A Kuwaiti government official announced modification of foreign direct investment law is on cards as the world’s leading oil producer pushes its $111bn plan to modernise the economy.
“Foreign investors coming to Kuwait find obtaining necessary licenses a very difficult and prolonged process, as well as getting land needed for projects,” Sheikh Meshaal Jaber Al-Ahmad Al-Sabah, head of the Kuwait Foreign Investment Bureau, said in an interview with Bloomberg. “The proposed amendment should overcome shortcomings of the law. We hope it will be passed this year.”
Kuwait is banking on private investors to contribute about half of the four-year development plan, which began in the 2010-2011 fiscal year, in a bid to diversify its oil-dominated economy. The country’s current foreign direct investment law was passed in 2001 to ease foreign ownership limits.
The fourth largest OPEC oil producer is seeking investments in projects including a $14bn oil refinery.
According to data on the United Nations Conference on Trade and Development’s website, Kuwait was the lowest recipient of FDI among the six Gulf Cooperation Council states in 2010 with $6.5bn. Saudi Arabia, the biggest Arab economy, was the highest with $170.5bn, followed by the UAE with $76.2bn.
According to estimates, Kuwait owns around $300bn of assets abroad controlled by its sovereign-wealth fund. The Kuwait Investment Authority has stakes in Daimler and BP, and invested in the initial share sales of Agricultural Bank of China and Citic Securities.
“Some government agencies still don’t understand the importance of international investors, and so take too long to grant approvals required by the law,” Sheikh Meshaal Al Sabah said.
The top investment bureau official insisted that the proposed amendment will cut short red tape to obtain licenses and land for investors who fulfil the criteria. He added that the establishment of an independent authority will consolidate efforts to promote investment opportunities in Kuwait to the foreign market.
Kuwaiti Finance Minister Mustafa al-Shimali said in March the country’s economy expanded at 5.7% in 2011 and expected growth to be “a little higher” this year. National Bank of Kuwait, the country’s biggest lender, last month issued a higher forecast for Kuwait’s 2012 real gross domestic product, saying it would grow at 4.4% thanks to increased oil output.
Foreign direct investments that come under the bureau’s jurisdiction climbed 20% in 2011 from the previous year, Sheikh Meshaal said.
“Since we started operations in 2003, about US$5.4bn in foreign investment was recorded to have come to Kuwait,” he said. “The law’s achievement may have been short of expectations, disappointing perhaps, but it is still progress.”
The bureau operates under the Ministry of Commerce to oversee foreign investors interested in operating within the framework of the law.
“Our democratic political system should not threaten foreign investors,” Sheikh Meshaal said while adding: “They’re used to it in their countries.”