By Shilpa Mathai
Kuwait revises foreign invetsment law, but analysts say red tape sill needs to be cut.
Kuwait has finally issued the by-laws necessary to implement the 2001 Foreign Investment Law passed by its parliament that will open up most of the emirate’s economic sectors to foreign investments.
Foreigners can now invest in all industries, except oil and gas exploration and production, in addition to infrastructure projects in water, power, telecommunications and sewage treatment.
Foreign companies establishing offices in Kuwait are guaranteed full ownership and are allowed to invest in sectors like tourism, real estate and the entertainment industry. Banking, investment and exchange is subject to central bank approval, in addition to insurance companies, information technology, health and pharmaceutical sectors.
Following the ouster of Saddam Hussein in Iraq, Kuwait appears eager to bolster its sluggish economy. The country is hoping to play a part in the reconstruction of Iraq.
It has launched a drive to attract foreign investors and Commerce and Industry Minister Abdulrahman Al Taweel said security concerns have taken a back seat in the post-Saddam era, which would bring major economic changes.
“Security concerns were predominant when Saddam Hussein was in power. After the liberation of Iraq, opening the economy has become the dominant concern,” said Taweel.
According to him, the foreign investment law grants tax holidays of up to ten years for investors besides custom duty and raw material charges exemptions. Revisions to the country’s 1995 income tax law to reduce corporate income tax from existing 55% is under consideration by a government committee. This will have a huge impact on tourism, says Nabila Al Anjari, assistant under secretary for tourism in Kuwait.
Lucrative incentives will be given to hotel companies wanting to invest in developing the country’s tourism infrastructure. At least 20 new hotel projects are in the pipeline from five star luxury hotels to budget accommodation. Long term investment plans for include the development of offshore islands and golf courses.
But, according to business experts, the emirate needs to reduce government red tape if it wants to attract foreign direct investment. They say the Gulf state has to provide an investment friendly climate, clarify aspects of the foreign investment law taxation and benefits, maintain legal structures and reduce government regulations in business.
“Investors want familiarity of approach and laws that don’t have double meaning,” Mark Hoyle of U.K.-based Tanfield Chambers, an expert in Arab and Islamic law told Reuters.
“Foreign firms want to be able to bring in foreign employees as needed without restrictions.”