial products (HS 25-97) 4.9 4.6 4.6

WTO agricultural productsa 5.7 5.7 5.7

WTO non-agricultural productsb 4.9 4.6 4.6

By ISIC sector c

ISIC 1 - Agriculture, hunting, forestry, and fishing 3.3 3.2 3.2

ISIC 2 – Mining and quarrying 5.0 4.9 4.9

ISIC 3 - Manufacturing 5.1 4.8 4.9

By stage of processing

First stage of processing 4.0 3.9 3.9

Semi-processed products 4.9 4.8 4.8

Fully processed products 5.2 4.9 4.9

Domestic tariff "spikes" (% of all tariff lines)d 0.3 0.6 0.6

International tariff "peaks" (% of all tariff lines)e 0.3 0.6 0.6

Overall standard deviation of tariff rates 5.2 5.3 5.3

Coefficient of variation of tariff rates 1.0 1.1 1.1

Tariff quotas (% of all tariff lines) 0.0 0.0 0.0

Duty-free tariff lines (% of all tariff lines) 5.8 10.6 9.4

Non-ad valorem tariffs (% of all tariff lines) 1.1 1.3 1.4

Non-ad valorem tariffs with no AVEs (% of all tariff lines) 1.1 1.3 1.4

Nuisance applied rates (% of all tariff lines)f 0.0 0.0 0.0

Number of lines 7,154 7,121 7,100

Ad valorem 98.9 98.7 98.6

Non-ad valorem 1.1 1.3 1.4

Specific 0.0 0.0 0.0

Compound 0.0 0.0 0.0

Mixed 0.3 0.3 0.3

Others (prohibited and special goods) 0.8 1.0 1.1

Table III.2 (cont'd)Memo: some comparisons

By WTO definitiong

WTO Agriculture 5.7 5.7 5.7Live animals and products thereof 2.8 2.7 2.7Dairy products 5.0 5.0 5.0Coffee and tea, cocoa, sugar, etc. 4.0 4.0 4.0Cut flowers and plants 4.5 4.5 4.5Fruit and vegetables 3.5 3.5 3.5Grains 0.5 0.5 0.5Oil seeds, fats, oils, and their products 4.9 4.8 4.8


2003 2007 2011

Beverages and spirits 5.0 4.9 4.9Tobacco 100.0 100.0 100.0Other agricultural products 4.4 4.1 4.2

WTO Non-agriculture (excluding petroleum) 4.9 4.6 4.6Fish and fishery products 3.2 3.2 3.2Mineral products, precious stones, and precious metals 4.8 4.7 4.7Metals 5.0 5.0 5.0Chemicals and photographic supplies 4.8 4.5 4.5Leather, rubber, footwear, and travel goods 5.0 5.0 5.0Wood, pulp, paper, and furniture 4.6 4.5 4.6Textiles and clothing 5.0 5.0 5.0Transport equipment 4.4 4.4 4.4Non-electric machinery 5.0 4.2 4.6Electric machinery 5.0 3.4 3.8Non-agricultural articles n.e.s. 5.0 4.6 4.7

Oil and petroleum 5.0 5.0 5.0

a WTO Agreement on Agriculture definitions.b Excluding petroleum.c International Standard Industrial Classification (Rev.2). Electricity, gas, and water are excluded (1 tariff line).d Domestic tariff spikes are defined as those exceeding three times the overall simple average applied rate. e International tariff peaks are defined as those exceeding 15%.f Nuisance rates are those greater than zero, but less than or equal to 2%. g 34 tariff lines on petroleum products are not taken into account.

Note: The 2003 tariff is based on HS 02 nomenclature, and the 2007 and 2011 tariffs are based on HS 07 nomenclature. For non-ad valorem tariff lines, the ad-valorem part of alternate rates was taken into account for the calculations.

Source: WTO Secretariat calculations, based on data provided by the Kuwaiti authorities.

98. Overall, Kuwait's applied MFN tariff displays positive escalation from unprocessed to fully processed products (Chart III.2). This escalation is mainly because the average applied tariff rate on the first stage of processing is relatively low. At a more disaggregated level, the tariff structure reflects that a large number of sectors are subject to flat tariff protection: uniform tariff applies for the three stages of processing for textiles and apparels, wood products, non-metallic mineral products, and other manufacturing. Nonetheless, for certain industries the tariff depicts negative escalation, such as in paper and printing, chemicals and plastics, and fabricated metal products.

99. As a result of the implementation of the GCC common external tariff, Kuwait's simple average applied MFN tariff was reduced from 7.7% in 2002, to 5.0% in 2003 (when the Customs Union was launched) and 4.7 % in 2007. The simple average tariff rate increased slightly, to 4.8% in 2011.


(9.4)

(89.2)

(0.3)0

10

20

30

40

50

60

70

80

90

100

0

1,000

2,000

3,000

4,000

5,000

6,000

0 5 100The figures in brackets correspond to the percentage of total lines. Totals do not add to 100% due to the exclusion of prohibited and special goods rates.

WTO Secretariat calculations, based on data provided by the Kuwaiti authorities.

Chart III.1Breakdown of import duty rates, 2011Number of tariff lines

Note:

Source:

Percentage

Number of lines Cumulated percentage(right-hand scale)

100. In September 2010, Kuwait joined the WTO Information Technology Agreement (ITA). The authorities stated that Kuwait applied zero tariffs on most IT products before it joined the ITA. It committed to further eliminate tariffs on all IT products as of 2012.

(b) Tariff exemptions and reductions

101. GCC Member States agreed to exempt "national industry inputs" from Customs duties. These inputs are: machinery, equipment, parts, raw materials, semi-manufactured materials, and packing materials required for immediate industrial production. The manufacturing plant must have an industrial licence from the competent authority (PAI). Exemption is valid as long as the plant is in business. The purpose of the exemption is to lower production costs, increase competitiveness, encourage industrial investment and increase industry’s contribution to the economy.3 According to the authorities, there has been no study on the effects of tariff exemptions on domestic industry development.

102. The GCC Common Customs Law specifies the agencies and goods that are exempt from duty, including the diplomatic corps, military forces, personal effects, imports by charitable societies, and returned goods.4

103. Goods imported into Kuwait, on which customs duties and other taxes were not collected, must be re-exported, or used in the free-trade zone.5 Customs duties and other taxes collected on

3 GCC Secretariat General, Amended Controls for Exemption of Industry Inputs from Customs Duties in GCC Member States, 2009.

4 Article 98-106 of the GCC Customs Law.5 Article 95-97, Unified Customs Regulation (Law) of the Cooperation Council for the Arab States of

the Gulf.


foreign goods may be totally or partially refunded at re-exportation (depending on whether entire or part of the imported goods are re-exported).

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Chart III.2Tariff escalation by ISIC 2-digit industry, 2011

Per cent

Source: WTO Secretariat estimates, based on data provided by the Kuwaiti authorities.

All

prod

ucts

Food

, bev

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es

Tex

tiles

, ap

pare

l

Woo

d pr

oduc

ts

Pape

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Che

mic

als,

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ts

Fabr

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NO

T A

PPL

ICA

BL

E

Agr

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Min

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Raw materials Semi-processed Fully processed

NO

T A

PPL

ICA

BL

E

(iii) Other fees and charges

104. Customs collects ad valorem fees on imported goods, including special services fees for temporary entry of products, transit services fees, and non-ad valorem fees for certificates. According to information from the authorities, in 2009/10, Kuwait Customs collected US$19 million in fees and charges, down from US$22 million in 2008/09 and US$48 million in 2005/06. The decline was attributed to the collection of a large part of fees and charges being entrusted to the private sector.

Table III.3Customs duty and fees, 2003-10(US$ million)

Fiscal year Fees and charges Customs duty

2003/04 20.9 491.62004/05 31.5 565.82005/06 48.1 602.12006/07 16.9 655.72007/08 19.1 787.62008/09 21.9 798.52009/10 18.9 662.5

Source: Customs information.

105. Kuwait requires authentication of documents such as commercial invoices, certificates of origin, health and halal meat certificates, and manifests, for all imports. These documents must be authenticated by the Kuwaiti embassy or an assigned embassy in the exporting country. Consular authentication costs KD 5-10 per page, and the authorities are preparing a study to reassess these fees.


According to the authorities, the purpose of consular authentication is to prevent the importation into Kuwait of problematic goods through fake and fraudulent documentation.

(iv) Free-trade zones

106. The Law Concerning Free Trade Zones (No. 26 of 1995) allows for the establishment of one or more free-trade zones (FTZs). The Ministry of Commerce and Industry assumes supervision of the free-trade zones, although it may entrust their management to the private sector. Firms can obtain licences on the spot and face little state intervention.6 They are exempted from corporate income tax and customs duties (although firms outside the zones are also exempted from customs tariff when importing "national industry inputs"). Exports and imports into the zone are not subject to the import and export restrictions, although they may not import goods that are prohibited. Foreign invested firms established in the zones are subject to the offset programme if they obtain government procurement contract (section (3)(iii)).

107. In 1998, Kuwait established a free-trade zone in the industrial and commercial area at Shuwaikh Port. The FTZ is owned and financed by the private sector. The objective of the zone is to "attract national and foreign investment for the restoration of Kuwait as a pioneering trade country, by providing investors with commercial and investment opportunities, so as to carry out all permissible activities without restriction or limitation, which will to boost exports and revive national economy".7

(v) Import prohibitions, restrictions, and licensing

(a) Import prohibitions

108. Kuwait prohibits the importation of certain goods mainly for religious considerations, as well as meeting the requirements of international conventions and following UN sanctions, security, health and safety, moral, and environment protection. Products prohibited from importation cover, inter alia, food products containing alcohol, pork and their derivatives, as well as cars and trucks with the steering wheel to the right or the modified steering wheel (Table AIII.2).

(b) Import licensing

109. Kuwait maintains a non-automatic, "general" import licensing system, in accordance with the Import Law (No. 43 of 1964).8 The licensing system applies to all goods from all countries. Importers must obtain a commercial licence, then an import licence, both from the Ministry of Commerce and Industry (MCI). The MCI is the single administrative body in charge of issuing licences. According to the authorities, licensing is not in place to restrict the quantity or value of imports; it is to ensure that goods do not enter Kuwait if they do not meet the requirements of its different laws, regulations or decisions.

110. Import licences may be further grouped into those granted to firms and companies, and those given to persons and some companies according to their activities. The conditions and validity of these licences are listed in Table III.4. There is no penalty for non-use of a licences; licences are not transferable. There are no fees or administrative charges, or deposit or advance payment requirements associated with the issuance of a licence.

6 Abdullah Kh. Al-Ayoub & Associates. Viewed at: http://www.al-ayoub.org/index.html [04/02/11].7 Ministry of Commerce and Industry (2010), p. 55.8 WTO document G/LIC/N/3/KWT/1, 25 October 2010.


Table III.4Import licences, 2004-10

Type of licence Conditions Validity

Import licences to firms and companies

Granted to companies and establishments upon provision of: 1. Application signed by the person concerned2. Copy of valid commercial license3. Copy of signature certificate of the person concerned4. Copy of Chamber of Commerce certificate valid for

the current year5. Copy of Commercial Register certification6. Original import licence, in case of renewal7. A letter from concerned company/establishment

requesting a replacement, if the original is lost

One year; extension may be granted.

Import licences to persons, firms, and companies according to activities

Granted upon provision ofA: persons:

1. Application signed by the relevant person2. Copy of shipment policy3. Copy of civil identity card

B: Establishment/company:1. Application signed by the concerned person2. Copy of valid commercial licence3. Copy of shipment policy4. Copy of signature certificate of the concerned person

One-shipment licence

Year Newly issued import licences Import licences to firms and companies(new and renewed)

Import licences to persons and some companies

2004 2,152 9,619 5,4092005 1,928 10,084 5,7762006 1,704 10,214 6,1112007 1,801 10,536 7,1162008 1,754 10,955 8,5092009 1,401 10,944 6,9982010 1,343 10,076 6,214

Source: MCI (2010), Annual Report 2009, Department of Planning and Research, p. 43; and information provided by the Kuwaiti authorities.

111. For certain goods, importers require special permission from competent agencies, in addition to the “general” import licence from the MCI (Table III.5).

Table III.5Imports requiring special permission

HS code Description Agency of release

Chapters 1-5 Live animals, animal products Public Authority of Agriculture Affairs and Fish Resources (PAAF)

Chapter 6 Live trees other plants; bulbs, roots and the like; cut flowers and ornamental foliage

(Fresh)PAAF

Chapter 7 Edible vegetables and certain roots and tubersChapter 8 Edible fruits and nuts; peel of citrus fruit or melonsChapter 9 Coffee, tea, mate and spices (Chilled and frozen)

Kuwait MunicipalityChapter 10 CerealsChapter 11 Products of the milling industry; malt; starches; inulin; wheat

glutenChapter 12 Oil seeds and oleaginous fruits; miscellaneous grains, industrial or

medicinal plants; straw and fodderChapter 15 Animal or vegetable fats and oils, and their cleavage products and

prepared edible fats; animal or vegetable waxesPAAF

Table III.5 (cont'd)


HS code Description Agency of release

Chapter 16-23 Prepared foodstuffs; beverages, spirits and vinegar; tobacco and manufactured tobacco substitutes

Kuwait Municipality

Chapter 24 Tobacco and manufactured tobacco substitutes Ministry of Health25010010 Common salt (table salt) Kuwait MunicipalityChapter 28 Inorganic chemicals; organic or inorganic compounds of metals, of

rare earth metals, of radioactive elements or of isotopesEnvironment Public Authority

Chapter 29 Organic chemicalsChapter 31 FertilizersChapter 32 Tanning or dyeing extracts; tanning and their derivatives, dyes,

pigments and other colouring matter; paints and varnishes; putty and other mastics; inks

Chapter 35 Albuminoidal substances; modified starches; glues; enzymesChapter 38 Miscellaneous chemical productsChapter 30 Pharmaceutical products Ministry of HealthChapter 33 Essential oils and resinoids; perfumery, cosmetic or toilet

preparationsChapter 34 Soap, organic surface-active agents, washing preparations,

lubricating preparations, artificial waxes, prepared waxes, candles and similar articles

Chapters 44-46 Wood and articles of wood; wood charcoal Public Authority for Industry (PAI)

56081100 Made up fishing nets of man-made textiles PAAFChapters 84-85 Machinery and mechanical appliances; electrical equipment; parts

thereof; sound recorders and reproducers, television image and sound recorders and reproducers, parts and accessories of such articles

PAI

8424.1000 Fire extinguishers Kuwait Fire Service Directorate8424.9090 Other parts for mechanical or jet projecting appliances, not

elsewhere classified8413.1910 Fire pumps8705.3000 Fire fighting vehicles6506.1020 Firemen's helmets8905.9010 Fire-floatsChapter 87 Private cars (1,000 to 3,000cc) of the current year model, or the

model of the previous five years maximum (in Chapter 8703)Ministry of Commerce and Industry

9020.0000 Other breathing appliances and gas masks Kuwait Civil Defence Directorate

Source: Information provided by the Kuwait Customs Authority.

(vi) Contingency measures

(a) Legislation framework

112. Kuwait notified to the WTO that the GCC Common Law on Anti-dumping, Countervailing Measures and Safeguard was most recently amended in December 2010.9 It agreed to notify the Rules of Implementation when its translation into English has been completed. Under the amended Law, the GCC Ministerial Committee, the Permanent Committee (PC), and the Technical Secretariat are responsible for implementing this law and its implementing rules.

113. Complaints may be made by, or on behalf of the GCC industry, if supported by those GCC producers who account for more than 50% of the total production of the like product produced by GCC producers who support or oppose the complaint; GCC producers expressly supporting the complaint must account for at least 25% of the total production of the like product produced by the GCC industry.

9 WTO document G/ADP/N/1/KWT/1, G/SCM/N/1/KWT/1, G/SG/N/1/KWT/1, 20 June 2011.


114. All complaints must be submitted to the Technical Secretariat. Within 30 days of receipt of a complaint, the Technical Secretariat examines the accuracy of the evidence provided and prepares an initial report to the Permanent Committee with its proposal whether to initiate an investigation. Within 15 working days of receipt of the initial report, the PC must decide either to initiate an investigation, as there appears to be sufficient evidence within the meaning of the Law and its regulation; or to reject the complaint because of insufficient evidence. The Technical Secretariat informs the complaining party of the PC's decision within 7 working days of issuance of the decision.

115. If the PC decides to initiate an investigation, the Technical Secretariat must send questionnaires to interested parties, including domestic producers, importers, exporters, and foreign producers and consumer associations. Parties receiving questionnaires have 40 days to reply; an extension of 10 days may be granted depending on parties' circumstances. The Technical Secretariat may disregard any reply that is not submitted within the time provided and in the form requested.

116. The Technical Secretariat normally makes a preliminary determination no later than 180 days following initiation of investigation, and publishes a report containing details of the finding and conclusions reached, as well as the reasons that led to the conclusions, while protecting confidential information. Parties must submit comments, if any, on information disclosed to them, in writing within 15 days of the disclosure.

117. An investigation must be terminated immediately if (a) the volume of imports (actual or potential) is negligible, i.e., if the volume of imports from a particular country accounts for less than 3% of the total imports of that product10; and (b) if it is determined that the price margin is de minims, i.e., if this margin is less than 2% of the export price.

118. The decision to terminate the investigation, to impose anti-dumping duties, countervailing measures, or safeguard measures, must be published by the Technical Secretariat in the Official Gazette. The decision to impose any trade remedy measures enters into force on the date of its publication in the Gazette.

119. The Ministerial Committee, which is the GCC industrial cooperation committee consisting of industrial ministers from member states, is responsible for applying definitive measures upon recommendations of the PC. A national governmental body, assists the GCC authorities in carrying out the investigation.

120. The GCC Ministerial Committee has not applied any trade remedy measures to date. Two safeguard investigations have been initiated: Notice No. 1/2009 against increased imports of other uncoated paper and paperboard in rolls or sheets; and Notice No. 2/2009 against increased imports of angles, channels and beams. The two investigations were terminated by the GCC Permanent Committee, which determined that there was a lack of injury in both cases. In accordance with the Law, affected parties may apply to the Ministerial Committee for review. If the case is rejected by the Ministerial Committee, the party may appeal to a judicial body in a member state.

(b) Anti-dumping

121. The PC may impose provisional anti-dumping measures if the following conditions are met: (a) an investigation has been initiated and notice has been given to that effect; (b) interested parties have been given adequate opportunities to submit information and make comments; and (c) an

10 However, the volume of dumped imports is not negligible if more than one country is under investigation, and collectively imports from these countries account for more than 7% of total imports of the investigated product.


affirmative preliminary determination has been made of dumping, injury, and causal link, and confirms that provisional measures are necessary to prevent injury being caused during the investigation. Provisional measures may take the form of provisional duty or a security (by cash deposit or bond), not greater than the estimated dumping margin. The provisional duties may be imposed no earlier than 60 days from initiation of the investigation. They may be applied for four months and may be extended for another two months.

122. The need for the continued imposition of provisional measures may be reviewed. Upon initiation of a review, the Technical Secretariat must publish a notice in the Official Gazette. After the review, the PC submits a proposal to the Ministerial Committee to: (a) repeal the measures if it is determined that the anti-dumping duty is no longer warranted; (b) maintain the measure if it is determined that dumping and injury would likely continue or recur if the measure were removed; (c) amend the measure. A review must be concluded within 12 months of its initiation.

123. Based on the proposal from the PC, the Ministerial Committee may adopt definitive anti-dumping duties, which must not exceed the margin of dumping. Such duties are imposed on the dumped imports from all sources, for a period not exceed five years, which may be extended after a review.

124. If a product is subject to definitive anti-dumping duties, a review must be carried out to determine individual dumping margins for new exporters. No anti-dumping duties are levied on imports from such exporters or producers during the review process. However the PC, upon proposals from the Technical Secretariat, may withhold appraisal or request guarantees to ensure that anti-dumping duties may be levied retroactively to the date of the initiation of the review. Such a review must be completed within nine months from initiation, and in any case no more than twelve months.

125. Kuwait notified in 1998 that it did not adopt any anti-dumping actions during the period 1 July to 31 December 1997.11 According to the authorities, Kuwait (or the GCC) has not taken any anti-dumping actions.

(c) Countervailing duties

126. The PC may impose provisional countervailing duties if the following conditions are met: (a) an investigation has been initiated and a notice has been given to that effect; (b) interested parties have been given adequate opportunities to submit information and make comments; (c) an affirmative preliminary determination has been made that provisional measures are necessary to prevent injury being caused during the investigation.12 Provisional measures may take the form of a provisional duty or a security (by cash deposit or bond), not greater than the estimated amount of the countervailable subsidy. Provisional duties must be imposed no earlier than 60 days from the initiation of the investigation, and must be applied for a period not exceeding four months.

127. A countervailing measure may remain in force only as long as, and to the extent that, it is necessary to counteract the countervailable subsidy that is causing injury. A definitive countervailing duty expires five years from its imposition, or five years from the date of initiation of the most recent review.

11 WTO document G/ADP/N/35/Add.1, 30 March 1998.12 A negative preliminary determination does not automatically terminate the investigation, but no

provisional measures may be imposed in such a case.


128. The need for the continued imposition of countervailing duties may be reviewed. Upon initiation of a review, the Technical Secretariat must publish a notice in the Official Gazette. After the review, the PC submits a proposal to the Ministerial Committee to: (a) repeal the measure; (b) maintain the measure if it is determined that subsidization and injury would likely continue or recur if the measure were removed; or (c) amend the measure. A review must be concluded within 12 months.

129. Kuwait notified that it did not adopt any countervailing duty action during the period 1 January to 30 June 199513, or 1 January to 30 June 1996.14 According to the authorities, Kuwait (or the GCC) has not taken any countervailing measures.

(d) Safeguard measures

130. The Technical Secretariat is responsible for reporting to the PC if it finds that the import quantity of an investigated product is increasing so fast as to cause or threaten to cause serious injury to the GCC industry producing like or directly competitive products, and that the application of a definitive safeguard measure is in the public interest. The PC may recommend that the Ministerial Committee apply a definitive safeguard measure. The duration and level of any such measure must not be more than necessary to prevent or remedy serious injury and to facilitate adjustment.

131. A definitive safeguard measure may take the form of a quota on imports of the investigated product, or safeguard duties; the measure must not reduce the quantity of those imports below the average level registered in the most recent three representative years for which statistics are available, unless there is clear justification that a different level is necessary.

132. According to the authorities, Kuwait (or the GCC) has not taken any safeguard measures.

(vii) Standards and other technical requirements

(a) Standards and technical regulations

Standardization

133. According to the authorities, Kuwaiti standards are based on international standards with limited deviations due to climatic, geographical, and infrastructural conditions; more than 90% of Kuwaiti standards are equivalent to international standards.

134. A decision was taken through the Gulf Standardization Organization (GSO), to develop common unified standards and technical regulations that will eventually replace the standards and technical regulations of individual GCC member countries. According to the authorities, the GCC common standards and technical regulations are to be based on international standards wherever possible, and deviations are to be kept to an absolute minimum for climatic, geographic, infrastructure, and moral reasons.15 Before adopting a unified GCC standard, individual GCC countries apply their own standards; a product that meets the requirements of a technical regulation of another GCC country but not Kuwait's is not allowed to enter Kuwait.

135. Kuwait's Standards Unification Law No. 128 /1977 covers the adoption of standards, technical regulations, and conformity assessment procedures, and established the Public Authority for

13 WTO document G/SCM/N/7/Add.1/Rev.1, 7 February 1996.14 WTO document G/SCM/N/19/Add.1, 9 October 1996.15 WTO document G/TBT/2/Add.105, 6 April 2011.


Industry (PAI) as the government agency responsible for enforcing the Law. The PAI reviews current standards at least every five years. The Standards and Metrology Department (KOWSMD) under the PAI is in charge of developing and publishing national standards, adopting foreign and international standards as national standards, quality mark licensing, and issuing conformity certificates for local and imported products.16

136. Article 11 of the Law designated the Official Gazette as the official publication for announcing the adoption of standards. The ongoing drafting work on standards and technical regulations is announced in the Consumer Magazine. According to the authorities, proposed drafts are available upon request.

137. Kuwaiti standards take into consideration the opinions of various stakeholders (producers, traders, consumers, relevant authorities, and experts) through their participation in the work of the specialized Technical Committees (TCs), which draft standards and conduct relevant studies. Foreign producers and exporters may participate as TC members through their local agents. They may also submit their comments on draft standards directly.

138. The authorities state that provisions of the Standards Unification Law are compatible with the TBT Agreement. Kuwait applies the Code of Good Practice for the Preparation, Adoption, Application and Notification of Standards and Technical Regulations in accordance with the TBT Agreement. Its acceptance of the Code was notified to the TBT Committee on 29 October 2002.

139. Article 13 of the Standards Unification Law stipulates that Kuwaiti standards are voluntary, and the Ministry of Commerce and Industry may convert them into mandatory technical regulations for considerations of health, safety, or national security. The Technical Committee for the sector concerned, in the KOWSMD, discusses and recommends the conversion, and prepares a draft technical regulation. Once approved by the Director of the KOWSMD, the draft technical regulation is notified to the WTO for comments within 60-90 days. A tentative enforcement date is assigned, which allows a sufficient period for importers and local manufacturers to comply. If the measure is likely to have a major effect on importers or local manufacturers, advertisements are placed in newspapers, and stakeholders are invited to meetings and seminars to express their views. In most cases, the period allowed for enforcement is no less than six months from publication of the technical regulation in the Official Gazette. The finalized regulation must be approved by the Minister of the Ministry of Commerce and Industry.

Kuwait Conformity Assurance Scheme (KUCAS)

140. From June 2006, PAI has implemented the Kuwait Conformity Assurance Scheme (KUCAS) Guidelines to verify the conformity of all "regulated products" (imported or domestically produced), i.e. products subject to technical regulations, including electrical toys, household and commercial electrical and gas appliances, automotive, chemical, and building materials (Table AIII.3). According to the authorities, this is to protect consumers and prevent deceptive practices. 17 The authorities state that all Kuwaiti technical regulations and conformity assessment procedures target consumer products that pose a high risk to Kuwaiti consumers due to health and safety hazards associated with their use, or as a result of prevailing deceptive practices.18

16 WTO document G/TBT/CS/N/148, 13 November 2002.17 PAI online information, "Kuwait Conformity Assurance Scheme (KUCAS) Guidelines". Viewed at:

https://www.pai.gov.kw/portal/page/portal/pai/KUCAS/Guidelines/KUCAS_Guidelines_en_r.pdf [13/01/11].18 When assessing the risks and hazards involved, the PAI considers the apparent hazards in the

product; information received about accidents and injuries to consumers in Kuwait and neighbouring Gulf countries, as well as information from several product recall databases in the United States, U.K., Australia, and other countries; technical regulation status of the relevant product in the United States, Canada, EU, and


141. For imported products, conformity assurance procedures may be completed either by the exporters, in the exporting country, through a certification/inspection body (CIB) approved by PAI (four CIBs have been approved); or by importers, who complete conformity procedures upon arrival of consignments at Kuwaiti ports, through KUCAS Conformity Unit under the KOWSMD. In order to avoid “full testing” of frequently exported/imported regulated products, the exporter/importer may apply for a Technical Evaluation Report (TER) or a Technical Evaluation Certificate (TEC), valid for two years.

142. Consignments of regulated products that have obtained a TEC/TER are subject to selective technical inspection. After inspection, the Conformity Unit issues a Certificate of Clearance (CoC), the importer may obtain customs clearance, and the products are allowed for sale on Kuwait market. If the product fails the test, it is considered as non-conforming and a re-export order is issued. The importer must show evidence that the consignment has been re-exported within two weeks of the order.

143. For regulated products considered high risk by the KUCAS' Risk Assessment System, the Conformity Unit must conduct market surveillance on samples picked up randomly in the market. This is done in cooperation with the Directorate of Consumer Protection in the Ministry of Commerce and Industry. If the product fails to meet applicable standard requirements, a product recall or re-export order is issued. According to the authorities, the Risk Assessment System takes into consideration several risk factors: type of product (process or batch production versus non-process), compliance history as determined in pervious consignments and through market surveillance, confidence in the product (whether the exporting country adheres to international standards and conformity assessment procedures), application of quality management system by the manufacturer (such as ISO 9001 or equivalent), and the frequency of consignments.

144. Some regulated products are exempted from KUCAS conformity procedures: products holding the Kuwait Quality Mark; diplomatic cars imported by foreign embassies; products imported in small non-commercial quantities; products imported on a temporary basis (e.g. for display purpose); products forming contents of large industrial or government projects. In addition, the GSO issues GCC certificates for road vehicles and tyres, both of which are exempted from KUCAS conformity procedures.

145. Locally manufactured regulated products that do not have a Kuwait Quality Mark licence are subject to the same conformity procedures as imported products. If the product fails to meet the requirements of the applicable technical regulations, a Production suspension and product recall order is issued. The manufacturer must rectify the deficiencies in all stock and recalled products before being allowed to re-market them. If this is not feasible, the manufacturer must either destroy the products, or export them to countries whose standards consider these products as compliant (according to the authorities, this has never happened in practice). A manufacturer must obtain Approval to Market for his product, without which he cannot renew his annual manufacturing license. This approval is only granted to manufacturers whose products are compliant with KUCAS, or the Kuwait Quality Mark Scheme.

146. The Kuwait Quality Mark is a voluntary system assuring the quality of products. Manufacturers may request a Quality Mark on their products from the Quality Control and Development section of the PAI. A Quality Mark is valid for one year; after that the product must be re-evaluated and re-inspected in the factory. Manufacturers must to pay for the Quality Mark: KD 225 for the first year of a new application, and KD 80 for annual renewal.

Australia; and extent of voluntary compliance of products and the prevalence of deceptive practices assessed by the market surveillance activities carried out by the PAI.


TBT notifications

147. Up to 13 October 2011, Kuwait had made 69 notifications of standards and technical regulations to the WTO; 56 were notified under Article 2.9 of the TBT Agreement, 52 by the Standards and Metrology Department (KOWSMD), and the other 4 by the PAI directly. The period for comment for these notifications was 60 days. Around 70% of the notifications were on technical regulations (i.e. mandatory); more than half related to motor vehicles, while the rest covered foodstuffs, and halal food.

148. Between January 2008 and October 2011, WTO Members raised one concern in the TBT Committee over Kuwait's technical regulations.19 Australia encouraged GCC members to nominate one member to act as a single TBT notification authority on behalf of the GSO or the GCC Secretariat.20 Kuwait authorities noted that they agreed with Australia's comments.

(b) Sanitary and phytosanitory requirements

149. Kuwait adopts the GCC Laws on Veterinary Quarantine and Plant Quarantine, aiming to protect human, animal, and plant life and health.

150. The Public Authority of Agriculture Affairs and Fish Resources (PAAF) is the national enquiry point under the WTO SPS Agreement.21 Kuwait is a member of the OIE (World Organization for Animal Health), IPPC (International Plant Protection Convention), and CODEX (the Codex Alimentarius Commission). The authorities stated that SPS requirements in Kuwait are based on international standards.

151. An importer of animals and animal products, and plants and plant products must register with PAAF to obtain import permission; an official sanitary or phytosanitary certificate is required from the exporting country. PAAF conducts testing/inspection through its legal entity at the border, in accordance with the GCC SPS laws. According to the PAAF, it bears the cost of conformity assessments and inspections. If a consignment is not in conformity with SPS requirements, the importer may either destroy the consignment or re-export within a maximum of one week.

152. In accordance with the GCC Veterinary Quarantine Law, animals suspected of having been infected with an epizootic or contagious disease must be held in quarantine for a period not less than the incubation period for the epizootic disease, in order to allow the necessary tests to be carried out. In accordance with the GCC Plant Quarantine Law, if an imported item presents any risk of introducing or spreading pests, the competent authority may require the item to undergo appropriate treatment to remove the risk within one week; to be re-exported to the originating country or another country; or to be destroyed by a means specified in the notice.

153. The PAAF is also in charge of issuing phytosanitary certificates for exporters of animals and animal products, and plants and plant products. An exporter/re-exporter must submit an application to the PAAF, to obtain a phytosanitory certificate. Consignments must be exported within one week of issuance of the phytosanitory certificate.

19 WTO document G/TBT/GEN/74/Rev.6, 19 October 2010.20 WTO document G/TBT/M/49, 22 Dec 2009.21 Animal health affairs are the responsibilities of Department of Animal Health, Animal Quarantine

Section. Plant wealth affairs are the responsibilities of Department of Research and Nursery, Plant Quarantine Section, Plant Protection and Pest Controlled Section, Soil and Water Section.


154. Imports of foodstuffs of animal origin must be inspected by municipal officials, while medicines and drugs are subject to laboratory testing by the authorities in the Ministry of Public Health.22

155. Kuwait has made three notifications under the Agreement on the Application of Sanitary and Phytosanitory Measures (Table III.6). All the notifications were made by the PAAF, and were on emergency measures.

Table III.6Notifications on sanitary and phytosanitary measures, 13 October 2011

Date of notification/symbol of document

Products covered Objective/rationaleNature of the urgent problem(s) and reason for urgent action

Regions/countries likely to be affected

International standard applicable

30/05/2007G/SPS/N/KWT/1

Live birds, their products (including poultry meat, day-old chicks, eggs) and by-products

Food safety, animal health, and protect humans from animal disease, to prevent the entry of avian influenza virus

Import restriction imposed due to the reported detection of highly pathogenic avian influenza (HPAI) virus serotype H5N1 in Kuwait

All countries OIE

31/07/2009G/SPS/N/KWT/2

Live birds, their products (including poultry meat, day-old chicks, eggs) and by-products

Food safety, animal health, and protect humans from animal disease, to prevent the entry of avian influenza virus

Import restriction imposed due to the reported detection of low pathogenic avian influenza (LPAI) virus serotype H7N9 in the State of Kentucky, United States

United States, State of Kentucky

OIE

31/07/2009G/SPS/N/KWT/3

Equine breed Food safety, animal health, and protect humans from animal disease, to prevent the entry of equine influenza virus

Import restriction imposed due to the reported detection of highly pathogenic equine influenza (HPEI) virus serotype H3N8 in India

India OIE

Source: WTO documents; and information provided by the Kuwaiti authorities.

1. According to the authorities, import restrictions were imposed temporarily in 2010 due to reported HPAI virus serotype H5N1 in Romania and Denmark.

2. Kuwait has signed bilateral/regional agreements covering SPS measures with: Algeria, Argentina, Australia, Bulgaria, Egypt, Indonesia, Iran, Jordan, Laos, Mongolia, Morocco, Sudan, Syria, Turkey, Tunisia, Viet Nam, Yemen, and ICARDA.

(c) Labelling and packaging requirements

1. Kuwait has three technical regulations covering labelling of pre-packaged foodstuffs, food additives, and packaged tobacco products. All packaging containing foods should have a sticker showing the name of the product, the contents, the net and gross weights, the country of origin, date of production, and date of expiry in Arabic. In general, labels must be in Arabic and any other language.

2. Technical regulations are applied on the packaging of non-returnable glass bottles for carbonated beverages, tea and herbs bags, and food packages. A voluntary standard applies to the production, processing, labeling and marketing of organically produced food; and a standard (GSO150:2007) on shelf life covers expiry periods for food products, which includes both a

22 Kuwait Chamber of Commerce and Industry online information. Viewed at: http://www. kcci.org.kw/.

http://www/


mandatory and a voluntary expiry period. According to the authorities, this standard is under modification.

3. Kuwait has two technical regulations on halal food. One is a general requirement that must be followed when producing, preparing, dealing, and storing halal food and its products; the other is a guideline for halal food certification bodies and the accreditation requirement.

4. Currently, genetically modified organisms (GMOs) are not allowed to be imported into Kuwait.

(2) MEASURES DIRECTLY AFFECTING EXPORTS

(i) Procedures

1. Kuwait maintains simple export procedures. According to the authorities, any natural persons or legal entities, Kuwaiti, GCC or foreign, may export in Kuwait. The same declaration, registration, and documentation requirements apply as for imports.

(ii) Export prohibitions and licensing

1. Kuwait prohibits the following products from exportation, for economic, safety, security, and environmental reasons, and to ensure compliance with international obligations (Table III.7).

Table III.7Products banned from exportation, 2011

HS code Description

11010010 Wheat or meslin flour Chapter 93 Arms and ammunition; parts and accessories thereof

01041090, 01041010, Live sheep and goats10030000, 1005909010059030, 1005902010059010

Maize (corn), barley, bran

Chapter 97 Works of art, collectors’ pieces and antiques

03062300, 03061300 Crustaceans, whether or not in shell, live, fresh, chilled, frozen, dried

0303, 0302,0301 Live fish, fresh, chilled or frozen

73251010, 8544 Other articles of iron and steel, cable

1006, 1512, 2940, 0401, 0402, 0403, 0702, 1104

Rice, sugars, sunflower-seed oil, milk and cream, cereals grains otherwise worked, tomatoes, fresh or chilled

Source: Information provided by Kuwait Customs.

2. Certain goods require an export licence from the competent authorities (Table III.8).

3. Kuwait does not apply export quotas.

Table III.8Export licensing

HS code Description Authority Rationale

Chapter 27 Mineral fuels, mineral oils and products of their distillation; bitumen substances; mineral wax

Kuwait Petroleum Corporation

"Strategic" products

Chapters 1, 2, 3, 4, 7, 8, 9, 10, 11, 15, 17, 18, 19, 20, 21, 2201, 2002

Foods Kuwait Municipality Health, SPS

0908200012079100

Oil seeds, oleaginous fruit, manufactured Ministry of Health Health


HS code Description Authority Rationale1207991012079920121130001211400012119020121190601302110013021910293991102844 Radioactive isotopes Ministry of Health Health90182000, 9022 Apparatus based on the use of X-rays or of alpha Ministry of Health Health284161002914310029163400291635002922430029329100293292002932300029329400293332002939410029394200293961002939620029396300

Psychotropic substances Ministry of Health Health

Chapter 3 Fish, crustaceans and aquatic invertebrates Public Authority of Agriculture and Fish Resources (PAAF)

SPS

23099010 Preparations of a kind used in animal feeding PAAF SPSChapters 1, 41, 5, 4301, 4302, 4303

Animal ecology and leather PAAF SPS

9706 Antiques of an age exceeding 100 years Dept. of Antiques and Museum

Culture

71181000 Coin (other than gold coin), not being legal tender Central Bank SecurityChapter 0101 Live horses PAAF SPS3825 Residual products of chemical or allied industries Environment Public

AuthorityProtecting environment

3915 Waste, parings and scrap, of plastics Environment Public Authority

Protecting environment

40170010 Including waste and scrap; articles of hard rubber Environment Public Authority

Protecting environment

Chapter 30 Pharmaceutical products Ministry of Health Health8506-8507 Primary cells and primary batteries Environment Public

AuthorityProtecting environment

27101901 Engine oil Environment Public Authority

Environment protection

Table III.8 (cont'd)


HS code Description Authority Rationale7204, 7404, 7503, 7602, 7802, 7902, 8002, 8101970081027900810330008104200081053000810600008107300081083000810930008110200081121300811222008112520081130000

Ferrous waste and scrap Ministry of EnergyMinistry of Defence

Environment protection

Source: Information provided by Kuwait Customs.

(iii) Export duties, duty concessions, and subsidies

156. Kuwait applies no export taxes, charges, or levies.

157. According to the authorities, Kuwait applies no export subsidies. Kuwait notified that it provided no export subsidies to agricultural products from 1995 to 201023, and no export subsidies to agricultural products were provided in 2011.

158. The Arab Investment and Export Credit Guarantee Corporation, through an MOU with the PAI, provides insurance to exporters for commercial and non-commercial risks. It aims to promote capital mobility in Arab countries and to enhance Arab exports worldwide, by providing guarantee coverage to Arab and non-Arab investments in its member countries against non-commercial risks, and by providing export credit guarantees against commercial and non-commercial risks. In 2010, of a total value of US$768 million export credit contracts, 8% (US$65 million) were for Kuwait exporters.24 Loans are not subject to any interest rates, although the Corporation charges some fees (depending on the project).

159. Exporters may obtain a credit line from the Islamic Development Bank (IDB). Between 1976 and 2010, Kuwait exporters obtained a total of US$1.4 billion from the IDB, of which 80% went on trade financing.25 The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) provides export credit guarantees to member states. It also provides member states investment insurance and guarantees against non-commercial risks.

(iv) Export promotion and marketing assistance

160. The Ministry of Commerce and Industry promotes Kuwaiti exports through export exhibitions, financed jointly by the MCI, PAI, and Kuwait Chamber of Commerce. In 2009, the MCI agreed to establish 113 exhibitions, of which 6 were held abroad; 74 of the 107 exhibitions in Kuwait were private exhibitions.26

161. The PAI has signed bilateral agreements to promote exports, with Jordan, Morocco, Oman, Syria, and Tunisia; the parties agree to promote their national exports by facilitating the participation

23 WTO documents G/AG/N/KWT/1, 28 July 2010, and G/AG/N/KWT/2, 21 March 2011.24 Arab Investment and Export Credit Guarantee Corporation (2011), p.17.25 IDB (2011), Table 2.26 Ministry of Commerce and Industry (2010), p. 51.


of private/public sectors in international exhibitions, and organizing conferences, seminars, and discussions.

162. The PAI's Industrial Establishment Exports Development Programme, is aimed at increasing the share of Kuwaiti industrial exports in international markets, by providing accurate and updated market information; developing training programmes for the national labour force; and creating new opportunities for Kuwaiti export products.

(3) MEASURES AFFECTING PRODUCTION AND TRADE

(i) Taxation and subsidies

163. Tax revenue accounts for a very small portion of government revenue in Kuwait; most government revenue comes from oil income. In 2009/10, tax revenue accounted for about 1.7% of total government revenue, while oil income accounted for 93.7% (Table III.9).27

164. Kuwait does not levy value-added tax, or excise tax. Major taxes include taxes and fees on trade (including tariffs), corporate income tax (for foreign companies), and national labour support tax (Chapter II(3)(ii)). While foreign companies are subject to corporate income tax, Kuwaiti (and GCC) companies are not.

Table III.9Tax revenue and percentage in total taxes, 2006-10(KD million)

2006/07 2007/08 2008/09 2009/10

Share in total gov. revenue

(2009/10)

Total government revenue 15,509 19,022 21,005 17,688 100%

Tax revenue 287 355 349 296 1.7%Indirect taxes 205 246 227 202 1.14%

Fees on properties 13 20.5 10 9 0.05%Fees on goods and services 1.8 2.3 2 1.9 0.01%Taxes and fees on trade 190 224 214 190 1.1%Direct taxes 82 111 127 94 0.5%

Zakat 0 0.17 4.5 16 0.1%National labour support tax 49 72 79 31 0.2%Corporate income tax 33 38 43 47 0.2%

Other major government revenue 14,511 17,719 19,710 16,584 93.7%Total government expenditure 10,306 9,698 18,262 11,250 n.a.

n.a. Not applicable.

Source: Ministry of Finance.

165. According to the authorities, Kuwait maintains no trade-related investment measures.

166. The Government has adopted a welfare state model since independence in 1961. People receive a number of free social services (e.g. health care and education), while paying a small fraction of the cost of public services (e.g. communications, water, and electricity). Most fees for public services have not changed for decades.

27 The remaining 4.6% of government revenue came from services revenues, and miscellaneous revenues and fees.


(ii) State trading, state-owned enterprises, and privatization

167. According to the authorities, Kuwait has no state trading enterprises.

168. The Kuwait Petroleum Corporation (KPC) is a State-owned corporation run by an independent management and Board of Directors. The KPC conducts its business in accordance with commercial considerations and, according to the authorities, does not influence the level or direction of import and export through its purchases or sales.

169. The public sector is Kuwait's largest employer with 76% of the Kuwaiti labour force working in the sector. The State has a direct and strong influence in the economy: it fully owns companies such as the Kuwait Petroleum Corporation (KPC), and the petroleum sector accounts for half of GDP. The State also has full/majority ownership in the telecoms, banking, and electricity generation sectors. The authorities provided a list of selected SOEs with full/majority state ownership (Table III.10), although the share of SOEs in the economy in terms of contributions to GDP and employment was not available.

170. The Government considers privatization as a means of increasing State revenue, and help the economy to diversify from oil. Under Law No.37 of 2010 Regarding the Organization of the Privatization Programs and Operations (Privatization Law), a Technical Bureau is expected to be established soon, to consider details on how to implement the Privatization Law in Kuwait. Ministry of Finance is working with the World Bank through technical assistance programme to prepare a Kuwait privatization vision; a guidebook on the drafting of an implementing regulation; and to establish a technical bureau.

171. Even before the Privatization Law is implemented, progress has been made in privatization. For example, the Kuwait Airways Corporation (KAC) is undergoing transition to a private shareholding company pursuant to Law No. 6 of 2008 (Regarding Conversion of KAC into a Joint Stock Company). Also, the Kuwait Stock Exchange is to be privatized in accordance with the Capital Markets Law (Law No.7 of 2010) (Chapter IV).

Table III.10Selected SOEs, 2011

SOEs Government share (%) Major activities

Kuwait Investment Company

76.194% - Investing and trading in stock exchange- Investing in real estate market- Writing bills and issuance of the certificate of deposit- Accepting term deposits and investing in financial institutions- Contracting foreign currencies- Organizing international, regional and local exhibitions- Managing the portfolio of customers

Kuwait Public Transport Company

100% - Public transport including road transport inside and outside of Kuwait, and sea transport among Kuwaiti islands

- purchasing, using and selling vehicles and any necessary means of transport for sea and land public transport

- Building industries related to public transport for sea and land transport- Renting any means of transport for the services of sea and land public transport

National Offset Company

100% - Managing offset programme in the name of Ministry of Finance- Guiding foreign companies to carry out their liabilities to the Kuwait offset

programme by implementing long-term partnerships in the Kuwait private sector, and guaranteeing transparency

- Encouraging and attracting foreign investment- Supporting the private sector in the national economy


SOEs Government share (%) Major activities

Table III.10 (cont'd)Kuwait Real Estate Investment Consortium

99.127% - Coordinating real estate companies in Kuwait- Investing in real estate for profit- Building construction, and importing and trading materials related to building- Establishing the management of hotels, clubs, restaurants, coffees, motels, chalets,

and all facilities of tourism, sport and entertainment- Investing in other real estate companies- Managing the properties of third parties- Establishing real estate companies in other countries, to strengthen Arab and

international cooperation

Touristic Enterprise Company

99% - Entertainment projects- Establishing and managing entertainment centres, including amusement parks- Managing tourism projects- Establishing and managing hotels and entertainment places with cooperation of

hotel companies

National Technology Enterprise Company

100% - Establishing or participating in private projects with international technology- Helping the development of technical skills and technology, and encouraging

citizens to engage in advanced technology projects- Studying the highly automated industrial, commercial, professional, occupational,

and service projects- Employing national labour force, and providing with the needed experts - Establishing, participating in portfolios

Source: Ministry of Commerce and Industries.

172. According to the Kuwait Investment Authorities (KIA), the privatization process has been conducted through ownership transfer, and the Government retains 24% of the shares of the new company, with the rest divided between a strategic partner, and the public. The KIA, as a passive investor, has some influence on the Board of Directors. In parallel, efforts have also been made to encourage competition, to avoid having a private company replacing a public company as a monopoly.

173. Through privatization, the Government intends to increase the share of the private sector in the economy; it currently accounts for 25% of GDP.28 In particular, the aim is to increase the share of private investment in total investment from 31% in 2009/10 to 49% in 2011/12 (Table III.11).

Table III.11Public and private sectors in the economy, 2009-12

2009/10 2010/11a 2011/12a

Total investment (KD Million) 6,172.8 7,712.6 8,265

Government investment/total investment 68.5% 64.8% 51.1%

Private investment/total investment 31.5% 35.2% 48.9%

a Estimates.


(iii) Government procurement

174. According to the authorities, the main objective of government procurement in Kuwait is to achieve the best value for money, and to maximize competition through transparency and unbiased procurement procedures.

28 Oxford Business Group (2011), p.24.


(a) Legislative framework

175. Government procurement is regulated under Circular 16 of 1995 on Purchasing Systems of State Authority, Circular of Collective Purchasing, and Law No. 37 of 1964 concerning Public Tenders (Table III.12). Procurement by state-owned enterprises, or public utilities, is not considered part of government procurement in Kuwait. This section focuses on government procurement above KD 5,000 and regulated under Law No.37 of 1964.

Table III.12Government procurement methods and corresponding legislation

Procurement methods and description Legal instruments Threshold Value2008/09

Value2009/10

Kuwaiti dinar (KD)

Direct order

An order to the supplier to provide the state authority with materials or services

Circular 16 of 1995 on Purchasing Systems of State Authority

< 2,000 19 million 16 million

Tender with lower threshold

Bids submitted by more than one supplier, for goods or services; selection is through the purchasing committee in the state authority

(Mumarasah)

Circular 16 of 1995 on Purchasing Systems of State Authority

2,000-5,000 5 million 7 million

Collective purchase

Special requirements of materials and services,are standardized for a group of government authorities. The standardized requirements are announced by the Collective Purchase Committee under the Ministry of Finance

Circular of Collective Purchasing

< 5,000

(if over KD 5,000, Central Tenders Committee must approve)

6 million 3 million

Tender

Buying materials and services that are not monopolized or controlled by administrated pricing; process through the CTC

Law No. 37 of 1964 on Public Tender

> 5,000 2009: 2,709 million

2010:

4,783 million


176. Public procurements above KD 5,000 are supervised and managed by the Central Tenders Committee (CTC), which was set up under Law No. 37 of 1964. The threshold is the same for goods, services, and works. The CTC, affiliated to the Cabinet, comprises six full-time independent members appointed by the Council of Ministers, as well as representatives from, inter alia, the Ministry of Finance, FATWA (Legislative Department), and the General Secretariat of the Supreme Council for Planning and Development.

177. Annual government procurement managed by the CTC was KD 4,783 million (12% of GDP) in 2010, up from KD 2,709 million (9% of GDP) in 2009 (Table III.13). The authorities do not have data on the annual value or proportion of procurement of foreign products and services.

1. Kuwaiti suppliers, or non-Kuwaiti suppliers with a Kuwaiti partner or agent may submit tenders. Suppliers must register with the CTC, the Kuwait Commercial Registry, and the Kuwait Chamber of Commerce. Suppliers of construction works are classified into the following categories after registration: category I – suppliers that have the ability to undertake projects with initial cost exceeding KD 1 million (but less than KD 5 million); category II – suppliers with technical and financial abilities to participate in tenders not exceeding KD 1 million; category III – local suppliers with total works value not exceeding KD 500,000; category IV – local suppliers with total works


value not exceeding KD 250,000. After one year of classification, the supplier may ask the CTC to reconsider the classification category, and transfer to a higher category.

Table III.13Government procurement value, 2009-11(KD million)

Procurement 2009 2010 2011 (April–August)

Total 2,708.8 4,783.3 1,717.5

Procurement by public administrators 1,998.9 2,281.8 1,605.0

Procurement by oil companies 709.9 2,501.6 112.5

Source: Information provided by the CTC.

(b) Procedures

2. The Government allows a 10% price preference for local products and 5% for GCC products. However, if no Kuwaiti company is participating in a tender, GCC products are treated as Kuwaitis and receive a 10% price preference.

3. For procurements managed by the CTC, two procurement methods are used: open tendering and restricted tendering. The Ministry of Finance must approve the projects, and FATWA reviews contracts above KD 75,000. For open tendering, advertisement is open; for restricted tendering, advertisement is to a list of registered contractors or suppliers (usually more than six). The State Audit Bureau must review contracts above KD 100,000 before they are signed. According to the authorities, restricted tendering accounts for more than half of all government procurement managed by the CTC, as most mega projects are awarded to a list of international companies.

4. The CTC awards tenders to bidders who submitted the lowest total price if the quality is satisfactory. The CTC may award a tender to the bidder who offered a higher price if the lowest price offered is unreasonably low.

5. Any interested party has the right to appeal against the CTC's decisions, and the CTC must hold a meeting to discuss the grievance urgently. The Council of Ministers makes final decisions. The CTC noted that 813 grievances arose during September 2010 to August 2011, and all the cases were addressed during the meetings of the CTC.

6. To ensure transparency in government procurement, according to the authorities, information on government procurement should be made available publicly, through CTC online announcement.29

In addition, Law No. 25 of 1996 on the Disclosure of Commissions requires transparency and accountability in all government contracts exceeding KD 100,000. Under the Law, the contracting party must declare whether it has paid, or will pay a commission of any kind to a disclosed or concealed intermediary. The Law also requires both the payer and the payee to disclose, separately, the amount of the commission, the type of the currency, and the place and the manner of the commission. Any actions of non-disclosure or misinformation result in sanctions ranging from civil and criminal penalties, to imprisonment.30

29 The CTC website is: www.ctc.gov.kw (only in Arabic).30 Kuwait Foreign Investment Bureau online information, "Investors Guide". Viewed at:

http://www.kfib.com.kw/kfibclient/clientpages/Index.aspx?id=64 [10.01.2011].

http://www.ctc.gov.kw/


(b) International agreements on government procurement

1. Kuwait is not a party, nor an observer, to the WTO Plurilateral Agreement on Government Procurement (GPA).

2. The GCC has signed two bilateral agreements covering government procurement, i.e., FTAs with EFTA and with Singapore. Under the GCC–EFTA FTA, for a transition period of ten years, GCC countries may provide price preferences of 10% to goods of domestic origin. For Kuwait, government procurement refers to purchases by central government entities (except Defence and Interior), with thresholds of SDR 400,000 for goods, SDR 400,000 for services, and SDR 5 million for construction services. Kuwait includes no public utilities or SOEs, but includes public authorities, Kuwait University, Port Authority, Kuwait Institute for Research, with thresholds of SDR 400,000 for goods, SDR 800,000 for services, and SDR 5 million for construction services.

3. The GCC–Singapore FTA has the same arrangement for government procurement, with the same coverage of entities and the same thresholds. Further, under the GCC–Singapore FTA, Singapore enterprises may participate in Kuwait's government procurement market with the same 10% price preference as for local firms.

(c) Exceptions

1. Kuwaiti government agencies may request permission from the CTC to conduct particular tenders outside the Public Tenders Law; according to the government online information, this rarely occurs.31 Military procurement by the Ministries of Defence, Interior, and National Guard is excluded.

2. Procurement by oil and petrochemical companies may be excluded from the Public Tenders Law. However, specific rules cover purchases by the Kuwait Oil Company (KOC), Kuwait National Petroleum Company (KNPC), Kuwait Oil Tanker Company (KOTC), and Petrochemical Industries Company (PIC): purchases of products/services/construction works with a value above KD 5 million, or purchases whose value changes by more than 10% of the contract value, must be managed by the CTC under the Public Tenders Law.

(d) Offset programmes

1. The Government plays a big role in the economy, and government contracts are of significant weight. To facilitate the development of a private sector, Kuwait's offset programme requires foreign firms that win government contracts above certain thresholds to make an investment that will add value to the economy. Primary objectives of offset programme includes the transfer of advanced technology, creation of job opportunities for Kuwaiti nationals, and provision of training for Kuwaitis.

2. The offset programme commenced in 1992 when the Council of Ministers established a Counter-Trade Offset Programme (Offset Programme) through its Decision No. 694. Between 2004 and August 2005, the programme was suspended, as in many cases offset obligations had not been fulfilled. The offset obligation was reinstated in August 2005, and in March 2006 a National Offset Company (NOC), a state-owned shareholding corporation, began to manage the offset programme on behalf of the Ministry of Finance. NOC works with foreign contractors by reviewing and approving their offset proposals and ensuring their offset obligations are fulfilled.

31 Kuwait Government online information. Viewed at: http://www.e.gov.kw/sites/kgoenglish/portal/ Pages/Visitors/DoingBusinessInKuwait/GoverningBodyOverView.aspx [25/01/11].

http://www.e.gov.kw/sites/kgoenglish/portal/%20Pages/Visitors/DoingBusinessInKuwait/GoverningBodyOverView.aspx

http://www.e.gov.kw/sites/kgoenglish/portal/%20Pages/Visitors/DoingBusinessInKuwait/GoverningBodyOverView.aspx


3. For foreign firms, offset obligations apply to military contracts of KD 3 million and above, civilian contracts of KD 10 million and above, and oil and gas contracts (with the exception of exploration and production contracts). Since 1992, 112 offset contracts have been signed; defence contracts accounted for 60%.32

4. Before they may receive government contracts Foreign firms must invest 35% of the contract value in an approved offset business venture. Offset investment can be either direct or indirect. Direct investment involves projects in which foreign contractors help the Government to acquire and deploy new technologies, or to train Kuwaiti citizens in their use, such as establishing a laboratory, training programme on high technology equipment or software. Indirect investment involves projects that help the Government develop the private sector, such as grants or donations to approved and licensed organizations in Kuwait providing educational, health care, and public services. The NOC uses a multiplier system to encourage offset projects in the most needed areas. A higher multiplier value means a smaller financial obligation for the foreign firm. Projects in health, education, environment, social, manufacturing, and services typically receive higher multiplier values, and direct projects are given a higher multiplier value than indirect ones.

5. Foreign contractors subject to offset must provide an unconditional and irrevocable bank guarantee, equal to 6% of the contract value. The bank guarantee is to ensure that foreign contractors implement their offset obligations. The value of the bank guarantee is reduced gradually until the obligation is fulfilled and the guarantee is cancelled.

(iv) Competition law and price controls

(a) Competition law

1. In April 2007, Kuwait National Assembly approved the Law for Protecting Competition (No. 10, 2007), regulating competition policy issues. However, this Law does not apply to facilities and projects owned or managed by the State; thus, its scope is limited to private businesses.

2. The aim of the Law is to ensure fair competition in the market, protect consumers and producers, and provide legal and fair principles and rules to encourage investment and stimulate business activities. The authorities state that the implementing regulation is still awaiting ratification. At the same time, the GCC is preparing a common Anti-Unfair Competition Law, which will replace Kuwait's competition law.

3. The Competition Law prohibits any agreements, contracts, practices or decisions that adversely affect competition. These include fixing prices, restricting the free flow of products, selling below cost, bid rigging, sharing or allocating markets, and eliminating equal opportunities between competitors through preferring some to the others. Violations are subject to a penalty of KD 100,000 maximum, or equal to the amount of realized illegal gains, whichever is higher. The relevant commodities may be confiscated. In case of repetition of violation, the penalty is doubled. The business may be suspended for a maximum of three years.

4. Some anti-competitive behaviours may be allowed, provided they may achieve certain and specific benefits for consumers, and the benefits are greater than the negative impact of restriction of competition. The Ministry of Commerce and Industry determines whether specific behaviours can be exempted.

32 Oxford Business Group (2011), p. 26.


5. The Law applies to the abuse of IPRs, trade marks, patents, and publishing rights if these rights have resulted in an adverse effect on competition.

6. A Competition Protection Authority is to be established and will report to the Minister of Commerce and Industry. Mergers and acquisitions must be notified if the combined market share is more than 35%. The Authority must examine and decide on such mergers and acquisitions, against a fee of 0.1% of the paid-up capital, or the total value of assets of the respective persons, whichever is less, subject to a maximum of KD 100,000.

(b) Price controls

1. With some exceptions, prices of goods and services are freely determined by the market. The Government controls the prices of public utilities such as electricity and water, as well as public transportation prices. Domestic calls on the fixed-line network are free, and calls from fixed-line to mobile phones in Kuwait are free. The Government also subsidies food for food security reasons. The regulated prices are applied to all consumers, regardless of their nationality.

(v) Intellectual property rights

(a) Legal framework

1. Under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), Kuwait must pass intellectual property laws that meet the minimum standards for the protection and enforcement of intellectual property rights set out in the Agreement. Other international treaties on IPRs that Kuwait has signed, as well as its national legislation are listed in Table III.14.

Table III.14IPR legal framework

Area Description

International conventions Convention Establishing the WIPO, signed in 1998

Arab Convention on Copyright Protection, signed in 1981

GCC GCC Patent Law, 1998

The GCC is preparing a common law on trade marks; which will replace corresponding national laws of GCC members

Kuwait national legislation

Copyright Law on Copyright and Neighbouring Rights (Law No. 64 of 1999). Kuwait has drafted a new copyright law under the MCI, it is before the competent authorities for approval

Patent, designs and industrial models

Law on Patents, Designs and Industrial Models (Law No.4 of 1962 and amended by Law No.3 of 2001)

Trade marks Articles 61-85 of the Law of Commerce No. 68 of 1980 (as amended by Law No.1 of 2001)

Geographical indications Article 62.3 of the Law of Commerce No. 68 of 1980 (as amended by Law No.1 of 2001)

Major responsible agencies

MCI Patents, designs, industrial models, copyrights, trade marks, geographical indications

National Council for Arts, Culture and Letters

Intellectual property rights regarding traditional knowledge and traditional cultural expressions/folklores. The Council is chaired by the Minister of the Ministry of Information

Customs Enforcement of IPRs at the border

Source: WTO Secretariat, based on information provided by the Kuwaiti authorities.

2. The Copyright Department moved from the Ministry of Information, to the Ministry of Commerce and Industry (MCI) in 2006, when the MCI became the sole ministry supervising


intellectual property rights. The MCI is also the contact point under Article 69 of the TRIPS Agreement.33

3. Kuwait does not provide preferential treatment to GCC countries or other Arab countries, in the area of intellectual property rights.

4. Kuwait is seeking to diversify its economy away from oil by attracting foreign investment and encouraging the development of the private sector. The Government believes that IPR protection tends to encourage invention and innovation, and enforcing IPR protection against counterfeiting and piracy could encourage the development of creative industries and promote competition. The MCI aims to foster greater public awareness of IPRs by coordinating with other government bodies, the private sector, and civil society entities.

5. Compulsory licensing is allowed under copyright legislation, as regards translation into Arabic (Article 16 of Law 64 of 1999).34 It is also allowed for patents, for purposes of state interests.

6. Parallel import of copyright protected goods is not addressed in the current Copyright Law. The authorities state that parallel imports are allowed in respect of trade marks, but not in respect of patents and industrial designs.

7. Kuwait has not adopted any specific procedures regarding the General Council Decision on the implementation of paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health.

(b) Copyright

1. Copyright is regulated by Law No. 64 of 1999 (Copyright Law). Article 43 stipulates that, for non-Kuwaiti citizens, copyright protection is limited to works that are published for the first time in Kuwait. For works of Arab authors, who are citizens of Members of the Arab Agreement for the Protection of Author’s Rights, copyright protection is limited to works published in any of those Member countries. If the authors are citizens of WIPO member states, copyright protection is limited to works published for the first time in one of those states.

2. Deposit and registration of works of authorship are not a condition for copyright protection. Nonetheless, Ministerial Order No. 30 of 2003 designates the Kuwait National Library as the place for depositing and registering works of authorship, where copyright and assignment of right applications are examined, and the necessary certificates issued. There is a fee of KD 10 per certificate.

3. The Copyright Law defines a non-exhaustive list of protected works (Article 2), and the terms of protection of the author's economic rights (Article 17). These are:

50 years from the death of the author or from the death of the last surviving author for a joint work;

33 WTO document IP/N/3/Rev.11/Add.5, 13 October 2010.34 Article 16 of Law 64 of 1999: "The protection of the right of an author of a work made in a foreign

language and the right of the translator of that work into another foreign language to translate that work into the Arabic language shall lapse if the author or translator fails to exercise that right within 5 years from the date of the first publication of original or translated work. However, the Minister of Information may issue a license for translation of the work into the Arabic language or publication of the work after a year from the date of the first publication of the original or translated work. In such case, the author or beneficiary of the translation right shall be entitled to a fair compensation".


50 years from the end of the calendar year of publication for (a) works published under a pseudonym or anonymously, unless the author reveals his identity or his true name becomes publicly known, in which case the term lapses 50 years after his death; (b) works in which the owner of the copyright is a legal personality; (c) cinematographic and photographic works, works of applied art, computer programs and databases; and (d) works published for the first time after the author’s death;

50 years from the end of the calendar year in which the performance or recording took place;

20 years from the end of the calendar year in which the broadcast of a programme first occurred.

4. In case of infringement or potential infringement of copyright, at the request of the author or the successor, a judge may temporarily suspend the publication, production, or presentation of a work (Article 36). If the judge deems appropriate, he may order destruction of the illegally published copies of the work, and the court may decide compensation for the use of such work (Article 38).

5. Penalty for copyright infringement is detention for a period of one year or a fine of KD 500, or both. Compared to a one-year detention, a fine of KD 500 seems rather low. According to the authorities, the new copyright law is to address this issue.

(c) Trade marks

1. The GCC is preparing a common law on trade marks which will replace corresponding national laws of GCC members.

2. Currently, the Commercial Code (Law No. 68 of 1980 and amended by Law No.1 of 2001) governs trade mark registration and penalties for infringement. Article 64 stipulates that any person may apply for registration of his trade mark at the Register of Trademarks. If the Registrar accepts the application, the application must be published in three consecutive issues of the Official Gazette. Within 30 days of the publication, any concerned person may write a notice of objection. If no objection is raised, a certificate of registration is granted to the applicant. It takes approximately six months to one year to obtain a registration certificate, if no objection is raised.

3. Registered takes effect retroactively from the date of submission of the application. Protection is for ten years from the date the application is approved. It may be renewed for further ten year intervals.

4. A decision by the Registrar to reject or suspend the registration of a trade mark may be challenged by the applicant before the Court. The Court may order cancellation of the registration, upon application by any persons, if the mark has not been used effectively for five consecutive years. The cancellation or renewal of the registration must be published in the Official Gazette: a cancelled mark cannot be re-registered in favour of a third party for the same products, until three years after the date of cancellation.

5. Based on information from the authorities, in 2010, 8,410 trade mark applications were filed (Table III.15): 6,402 were foreign trade marks, and 2,008 were Kuwaiti trade marks.


Table III.15Trade marks, 2008-10

2008 2009 2010

Trade mark filling 8,825 7,852 8,410 Trade mark examination 7,377 9,147 9,263Notification of acceptance 7,520 9,086 9,898Registered trade marks 6,522 6,954 7,923Published Trade marks 7,315 7,602 8,980

Source Ministry of Commerce and Industry (2010), Annual Report 2009, Department of Planning and Research, p. 45; and information provided by the Kuwaiti authorities.

6. The Law protects well-known marks and provides civil remedies against infringement and counterfeit use for owners of unregistered well-known marks. Infringers of trade marks may be imprisoned for a maximum of three years, or liable to a fine not exceeding KD 600.35 Again, comparing to a three-year detention, a fine of KD 600 seems to be low. The Government is planning to modify the penalty through the GCC unified trade mark law.

(d) Patent

1. The GCC Patent Law entered into force on 3 October 1998, and a GCC Patent Office was set up in Riyadh, Saudi Arabia. Kuwait also has national patent legislation, and a national patent office. Currently, dual protection is allowed, i.e., applying for both national and GCC patents for the same invention.

2. To apply for a national patent in Kuwait, an inventor must register with the Patents Office at the Trademark and Patent Department of the MCI. Non-Kuwaiti citizens, companies, and other juristic personalities may register patents in Kuwait if they are nationals or residents of countries that offer Kuwait reciprocity, such as WTO Members. Currently, patent protection is for 20 years starting from the date of the application.

(e) Industrial designs and layout designs of integrated circuits

1. Industrial designs and layout designs of integrated circuits must be registered in the Trademark and Patent Department under the MCI. They are protected for ten years, renewable for a further five years.

2. Table III.16 shows the number of requests for industrial designs and patents, by local and foreign applicants; however, the number granted was not available to the Secretariat.

(f) Other intellectual property rights

1. Geographical indications are protected under the law regulating trade marks (the Commercial Law No.68 of 1980 as amended by Law No.1 of 2001, Article 62.3). In the WTO TRIPS Committee, Kuwait stated that it does not import or export any alcohol, for religious reasons, and that participation in the registration system for GIs should be voluntary and without any legal effect.

35 Abdullah Kh. Al-Ayoub and Associates online information. Viewed at: http://www.al-ayoub.org/index.html.


Table III.16Intellectual property rights applications, 2001-10

Year Industrial models – total number of requests Patents – total number of requests

Local Foreign Total Local Foreign Total

2001 15 11 26 35 80 1152002 23 49 72 44 94 1382003 37 112 149 56 74 1302004 19 54 73 75 89 1642005 28 29 57 70 42 1122006 10 95 105 75 56 1312007 28 91 119 102 102 2042008 40 117 157 75 108 1832009 70 77 147 76 71 1472010 36 63 99 18 65 83

Source: Ministry of Commerce and Industry, Annual Report 2009 Department of Planning and Research, p. 46; and information provided by the Kuwaiti authorities.

2. Kuwait does not have legislation on plant varieties, or on undisclosed test or other data.

(g) Enforcement at the border

1. Kuwait Customs may act upon applications from right holders, or upon information about importation of counterfeit and infringing goods. For goods suspected of infringing IPRs, Customs may detain the goods and refer to the legal department to determine whether the goods infringe IPRs. The number of seizures by Customs rose from 188 in 2004 to 382 in 2005, and averaged around 330 annually between 2006 and 2010. Most concern consumer goods, such as electrical appliances, car parts, and clothing, bags, and accessories. According to the authorities, all these goods are destined towards the Kuwait market, not for transit. The value of the detained/seized goods was not available to the Secretariat.


(1) AGRICULTURE AND FISHERIES

(i) Main features

178. The contribution of agriculture and fisheries to Kuwait's GDP and employment is very limited (Chapter I(1)(i)), mainly because of scarce water resources and unfavourable climatic conditions. Nonetheless, agriculture and related activities are very important for Kuwait's food-security objective (section (ii) below). Only 11% of total land area is considered as potentially cultivatable (200,000 ha out of 1.8 million ha), and just about 107,000 ha are suitable for irrigation development. Moreover, urban development has caused significant loss of traditionally agricultural areas. Soil salinization, resulting from the deterioration in the quality of the groundwater used in irrigation, has also led to a general reduction of cultivated land. Other key difficulties facing agriculture include tenancy problems; small farms holdings and labour shortages, which restrict investments; high production costs; and competition from imported products.

179. In general, traditional farms depend heavily on government support, while modern agricultural management and production techniques are used mainly by relatively large agricultural holdings managed by private companies or state-owned corporations. Modern farming methods are used mainly for livestock production, poultry, fodder, feed concentrates, and milk. It is estimated that


about 80% of protected agriculture is carried out in plastic tunnels (40% cooled and 60% uncooled), while the remaining 20% is cultivated in greenhouses with internal environmental control.

180. The main vegetables planted include aubergines, tomatoes, potatoes, and onions, while field and fodder crops include wheat, barley, sunflowers and alfalfa. Kuwait's main livestock population comprises cattle (around 18,000), camels (38,000), and sheep and goats (900,000 head). Kuwait remains heavily dependent on imports to meet its domestic demand for food, with some 98% of food consumed being imported. Locally produced crops, including vegetables, satisfy less than 20% of domestic consumption. Self-sufficiency ratios are: 5% for red meat; 23% for fresh milk, 37% for poultry meat, and 65% for table eggs.1 Kuwait has no agriculture production surplus.

181. According to the latest available figures available, Kuwait had an agricultural trade deficit of US$3,115 million in 2009, up from US$2,479 million in 2006. Agricultural exports amounted to US$230.6 million (0.4% of total merchandise exports), while agricultural imports reached US$3,345.5 million (16.5% of total merchandise imports). Kuwait imports between 1.5-2 million live head mostly from Australia. Imported agricultural and fishery goods are distributed centrally in through auctions.

182. Fisheries plays a vital role in Kuwait's heritage, and fishing is a traditional activity practised along its 195 km coastline. Nonetheless, production has been decreasing over time, mainly due to over-fishing. Aquaculture is also being developed. Fishing is prohibited in Kuwait Bay and within three miles of the coast. Kuwait imports most of its fish from Oman, Saudi Arabia, and Iran.

(ii) Policy developments

183. The Public Authority for Agricultural Affairs and Fish Resources (PAAF), established under Amiri Decree No. 94 of 1983, is in charge of policy formulation in the sector. It also has responsibilities for the development of plant, animal, and fishery resources, including land allocation; SPS measures, including issuing certificates to import and export certain agricultural products (Chapter III(1)(vii)(b)); and marketing support. Another key institution is the Kuwaiti Farmers Federation (KFF), a non-governmental organization, which operates collective procurement of seeds, fertilizers, greenhouses, water pumps, tractors, pesticides, drips, insect nettings, and technical know-how.

184. Kuwait's key policy objective in agriculture is food security, which is to be achieved mainly through relatively low customs tariffs (3.2%2), the allocation of land to farms, and investing in farms abroad. In June 2011, PAAF allocated land to 60 farms in the Al-abdaly farm area 3, and more land allocations are expected in 2012. Kuwait is also encouraging companies to invest in farm projects abroad. According to the authorities, any country with available resources and attractive investment regulations may be approached. Moreover, PAAF has approved several build-operate-transfer (BOT) projects to encourage the participation of the private sector in agriculture and fisheries.

185. Kuwait aims to increase its self-sufficiency ratios in agricultural and fishery products and diversify its production base. In order to meet these objectives, foreign investment is allowed in agriculture and fisheries. Under the Privatization Law of 2010 and the Foreign Investment Law of

1 Food self-sufficiency ratios were provided by the Public Authority for Agricultural Affairs and Fish Resources (PAAF).

2 Simple average applied MFN tariff for agriculture, hunting, forestry and fishing (Major Division 1 of ISIC Revision 2).

3 The Al-abdaly farm is located in the north of Kuwait and covers about 147,000 m2.


2001, foreigners are allowed to participate, in the form of joint-ventures, in cultivation and processing of agricultural products.4

186. Most land in Kuwait belongs to the State. However, local and foreign companies may lease land for cultivation and/or livestock for a period of 25 years. Longer leasing contract terms are possible upon request, subject to approval by both the PAAF and the State Properties Department of the Ministry of Finance.5

187. Kuwait has applied the GCC Laws on Veterinary Quarantine and Plant Quarantine since 2003. Imported, exported, and domestically produced plants and animals are subject to inspection by the Public Authority for Agricultural Affairs and Fish Resources. Importers of foods and perishable goods must produce a certificate to ensure that importing goods are safe for human consumption and comply with Islamic law (Chapter III(1)(vii)(b)).

188. Kuwait has signed bilateral arrangements for agricultural cooperation and development with Egypt (2001), Iran (2007), Jordan (2004), Morocco (2006), and Syria (2003). The arrangements cover, inter alia: control of diseases; exchange of seeds and seedlings; exchange of meat; exchange of information; technology cooperation; fishery resources preservation; and encouragement of private investment.

189. Kuwait has notified the WTO that it does not provide export subsidies on agricultural products (Chapter III(2)(iii)).6

190. In the Uruguay Round, Kuwait did not make any reduction commitments on domestic support. According to the authorities, financial support to agricultural producers, as measured by the Aggregate Measurement of Support (AMS), was below the de minimis level of 10% for which no reduction commitments were required.

191. No concerns have been raised in the WTO Committee on Agriculture about Kuwait's agricultural policies.

192. Some of the PAAF's key objectives for fisheries are: to protect and control fishing activities, particularly for certain species (e.g. shrimps) due to the high demand; preserve the marine environment and biodiversity; maintain fish catches at levels sufficient to support the spawning biomass; ensure the sustainable development of fish resources; encourage investment expansion in aquaculture; establish infrastructure mainly for marine hatchers and stock enhancement programmes.

193. The Kuwaiti United Fish Company and the National Fish Company are permitted to export 35% of their total frozen production of shrimps. Companies and establishments licensed to practice aquaculture are permitted to export no more than 50% of total annual production. Exports of fish and crustaceans caught in Kuwaiti waters are banned. Re-exportation of fishery products may be allowed subject to permission from the PAAF.

194. While the majority of tariff lines on agricultural products have ad valorem rates, 19 tobacco and tobacco-related products have mixed tariffs, and there are 50 "special" goods (Chapter III(1)(ii)(a)). Moreover, alcoholic beverages and pork and pork products are prohibited, for religious reasons. The simple average applied MFN tariff for agriculture, hunting, forestry and fishing (3.2%) is

4 One example of such joint-ventures is Kuwait Danish Dairy (KDD), which processes imported dairy and fruit products, supplies the domestic market, and exports to other GCC countries.

5 Individuals are not allowed to lease land for agricultural purposes.6 WTO documents G/AG/N/KWT/1, 28 July 2010, and G/AG/N/KWT/2, 21 March 2011.


1.6 percentage points lower than for manufacturing (Table III.2). Imports of some agricultural raw materials and most basic food products (e.g. fresh milk and meat) are duty free. Tobacco products are subject to the highest tariff rate of 100%.

195. Kuwait bound its tariff lines on agricultural products (WTO definition) at 100%. The authorities stated in the context of this Review that applied tariffs have always been maintained below bound levels.

196. Kuwait does not apply tariff quotas on agricultural products.

197. The main domestic support measures provided by the PAAF include: production subsidies for agricultural producers; feed subsidies and free veterinary services for livestock producers; cash support for owners of operational fishing boats and fish farms; and provision of free fodders for fish farms.

198. According to the latest available figures7, in 2008/09, Kuwait disbursed KD 43.9 million in agriculture subsidies for: fodders (73%), plant producers (15%), milk (7%), palm (4%), fisheries (1%)8, and other (1%). In addition, KD 1.6 million was granted as indirect agricultural support for: medicines and drugs (41%), pesticides (29%), renting of machinery and equipment (12%), control of bovine tuberculosis (10%), and numbering and vaccination (8%).

(2) ENERGY

(i) Petroleum

199. The petroleum subsector dominates the Kuwaiti economy, accounting for nearly half of GDP, 95% of export revenues, and 84% of government income (Chapter I(1)).9 In 2010, Kuwait was the world's ninth-largest oil producer and the fourth-largest producer in the Organization of the Petroleum Exporting Countries (OPEC). Kuwait's estimates of proven crude oil reserves are 101.5 billion barrels, equivalent to almost 8% of the world's reserves.10 In 2010, OPEC allocated an oil production quota of about 2.3 million barrels per day (mmbd) to Kuwait.

200. The majority of Kuwait's oil reserves are located south of Kuwait City in the Greater Burgan area (the Burgan, Magwa, and Ahmadi onshore fields).11 Other notable fields include South Magwa, Raudhatain, Umm Gudair, Minagish, and Abdaliya. In addition, Kuwait shares the oil found in the Partitioned Neutral Zone (Divided Zone and Neutral Zone) with Saudi Arabia on a 50-50 basis. 12

Kuwait boasts more than 12 developed oil fields spread all over the country.

7 Information provided by the PAAF.8 Fish subsidies are given for ships and boats according to their specification, and for aquaculture in the

form of fodder.9 Kuwait has the highest dependence on oil in the Gulf Cooperation Council (GCC). (Oxford Business

Group, 2011.)10 OPEC (2011).11 The Greater Burgan area is the second largest oil field in the world after Ghawar field in Saudi

Arabia, and generally produces lighter crudes.12 The Partitioned Neutral Zone (PNZ) was established in 1922 to settle a territorial dispute between

Kuwait and Saudi Arabia. A Joint Operations Committee, with representatives from Kuwait and Saudi Arabia, manages the resources of the PNZ. Kuwait is represented by the Wafra Joint Operations Group, and Saudi Arabia is represented by Chevron. Oil production capacity in the PNZ is currently about 600,000 barrels per day, all of which is divided equally between Saudi Arabia and Kuwait.


201. In 2010, Kuwait's crude oil production increased by 2.3% to 2.312 mmbd, compared with 2.261 mmbd in 2009. Kuwait exported 1.430 mmbd of crude oil in 2010, representing around 61.8% of total crude oil production. Production of refined petroleum products accounted for 979,400 b/d in 201013, of which domestic consumption was 260,400 b/d (26.5%) and exports 631,600 b/d, (64.4%).

202. The Supreme Petroleum Council (SPC) is the highest policy body that oversees Kuwait's overall petroleum and gas sector.14 The Council sets general oil and gas policy within the framework of the national economic and social development plan; it is chaired by the Prime Minister and meets at least four times a year. The Ministry of Oil is the main regulator of the oil and gas sector and exercises policy-making powers in conjunction with the SPC. The Minister of Oil oversees the Kuwait Petroleum Corporation (KPC), chairs its Board of Directors, and is a member of the Supreme Petroleum Council.

203. The KPC, established in 1980, is the main operational entity responsible for Kuwait's hydrocarbon interests throughout the world. It is a state-owned holding corporation of ten specialized subsidiaries in Kuwait and worldwide, encompassing all aspects of the hydrocarbon industry (Table IV.1). Although state-owned, the KPC is run by an independent management team and Board of Directors.

204. KPC and its subsidiary companies benefit from certain exclusive concessionary rights and privileges in the oil and gas subsector. For example, downstream petroleum activities (i.e. processing of crude oil to fuel) are fully controlled and owned by KNPC, while the exploration and production of natural gas are the sole responsibility of KOC.

Table IV.1Subsidiaries of the Kuwait Petroleum Corporation (KPC)

Name Main activities

Kuwait Oil Company (KOC) Upstream operations for oil exploration and extractionKuwait National Petroleum Company (KNPC) Downstream operations of refining and distribution (local)Kuwait Foreign Petroleum Exploration Company (KUFPEC) Foreign upstream exploration and extraction operationsKuwait Petroleum International (KPI) Foreign downstream operationsPetrochemical Industries Company (PIC) Petrochemical industryKuwait Oil Tanker Company (KOTC) Marine transportation of hydrocarbonsKuwait Aviation Fuelling Company (KAFCO) Oil refuelling servicesKuwait Gulf Oil Company (KGOC) Manages Kuwait's share of natural resources in the

Partitioned Neutral Zone with Saudi ArabiaOil Development Company (ODC) In charge of "Project Kuwait"Oil Sector Services Company (OSSC) Shared services provider for oil sector

Source: Kuwait Petroleum Corporation website: www.kpc.com.kw.

205. Under the Kuwaiti Constitution, all natural resources, including oil are owned by the State. The State alone has the right to exploit, utilize, and safeguard those resources (Article 21). The right to concessions and/or monopolies for the exploitation of Kuwait's natural resources, including oil, may only be created by virtue of a law and for a limited time only (Article 152 and 153). According to Kuwait's Foreign Investment Law No. 8 of 2001, a foreign investor may carry out economic activities in industries other than oil and gas exploration and production (Chapter II(3)(i).

13 Products obtained from the processing of crude oil, unfinished oils, national gas liquids (NGLs) and other hydrocarbon compounds.

14 The Council of Ministers (Cabinet) is considered the highest decision-making body for investments and mega-projects of at least US$1 billion in the oil and gas sector.

http://www.kpc.com.kw/


206. KPC has developed a long-term strategy that aims to (i) increase Kuwait's crude oil production, mainly heavy oil from its current 2.3 mmbd to 4 mmbd by 202015; (ii) improve reservoir management practices; (iii) develop technically complex fields in a cost-effective manner; (iv) maximize the transfer of modern technology in oil extraction and (v) create job and training development opportunities for Kuwaitis. KPC plans to increase oil production by increasing the potential of existing reservoirs and by adding the production of new discoveries. To finance KPC's plan, in February 2010, the Kuwaiti National Assembly approved a budget worth KD 35 billion until 2013/14, where the oil and gas sector's share represents around 84% of the budget.

207. Under KPC's umbrella, Kuwait Oil Company (KOC)'s responsibilities are the exploration, drilling, and production of oil and gas within Kuwait. KOC is also involved in the storage of crude oil and delivery to tankers for export. KOC is increasing its focus on developing the more challenging fields in North and West Kuwait in order to preserve the mature oil reserves in the Greater Burgan area.

208. In partnership with international oil companies (IOCs), "Project Kuwait" was set up under the auspices of the Oil Development Company in the early 1990s to help meet KPC's strategic objectives. This partnership between Kuwait and IOCs was reflected in an Operating Service Agreement (OSA). Under the OSA and consistent with the Kuwaiti Constitution, Kuwait retains full ownership of petroleum production, reserves, and revenue; and strategic management of the ventures. The OSA does not involve production sharing, concessions, or the "booking" of reserves by IOCs. However, the IOC maintains control over the operational management; acts as a contractor or service provider, and employs a set quota of 30% of Kuwaiti labour. In addition, the IOC incurs 100% of the capital and operating costs and is paid in return a per-barrel fee, along with allowances for capital recovery and incentive fees for increasing reserves.

209. So far and in the oil upstream subsector, KOC has only managed in 2007 to sign a memorandum of understanding with Exxon-Mobil to produce heavy crude oil. However, an OSA was signed recently with Royal Dutch Shell to develop natural gas.

210. The majority of Kuwaiti crude oil exports (around 83.3%) were exported to Asia in 2010, followed by North America (8.9%) and Europe (4.3%) (Table IV.2). Most of the crude oil is sold on term contracts, with the price linked to the respective market benchmark crude in each of the Asian, European and U.S. markets.

Table IV.2Exports of crude oil, and refined productsa, by region, 2009-10(Million barrels)

2009 2010 % share in 2010

Exports to Crude oil Refined products

Crude oil Refined products

Crude oil Refinedproducts

Africa 40 .. 42 .. 2.90 ..Asia and Pacific 1,162 620 1,199 582 83.80 92.0Europe 51 52 62 49 4.30 7.75The Middle East

.. .. .. .. .. ..

North America 95 1 127 1 8.90 0.16Latin America .. .. .. .. .. ..Total 1,348 673.5 1,430 632 100 100

15 Oil production levels are expected to grow rapidly over the next five years (2010-15), according to Kuwaiti investment firm Global Investment House.


.. Note available.

a Including liquefied petroleum and natural gas.

Source: OPEC (2010 and 2011), Statistical Bulletin 2009. Viewed at: http://www.opec.org/opec_web/static_files_project/ media/downloads/publications/ASB2009.pdf; and OPEC (2011) Statistical Bulletin 2019/2011 edition. Viewed at: http://www.opec.org/opec_web/static_files_project/media/downloads/publications/ASB2010_2011 .pdf.

211. Kuwait's main port for crude oil exports is Mina al-Ahmadi. Other operational oil export terminals are Mina Abdullah, Shuaiba, and Mina Al Zour. A new terminal is planned on Bubiyan Island to handle increased crude oil production, generated by the Northern fields.

212. In addition to local oil production, Kuwait is engaged in crude oil and natural gas exploration, development, and production in 15 countries in Africa, the Middle East, and Asia, through the Foreign Petroleum Exploration Company (KUFPEC). A subsidiary of KPC, KUFPEC is an international oil company, which participates in joint ventures with companies in oil and gas exploration and production both as an operator and partner. In 2009, KUFPEC's total operating revenue amounted to US$820.9 million, of which oil and condensate represented 47.7%, while gas accounted for 52.3%. Total investments amounted to US$760 million in 2010. According to the authorities, KUFPEC aims to produce around 100,000 barrels per day (oil equivalent) of crude oil by 2015.

213. Procurement by oil companies is generally excluded from the Public Tenders Law and the regulatory controls of the Central Tenders Committee (CTC). However, for the three oil companies – KOC, KNPC, KOTC - and the Petrochemical Industries Company (PIC), procurements of KD 5 million and above and /or where there is a variation by more than 10% of the contact value, must be managed by the CTC under the Public Tenders Law.

(a) Downstream petroleum activities

214. Downstream petroleum activities (i.e. the processing of crude oil to fuel) are fully controlled and owned by the Kuwait National Petroleum Company (KNPC), a subsidiary of KPC. KNPC is in charge of refining operations and aims to be the best refiner in the Gulf region. Kuwait's refining capacity stands at around 936,000 barrels per day (b/d). There are three refineries in Kuwait: Mina al-Ahmadi is the largest, with a capacity of 466,000 b/d, followed by Mina Abdullah (270,000 b/d) and Shuaiba (200,000 b/d). A new refinery, estimated to cost around US$15 billion, will be able to process ultra-heavy oil, at a refining capacity of 600,000 b/d.

215. Kuwait's production of refined products increased to 979,000 b/d in 2010 from 892,700 b/d in 2009. The majority of Kuwait's refined petroleum products are exported; around 92% to Asia in 2010, followed by Europe (7.75%) and North America (0.16%) (Table IV.2).

216. Petroleum products are shipped through pipelines from the refineries to two main storage depots (Sabhan and Al-Ahmadi). They are reaching domestic consumers through 99 filling stations across the country. The distribution and the storage facilities are fully controlled and owned by KNPC. Some gas stations have been privatized.

217. Since 1999, Kuwait's domestic fuel supply has been unleaded gasoline. Table IV.3 shows theregulated prices of refined petroleum and gas products.

Table IV.3Regulated prices of refined petroleum and gas products, 2011

http://www.opec.org/opec_web/static_files_project/media/downloads/publications/ASB2010%20_2011

http://www.opec.org/opec_web/static_files_%20project/


No. Item Current regulated price HS classification

1. Gasoline 114 fils/litre 27101121

2. Diesel 87.5 fils/litre 27101130-3

3. Kerosene 87.5 fils/litre 27101129

4. Fuel Oil .. 27101140

.. Not available.

Exchange rate: 1 US$ = 0.275 Kuwaiti dinars (KD); 1 KD= 1,000 fils.

Source: OPEC (2011) Annual Statistical Bulletin (2010/2011). Viewed at: http://www.opec.org/opec_web/static_ files_project/media/downloads/publications/ASB2010_2011.pdf.

218. Kuwait Petroleum International (KPI), known as Q8, manages KPC's refining and marketing operations internationally, with approximately 4,000 retail stations across six European countries. 16 A top ten energy conglomerate, KPI owns an 80,000 b/d refinery in the Netherlands and has a 50-50 joint venture with AGIP in the 240,000 b/d refinery in Italy. According to the authorities, in March 2011, a new 50-50 joint-venture between KPI and China Petroleum and Chemical Corporation (Sinopec) was approved to build a refinery and petrochemical complex in south China. Expected to be operational in 2014/15, the plant will process 100% Kuwaiti crude oil, with a refining capacity of 300,000 b/d. Another refinery has been commissioned by KPI to operate in Viet Nam by 2014/15, with a refining capacity of 200,000 b/d.

219. Kuwait has not bound any of its crude oil and petroleum-related products in its Uruguay Round Schedule of Concessions. The GCC MFN applied tariffs on petroleum products, such as crude oil, refined petroleum oils; petroleum coke and petroleum jelly are 5%.

(ii) Natural gas

220. Kuwait ranks 18th in global natural gas reserves. In January 2010, Kuwait's estimated natural gas reserves stood at nearly 1,784 billion cubic metres, about 1% of the world's total. Kuwait produces mainly dry natural gas, approximately 11.9 billion cubic metres in 2010. According to OPEC, the volume of the gas that is flared is only about 1.8% of the total produced (Table IV.4).

Table IV.4Gas production and utilization, 2005-10(Million cubic metres)

2005 2006 2007 2008 2009 2010

Gross production 13,300 13,670 13,310 13,870 11,689 11,950Marketed production 12,300 12,410 12,060 12,700 11,489 11,733Flared 1 260 250 200 200 217Re-injection n.a. n.a. n.a. n.a. n.a. n.a.Shrinkage 1,000 1,000 1,000 970 n.a. n.a.


Note: Marketed production corresponds to gross production, minus the volumes of gas flared or re-injected into the fields, minus the shrinkage.

Source: OPEC (2011), Annual Statistical Bulletin (2010/2011). Viewed at: http://www.opec.org/ opec_web/static_files_ project/media/downloads/publications/ASB2010_2011.pdf.

16 Italy, Denmark, Belgium, the Netherlands, Luxembourg, and Sweden.

http://www.opec.org/

http://www.opec.org/opec_web/static_


221. The majority of natural gas in Kuwait is associated gas (i.e. gas found and produced in conjunction with crude oil). In 2006, non-associated gas was first discovered in the deep Jurassic reservoirs in the northern fields of Sabriya, Rahiya, Mutriba, and Um Niga.

222. Natural gas in Kuwait is a multipurpose resource: while it is mainly used for domestic electricity generation, it is also used for water desalination, as a feedstock for the petrochemical industry, and to free-up additional crude oil for export. Since current levels of natural gas production do not meet national consumption levels, especially with the increasing power shortages during the summer months, the authorities fill in the gap by imports.

223. Kuwait imported around 25 trillion BTU (i.e. 70 million cubic metres) of liquefied natural gas (LNG) in 2009. It has recognized the importance of LNG to cover the shortage in gas in Kuwait, especially during the summer season, from economic and environment point of views. It has procured a long-term contract for LNG imports until 2013.

224. The exploration and production of natural gas in Kuwait are the responsibility of KOC, and policy-related matters fall under KPC's ambit. KGOC is in charge of the exploration and production of natural gas in the partitioned Neutral Zone and offshore operations. In order to reduce Kuwait's dependence on gas imports and become self-sufficient, the authorities aim to increase production to an estimated 19.3 billion cubic metres by 2014 by maximizing the exploration, development and production of non-associated gas and by adopting a zero flaring policy for both onshore and offshore operations, targeting 1% gas flaring.17

225. In February 2010, a five-year Enhanced Technical Services Agreement (ETSA) was signed between KOC and Shell Kuwait Exploration and Development B.V., a subsidiary of Royal Dutch Shell.18 Shell aims to play a technical and advisory role in the development of non-associated gas in the complex northern fields of Marrat and Najma Sargelu Reservoirs.

226. Mina al-Ahmadi GasPort is the main port for regasification and is the Arabian Gulf's first regasification terminal. Mina al-Ahmadi's capacity is around 10,300 tonnes of LNG per day.

(iii) Petrochemicals

227. Kuwait is active in the petrochemical industry. The first chemical fertilizer complex both in Kuwait and the region, comprising ammonia, urea, ammonium sulphate, and sulphuric acid production was completed in 1966 in the industrial area of Shuaiba.

228. The main petrochemical products include fertilizers, olefins, and aromatics. In 2010, Kuwait's total production capacity was 7,090 million tons (Table IV.5); total sales of fertilizers reached US$347 million, a 65% increase over 2009. Kuwait exports its petrochemical products globally.

Table IV.5Kuwait's production capacity of petrochemical products, 2010(Million tons)

Product 2010

Fertilizers Urea 1,050Ammonia 660

17 KPC has developed environment-friendly policies such as a greenhouse gas (GHG) management strategy and the potential to use international carbon financing mechanisms like the Clean Development Mechanism (CDM).

18 Shell is a partner with government-owned Qatar Petroleum in the Qatargas LNG project.


Olefins Ethylene 1,650Polyethylene 900Ethylene glycol 1,000Polypropylene 150

Aromatics Paraxylene 830Benzene 400Styrene monomer 450

Total 7,090

Source: Kuwaiti authorities.

229. According to the authorities, producers of fertilizers may benefit from a regulated price of natural gas, which is available to all users in Kuwait. The feedstock of other petrochemical industries is linked to international crude oil prices.

230. The Petrochemical Industries Company (PIC), a subsidiary of KPC, and a petrochemical conglomerate, is in charge of the petrochemical industry in Kuwait. The PIC has joint-ventures with several national and foreign companies to produce diverse petrochemical products (Table IV.6). In addition, the PIC owns two fertilizer plants for the production of ammonia and urea and one polypropylene plant.

Table IV.6Kuwait's petrochemical companies, 2011

Joint venture companies Ownership structure Activities/responsibilities

Equate Petrochemical Company PIC (42.5%); DOW Chemical Company (42.5%) U.S. company; Boubyan Petrochemical Company (9%); Al-Qurain Petrochemical Industries Company (6%)

produces polyethylene and ethylene glycol;operates PIC's polypropylene plant;operates TKOC's two plants for themanufacturing of ethylene and ethylene glycol;operates TKSC's styrene plant;operates TKAC's paraxylene and benzene plantsand sea cooling towers

Kuwait Olefins Company (TKOC)

PIC (42.5%); DOW Chemical Company (42.5%); Boubyan Petrochemical Company (9%); Al-Qurain Petrochemical Industries Company (6%)

owns the Olefins –II complex;produces ethylene glycol

Kuwait Aromatics Company (TKAC)

PIC (40%); KNPC (40%); Al-Qurain Petrochemical Industries Company (20%)

owns the Kuwait Paraxylene ProductionCompany (KPPC);produces paraxylene and benzene;

Kuwait Styrene Company (TKSC)

TKAC (57.5%) and DOW Chemical Company (42.5%)

produces styrene monomer;obtains benzene feedstock from TKAC andethlyne from TKOC

Al-Qurain Petrochemical Industries Company (QPIC)

PIC (10%)

Gulf Petrochemical Industries Company (GPIC)

PIC (33%); Government of Bahrain (33%); Saudi Arabia's SABIC (33%)

produces ammonia, urea, and methanol

MEGlobal PIC (50%); DOW Chemical Company (50%)

owns plants in Canada that produce monoethylene glycole and di-ethylene glycol;based in Canada


MEGlobal BV PIC (50%); DOW Chemical Company (50%)

markets ethylene glycol produced by thepartners and production by MEGlobal BV;based in Dubai

PIC-Canada Company PIC (100%) manages PIC's investments in MEGlobal;based in Canada

Equipolymers Company PIC (50%); DOW Chemical Company (50%)

manufactures PTAa/PET and markets PET;with two PET plants in Germany

a PTA is a feedstock used in the production of PET, which is used in making bottles and containers for soft drinks, food, and other liquids

Source: WTO Secretariat.

231. Kuwait aims to be a global petrochemicals player and attract investment opportunities especially in Asia. In March 2011, a new 50-50 joint venture between KPI and China Petroleum and Chemical Corporation (Sinopec) was approved to build a refinery and petrochemical complex in south China at a cost of around US$8.7 billion. Expected to be operational in 2014/15, an ethylene plant will have an annual production capacity of one million tons. Moreover, a new olefins project, Olefins III project is under way. The Olefins-III project will comprise a world-scale ethylene cracker plant with a capacity of 1.4 million tons per annum and derivative units to produce polyethylene, ethylene, glycol, polypropylene and other specialty products. The project feasibility study is under development, and the Project is planned to be operational in 2017.

232. The PIC is considering ways of integrating the refinery and petrochemical operations jointly with Kuwait National Petroleum Company (KNPC), in order to improve the use of hydrocarbons resources in Kuwait.

(ii) Electricity and water

233. Kuwait is a large consumer of electricity; consumption per head is considered high even by regional standards. In 2009, Kuwaitis consumed around 47,046 GWh of electricity. Strong population growth and economic expansion, coupled with high electricity consumption during the hot summer months and water desalination have contributed to the increase. According to the authorities, 70% of electricity consumption goes to air conditioning.

234. Electricity in Kuwait is highly subsidized by the Government. The Ministry of Electricity and Water is responsible for the overall policymaking of the electricity and water sectors as well as the operation, distribution, and transmission of electricity and water in Kuwait. In addition to the Ministry, policies must be approved by the Council of Ministers.

235. The Ministry of Electricity and Water owns and operates six power stations with a total generating capacity of 13,000 megawatts (MW) of electricity in 2011. Significant capacity additions are needed to meet demand. In order boost electricity capacity, in September 2009, the Ministry awarded a build operate and transfer (BOT) contract for a 2,000 MW plant at Al Subiya, Kuwait's largest power plant. The first phase of the plant, of 1,382 MW was scheduled to be operational in time to meet the summer power surge in 2011; it helped increase capacity by 10%.

236. In May 2010, Law No. 39 of 2010 was newly promulgated to regulate electricity and water sectors in Kuwait. According to the law, foreign investment will be allowed for the first time through public-private partnerships whereby independent water and power projects (IWPPs) will be


established and BOTs no longer used. Under the IWPPs, private companies will generate electricity and water and sell it to the Ministry of Electricity and Water, which will then sell it to consumers. Foreign investors are allowed up to 26% ownership of a project, with 24% owned by the Kuwait government and 50% by the public through initial public offerings (IPOs).

237. Kuwait’s first IWPP is currently under way. The Ministry of Electricity and Water has enlisted a team of international advisers to prepare terms of reference for interested developers, and applications to pre-qualify for the project. The IWPP will be located at Al Zour and will have the capacity to produce 1,500 MW of electricity and 100 million gallons/day of desalinated water. The Government has set a target of completing the IWPP by mid-2012.

238. Kuwait has no natural fresh water resources. In recent years, the Government has taken steps to build water desalination plants to take advantage of the available seawater and convert it into drinking water. Kuwait has five water desalination plants, which produce around 420 million gallons of potable water per day.

(3) SERVICES

(i) Overview

1. Services is the largest non-oil sector of Kuwait's economy, contributing about 48% of GDP in 2010 and accounting for over 42% of total employment. Most services activities are controlled predominantly by the Government through state-owned enterprises (SOEs), with state monopolies in some sectors such as fixed-line telephone services and postal services. In line with the Government's intention under the current medium-term Development Plan to promote a larger role for the private sector in the economy, greater private-sector involvement in several services sectors or subsectors is being considered, and efforts are being made to improve the legislative environment and physical infrastructure to facilitate this (Chapter II(3)). Kuwait has opened some services subsectors to foreign investment, including financial services, air transport, mobile telephone services, and professional services.

2. Under the General Agreement on Trade in Services (GATS), Kuwait made specific commitments in eight services sectors: business services, construction and related engineering services, distribution services, environmental services, financial services, health and related social services, tourism and related services, and recreational, cultural and sporting services. Within these 8 sectors, Kuwait has made commitments in 61 out of a total of 151 subsectors (Table AIV.2). Certain limitations have been placed on market access and national treatment in these commitments. Kuwait has not made any commitments in telecommunications services, educational services, or transport services. It maintains MFN exemptions under GATS Article II for air transport and the promotion and protection of investments.

3. Under its horizontal commitments, national services or services of national origin should have priority in government procurement contracts; all foreign suppliers must comply with the counter-trade offset programme. With the exception of banks, financial and insurance institutions, foreign commercial presence should be either through a Kuwaiti agent or through a partnership with a Kuwaiti company (in which the aggregate proportion of foreign capital should not exceed 49%). Foreign commercial presence must contribute some economic interest to the country, such as technology transfer, and Kuwaiti nationals must account for at least a proportion, e.g. 60% in the case of insurance and banking of its workforce. With regard to presence of natural persons, Kuwait's commitments relate to the entry and temporary stay of natural persons who are managers, specialists, and skilled technicians. Self-employment of foreign nationals is not allowed.


(ii) Financial services

(a) Overview

1. Financial services generate over 14% of GDP and employ less than 5% of Kuwait's total labour force. The sector grew rapidly during 2003-07, at an annual average rate of about 40%, but stagnated in 2008 and shrank by almost 5% in 2009 as a result of the impact of the global financial crisis on the Kuwaiti economy. Growth is expected to recover quickly, based on the strong capital base and high liquidity levels of banks. The latest IMF financial stability report confirmed that Kuwait’s banking system passed its stress tests and can withstand significant additional shocks, but investment companies have been substantially more vulnerable since the financial crisis, due to the concentration of their activities in financial instruments and real estate.19

2. The Government aims to strengthen the financial services sector as part of its efforts to diversify the economy and to develop Kuwait into a regional financial centre. In accordance with the Medium-term Development Plan, the Government intends to double the number of working banks and investment companies in the coming years.20 It aims to ensure that Kuwaiti banks obtain the highest ratings of the main international ratings institutions.21

3. The Central Bank of Kuwait (CBK) is developing and improving its inspection and supervisory systems over the whole financial sector, basing itself on international standards, including important modifications in the area of corporate governance, banks' risk management and control standards and financial stress testing. The CBK implemented in full the Basel II Accord to increase bank capitalization from December 2005 for commercial banks and from June 2009 for Islamic banks. Full implementation of the Basle III Accord on bank liquidity and leverage is planned for 2017-19. A new Financial Stability Office has been created in the CBK, and a new financial stability law was issued in 2009 (Law No. 2 of 2009 Concerning Enhancing the Financial Stability in The State of Kuwait). It is considered to be urgently needed to allow precautionary and preventive action to be taken to safeguard the banking system from any adverse effects of future global financial crisis.

4. To facilitate the development of the financial services sector, the Government has relaxed foreign investment restrictions. The Direct Foreign Investment Law (Law 8 of 2001) abolished the upper bound of 49% foreign ownership in financial firms, and under law 28 of 2004 the CBK approved a set of principles, rules and controls regarding the licensing and operation of the branches of foreign banks in Kuwait.22 Ten foreign banks have so far been allowed to establish local branches. All branches of foreign banks are treated as national banks and are subject to the same laws and regulations. Banks, investment companies, exchange companies, and insurance companies are allowed to have up to 100% foreign ownership as long as they acquire licences from the corresponding regulatory authorities in Kuwait (Chapter II). Unlike in other sectors, foreign investors in financial services in Kuwait do not need to employ a Kuwaiti agent.

5. The CBK is the main regulator of the financial services sector (apart from insurance). It was the regulator for both banking and financial activities until February 2010, when the newly established Capital Markets Authority (CMA) became the independent regulator of Kuwait's capital market. The CBK is coordinating with the CMA to supervise the lending portfolio of investment companies. The

19 IMF (2010).20 State of Kuwait (2010) Part 3, First Economic Policies, Point 2 of 4.1 "Policies for transforming to

financial and commercial centres (financial sector)".21 State of Kuwait (2010) Part 3, First Economic Policies, Point 3 of 4.1 "Policies for transforming to

financial and commercial centres (financial sector)".22 www.cbk.gov.kw.


Ministry of Commerce and Industry (MCI) is responsible for granting licences to insurance companies in Kuwait.

(b) Banking

Banking sector development

1. The banking sector is recovering from the global financial crisis. Some banks increased their capital, such as the Gulf Bank, which received a large new capital injection from the Kuwait Public Authority for Investment. As a result of the crisis, total profitability of the banking sector fell slightly in 2009 to US$1.2 billion, but it increased by over 60% in 2010 to US$2 billion as confidence in the sector was restored and at the same time the capital sufficiency ratio increased from 16.7% to almost 19%.

2. Kuwait has 11 domestic banks, 7 GCC banks, and 3 banks from non-GCC countries, which are 100% foreign-owned (Table IV.7). The CBK is in the final approval process for an additional GCC bank to start operating as a branch in Kuwait.

Table IV.7Banks, 2011

Details Note

Domestic banksCommercial banks National Bank of Kuwait Kuwait's largest commercial bank

Gulf BankCommercial Bank of KuwaitAl-Ahli Bank of KuwaitBurgan Bank

Islamic banks Kuwait Finance House (KFH) The largest Islamic bankInternational Bank of KuwaitBoubyan BankAl-Ahli United BankWarba Bank

Specialized bank Industrial Bank of KuwaitYear licence granted

Banks from GCC countries National Bank of Abu Dhabi 2005Qatar National Bank 2007Doha Bank 2008Mashreq Bank 2009Bank of Muscat 2010Al Rajhi Bank 2010Bank of Bahrain and Kuwait 1977

Foreign (non-GCC) banks BNP Paribas 2005HSBC 2005Citibank 2006


3. The National Bank of Kuwait is the largest of the domestic banks in commercial (non-Islamic) banking, with a domestic market share of 29% (total assets), 74 branches in Kuwait and 14 branches abroad. Kuwait Finance House is the largest Islamic bank, with a domestic market share of 27% and 54 local branches. All local banks are majority-owned privately, with a minority government share, except for the specialized Industrial Bank of Kuwait, which is fully-owned by the Government. Direct or indirect ownership by any single natural person or legal entity in a domestic


Kuwaiti bank must not exceed 5% of the bank's capital, other than by prior authorization of the CBK.23

4. Kuwait has gradually opened up its banking sector to foreign participation. Following the launch of the GCC Common Market on 1 January 2008, banks originating in other GCC countries are granted national treatment in Kuwait. The three non-GCC foreign banks obtained licences in 2005 and 2006, to operate in Kuwait.

5. One of the major challenges for banks in Kuwait is a shortage of lending opportunities, since the economy is dominated by the oil sector and government activities, which do not require bank financing. Real estate and equities investments are the two major lending destinations for banks; other opportunities are limited.

Regulatory framework

1. Under Law 32 of 1968, the Central Bank of Kuwait (CBK) was established as the regulator of the banking sector, responsible for licensing and prudential surveillance.

2. Banks are free to set their own deposit rates. The CBK controls lending rates by setting the maximum permitted at a fixed margin over the CBK discount rate. The average weighted interest rate on total bank loans in June 2011 was 5.2%, and the weighted average interest rate on total bank deposits was 2.2%. The interest rate spread has varied narrowly around 3% for the past five years.

3. Foreign banks must apply to the CBK for a licence to practise banking in Kuwait. The CBK's decision on the application is to be taken in light of the conditions prevailing at the time, and the CBK has no obligation to provide reasons for rejecting an application.24 Reciprocal treatment is taken into account by the CBK when considering a licence application. The licence is a general licence covering all banking business in Kuwait, including retail and corporate banking. In this regard, foreign banks receive the same treatment as domestic banks. All foreign banks branches, within three years of receiving their licence from the CBK must have Kuwaiti nationals as 60% of their total workforce.25

4. Currently, foreign banks may not open more than one branch in Kuwait26, The capital requirement for foreign banks (GCC and non-GCC) to establish in Kuwait is KD 15 million, compared with KD 75 million for domestic banks.

5. Banks may provide credit facilities to non-resident customers up to KD 40 million without prior approval from the CBK for the purpose of financing contracts awarded by Kuwait government bodies.

6. Under the Bank Deposit Guarantee Law (No. 30) of November 2008, all deposits in local banks are fully guaranteed. The Financial Stability Law (Decree Law 2) of March 2009 aimed to stabilize Kuwait's financial system against the background of the global financial crisis. Under the Law, the CBK provided all banks operating in Kuwait (including foreign banks) with the opportunity to receive guarantees on any specific provisions that they have to make against declines during 2009-11 in the value of the financial and real estate investment portfolios they held on 31 December 2008. The guarantees are valid for up to 15 years, with a 1% annual guarantee fee. Banks are required to cover any deficits still outstanding from 1 January 2012. Domestic banks that

23 CBK Law 32, Article 5724 CBK Law 32 of 1968, Article 56.25 Circular No. 2/BS, IBS/160/2004.26 CBK Law 32, Article 56.


need to raise new capital for this purpose may ask the Kuwait Investment Authority (KIA) to step in and purchase convertible bonds and/or preferred shares if new capital cannot be raised from shareholders or other investors.

7. Also under the Financial Stability Law, the State guaranteed 50% of the new finance provided by Kuwaiti banks to domestic productive economic sectors in 2009-10, provided that this finance is not used for real estate trading or shares trading on the stock exchange.

8. There are no separate rules or policies regulating Islamic financial services in Kuwait. However, under CBK Law 32, conventional banks may not compete to provide Sharia-compliant services.

Non-bank financial services providers

1. Ninety-five investment companies (ICs) and 39 exchange companies are licensed to operate in Kuwait. They account for around 30% of total financial sector assets. They are primarily engaged in asset management and may not engage in banking activities.

2. ICs are subject to CBK Law 32 of 1968, and must obtain a licence from the CBK. Foreign invested ICs must also obtain a licence from the Kuwait Foreign Investment Bureau of the Ministry of Commerce and Industry. The CBK's current policy is to limit the number of licences granted to international financial institutions. As in the case of applications from foreign banks, the CBK has no obligation to provide reasons for rejecting an application. Foreign applicants must obtain written approval from the regulatory authorities of their home country to incorporate and practise asset management in Kuwait. The parent company must be a renowned international financial institution in the field of asset management.

(c) Securities

1. The Kuwait Stock Exchange (KSE) is government-owned. It was established in August 1983 and is the third largest Arab stock market. At end 2010, market capitalization on the KSE was KD 33.7 billion, of which about 42% was accounted for by the banking sector and 14% by investment companies. Information about the possible, eventual privatization of the KSE is contained in CMA Law No. 7 of 2010, Article 33, Chapters 3 and 13.

2. Currently, 215 companies and 1 fund are listed on the KSE (Table IV.8); 13 are non-Kuwaiti companies, of which one (Egypt Kuwait Holing Company) is a non-GCC company. The minimum paid-up capital requirements for companies to be listed are KD 10 million for listing on the regular market, and KD 3 million on the parallel market. The policies and procedures for companies to apply to list on the KSE are detailed in the Capital Market Authority Decision No. 3 of 2011.27

239. Large institutional investors active on the KSE include the Kuwait Investment Authority (KIA), 52 investment companies (ICs), and 114 active investment funds, of which 56 are Kuwaiti funds, 27 are GCC funds, and 31 are non-GCC foreign funds. Since 1990 (Decree No. 31), foreign collective investment (such as investment funds) have been allowed to be listed and marketed on the KSE if they obtain approval from the CMA. The KSE remains highly retail oriented, with individual retail investors accounting for around 61% of the total number of transactions, 58% of traded stocks, and 42% of total market value.

Table IV.8

27 http://www.kse.com.kw.


SecuritiesRegular market Parallel market Total

Number of companies listed 216 (215 companies and 1 fund) 14 230GCC companies 12 0 12Non-GCC foreign companies 1 0 1

Minimum paid up capital requirement KD 10 million KD 3 million n.a.Main features See Executive Regulations of

the CMA Law No. 7 of 2010See Executive Regulations of the CMA Law No. 7 of 2010

n.a.



240. Under Law No. 20 of 2000, foreign investors are allowed to buy and sell equities on the KSE. All trading must take place through one of the 14 brokerage firms registered with KSE.28

241. The Capital Markets Law (Law No. 7 of 2010) was passed in February 2010, and the Capital Markets Authority (CMA) was set up as the independent regulator for the Kuwait stock market. The CMA is responsible for formulating regulations, granting licences, supervising mergers and acquisitions, and settling disputes. The CMA issued the Executive Regulations for the Capital Markets Law on 13 March 2011.

(b) Insurance

1. Kuwait's insurance market has grown quickly in recent years; between 2003 and 2009, the annual average growth rate of premium volume was 8.9%. Gross written premiums reached KD 180.4 million in 2008, from KD 109.7 million in 2003, but dropped to KD 171 million in 2009 due to the impact of the global financial crisis.

2. Thirty-five insurance companies and two reinsurance companies operate in the Kuwait market. Both insurance and reinsurance are open to foreign investment. Two of the insurance companies are foreign invested from GCC countries, and ten from outside the GCC. All insurance companies are privately owned and operated; 14 have been set up in the past 10 years, which has helped reduced prices considerably.

3. Domestic insurers account for 87% of the market, and four domestic companies account for about 70% of collected premiums: Gulf Insurance, Kuwait Insurance Company, Warba Insurance, and Al Ahleia. The two reinsurance companies are Kuwait Reinsurance and Al Fajer Retakaful Insurance.

4. Under the National Insurance Law passed in 1961, the Department of Insurance under the Ministry of Commerce and Industry is the regulator of the insurance sector. All applications for licences to operate insurance or reinsurance companies in Kuwait are under the control of the Department, which must process applications within 60 days. There are no policy restrictions on the establishment of foreign insurance companies, subject to them receiving a licence, or on the number of local branches they may establish. The minimum capital requirement is KD 5 million for establishing a single business insurance (life or non-life) and KD 10 million for dual business (life and non-life). The capital requirement for reinsurers is KD 15 million.

28 Policies regulating brokers are contained in Capital Market Authority Decision No. 9 of 2011 and Law No. 7 of 2010 (available on the KSE website).


5. A new insurance law has been under preparation since 2008, but has not yet received Cabinet approval.

6. Health insurance in Kuwait is provided by the private sector and is overseen by the Ministry of Health. Health insurance is obligatory for foreigners, but optional for Kuwaiti citizens, who have access to free public-sector health care.

3. Takaful (Islamic) insurance has been developing quickly in Kuwait since the first takaful company was established in 2001. Capital requirements for new takaful companies are low, and the potential for takaful activity has encouraged new interest in the market. Kuwait has currently 13 takaful companies, all Kuwaiti privately-owned. There are no restrictions on foreign investors entering the market.

(iii) Telecommunications and postal services

7. Kuwait's telecommunication market has been growing rapidly in the past decade, but still has the lowest penetration rates among the GCC countries. In 2010, Kuwait's mobile penetration rate was 161% and the fixed-line rate was 21%.29 Internet subscription is also low, with 32 subscribers per 100 inhabitants. (Table IV.9). In line with international trends, penetration rates of fixed lines are in decline as the population shifts towards mobile usage; moreover, Kuwaitis own multiple SIM cards.

Table IV.9Telecommunication statistics, 2000-September 2011

Fixed statistics 2000 2005 2009 2010 Sept 2011a

Number of fixed telephone lines 467,067 504,806 553,500 566,300 515,645Number of fixed lines per 100 inhabitants 24.07 22.30 20.92 20.69 ..Mobile statisticsActive mobile subscriptions 476,000 2,277,000 3,876,000 4,400,000 4,106,016Mobile subscriptions per 100 inhabitants 24.53 100.57 146.47 160.78 127Internet statisticsTotal fixed broadband internet subscribers .. 25,000 45,000 46,000 115,727Broadband internet subscribers per 100 inhabitants

.. 1.10 1.70 1.68 11

Percentage of individuals using the internet 6.73 25.93 36.85 38.25 ..Percentage of households with internet access 20.00 27.00 30.63 31.61 ..

.. Not available.

a Information provided by the Kuwaiti authorities.

Source: International Telecommunication Union/ICT Indicators 2011 database. Viewed at: www.itu.int/ITU-D/ICT/ statistics.

1. Fixed-line (including national and international long-distance) services are provided by the Ministry of Communications (MOC). The mobile sector has three providers: Zain, Wataniya, and Viva (Table IV.10). Zain, the oldest and largest was established in 1983 as Mobile Telecommunications Company, and now has operations in 24 countries in the Middle East and Africa, with a subscriber base of more than 70 million. Zain is listed on the Kuwait Stock Exchange and there are no restrictions on Zain shares as the company’s capital is 100% free float and publicly traded. The largest shareholder is the Kuwait Investment Authority (24.6%). Zain sold the majority of its operations in Africa to India's Bharti Airtel (except for Sudan and Morocco) for US$10.7 billion in April 2010.

29 ITU (2011) statistics. Viewed at: www.itu.int/ITU-D/ICT/statistics.

http://www.itu.int/ITU-D/ICT/

http://www.itu.int/ITU-


2. Wataniya Telecom, the second-largest mobile operator in Kuwait, was commercially launched in 1999 as the first privately owned operator in Kuwait. In March 2007, Qatar Telecom (Qtel) acquired 52.9% of Wataniya Telecom shares from Kuwait Projects Company Holding KSC (KIPCO) group. Wataniya has operations in Kuwait, Maldives, Saudi Arabia, Tunisia, Algeria, and in the Palestinian Authority, with a global subscriber base of more than 11 million. Viva, Kuwait's third operator entered the market in December 2008; it is 24% owned by the Kuwaiti Government, and 26% by Saudi Telecom Company.

Table IV.10Telecom services providers, 2011

Company Market share(%)

Kuwait Government ownership (%)

Private ownership shares (%) Main private owner

Fixed line MOC 100 100 0 n.a.Mobile Zain 46 24.6 76.4 Al Khair National for Stocks

& Real Estate Co. (9.8%)Wataniya 39 23.6 77.5 Qatar Telecom QTel (52.9%)Viva 15 24 76 Saudi Telecom (26%)



3. The Ministry of Communications (MOC) is the telecom services regulator. As at October 2011, Kuwait did not have an independent telecom regulator; although plans for such an authority to be established are under way. MOC is also the monopoly operator of the national fixed-line network, and controls Kuwait's only international gateway, as well as internet service provider (ISP) licences. As the industry regulator, MOC manages licensing market procedures, and regulates prices of mobile communication services. MOC does not charge fixed licence fees. In the case of disputes in the telecoms sector, companies have recourse to local courts.

4. There are no specific laws regulating Kuwait's telecommunications sector. However, Law No. 26 of 1996, which regulates wireless communication services, states that mobile phone services are open to private investors, including foreigners. So far, only GCC foreign investors have participated in the mobile phone subsector.

5. The general policy for telecommunications, as set by the MOC, is to, inter alia, expand the provision of telecommunications services; encourage private investment in the telecommunications industry; and enhance competition. More recently, MOC has announced plans to improve the regulation and competitiveness of Kuwait's telecoms sector. These include establishing an independent telecoms regulator; introducing mobile number portability (MNP)30; setting up a shareholding firm to offer competitive international call tariffs; privatizing fixed-line operations; and developing Kuwait's fibre-optic infrastructure.

6. Domestic calls on the fixed-line network are free. From 2009, calls from fixed-line to mobile phones in Kuwait became free, resulting in a decline in mobile-to-mobile calls. The MOC only charges for international telecommunications, i.e. outgoing calls. Prices for local mobile-to-mobile calls are set by each mobile operator. Prices for mobile-to-fixed-line calls as well as international mobile and fixed-line calls are set by the MOC. There is no interconnection system within the three mobile network operators.

30 MNP allows customers to change operators without having to change their number.


7. Value-added services, such as data transmission by internet services providers (ISP) and internet content providers (ICP) are available, but, voice-over-internet protocol (VoIP) services have been banned since 2008 because no billing system has been available to the MOC. According to the authorities, VoIP should be re-allowed by the end of 2012. All operators have the right to negotiate deals with content providers. Five companies offer ADSL services through renting lines from the MOC. Six ISPs plus three mobile networks provide mobile broadband services. For foreign ICPs to operate in Kuwait a local Kuwait agent is required; up to 49% of ownership is possible and approval is needed from the Ministry of Trade and Industry.

(b) Postal services

8. Postal services are regulated under the Law on Organizing Postal Works (Law No.1 of 1970). In accordance with the Law, the Ministry of Communications (MOC) is the monopoly operator of the postal network. According to the authorities, the MOC outsources postal services to a private company. A local company, known as the Eastern Arab Company for General Trade and Construction is in charge of mail distribution to homes in Kuwait.

9. The MOC is responsible for providing universal postal services. There are no local courier services, as the law does not permit it. However, foreign express courier services are allowed to operate in Kuwait by obtaining a licence from the transport sector, and then approval from the Ministry of Trade and Industry, and the MOC. According to the authorities, a separate postal authority is expected to be established soon.

(iv) Transport

(a) Overview

1. In 2009, transport, storage, and communications accounted for 8.3% of GDP and employed 3.1% of the labour force.

2. The Government has selected transport and logistics as key sectors for expansion and diversification in the current Medium-Term Development Plan, aiming to build on Kuwait’s strategic geographic location. The Government will spend US$35 billion on improving Kuwait's transport infrastructure, including projects to build a new deep-water port in Boubyan and a national centre for organizing ship movements, expand the international airport, improve the pan-GCC/Iraq rail network, and build an underground metro system in Kuwait City.

3. The MOC is the regulator of the transport services sector. Its policy objectives for the sector are to develop Kuwait into a regional transport centre with larger private participation. The Government expects the transport sector to grow on average at 15.5% annually between 2010 and 2014. It plans to establish a separate public authority to regulate transport by 2012.

4. Transport services have been dominated traditionally by private business. The Medium-Term Development Plan sets a target to increase further the share of the private sector in transport services, with annual average planned growth of the private sector of 18% and the public sector of 7%.31

31 Development Plan, Part 3, 5.2 Transportation Policies Point 6 it states "Continuing in allowing the private sector in presenting services pertaining to air transportation and shipment as well as privatizing some activities pertaining to the same and to sea and land transportation".


(b) Maritime transport

1. Kuwait's trade and economic growth depends heavily on maritime transport. Kuwait is a contracting party to the UN Convention on a Code of Conduct for Liner Conferences, 1974. Ships flying foreign flags account for about 40% of the total deadweight tonnage of merchant fleets using Kuwait's three ports (Table IV.11).

2. The Kuwait Oil Tanker Corporation is fully owned by the Kuwait Petroleum Corporation and specializes in cruel oil, petroleum, and gas transportation. Foreign investors may operate in the maritime shipping industry subject to the Foreign Investment Law (Law 8/2001).

3. All ports and their facilities in Kuwait are fully owned by the State. Kuwait Ports Authority (KPA) is a public authority run on a commercial basis under the Ministry of Communications to manage port facilities. Ships are subject to KPA charges and fees for navigation and other services. Charges and fees are set by the Kuwait Council of Ministers, and cannot be altered by KPA. Vessels registered in Kuwait and other GCC countries are exempt from berthing dues and anti-pollution fees. Vessels registered in Kuwait and GCC countries of less than 400 tonnes, and foreign vessels of less than 25 tonnes, are exempt from port dues, marine light dues, pilotage, and service fees of tugs at Doha Port.

Table IV.11Shipping and maritime transport services, 2010

National and foreign-flag vesselsa Merchandise fleet by size('000 dwt)

Merchant fleet by types of ship ('000 dwt)

Number of vessels 86 1 Jan 2005 3,811 Total fleet 3,856National flag 39 1 Jan 2006 3,706 Oil tankers 3,216Foreign flag 47 1 Jan 2007 3,442 Bulk carriers 39

Deadweight tonnage 6,603,264 1 Jan 2010 3,856 General cargo 76National flag 3,835,639 % change 2005-06 -2.8% Container ships 292Foreign flag 2,767,625 % change 2006-07 -7.1% Other types 233

Foreign flag/total 42% % change 2007-10 12%Total / world total 0.57%

a Vessels of 1,000 GT and above.

Source: UNCTAD (2010), Review of Maritime Transport 2010. Viewed at: http://www.unctad.org/en/docs/rmt 2010_en.pdf .

4. Pilotage services are provided by Kuwaiti nationals employed by KPA. All shipping companies, including foreign companies, must have a Kuwaiti shipping agent licensed by the Ministry of Commerce and Industry (MCI).32 In order to increase competition, Kuwait has replaced the monopoly (one-contractor) system for stevedoring services and now licences three stevedoring companies to handle commercial (non-container) cargo and two companies to handle container cargo; shipping agents are free to choose between these companies at Shuwaikh Port. This change in policy has improved the quality of services and brought down stevedoring prices.

5. KPA runs Kuwait's two main commercial ports at Shuaiba and Shuwaikh; and Doha Port is designated for small ships and dhows. In January 2010, the Kharafi Group from Kuwait and the Hyundai Engineering & Construction from Korea were jointly awarded a US$1.14 billion contract, to build a port on Boubyan Island. This build-operate-transfer (BOT) project is

32 Law 80/282.

http://www.unctad.org/en/docs/rmt%202010_en.pdf

http://www.unctad.org/en/docs/rmt%202010_en.pdf


expected to be privately owned and managed.

(c) Air transport

1. Civil aviation services are regulated by the Directorate General of Civil Aviation (DGCA) under the Ministry of Communications. The DGCA is responsible for airport management, air traffic control, traffic rights, slots, and airline licensing. The Parliament is studying proposals to establish an independent regulator of civil aviation transport in Kuwait.

2. Kuwait's civil aviation airport, Kuwait International Airport, handled 8.33 million passengers in 2010. Under the Medium-term Development Plan, there are plans to construct a new passenger terminal, a dedicated air cargo village, and a third runway.

3. Kuwait has three domestic airlines operating regional and international routes. Kuwait Airways Company is the flag airline, owned and managed by the Government. In February 2008, the Government announced its intention to privatize Kuwait Airways Company and a management company has been appointed to oversee the process. The monopoly of Kuwait Airways was ended when licences were granted to two private Kuwaiti-owned airlines, Jazeera Airways in 2004, and Al-Wataniya in 2005, to provide commercial air services.

4. With regard to passenger air transport services, Kuwait adopted an "open-sky" policy in 2006. Airlines are free to compete through prices for market share, although the Directorate General of Civil Aviation (DGCA), and the laws and regulations of the State of Kuwait will intervene if price competition is judged to be predatory, based on ICAO rules. The operation of foreign airlines is based on bilateral air services agreements in which the State of Kuwait has concluded with other countries and states (Table AIV.1). Traffic rights are distributed equally (or according to demand in case of excess supply) among national airlines. Foreign (non-GCC) airlines must have a Kuwaiti agent to act for them to provide sales, marketing, and reservations. However, GCC member states airlines are not required to have a local agent to represent them in the State of Kuwait. Two private Kuwaiti companies are contracted by the DGCA to provide ground handling services for all airlines, including repair and maintenance.

5. The policy of the Directorate General of Civil Aviation is to eliminate all restrictions on the operation of air cargo flights.

(d) Land transport

8. Land transport in Kuwait is regulated by the Ministry of Communications, while the Ministry of Commerce and Industry (MCI) is responsible for licensing transport service providers. After obtaining a licence from the MCI, transport service providers must register with the MOC, and registration is only open to Kuwaiti nationals.

9. The Medium-Term Development Plan has a target to add around 1,200 km of paved highways and internal roads. The Government proposes to build a metro system and other public transport systems to encourage the use of public transport. A private partner is to be selected to design, build, finance, operate, and maintain the metro system. Detailed policies have not yet been published by the authorities.

10. In 2004, all GCC member governments agreed to build a pan-GCC railway network; the project will cost US$25 billion. The proposed network (more than 2,000 km) is to connect countries in the region, including Iraq. This network will also connect other means of transport, i.e. air, sea and urban metro systems. The detailed plan of construction, operation, and management of the pan-GCC


rail network has not yet been published by the authorities. Foreign investors will be allowed to participate.

(v) Foreign workers, and professional services

11. Foreigner workers outnumber the Kuwaiti labour force, and therefore have a significant impact on the country's external balance. In 2009, foreign workers’ remittances to their home countries amounted to KD 2.8 billion, equivalent to 9.1% of GDP.

12. As part of Kuwait's overall policy to diversify its economy from the hydrocarbon-centred industries, Kuwait is investing to expand its services sector and is anticipating higher demand for both skilled and unskilled foreign labour.

13. Companies apply to the Ministry for Labour for permits to employ skilled foreign labour. The number of permits granted is determined by the Ministry on the basis of its assessment of the economic needs of the company concerned. Once an application is approved, entry visas are issued that are valid for three months. After entry, the employer applies for a work permit (Iqama) which is valid for five years and is renewable.

14. The Government's policy objective is to introduce more competition into the professional services sector and to improve its efficiency. At the same time, Kuwait has no mutual recognition arrangements on professional qualifications with any country.

15. Unskilled foreign workers in Kuwait are mainly working in personal and household services. In February 2010, a new labour law was passed by the National Assembly to replace three separate labour laws. Unskilled labour must be sponsored by their prospective employer. The sponsor applies for an entry visa, which is valid for three months, and subsequently for a residence permit, which is valid for two or five years depending on the contract with the employer. The permit may be extended beyond five years. After three years of residence in Kuwait, a foreign worker may change jobs from one sponsor to another, and switch from domestic jobs to other jobs in the private sector. The labour law sets a new minimum wage for workers in the private sector, which does not apply to domestic workers.


REFERENCES

Arab Investment and Export Credit Guarantee Corporation (2011), Annual Report 2010, p.17, Kuwait. Viewed online at: http://www.iaigc.net/UserFiles/file/en/archives/annual_reports/Annual_Report_ 2010_(english).pdf [21/07/2011].

Global Investment House (2011), Kuwait Development Plan, Kuwait.

IDB (2011), Annual Report 1431H (2010). Viewed at: http://www.isdb.org/irj/go/km/docs/ documents/IDBDevelopments/Internet/English/IDB/CM/Publications/Annual_Reports/36th/AnnualReport36.pdf [21.07.2011].

IMF (2010), Kuwait: Financial System Stability Assessment – Update, IMF Country Report No. 10/239. Viewed at: http://www.imf.org/external/pubs/ft/scr/2010/cr10239.pdf.

IMF (2011a), Kuwait: 2011 Article IV Consultation—Staff Report; Public Information Notice on theExecutive Board Discussion; and Statement by the Executive Director for Kuwait. Country Report No. 11/217, July. Viewed at: http://www.imf.org/external/pubs/ft/scr/2011/cr11217.pdf.

IMF (2011b), Kuwait: Statistical Appendix. Country Report No. 11/219, July. Viewed at: http://www.imf.org/external/pubs/ft/scr/2011/cr11219.pdf.

IMF (2011c), World Economic Outlook, September. Viewed at: http://www.imf.org/external/pubs/ft/ weo/2011/02/pdf/text.pdf.

KFIB (2011), WTO Report: The Business and Investment Environment in Kuwait, 2010/11, Kuwait.

Kuwait National Competitiveness Committee (2009), Kuwait Competitiveness Report 2008-2009, Centre of Excellence in Management, College of Business Administration, Kuwait University.

Ministry of Commerce and Industry (2010), Annual Report 2009, Kuwait.

National Bank of Kuwait (2011), Kuwait Economic Brief, September. Viewed at: http://www.kuwait.nbk.com/InvestmentAndBrokerage/ResearchandReports/$Document/Monthly Briefs/en-gb/MainCopy /$UserFiles/EBMoneyBrief20110927E.pdf.

OPEC (2011), Annual Statistical Bulletin, 2010/2011 edition. Viewed at: http://www.opec.org/ opec_web/static_files_project/media/downloads/publications/ASB2010_2011.pdf.

Oxford Business Group 2011, Kuwait 2011, p.24, London.

State of Kuwait (2010), General Frame of Development Plan for the State of Kuwait 2010/2011 – 2013/2014, General Secretariat of Higher Council for Planning and Development, January. Viewed at: http://www.kuwaitnoc.com/noc/pdf/development-plan2010-2014.pdf.

UNDP (2011), Human Development Report 2011, New York. (CH1) Oxford Business Group 2011, Kuwait 2011, p.24, London.

http://www.opec.org/

http://www.kuwait/

http://www.imf.org/external/pubs/ft/

http://www.isdb.org/irj/go/km/docs/%20documents/IDBDevelopments/Internet/English/IDB/CM/Publications/Annual_Reports/36th/AnnualReport36.pdf



http://www.iaigc.net/UserFiles/file/en/archives/annual_reports/Annual_Report_2010_(english).pdf

http://www.iaigc.net/UserFiles/file/en/archives/annual_reports/Annual_Report_2010_(english).pdf

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