Kuwait's Trade & Investment
Recently, Kuwait adopted Law No. 56 of 1996 (Effective 15.1.97), creating an independent entity called the Industrial Authority, and abolishing the Shaubia Industrial Authority and the Industrial Committee. All industrial projects in the emirate, including those now in operation, will have to be licensed by the new authority.
Kuwait's new investment law authorizes tax holidays for up to 10 years. Incentives include grants, tax deferrals, special access to credit and import quota exemptions.
A variety of incentives are 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 the Minister of Commerce and Industry prior to being established. Prior to effecting any change in its capacity, location, or business, an approved industrial enterprise must obtain a modified permit from the Minister of Commerce and Industry. Eligible enterprises are businesses run by Kuwaiti individuals or companies established in Kuwait.
Approved industrial enterprises must provide the Ministry of Commerce and Industry with their annual financial statements and records of goods imported duty-free under the incentives program. The work force of an approved industrial enterprise must be composed of at least 25 percent Kuwaiti nationals, unless waived by the Ministry of Commerce and Industry because of the unavailability of sufficient qualified Kuwaiti labor.
Kuwait is a member of the GCC and, as such, is subject to the GCC trade agreements. These agreements are described in the section on Trade Agreements in the chapter on Bahrain.
Kuwait has been a member of GATT and has signed the WTO agreement.
Only Kuwaiti nationals and entities in which Kuwaitis hold at least a 51 percent interest are permitted to import goods into Kuwait. Foreign business entities are required to use a Kuwaiti import agent. Customs duties is 4 percent on average, which is applied to the cost, insurance and freight value of goods. There is also a customs clearance and inland transportation that is usually charged $175 per container. Some items that are competitively produced in Kuwait are subject to an elevated customs duty of 15 percent.
Imports that compete with locally manufactured goods of “infant industries,’’ the Ministry of Commerce and Industry may impose protective tariffs of up to 25 percent. In these situations, tariffs are imposed on a case-by-case basis.
Since July 1, 1997, the Council of Ministers approved imposing a 70 percent customs duty on cigarettes and tobacco products in lieu of the previously approved 100 percent. The Kuwaiti government may also raise tariffs in order to increase revenue and "harmonize upward" with tariffs in other GCC states.
Public Sector Procurement
Procurement by the Kuwaiti Government and its agencies is governed by Law No. 37 of 1964 as modified by Law Nos. 13 and 31 of 1970 and 1977, respectively concerning Public Tenders (hereinafter, the “Tenders Law”). The Tenders Law provides that any procurement made by the Kuwait Government with a value in excess of KD 5,000 must be conducted through the Central Tenders Committee procedures in order to ensure competitive pricing.
Article 5 of the Tenders Law provides that a bid for a government contract may be made by a Kuwaiti merchant, individual or company which is registered in the Register of Commerce in the Chamber of Commerce and Industry of Kuwait. A foreign entity may act as a government contractor only through a Kuwaiti entity in which it has an ownership interest or by acting directly but with the assistance and support of a Kuwaiti agent or commercial representative.
The tenderer must be registered in the Classification List of Contractors and Suppliers.
The two exceptions to the application of the Tenders Law are Ministry of Defense procurements and other specialized procurements by the approval of the Central Tenders Committee.
Kuwaiti nationals have the right to join and to establish unions. Expatriate workers are allowed to join unions after a five-year residency term but only as non-voting members. Kuwaiti law forbids the establishment of more then one union per “functional area”.
Kuwaiti workers have the right to organize and to bargain collectively. The right to strike is recognized but is limited by Kuwait’s labor law, which requires compulsory negotiations followed by arbitration. The constitution prohibits forced labor except in cases specified by law with just remuneration. The minimum age for employment, both full and part time, is eighteen years of age. There is no minimum wage for the private sector and in the public sector the minimum wage is KD226 a month for Kuwaiti bachelors and KD301 a month for married men.
General working conditions are established by Kuwaiti law for both the public and the private sector, with the oil industry treated separately. The work week is limited to forty-eight hours with one day of rest per week and a minimum of fourteen days of vacation annually.
The law governing the oil industry provides for a forty hour work week, over time pay, and thirty days annual leave. Women are promised equal pay for equal work.
Employers are responsible for maintaining a safe working environment.
Foreigners wishing to work in Kuwait must obtain a work permit before entering the country. Such permits are granted by the Ministry of Labor and are generally limited to sectors in which there is a need for expatriate labor such as tourism, industry, banking and private education.
Foreign contractors are obliged under Decision No. 694 (26.7.92) to take part in a counter-trade offset program if the accumulated value of contracts in which they are engaged is equal or greater than KD 1 million.
The offset may reach up to 30 percent of the monetary value of the said supply contract and can be performed by counter-trade, training or investment programs. The offset obligations must be settled within eight years.
The Gulf War resulted in serious environmental damage. Iraq’s mass destruction of oil wells, the huge oil spills caused by allied air strikes and the use of heavy tracked vehicles in the desert by both sides triggered an environmental catastrophe, resulting in frequent sand storms, the destruction of marine wildlife, and high levels of poisonous by-products in the air from the 1991 oil fires.
Kuwait is a member of several treaties concerning the preservation of the environment.
As of Feb. 27, 1975 Kuwait has been obliged under the International Convention for the Prevention of Pollution of the Sea by Oil, to inter alia, limit the size of oil tankers and to regulate oil tankers arrangements.
As of March 29, 1975, Kuwait has been obliged under the Convention Concerning Protection Against Hazards of Poisoning Arising from Benzene, to, inter alia, protect workers from hazards arising from benzene by using substitutes, providing adequate means of personal protection and taking all necessary measures to prevent the escape of benzene vapor into the air.
As of July 1, 1979, Kuwait has been obliged under the Kuwait Regional Convention for Cooperation on the Protection of the Marine Environment from Pollution to take all measures to prevent abate and combat pollution of the marine environment caused by ships, aircraft, land-based sources, exploration of the sea bed and other human activities. The convention also provides for a system of research and cooperation between the gulf states. Under an enclosed protocol to this convention, the gulf states have established the Marine Emergency Mutual Aid Center in order to combat sea pollution caused by oil.
Kuwait is a signatory to two treaties prohibiting the development and use of weapons modifying the environment, namely bacteriological toxin and nuclear weapons. Furthermore, Kuwait has ratified, inter alia, the following international environmental agreements: the 1977 UN Environmental Modification Convention (ENMOD); the 1983 FAO International Undertaking on Plant Genetic Resources; the 1967 Outer Space Treaty; Annex 16 on Environmental Protection to the 1944 Chicago Convention on International Air Aviation; the 1969 Brussels Convention Relating to Intervention on High Seas in case of Oil Pollution Casualties and its 1973 protocol; the 1982 UN Convention on the Law of the Sea; and the 1971 Brussels Convention on the Establishment of an International Fund for Compensation of Oil Pollution Damage
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