Talent, potential and opportunity – the Gulf’s forgotten market?
12 May 2015
This month, I have great pleasure in posting a ‘guest blog’. The below has kindly been written for these pages by HMA Matthew Lodge, the UK Ambassador to Kuwait, who has some unique insights into the opportunities and challenges of this particular Gulf market.
The Kuwait Times on 5 April ran a story about how the country has fallen down the rankings in the latest World Bank “Ease of Doing Business” rankings (www.doingbusiness.org). More than six months after my arrival here as British Ambassador, the story does not come as a complete surprise, but I think it misses some important truths about Kuwait. Nowadays frequently overshadowed by the dynamic self-confidence of many of its Gulf partners, this is a mature, confident and sophisticated market. Having been in the vanguard of development and growth in the 1960s and 70s, Kuwait and Kuwaitis were generating wealth, doing business, investing and building their infrastructure when Dubai and Doha were a mere fraction of the size they are today.
So where is Kuwait now? 86th in the World Bank rankings. Behind all of its GCC partners. But also behind Colombia, the Russian Federation, and Vietnam. Even within the MENA region, Kuwait is also behind Tunisia and Morocco. So perhaps it should come as no surprise that businesses looking to establish themselves, or to expand, within the Gulf, will often end up elsewhere before they summon the courage to try Kuwait. But I think businesses should take a closer look...
Firstly, with that established confidence and maturity that the Kuwaiti market enjoys, there is a huge amount of talent and experience here amongst Kuwaitis who have diverse business interests across varied markets. With an average per capita income of US$47,639, and more than its fair share of multimillionaires, there is no shortage of disposable income, nor any lack of business acumen. With a long-established trading pedigree, Kuwaitis know how to do business. They enjoy it and do it well. Find yourself the right Kuwaiti partner, and you’ll be building a powerful team.
Secondly, for all that this place may lack in bling, glitz and brash self-confidence, the underlying fundamentals are strong – arguably stronger than anywhere else in the region. With the world’s oldest sovereign wealth fund (the Kuwait Investment Authority www.kia.gov.kw) and investments across the globe, Kuwait enjoys a strong reserve. Kuwait’s production costs for its oil production are amongst the lowest in the world and, making up nearly 10% of global reserves, Kuwait will be able reap the benefit of its natural resources for many years to come.
Thirdly – and importantly for British businesses or those involving British staff or strong UK connections – there is a particular bond here in Kuwait between Kuwaitis and Great Britain. Indeed the Kuwait Investment Authority was actually established first in the UK, (as the Kuwait Investment Office) before it was created in Kuwait. Many Kuwaitis will have studied in the UK, may own property there or will travel regularly to London and other parts of the UK as tourists, patients receiving healthcare, sports fans (a few football club owners) or business people. The connections run deep, across almost every aspect of society. That means, if you are competitive, have a good quality product, a compelling business proposal or a sound project seeking investors, you may well be able to find a Kuwaiti partner with whom you can do business. If you’re looking for an easy ride, quick win or unquestioning investor - look elsewhere. Kuwait understands business and you can expect those with whom you interact to drive a hard deal. But there is a genuine appetite here and a huge amount of potential.
But what potential exactly? An oil and gas sector which is looking to increase production by nearly 25% in the next five years. A new five year National Development Plan is projected to be worth over KWD14 billion with major infrastructure projects around healthcare, transport (GCC rail and Kuwait metro projects), port capacity, a new airport and more. Kuwait is also taking steps to make the business environment more attractive to the international businesses that will deliver the majority of these projects. Whether that’s a re-write of the original 1960 Companies Law (updated and passed by the National Assembly in 2012, dramatically reducing the red tape and time around establishing a Kuwaiti company), or the passing of the 2013 Foreign Direct Investment Law (that allows new Kuwaiti companies established by international investors to be up to 100% fully foreign owned) and through to the newly created Kuwait Direct Investment Authority (http://www.kfib.com.kw) which offers tax holidays, customs exemptions and, in certain circumstances, even the land for your facility.
Kuwait is a society that is determined to build up its human capacity, supporting skills and education for Kuwaitis in a range of disciplines from project management, engineering, science and medicine. The US$7bn Kuwait Fund for SME development is attempting to stimulate the latent entrepreneurship that exists in every young Kuwaiti into the backbone of a non-oil economy. Be in no doubt, the demand is here. For the Embassy’s part, our UK Trade and Investment (www.gov.uk/ukti) team continues to focus on these major projects and high value opportunities. And we’re also supporting an exciting new development – the creation of a Kuwait British Business Centre (www.kbbcentre.com) to help encourage and support UK small and medium size business in entering the Kuwaiti market. So we’re here to help.
The British Embassy in Kuwait, along with other UK missions across the Gulf, is working with PwC to help support the UK’s push to attract more inward investment into the UK. I had the pleasure of working with Matt Alabaster and his colleagues as I prepared for my arrival last summer. He showed me an early draft of the study he was producing (www.pwc.co.uk/patience). If you haven’t yet read it, I recommend you do. Having been here in Kuwait for just over seven months, I recognise the descriptions offered and the advice given – Patience, Resilience and a Sense of Humour are all needed. But, in return, if you come to Kuwait, and bring that approach with you, I think you’ll find a market with enormous potential, delightful people and an instinctively pro-UK perspective. Build the relationships, take time to understand the customer and the market and engage for the long-term, and you open up a whole range of opportunities for your business in this all-too-often overlooked corner of the GCC. Go on, give it a try. The Embassy, UKTI Kuwait and the KBBC look forward to your call...
British Embassy Kuwait
6 April 2015