Financial Services

An Expert's View about Banking, Finance and Insurance in Kuwait

Posted on: 25 Aug 2012

The Kuwaiti financial system is sizeable and well developed. It includes a growing number of financial companies and investment funds, as well as an active stock exchange.

Financial Services Sector in Kuwait The Kuwaiti financial system is sizeable and well developed. It includes a growing number of financial companies and investment funds, as well as an active stock exchange. The insurance sector is growing quickly. Market overview ξ Banking in Kuwait consists of the Central Bank of Kuwait, eleven local banks and a handful of foreign banks. In terms of both assets and capital, the market is dominated by the National Bank of Kuwait (NBK). NBK is listed in the world’s 50 safest banks as ranked by US-based Global Finance. There are five sharia-compliant lenders. Foreign banks include HSBC, BNP Paribas, Citigroup, National Bank of Abu Dhabi and Qatar National Bank. ξ As Kuwait begins to implement its National Development Plan, it is likely that businesses and the government will increasingly turn to local banks for financing, creating demand for any idle capital. The banking sector appears to be well positioned to take advantage of any profitable investment opportunities that may arise. ξ The number of non-bank financial institutions has increased significantly in the last few years. While the activity of conventional investment companies is heavily concentrated in foreign markets, the core business of Islamic investment companies, which have been growing quickly in recent years, is domestic. A number of leading investment houses have run into financial problems as the squeeze on liquidity eroded their access to the short-term funding, which they had relied on to support long-term projects. ξ The Kuwaiti parliament passed legislation in 2010 that established the Capital Markets Authority (CMA), Kuwait’s first independent stock market regulator, as part of a larger regulatory framework for the country’s capital markets. The CMA regulates the Kuwait Stock Exchange (KSE), supervises public and private subscriptions and oversees mergers and acquisitions. ξ The KSE is the second largest bourse in the Arab world after the Saudi Arabian equity market. Many investors like the high risk environment with its high returns. However most think that the new authority will increase competition and lead to greater direct foreign investment into Kuwait. A plan for the KSE’s privatisation has been outlined. Key opportunities Kuwait has embarked on an ambitious economic development plan involving an estimated spending of about KD31 billion (US$108 billion), which aims to make Kuwait a regional trade and financial hub through sustaining economic development, economic diversification and GDP growth. The plan is driven by government spending coupled with increased private sector participation, and offers opportunities for UK banks, law firms and other financial services firms. In 2010 Kuwait announced a £90 billion 4 year (since increased to £100 bn over 5 years) package for infrastructure development. In addition, the oil sector is set to see a further £60 billion investment programme including a new 615,000 bpd oil refinery and increased oil production capacity raised to 4 million barrels per day. In its strategy to promote and support increased private sector participation in infrastructure development, the Government of Kuwait has established a Public Private Partnership programme providing significant investment and financing opportunities for the private sector. The healthcare and education infrastructure schemes in particular will be developed using UK models. Great potential also exists, therefore, for the UK financial services industry to provide advisory services and expertise on PPP/PFI infrastructure development in Kuwait. To facilitate the activities of UK businesses in the PPP programme, in 2011 the UK and Kuwaiti governments signed an MOU on Trade and Technical Co-operation which covers the area of provision of advisory and consultancy services allied to Kuwait’s rolling cycle of 5 year development programmes. Latest export opportunities – Financial & Professional Services Latest export opportunities - Kuwait Getting into the market We strongly advise UK companies to consider how to structure their business in Kuwait prior to a decision to enter the market. A visit to Kuwait by the UK company will help confirm the market potential and start to develop relationships with prospective business partners. Kuwaitis like to build on social relationships prior to business. In dealing with them, it is important to be patient and allow time for the relationship to cement. In general Kuwaitis tend to be pro-British and once you have gained their trust, they will rarely let you down. Kuwaitis can be hard bargainers. Preferably the same person should return as any new representative will often find that they need to establish the relationship almost from the start. Regular contact, preferably in person, but at least by telephone, is the best way of ensuring your business stays uppermost in the mind of your interlocutor. If your business will involve the delivery of any services within Kuwait you are strongly advised to seek the advice of a local accountant to avoid any unpleasant surprises. The application of the tax law is often unpredictable and sometimes completely arbitrary. Only Kuwaiti nationals or a firm whose ownership is at least 51% Kuwaiti may carry out commercial agency business in Kuwait. An agency agreement must be registered with the Ministry of Commerce and Industry. When registering, a number of firms take out a licence for both trading and contracting, even if they only intend to concentrate on one activity. More about doing business in Kuwait Contacts Market intelligence is critical when doing business overseas, and UKTI can provide bespoke market research and support during overseas visits though our chargeable Overseas Market Introduction Service (OMIS). To commission research or for general advice about the market, get in touch with our specialists in country - or contact your local international trade team. ξ Paul McKay, British Embassy Kuwait. Tel: +965 2259 4363 or email: ξ Romeo Rosario, British Embassy Kuwait. Tel: +965 2259 4364 or email: Contact your local international trade team Major Events None at present. UKTI Events UKTI runs a range of events for exporters, including seminars in the UK, trade missions to overseas markets and support for attendance at overseas trade shows. Latest events – Financial & Professional Services Latest events – Kuwait Useful links More about OMIS and other UKTI services for exporters
Posted: 25 August 2012

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