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Kuwait aims to attract more foreign investment into the Gulf State

Kuwait has suspended a programme under which foreign winners of huge government contracts are required to invest in the local economy, said the Finance Minister this week, as it was trying to attract more overseas companies into the Gulf state.

Although it has been frozen temporarily, it needs to be revised, said Anas al-Saleh, adding that several international business firms have been critical of the scheme. He said that the new rules may be ready in six months time.

Ever-since the trauma of Iraq’s 1990-91 occupation, Kuwait’s economy has been lagging behind more dynamic trade hubs like Dubai and Doha. According to Kuwaiti leaders, the political deadlock in Parliament makes it difficult to approve large projects, involving foreign investment. However, majority of the observes say that the frequent personnel changes by the government , coupled with layers of bureaucracy and general ennui are also the causes.

The offset programme was introduced in 1992, to wean Kuwait of its oil-dependency and foreign manpower, by giving more accessibility to new technologies and training.

Foreign suppliers are required to invest 35 percent of the contract value in an approved offset business venture, as per the website of the Kuwait Direct Investment Promotion Authority.

Kuwait’s programme is also applicable to civilian contracts signed with Kuwaiti government entities. Diplomats are of the opinion that suspension disclosed by the minister affected both defence and civil contracts.

However, critics of the scheme are of the opinion that it favours multinational companies enabling them to absorb offset costs by using economies of scale and that it required smaller exporters to divert precious management resources.

The Minister said that he needs to revise it and implement it in a more moderate way, and that would not take more than six months, said Saleh, by when, the new rules would be ready.

According to a study by the National Bank of Kuwait, part of organisation’s offset obligation can be fulfilled by purchase of goods and services of Kuwaiti national origin, but, the purchases should not be related to the supply contract which is initially subject to the scheme.

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