Kuwait: How is the investment situation in this country?
A Comprehensive Overview of Kuwait's Investment and Economic Situation
Kuwait, as one of the countries in the Middle East region, has provided a very good basis for foreign business and legal entities to begin investing and launching a business in the light of reforms to their political and economic systems over the past decade. However, investing heavily in oil and the central government may have some risks. In this article, Sindbad aims to become more familiar with the political and economic situation in the Middle East
Geography of the State of Kuwait
Kuwait is located in the southwestern Asian continent in the Middle East. It shares land borders with countries such as Iraq and Saudi Arabia by water. According to published statistics, the population of the country is approximately 5 million, of which there are a significant 1 million foreigners working in the service and industrial sectors. Its capital is the port city of Kuwait, which is also the most important city in the country. Other major cities in Kuwait include Al-Sheikh, Al-Ahmadi, Al-Jarra and Huli.
Today's Kuwaiti region is believed to have been one of the most important cities in Mesopotamia on the basis of the similarities and evidences of nearly three thousand years BC and is thought to be an 18th-century tribe known as Inizah in the present-day region of Kuwait and northern Arabia. Have been deployed. The region became an autonomous sheikh region in the year 6, after many long struggles. Abdul Rahim Sabah was the first Sheikh of Kuwait whose family holds all power in Kuwait to this day. In the eighteenth and nineteenth centuries the country came under the banner of the Ottoman Empire. In 1930, the British also supported the Kuwaiti Middle East.
Oil is Kuwait's main source of income, with its discovery dating back to year 9, and studies have shown that nearly 2% of all oil claims in the world are in this small country, which led to Kuwait having become the world's largest. second-largest oil exporter in two decades with foreign investment. It came out of British rule in year 2 and declared independence on June 19th.
Kuwait has six provinces, each governed by a governor appointed by the emir. Kuwait's political structure among the countries of the region, in an Arab and Gulf context, is closer to the political model of Western democracy. Among the Arab Gulf states, the Kuwaiti people have good knowledge, political growth, and scientific standing. Kuwait's geographical and economic position is one of the reasons Kuwait has been heavily influenced by external events. Its location in the northwest of the Persian Gulf and in the neighborhood of Saudi Arabia and Iraq and its proximity to Iran has created a special political and geographical location for Kuwait. In the twentieth century, as oil has become more and more politically important, oil-rich countries are more likely to be influenced by world political events than ever before. None of the oil-rich countries, especially those located in the Middle East, can be neutral and neutral in the face of world events because they have the natural resources to transform a country into a superpower or another.
The Kuwaiti constitution is the most important legal instrument of the country, which was adopted on November 11, 1962. In May 2005, the country's constitution was revised and revised. The new constitution states that anyone over the age of 21 who has resided in the country for twenty years can vote. Military personnel and police cannot vote. Under the law, women can also participate in elections.
Conditions and risk of investing in Kuwait
Assessments by international organizations all show that Kuwait is relatively stable among the countries of the Middle East. The country is ranked second in the country in risk ratings, with the US $ 80 million short-term credit ceiling below $ 80 million, and the US $ 160 million mid-term and long-term credit over two years. According to the country's investment laws, the outside investor has 49% ownership of the Kuwaiti corporation and the remaining 51% must be owned by a Kuwaiti partner. The creation of a large free trade zone in al-Sheikh port in 1998 has been one of the plans of the Kuwaiti government in recent years.
The Benefits of Investing in Kuwait
Kuwait is one of the best countries in the Middle East to start an investment in many ways, according to statistics and reports released by international institutions. Accordingly, investing in this country will have benefits for both foreign and legal entities, the most important of which are the following three.
- The Kuwaiti government has sought to improve the investment environment by providing various tax exemption services.
- The possibility of free exchange of capital
- 100% guarantee of private ownership
Participate in tenders in Kuwait
In Kuwait, bidding for all natural and legal persons is free. A law firm is responsible for coordinating tenders. The economic liberalization policy and economic reform programs of the Kuwaiti government over the past decade have led to economic growth in the country. Therefore, the government has provided a good platform for supporting small and medium-sized enterprises and supporting industry and services.
General rules of investing in Kuwait
In recent years, the Kuwaiti government has adopted new laws on foreign investment that allow 100% exemption of government duties on foreign companies and entities for ten years, which is the subject of foreign investors' interest. Our own country has increased Iran's presence in the markets of Kuwait. On the other hand, the Kuwaiti government has taken other measures to improve the investment climate in the country. In order to attract more foreign investment from various countries around the world, he has set up an office called the Foreign Investment Bureau in the Kuwaiti Ministry of Commerce. The office is active in providing information and services to foreign investors.
All investors, both real and legal, must submit their project documentation to the Kuwaiti Foreign Investment Attraction Bureau in order to start their direct investment in Kuwait. There are also other ways to invest in the Kuwaiti market and invest in it. In some ways, companies can start investing or implementing projects in Kuwait with the participation and ownership of a reputable Kuwaiti company, but it does not require complex administrative processes in Kuwait.
Over the past few decades, as Kuwait's oil revenues have risen sharply, the government has launched new funds called the Future Generations Fund. The government is required by the constitution to invest 10 percent of the country's total revenue annually in the fund. The fund is now estimated at nearly $ 80 billion.
Different stages of starting a business in Kuwait
Kuwait, as well as other Gulf states or any other country around the world, has set specific conditions for companies to start a new business. In general, these steps can be summarized in the following few cases.
- First step, filling out the relevant application form at the Ministry of Commerce registration office to establish a new business or company
- Second step, informing about the company name and filling out the application form
- Third step, submission of letter issued by the company registration office to banks, municipality and judiciary
- Fourth step: Deposit the minimum amount of capital needed to start a business in one of the banks approved by the Ministry of Commerce and receive a deposit approval certificate issued by the relevant bank.
- Fifth step, preparation and presentation of all legal and criminal details of the shareholders of the company in order to perform the duties of official registration of the company.
- Sixth step, conducting a municipal inspection of the company in question and providing the agency with the relevant certificate
- Seventh step, after an inspection by the municipality and approved by the organization, the company registration office issues an informal certificate to the company.
- Eighth step, signing an unofficial certificate and issuing a business start-up license by the company registration office
- Ninth step, registration of the company in the Commercial Registration Office of Kuwait
- Tenth step, registration of the relevant company and business in the Kuwait Chamber of Commerce and Industry
- Eleventh step, registering with the Urban Census Bureau
- twelfth step, Registration and Completion of Company Profile in the Ministry of Labor and Social Affairs of Kuwait
Customs laws and regulations in Kuwait
Among the factors that have made Kuwait attractive for foreign investment startups are its customs laws and regulations.
Customs are one of the main institutions influencing Kuwait's economy. For this reason, the government is paying particular attention to the appropriateness of its processes and tariffs. In general, Kuwait adheres to a relatively free and proper system in its customs mechanisms. Customs officials have not banned the import of many goods, and overall Kuwaiti customs regulations are much easier and easier than many other Middle Eastern countries.
In general, customs duties in the country are usually levied on imports of goods at 4%, 8% and above 4%. Kuwait has concluded economic cooperation treaty with other GCC countries. The purpose of this treaty is to establish a common market for the expansion of the trade relations between the countries concerned.
In 2003, GCC member states agreed, according to the GCC, to apply the same customs duty on imports to member states. The said customs duty for most imported goods is equal to five per cent of the value or value of the goods. The importation of goods into free trade zones is not subject to customs duties. In this context, goods that have a value added value of more than 40% of their initial value at the time of import in Kuwait are domestic goods. Owners of these goods can export their products to the GCC countries without paying any import duties.
Concerning the currency laws governing Kuwaiti markets, it should be noted that the Kuwaiti currency and foreign exchange laws are formulated and enforced by the Central Bank of Kuwait. In Kuwait, any foreign exchange is free and the government has not made any strict rules. Kuwaiti dinar, like the currency of other oil-exporting countries, has a direct dependence on the dollar. The Kuwaiti Dinar is freely convertible and equals daily.
In general, Kuwait lacks any tax system. To date, the government has not sought to generate tax revenue due to its high oil sales and small population. For this reason, the government has provided many subsidies in areas such as energy, water, electricity, transportation, health. It can be said that Kuwait's tax system is very specific to other Gulf states, with very few types of taxes defined. In Kuwait's free zones, companies and foreign economic activists are not taxed.
Investing in Kuwait for Iranian Investors
The existence of a blue border that has facilitated the export and importation of Kuwait for Iranian investors and companies. On the other hand, the good political and cultural relations between Iran and Kuwait have made it easier for Iranians to invest. In general, Kuwait has a consumer society and lacks a strong and coherent industrial sector and producer. Therefore, a thorough and thorough investigation and a thorough understanding of Kuwaiti society can provide a more vibrant presence in its markets.
For example, according to Kuwaiti statistics, annual imports to the country are about 14 billion, which is a large proportion of the country's low population. Business experts believe that by implementing a set of standards and measures, Iranian companies could have a $ 3 billion stake in the market, but unfortunately statistics show that the amount of exports currently exported to Kuwait is much lower. In general, according to experts, there is a lack of understanding of the realities of today's Kuwaiti society, the pursuit of business in an outdated and traditional way, as well as a lack of compliance with international standards, as well as a lack of communication between Iranian and Kuwaiti companies, the failure to introduce Iranian industrial capabilities, the multiplicity of decision-making centers in the sectors. Iran's economic and high inflation rate and the lack of commitment of Iranian companies to maintain the quality of export goods are among the major problems that Iranian companies face in entering the Iranian market.
Weaknesses and risks of investing in Kuwait
Despite all the reforms that Kuwait has been implementing on its management systems over the past few decades and which have had potential benefits for the country, entering the country will still be free of risk. In this regard, it should be noted that Kuwait relies heavily on oil revenues. The government in Kuwait is very large in size, with nearly 90% of the Kuwaiti population employed by the government and generally accounting for about 60% of all spending in the country.
Kuwait has become one of the richest countries in the Middle East and in the world thanks to its rich oil revenues that have been in place for decades. However, the Kuwaiti government has made many reforms over the past decade to reject its political and economic systems to maximize foreign capital absorption. The rules and regulations for registering companies, investments and customs tariffs in this country are very simple and easy to start a new business.
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