Kuwait Real Estate News
Kuwait lacks foreign investments due to land restrictions
Despite its oil wealth and strategic location, Kuwait was able to attract only $123m foreign direct investment, which happens to be the lowest for a Middle Eastern country, except for the Palestinian territories, revealed the World Investment Report by United Nations 2008.
Qatar is the second least popular destination for foreign capital, among the six oil-rich Gulf States in the GCC, but, received 10 times more Foreign Direct Investments.
This is partly due to the wealth Kuwait has derived from its production of 2.6m barrels of oil a day, and this makes the foreign capital less necessary for its development.
However, the experts say that the main reason is an inhospitable environment, particularly for international companies. There is no private sector and everything is taken care by the government.
The oil industry too is not open to foreigners, and they are also not allowed to own a land. Majority of the companies should be owned by locals, and hence, as per the UN report, only 31 affiliates of foreign companies are based in Kuwait.
Kuwait has introduced reforms such as cutting the corporate tax from 55 percent to 15 percent this year, and has also improved access to land for development, but according to investors and experts, these changes are too limited.
One of the upstream development initiative, Project Kuwait, meant to open the northern oil fields to international companies and ease pressure on ageing structures elsewhere, was initiated in 1997. But there has been no progress in the scheme due to Parliamentary arguments.
Recently, Kuwait has announced its big project, the $85bn City of Silk or Madinat al Hareer, aimed to create jobs and offer housing, but is caught up in hurdles.
The difficulty faced in obtaining a land is the biggest hindrance towards investing in Kuwait. Even Kuwaitis have to wait for years to acquire areas for housing, schools or factories, although the country uses less than 4 percent of its area.
This is surely an handicap for an expanding economy and the country becomes less competitive, says Bassam al-Othman, Head of Real Estate at Markaz, a Kuwaiti investment company.
Experts feel that lack of availability of land in Kuwait is mainly due to the fact that majority of it is held under concession by the KPC (Kuwait Petroleum Corporation), the State Oil Company.
This scenario in Kuwait is quiet contrary to what is happening in majority of other Gulf States such as Saudi Arabia which is seen building around its oil infrastructure. Hence, it is not surprising that even Kuwaiti companies avoid investing in their local market, and move their operations abroad.
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