Case study on kuwait


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Kuwaits foreign policy, country overview. Kuwait's trade barriers and trading blocks, kuwait economic parameters, Kuwait's Import and export market.

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Case study on kuwait

  1. 1. Assignment # A 610 Course code : 50121617 Course name : Global Business Environment Batch : 2014 Specialization: Public Relations Roll no : 489
  2. 2. State Of Kuwait
  3. 3. State of Kuwait • Capital :- Kuwait city. • Official Languages :- Arabic. • Government :- United hereditary constitutional monarchy. • Currency :- Kuwaiti dinar (KWD) • Population (2013 estimate) :- 2,695,316 • GDP (nominal):- 2012 estimate - Total = $173.240 billion - Per capita =$45,824 • Main industrial products :- Petroleum, fertilizers, chemicals, construction materials, processed food.
  4. 4. Country Background • Kuwait, officially the State of Kuwait, is an Arab country in western Asia. Situated in the northeastern edge of the Arabian peninsula at the tip of the Persian Gulf, it shares borders with Iraq to north and Saudi Arabia to the south. • In 18th and 19th centuries, Kuwait was a successful center of trade and commerce. Kuwait rivaled Basra as an entrepot for trade between India and Middle East. Kuwait was also the center of boast construction in the Persian Gulf region. • In the early 20th century, Kuwait declined in regional economic importance, mainly due to trade blockades by British Empire and Al Saud. Kuwait’s economy was devastated by trade blockades.
  5. 5. Country Background (cont’d) • After World War I, Kuwait emerged as an independent sheikhdom under the protection of the British Empire. Kuwait’s oil fields were discovered in 1937. • Kuwait is a constitutional monarchy with a parliamentary system of government. Kuwait city serves as the country’s political and economic capital. • The country has the fifth largest oil reserves and petroleum products now account for 87% of export revenues and 75% of government income. • Kuwait is the 8th richest country in the world per capita. It is classified as a high income economy by the World Bank and is designated as a major non-NATO ally of United States.
  6. 6. B) Complete study on the Economic parameters of the country with focus on a Member of Trading Blocks with Trade barriers in place.
  7. 7. Kuwait Economy Kuwait is a small, relatively open economy with proven crude oil reserves of about 96 billion barrels (15.3 km3) – around 9% of world reserves. Petroleum accounts for nearly half of GDP, 90% of export revenues and 95% of government income. Kuwait lacks water and has practically no arable land, thus preventing development of agriculture. About 75% of potable water is either distilled or imported. Higher oil prices reduced the budget deficit from $5.5 billion to $3 billion in 1999; prices are expected to remain relatively strong throughout 2000s. The government is proceeding slowly with reforms. It inaugurated Kuwait's first free-trade zone in 1999 and would continue discussions with foreign oil companies to develop fields in the northern part of the country.
  8. 8. Main Economic indicators 2008 2009 2010 2011 2012 GDP at current prices (billion USD) 148.8 105.9 14.3 161.8 164.0 GDP per capita at current prices (USD) 43,370 30,440 34,730 43,590 42,060 GDP (% change) 6.0 -4.6 3.1 4.4 5.4 Gross fixed investment (% change) 13 -3 2 7 12 Exports (% change) 8.0 -13.0 2.7 4.6 4.4 Imports (% change) 9.0 -8.4 1.3 6.5 10.0 Consumer price index (% change, yearly average) 10.6 4.0 4.0 4.7 4.4 Exchange rate (yearly average) KWD/ 1 USD 0.27 0.29 0.29 0.28 0.28
  9. 9. A Brief About Kuwaiti Market • The state of Kuwait adopts free policy in the light of a free economic system. Kuwaiti markets are considered as an oasis for free trade. • In the light of United Custom Law of the GCC countries, custom duties do not exceed 5% on most of the goods imported from outside the custom union. • The relation between price and quality is the decisive factor in the success of the marketing goods of such countries in the Kuwaiti market. Kuwait is also an establishing member in World Trade Organization. (WTO).
  10. 10. Investment Laws • Kuwait’s new investment law authorizes tax holidays up to 10 years. Incentives include grants, tax deferrals, special access to credit and import quota exemptions. • A variety of incentives offered to new manufacturing businesses under the investment laws. Industrial enterprises that are eligible to receive such investment incentives must first obtain a permit from Minister of commerce and industry prior to being establish. Eligible enterprises are businesses run by Kuwaiti individuals or companies established in Kuwait. • The work force of an approved industrial enterprise must be composed of at least 25% Kuwaiti nationals, unless waived by the ministry of Commerce and Industry because of the unavailability of sufficient qualified Kuwaiti labor.
  11. 11. Trading Blocs Kuwait is a member of the following trade blocks:- • Gulf Cooperation Council (GCC) • Organization of the Petroleum Exporting Countries (OPEC) • Council of Arab Economic Unity (CAEU) • Greater Arab Trade Area (GAFTA) • Middle East Free Trade Area (MEFTA) • General Agreement on Trade and Tariff (GATT) • Arab Free Trade Area (AFTA)
  12. 12. Gulf Cooperation Council (GCC) • The Gulf Cooperation Council (GCC) is also known as the Cooperation Council for the Arab States of the Gulf (CCASG). It is a political and economic union of the Arab states broadening the Persian Gulf and constituting Peninsula • The six member states of the union are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates. Its head quarter is located in Riyadh, Saudi Arabia. • The unified economic agreement between these countries of the Gulf Cooperation Council was signed on November 11, 1981, in Abu Dhabi. It came into force on December 1, 1981.
  13. 13. Objectives of the GCC • Formulating similar regulation in various fields such as economy, finance, trade, customs, tourism, legislation and administration. • Fostering scientific and technical progress in industry, mining, agriculture, water and animal resources. • Establishing scientific research centers. • Setting up joint ventures. • Unified military presence (Peninsula Shield Force). • Encouraging cooperation of the private sector. • Strengthening ties between their people. • Establishing a common currency
  14. 14. GCC ; The Customs Union Trade between the GCC member states will be conducted within the framework of a customs union that shall include, at minimum, the following :- • A common external customs tariff (CET). • Common customs regulations and procedures. • Single entry point where customs duties are collected. • Elimination of all tariff and non-tariff barriers, while taking into considerations laws of agriculture and veterinarian quarantine, as well as rules regarding prohibited and restricted goods. • Goods produced in any member state shall be accorded the same treatment as national product.
  15. 15. GCC International Relations Member States shall take necessary measures to achieve the following :- • Negotiate collectively in a manner that serves the negotiating position of the member states. • Collectively conclude economic agreements with trading partners. • Unify import and export rules and procedures. • Unify commercial exchange policies with the outside world.
  16. 16. GCC: Statistics Statistics 2011 Balance of payments- current a/c net of trade group $298,378 Foreign direct investment- inward flows (million dollars) $25,960 Foreign direct investment – outward flows (million dollars) $21,825 Intra-group trade as a percentage of regional exports 5.1% Intra-group trade as a percentage of total exports 5% Service exports of trade groups (million dollars) $47,000 Service imports of trade groups (million dollars) $170,994 Trade group annual average export growth 36.2% Trade group annual average export growth (10-year avg) 18.4% Trade group annual average import growth 16.3% Trade group annual average import growth (10-year avg) 17.8% Trade group exports (million dollars) $889,947 Trade group imports (million dollars) $426,620 Value of intra-group trade (exports in million dollars) $44,130
  17. 17. Organization of Petroleum Exporting Countries • Organization of the Petroleum Exporting Countries (OPEC) is an oil cartel whose mission is to coordinate the policies of the oil producing countries. The goal is to secure a steady income to the member states and to secure supply of oil to the consumers. • OPEC is an intergovernmental organization that was created at the Baghdad Conference on September 10-14, 1960, by Iraq, Kuwait, Iran, Saudi Arabia and Venezuela. Later it was joined by 9 more governments Libya, United Arab Emirates, Qatar, Indonesia, Algeria, Nigeria, Ecuador, Angola and Gabon.
  18. 18. Council Of Arab Economic Unity • The Council of Arab Economic Unity (CAEU) was established by Egypt, Iraq, Jordan, Kuwait, Libya, Mauritania, Palestine, Saudi Arabia, Sudan, Tunisia, Syria, United Arab Emirates and Yemen on 3rd June, 1957. • It became effective on 30 May 1964, with the ultimate goal of achieving complete economic unity among it’s member states. • The organization is devoted to achieving economic integration within framework of economic and social development and to promoting freedom of movement of labor, capital, and services. • The organization’s chief policy making organ is the council, which is composed of economic and trade and industry ministers. The council meets twice each year to develop policies leading to custom unions.
  19. 19. Objectives of CAEU • To formulate regulations, legislations, and tariffs, aiming at the creation of a unified Arab Custom area. • To co-ordinate foreign trade policies with a view to ensuring the co-ordination of the region's economy vis-à-vis world economy. • To co-ordinate economic development and formulate programs for the attainment of joint Arab development project. • To co-ordinate legislation for taxes and duties. • To co-ordinate financial and monetary policies with the aim of achieving monetary unity. • To formulate unified regulations for transport and transit in the contracting countries
  20. 20. Greater Arab Free Trade Area • Greater Arab Free Trade Area (GAFTA) was declared within the Social and Economic Council of Arab League as an executive program to activate Trade Facilitation and Development Agreement that has been in force since January 1st, 1998. • The GAFTA includes in its membership 17 Arab countries: Jordan, United Arab Emirates, Bahrain, Saudi Arabia, Omen, Qatar, Morocco, Syria, Lebanon, Iraq, Egypt, Palestine, Kuwait, Tunis, Libya, Sudan, Yemen. • GAFTA is one of the most important economic achievements in the area of Arab common work. It contributes to efforts towards establishing the Arab Common Market.
  21. 21. Objectives of GAFTA • Gradual reduction in tariff rates, fees, and taxes with similar implications at an annual rate of 10% starting 1/1/1998 and based upon rates effective January 1st 1998. • Products that are forbidden (to be traded) for religious, environmental, security, and health reasons are exempted from the Execution Program of GAFTA. These products will be subjected to applicable national laws. • Removal of all non-trade barriers (administrative, quotas, and monetary) • Application of the “Agricultural Calendar” given the following
  22. 22. Middle East Free Trade Area • The US-Middle East Free Trade Area (MEFTA) initiative was an ambitious plan to achieve a single free trade agreement (FTA) between the United States and all countries between Western Sahara and Iran. It was launched by George W Bush in 2003. • Here, in theory, that means pushing all the countries up a scale of necessary conditions: from WTO membership to a Trade and Investment Framework Agreement leading to a bilateral investment treaty and/or an FTA. • Bush’s MEFTA project was clearly driven by US geopolitical and "security" interests and not just economic goals. The MEFTA project directly comes up against the EU’s plans for FTAs with the Mediterranean (EMFTA) and the Gulf states. • However, while the US initially set the deadline for MEFTA at 2013, the Obama Administration seems not to have followed through with it in the way that the previous administration had envisaged.
  23. 23. General Agreementon Trade and Tariff • The General Agreement on Tariffs and Trade (GATT), which was signed in 1947, is a multilateral agreement regulating trade among 153 countries. According to its preamble, the purpose of the GATT is the "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis.” • The GATT functioned de facto as an organization, conducting eight rounds of talks addressing various trade issues and resolving international trade disputes. • This agreement also created the World Trade Organization (WTO), which came into being on January 1, 1995. The WTO implements the agreement, provides a forum for negotiating additional reductions of trade barriers and for settling policy disputes, and enforces trade rules
  24. 24. GATT; 3 institutions + UN 1. International Monetary Fund (IMF) was established to facilitate international payments. 2. International Bank for Reconstruction and Development. After the War, European countries and Japan had to rebuild their production plants; this meant that these countries required a large amount of foreign capital. To encourage free flow of private capital, International Bank for Reconstruction and Development (IBRD, now the World Bank) was also established. 3. To facilitate free trade, International Trade Organization (ITO) was to be born. 4. As a political complement to these institutions, United Nations was also established in 1945 to replaced the League of Nations.
  25. 25. Major Provisions of GATT 1.Tariff (i) GATT obligates each country to accord non discriminative, most favored nation (MFN) treatment to all other contracting parties with respect to tariffs. (ii) MFN treatment does not mean free trade or national treatment. Imports from contracting parties are subject to tariffs or quotas. MFN treatment means that no other countries with some exceptions receive better treatment or lower tariffs.
  26. 26. Major Provisions of GATT • Exceptions to MFN (i) Existing tariff preferences such as those between British Commonwealth. (ii) GATT/WTO allows the formation of customs union, which causes a significant erosion to the MFN principle. (iii) An escape clause allows any contracting party to withdraw or modify tariff concessions, if it threatens a serious injury to domestic producers.
  27. 27. Major Provisions for GATT 2. Quantitative Restrictions GATT in general prohibits the use of quantitative restrictions on imports and exports. • Exceptions (i) agriculture - when government needs to remove surplus of agricultural and fisheries products. Important to US (ii) balance of payments - to safeguard balance of payments. If a country's foreign exchange reserve is low. (iii) Developing countries - LDCs may use import quotas to encourage infant industries. (iv) National Security- Strategic controls on certain exports. Patents, Copyrights, Public Morals
  28. 28. Major Provisions of GATT 3. Developing Countries Special Provisions to promote the Trade of Developing Countries. In 1965, the contracting parties added Part IV (Trade and Development) to GATT. (i) Developed economies will give high priority to reduction/elimination of tariffs on products of LDCs. (ii) refrain from introducing tariffs and NTBs to such imports. (iii) refrain from imposing internal taxes to discourage consumption of primary products from LDCs (iv) not expect reciprocal commitments from LDCs. By 2016, China may become the largest economy in the world. Its status may be changed to that of a developed economy.
  29. 29. Major Provisions of GATT 4. Other Provisions Provisions to eliminate concealed protection such as customs valuation. For example, American Selling Price valuation. By ASP, an ad valorem tariff is imposed on the domestic price. procedural matters: each member is entitled to one vote, decisions are made by majority vote. 2/3 majority is required to waive obligations. settlements of disputes.
  30. 30. Arab Free Trade Area • In the February 1997, the Arab Economic Union (a body established in 1957 in the framework of the Arab League) decided to create an Arab Free Trade Area (AFTA) by the year 2008. • For this purpose, 18 of the 22 members of the Arab League signed a treaty aiming at the elimination of all trade barriers between them by gradually lowering by 10% each year the customs duties on their trade and in gradually removing trade barriers in a process which started in February 1998. • At the Arab Summit held in Amman in March 2001 (Arab summits, the heads of states stresses the need to move forward towards the long-term objective of creating a strong Arab economic bloc. In September 2001, the Arab League’s Economic and Social Council which monitors the progress made, met in Riyadh and noted some advancement and decided to move the deadline for the end of the transition period forward to early 2005.
  31. 31. Objectives of AFTA The Greater Arab Free Trade Zone should boost the economies of the member countries in several ways: • Form a bigger and more homogenous market and thus attract more foreign direct investments (regional, European and international) • Increase trade between the member countries: despite the fact that some of these countries produce the same goods and are in competition for the export markets, they are complementary in many sectors Reduce the flow of smuggled goods which are not taxed and often hurt local productions as well as the balance of payments • Strengthen the member countries’ negotiating power when dealing with powerful economic blocs such as the EU or in international arenas such as WTO meetings (so far, 6 Arab countries are members of WTO: Morocco, Tunisia, Egypt, Jordan, Oman and Kuwait)
  32. 32. Trade Barriers Trade Summary • The U.S. goods trade deficit with Kuwait was $4.4 billion in 2008, an increase of $2.7 billion from $1.6 billion in 2007. U.S. goods exports in 2008 were $2.7 billion, up 9.5 percent from the previous year. Corresponding U.S. imports from Kuwait were $7.1 billion, up 72.2 percent. Kuwait is currently the 52nd largest export market for U.S. goods. • The stock of U.S. foreign direct investment (FDI) in Kuwait was $637 million in 2006 (latest data available).
  33. 33. Trade Barriers Import Policies Tariffs • As a member of the Gulf Cooperation Council (GCC), Kuwait applies the GCC common external tariff of 5 percent for most products, with a limited number of GCC approved country- specific exceptions. Kuwait’s exceptions include 417 food and agriculture items, which remain duty free, as well as tobacco products, which are subject to a 100 percent tariff.
  34. 34. Trade Barriers Import Prohibitions and Licensing • Kuwait prohibits the importation of alcohol and pork products, and requires a special import license for firearms. Used medical equipment and automobiles over five years old cannot be imported. Also prohibited are any books, periodicals, or movies that insult religion and public morals, and all materials that promote political ideology. • Kuwait continues to prohibit imports of live cattle from the State of Alabama and beef from the State of Oklahoma. The U.S. government has engaged local officials in an effort to encourage them to recognize U.S. control measures and World Animal Health Organization guidelines regarding Bovine Spongiform Encephalopathy.
  35. 35. Trade Barriers Documentation Requirements • In Kuwait, the import clearing process has historically been time consuming, requiring large quantities of paperwork, and numerous redundancies. However, the Customs Department is currently undergoing a major privatization effort, contracting with a private company to provide customs support services. The implementation of a state-of-the-art computer system has made the import process less complicated and more efficient. In October 2005, Customs began implementation of the Micro-Clear system at the Kuwait airport and completed implementation at all ports of entry in early 2006
  36. 36. Trade Barriers Customs Valuation • Kuwait began implementation of the WTO Customs Valuation Agreement in September 2003. Textiles and Apparel • Textiles and apparel products (dutiable at 5 percent) accounted for approximately 6 percent of Kuwait’s imports in 2006.
  37. 37. Trade Barriers Export Subsidies Policies • Kuwait does not directly subsidize any of its exports, which consist almost exclusively of crude oil, Petroleum products and fertilizers. Kuwait imports 98% of the country’s food products. • Some local vegetables grown by farmers, and are subsidized by the government; some of these vegetables are sold to nearby countries. However, the amounts grown and sold are not significant enough to have any real impact on local or foreign agricultural markets.
  38. 38. Trade Barriers STANDARDS, TESTING, LABELING, AND CERTIFICATION Standards As part of the GCC Customs Union, the six Member States are working toward unifying their standards and conformity assessment systems. However, each Member State currently continues to apply either its own standard or a GCC standard, resulting in a complicated situation for some U.S. businesses. GCC Member States do not consistently send notification of new measures to WTO Members and the WTO Committees on Sanitary and Phytosanitary Measures (SPS) and Technical Barriers to Trade (TBT) or allow WTO Members an opportunity to provide comments.
  39. 39. Trade Barriers Sanitary and Phytosanitary Measures • In May and October 2007, respectively, Bahrain and Oman notified WTO Members of proposed procedures meant to harmonize food safety import requirements for all GCC Member States. The United States and other WTO Members provided comments outlining significant concerns with the procedures, which, as currently drafted, do not appear to have a clear scientific basis and would substantially disrupt food exports to GCC Member States from their trading partners. The GCC Member States indicate that they are developing a response to these comments, and the United States has established a dialogue between U.S. and GCC technical experts to discuss the procedures and potential amendments to address the concerns raised.
  40. 40. Trade Barriers Conformity Assessment • In March 2003, Kuwait implemented its International Conformity Certification Program (ICCP), a pre- shipment certification program requiring that covered products be tested and certified by a single private company before being imported into Kuwait. The program applied to imports of: (1) household appliances and electronics; (2) new and used cars and other vehicles; (3) chemicals, including motor oil and paint; (4) building materials, including cement, gypsum, and bricks; and (5) paper and plastic items. • The GCC Standards Committee is currently developing a conformity assessment scheme to be adopted ultimately by each of the six Member States and has set 2010 as a deadline for full implementation by each Member State.
  41. 41. Trade Barriers GOVERNMENT PROCUREMENT • Kuwait’s government procurement policies require the purchase of local products, where available, and prescribe a 10 percent price advantage for local firms in government tenders. In 2004, the Council of Ministers agreed to increase this price advantage to 15 percent. However, the increase has not yet been implemented as it requires amendment of the GCC countries’ unified agreement, which has not yet occurred. • Offset obligations apply to military contracts with a value equal to or above KD3 million, civil government contracts with a value equal to or above KD10 million and oil and gas contracts (with the exception of oil and gas exploration and production contracts). Offset obligations amount to 35 percent of contract value with offset multipliers being established to target investment into specified sectors of the Kuwaiti economy.
  42. 42. Trade Barriers INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION • Kuwait is still in the process of drafting amendments to its intellectual property law to implement the WTO TRIPS Agreement. • Although Kuwaiti officials, particularly Kuwait Customs, continue to make progress on copyright enforcement and pursue cases through the judicial process, U.S. industry reports a lack of deterrent criminal penalties. U.S. industry also reports that sales of pirated and counterfeit goods remain high in Kuwait, and the use of unauthorized computer software continues in private enterprises.
  43. 43. Trade Barriers SERVICES BARRIERS Banking • Foreign-owned banks are restricted to opening only one branch, can only offer investment banking services, and are prohibited from competing in the retail banking sector. Furthermore, foreign banks are subject to a maximum credit concentration equivalent to less than half the limit of the largest local bank and are expressly prohibited from directing clients to borrow from external branches of the bank or taking any other measures or arrangements to facilitate such borrowing.
  44. 44. Trade Barriers Agent and Distributor Rules • Only Kuwaiti nationals and corporations may act as agents and distributors for foreign companies and exporters, according to Kuwait’s Commercial Agencies Law of 1964.
  45. 45. Trade Barriers INVESTMENT BARRIERS • Kuwait currently maintains a variety of restrictions on foreign direct investment and applies discriminatory taxation policies. In May 2000, Kuwait’s National Assembly approved legislation that allows foreign nationals to own up to 100 percent of all companies listed on Kuwait’s stock exchange, except banks. In January 2004, the National Assembly gave final approval to a bill permitting 100 percent foreign ownership of banks. • The foreign direct investment law that took effect in February 2003 authorizes majority foreign ownership in new investment projects and 100 percent foreign ownership in the following sectors: infrastructure projects such as water, power, waste water treatment or communications; investment and exchange companies; insurance companies; information technology and software development; hospitals and pharmaceuticals; air, land and sea freight; tourism, hotels and entertainment; and housing projects and urban development
  46. 46. Trade Barriers OTHER BARRIERS Corporate Tax Policies • In 2005, a number of corporations received income tax bills from Kuwaiti tax authorities although the companies had no commercial presence in Kuwait. Bills were typically sent to the companies’ Kuwaiti distributors and often included years of back taxes. Some companies have challenged the tax in court, and others are working with the U.S. and Kuwaiti governments to seek a legislative or regulatory solution. Kuwaiti law and judicial decisions are ambiguous in defining what does or does not constitute taxable presence. • On December 26, 2007, the Kuwaiti National Assembly passed legislation reducing the tax rate on foreign companies from 55 percent to 15 percent.
  47. 47. C) International Trade Statistics (Exports and Imports items)
  48. 48. Kuwait Imports • Imports in Kuwait increased to 1935 KWD Million in the second quarter of 2013 from 1864 KWD Million in the first quarter of 2013. • Kuwait main imports are: machinery, mechanical appliances, electrical equipment and electronics (24 percent of total imports); transport equipment (14 percent); base metals and articles thereof (12 percent); chemicals and related products (9 percent) and vegetables (6 percent). Main import partners are: United States (12 percent of total imports), China (10 percent), Saudi Arabia (8 percent) and South Korea (7 percent). Others include: Japan, Germany and India.
  49. 49. Import Statistics Product Trade Value Share Growth (thousands) (%) (% 5 year) Passenger Vehicles 3,972,054 6.14 143.79 Semi Finished Products of Iron & Steel 1,178,474 1.82 2,024.52 Seamless Iron & Steel Tubes & Pipes 968,880 1.50 1,300.70 Water Heaters 769,034 1.19 1,509.42 Articles of Jewelry & parts 731,509 1.13 644.82 Cell Phones & Video Recorders 671,953 1.04 184.03 Chicken 648,283 1.00 3,570.95 Non Crude Oil 625,987 0.97 644.11 Medicines in Doses 525,900 0.81 220.42 Trucks 512,143 0.79 138.24
  50. 50. Importing Into Kuwait The right to import goods into Kuwait on a commercial basis is restricted to Kuwaiti individuals and firms who are members of the Kuwait Chamber of Commerce & Industry (KCCI) and who have import licenses issued by the Ministry of Commerce & Industry (MCI).
  51. 51. Import Duties Kuwaiti customs duties are the lowest in the region, though there are protective tariffs on some goods. However commercial samples worth up to KD 5,000 may be brought in temporarily. • Duty is levied as a percentage of the CIF value of the goods up, but excluding unloading in, Kuwait. It is calculated and must be paid in Kuwaiti Dinar (KD). Where importers are invoiced in foreign currencies, customs use a list of 'standard' exchange rates to translate the CIF value into KD. • But most goods may be imported duty free, including: • food products, medicines, essential consumer goods, live animals, bullion, printed matter, etc., except where these (such as bread) are manufactured locally; • industrial and farm products from other GCC states provided they have at least 40% added value in the
GCC exporting country; and • raw materials, semi-processed goods, equipment and spare parts for new industrial establishments provided exemption has been obtained.
  52. 52. Kuwait Exports • Exports in Kuwait increased to 7999 KWD Million in the second quarter of 2013 from 7749 KWD Million in the first quarter of 2013. • Kuwait is the world´s eighth biggest exporter and the tenth largest producer of oil. Shipments of crude and refined oil account for 95 percent of total exports. • Main export partners are: South Korea (18 percent of total exports), India (15 percent), Japan (14 percent), China (10 percent) and United States (8 percent). Others include: Saudi Arabia, United Arab Emirates and Pakistan.
  53. 53. Export Statistics Top Products Exported in 2008 by Kuwait Market Value: 304,775 (millions) Product Trade Value Share Growth (thousands ) (%) (% 5 year) Crude Oil 106,264,748 34.87 705.04 Non Crude Oil 33,443,921 10.97 355.59 Petroleum Gases 5,502,205 1.81 376.23 Polymers of Ethylene 1,427,606 0.47 311.80 Nitrogenous fertilizers 1,045,232 0.34 577.49 Sulfur 814,263 0.27 1,354.55 Acyclic Alcohols 809,811 0.27 124.85 Articles of Jewelry & parts 455,442 0.15 2,474.05 Ferrous Waste & Scrap 299,535 0.10 530.42 Petroleum Coke 227,789 0.07 408.38
  54. 54. Kuwait Oil Sector Exports • In 2007, Kuwait’s total exports of crude and refined products reached nearly 2.7 million bbl/d. Of the 2.6 million bbl/d of crude oil Kuwait produced, roughly 1.6 million bbl/d was exported. The Asia-Pacific region received 1.3 million bbl/d, the United States received 175,000 bbl/d, and Western Europe received 109,000 bbl/d • Kuwait's single export blend ("Kuwait Export") has a specific gravity of 31.4°API (a typical medium Mideast crude), and is consideredsour with 2.52 percent sulfur content. • Mina al-Ahmadi is the country's main port for the export of crude oil. Kuwait also has operational oil export terminals at Mina Abdullah, Shuaiba, and at Mina Saud.
  55. 55. Kuwait Oil Exports
  56. 56. Value Of Exports And Imports Year National Exports (Million KD) Re- exports Total Total Petroleum others Exports Imports 2008 22,178 821 460 23,459 6,679 2009 13,479 990 466 14,935 5,723 2010 16,588 1085 286 17,959 6,499 2011 12,309 643 149 13,101 3,436
  57. 57. D) Comparative or Competitive advantages they have in producing commodities.
  58. 58. Oil In Kuwait • Located in the Middle East region that contains 75 per cent of the world's oil reserves, Kuwait has great petroleum resources. Today it is one of the long-term major oil producers with the fourth largest oil reserves in the world. • Oil has made Kuwait rich. Oil is Kuwait’s largest productive sector by a long way, and oil rents are the foundation of even the non-oil economy. But wealth does not lead automatically to economic and social development. • The origins of Kuwait’s oil industry date back to the 1920s. In 1921, Sheikh Ahmad Al-Jaber Al-Sabah became Ruler of the State of Kuwait. He was well aware of the activities of oil prospectors in neighboring Bahrain, Saudi Arabia and Iraq, as well as the Anglo- Persian Oil Company’s success in southern Iran.
  59. 59. Kuwait’s Oil Economy • Oil was first discovered in Kuwait in 1938, following a concession agreement between the state of Kuwait and Britain that allowed the British to explore and produce from Kuwaiti oil fields, with production starting in 1948. • Kuwait’s oil revenues have always accrued directly to the state.4 Until 1975, the mechanism was royalties and taxes on profits paid by foreign oil companies. In 1975, Kuwait nationalized the country’s oil industry, and in 1980 placed both the upstream and downstream sectors under the control of its national oil company, the Kuwait Petroleum Company • Kuwait’s oil revenues grew substantially in the decades after oil was discovered, rising from US$760 thousand in 1946 to US$567.5 million by 1965 and, following the oil price bonanza of the mid- 1970s, US$9.8 billion in 1976, the equivalent of 2.3 times non-oil GDP
  60. 60. Comparative Advantage in Oil • Kuwait undoubtedly has a significant competitive advantage when it comes to capital and energy. With oil production of 469m barrels in the first 6 months of 2007, the country can offer both cheap energy for manufacturing an abundance of feedstock for downstream activity in the petrochemical sector. • Increased production has enabled Kuwait to significantly boost its oil exports to key Asian countries this summer. • Much of Kuwait’s oil comes from a small number of mature fields dominated by Greater Burgan which, at 1.3m bpd, accounts for almost half of production. However, the discovery this summer of new fields in western Kuwait containing reserves of commercial-grade oil and gas will bolster plans to expand output.
  61. 61. The Oil Sector 2004 2005 2006 Average Daily Oil Production 2.38 mln barrels 2.58 mln barrels 2.48 Average price per barrel, Kuwait Export Crude $32.62 $45.7 $47.6 Annual revenue from oil exports $25.6 billion $42.9 billion $50.2 billion
  62. 62. E) Member of WTO, IMF & World Bank.
  63. 63. World Trade Organization • The World Trade Organization (WTO) is an international organization that establishes rules for international trade through consensus among its member states. It also resolves disputes between the members, which are all signatories to its set of trade agreements. • The WTO states that its aims are to increase international trade by promoting lower trade barriers and providing a platform for the negotiation of trade and to their business
  64. 64. WTO Principles The WTO discussions should follow these fundamental principles of trading. • A trading system should be free of discrimination in the sense that one country cannot privilege a particular trading partner above others within the system, nor can it discriminate against foreign products and services. • A trading system should tend toward more freedom, that is, toward fewer trade barriers (tariffs and non-tariff barriers). • A trading system should be predictable, with foreign companies and governments reassured that trade barriers will not be raised arbitrarily and that markets will remain open. • A trading system should tend toward greater competition. • A trading system should be more accommodating for less developed countries, giving them • more time to adjust, greater flexibility, and more privileges.
  65. 65. Kuwait and WTO • The State of Kuwait has been a WTO member since 1 January 1995. • The first review of the trade policies and practices of Kuwait takes place on 7 and 9 February 2012. The basis for the review is a report by the WTO Secretariat and a report by the Government of Kuwait. • Trade Policy Reviews are an exercise, mandated in the WTO agreements, in which member countries' trade and related policies are examined and evaluated at regular intervals. Significant developments that may have an impact on the global trading system are also monitored. All WTO members are subject to review, with the frequency of review depending on the country's size.
  66. 66. World Bank • The World Bank is an international financial institution that provides loans to developing countries for capital programs. World Bank’s official goal is the reduction of poverty. • The World Bank comprises two institutions: the International Bank for Reconstruction and Development (IRBD) and International Development Association (IDA) • The World Bank was created at the 1944 Bretton Woods Conference, along with 3 other institutions, including the International Monetary Fund (IMF).The World Bank and the IMF are both based in Washington DC, and work closely with each other. • The IBRD has 188 member countries, while the IDA has 172 members.
  67. 67. Kuwait and The World Bank • Kuwait joined the World Bank in 1962. For thirty years the Bank and the Arab States of the Gulf Region have been partners in the Strategic Cooperation Program (Technical Cooperation Program until 2008), supporting the rapid development of this closely linked group of distinctively characterised countries. • Early requests for the Bank's technical assistance ranged from the development of infrastructure--such as the interstate Saudi-Bahrain Causeway--to industrial policy and economic planning • Outstanding regional progress was made through public investment in high quality infrastructure, and in the creation of multi-annual development plans with integrated objectives and goals.
  68. 68. Kuwait & the World Bank Strategic Cooperation Program • Kuwait has been a partner in the Strategic Cooperation Program (SCP) for over thirty years. The program covered a broad range of issues in different development areas. • In FY06, the program began to grow significantly in size and diversity of subject areas. In November 2006, an agreement was reached on a rolling three-year program through December 31, 2009. • Under the new agreement, the program became more strategic and began to focus on strategic planning and its alignment with budget processes, public sector management, anti-corruption measures, and other issues vital for the development of the country. The government’s request to scale up fee-based services included a proposal to establish a World Bank office in Kuwait; the agreement on the establishment of the office was signed in September 2008.
  69. 69. International Monetary Fund • The International Monetary Fund (IMF) is an International Organization that was initiated in 1944 at Bretton Woods Conference and formally created in 1945 by 29 member countries. • The IMF’s stated goal was to assist in the reconstruction of the world’s International payment system post World War II. • The IMF describes itself as “an organization of 188 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. • Its headquarters are in Washington D.C., United States.
  70. 70. Kuwait & IMF Kuwait’s high oil prices and increased production have enabled the government to continue to record high fiscal and external surpluses and build strong buffers, the International Monetary Fund (IMF) said in a report. The IMF showed in its report, released after its Executive Board concluded Article IV consultation with Kuwait on Nov 25, that “overall real non-oil gross domestic product (GDP) growth is projected to increase modestly to three percent in 2013, driven by an increase in domestic consumption and pick-up in public investment.” It showed that “the overall average consumer price inflation (CPI) is projected at three percent in 2013,” whereas the fiscal and external surpluses are projected at 27 percent of GDP and 39 percent of GDP, respectively, in 2013.
  71. 71. India’s Imports From Kuwait • India’s imports from Kuwait went up by 7.07% in US$ terms from US$ 7704.25 million in 2007-08 to US$ 8,249.49 million in 2009-10. In Rupee terms, the imports rose by 25.93% from Rs. 30,95,993.03 lakhs to Rs 38,98,799.19 lakhs in the corresponding period. India’s imports from Kuwait (excluding POL) were US$ 339.69 million in 2009-10. • The major items imported by India were Organic Chemicals, Plastic and Articles thereof, Iron and Steel, Fertilizers, Aluminum and Articles thereof, Salt; Sulphur; Earths and Stone, Inorganic Chemicals; Organic or Inorganic Compounds of Precious Metals, Copper and Articles thereof, Nuclear Reactors, Boilers, Machinery and Mechanical Appliances, Miscellaneous goods.
  72. 72. Agreements between India and Kuwait • Trade Agreement was signed in February 1974. • MOU on cooperation in the field of Telecommunications was signed in February 1992. • Agreement for the promotion of Economic, Commercial and Technical Cooperation was signed in February 1992. • Agreement for Encouragement and Reciprocal Protection of Investment was signed in November 2001 and ratified in June 2003. • Agreement on Drug Demand Reduction and Prevention of Illicit Trafficking in Narcotic Drugs, Psychotropic Substances and Precursor Chemicals and Related Matters was signed in June 2006 is awaiting ratification. • MOU on Civil Aviation between India and Kuwait authorities, latest one signed in June 2007. • Agreement on the Avoidance of Double Taxation and Prevention of Fiscal Evasion of Taxes on Income was signed in June 2006; it came into force with effect from October 17, 2007