MFA: Strategic opportunities for foreign exporters
The shutdown of the economy due to pandemic measures hit Kuwait’s economy quite hard in 2020. However, the drop in oil prices was crucial, which was reflected in the drop in GDP and caused a fiscal crisis. Revenues from oil exports account for more than half of GDP and more than 80% of the public budget. Due to the lack of liquidity, the government’s efforts focused on finding solutions for the future.
The question of the introduction of taxes came up again. The main drivers of the rising inflation rate are higher food prices and housing costs. There is tension in the labor market due to visa restrictions. The main impetus for the positive prediction is the expected stabilization of oil prices at around USD 70/barrel, which should be positively reflected in the results of macroeconomic indicators already in 2021.
The Kuwaiti government has taken a number of measures to help the economy since the outbreak of the covid-19 pandemic. Their value has exceeded USD 8 billion in the year since the start of the pandemic. The main measures include employment support, repeated postponement of repayments of all types of business, investment and other loans by Kuwaiti banks, provision of special preferential and interest-free loans for SMEs and reduction of the central bank’s base interest rate.
The central bank has established a fund to support government measures in the amount of less than 40 million USD. The current crisis could be an impetus for the adoption of long-delayed fundamental economic reforms leading to the modernization and increase in the efficiency of state administration, the privatization of large state-owned enterprises and the strengthening of the role of the private sector in the national economy.
Last but not least, also the introduction of taxes – in particular, there is talk of VAT, consumer taxes and corporate income tax. The measures are intended to contribute to the fulfillment of the national development plan until 2035 “New Kuwait”, whose ambition is to diversify the economy and thus reduce dependence on oil and, among other things, to promote the employment of Kuwaitis, especially in the state administration, instead of foreign workers. According to reports from the local media, the anti-epidemic measures should last at least until the end of the summer, and a return to normal is not expected until the end of 2022.
The Kuwaiti market continues to provide business opportunities for Czech exporters who can offer original, innovative and advanced technologies and systems in promising sectors such as ICT, defense industry, healthcare, energy, construction industry. These are, for example, fire safety systems in buildings, the agricultural and food industry, etc. It is a relatively small market with a high purchasing power of consumers, whose purchasing appetite has not decreased even during the pandemic and who demand a wide range of imported goods, from basic to luxury.
As the world’s leading oil producer, Kuwait will continue to demand technology, services and material to maintain and expand its mining, refining (eg construction of the new Az-Zour refinery), processing and distribution infrastructure. In addition, due to the ever-increasing consumption of electricity, it will have to modernize and build new power plants, especially steam-gas plants.
According to allcountrylist, Czech suppliers could be used, for example, in the supply of transmission cables, switchboards or transformers, but also in the context of increasing the share of renewable energy sources, especially solar energy. In large public or PPP tenders, large multinational corporations originating from the USA, Korea, Japan, Europe or China usually win. However, Czech companies can obtain contracts for the subcontracting of parts or services.
Especially in the post-covid era, greater attention is paid to accelerating the digitization of business and state administration. There is great potential in Kuwait for Czech ITC companies, software developers and especially smartphone applications and digital service providers. The use of a wide range of services using mobile applications is growing, from ordering food and ready meals to electronic banking, e-government and even e-health. The demand for IT services, systems, technologies and applications will continue to grow in the future. The coronavirus pandemic in Kuwait is already transforming a number of business models in order to find solutions responsive to the new era.
The Czech Republic has built a good reputation in the field of defense industry in Kuwait. It is possible to apply both in state contracts for armaments, e.g. supply of ammunition, mortars, armored vehicles, parts, unmanned helicopters, drones, as well as in the provision of anti-radar and other systems. Supplies of sporting or hunting weapons and cartridges are also promising.
The construction boom continues in Kuwait. This is mainly the construction of new administrative and residential high-rise buildings and infrastructure projects. There is an opportunity for Czech exporters in the supply of technology, security devices, intelligent systems, air conditioning units, air purifiers, generators and other related equipment. There is great potential in innovative technologies in the construction industry, automated HVAC control, electric lighting, shading, access control, security and fire protection systems and other interrelated building management systems – smart building solutions, IoT.
Expansion and modernization of the international airport is still underway, including the construction of a new terminal and runway. An important project remains the future construction of a marine terminal on Bubiyan Island, which should become the largest port in the northern Gulf. Furthermore, the construction and reconstruction of other infrastructure projects, such as bridges, roads and other large investment units, are planned.
Healthcare and pharmaceutical industry
Kuwait continues to invest in public healthcare with the aim of further expanding capacities and increasing the quality of services provided by state hospitals and private providers. Significant investments are also planned as part of work to expand bed capacities (e.g. at Ibn-Sina Hospital by 81% by 2026). Due to the lack of qualified labor, the offer of systems that make the work of doctors more efficient can be interesting.
Part of the strategic plans of the government (also with the help of commercial providers) is self-sufficiency in some areas of medicine, which have traditionally been covered by foreign medical stays of Kuwaiti patients. Nevertheless, the area of service provision within the Czech spa industry, rehabilitation, medical stays and other health services is still interesting. For Czech suppliers, the Kuwaiti healthcare sector represents considerable potential. In particular, suppliers of medical technology, systems, medical materials and medicines, or high-quality and original cosmetics can apply. Service providers can also succeed. Quality is important, you can’t compete with goods from China on price.
Agricultural and food industry
Kuwait imports most of its food, although it has recently been trying to become more self-sufficient, e.g. by building its own farms. Czech companies could therefore establish themselves in the supply of agricultural technologies and systems with an aspect for demanding climatic conditions. Furthermore, in the supply of durable foods (cucumbers, jams, vegetables, etc.), some fresh vegetables, fruits, dairy products, cheeses, etc. Kitchen equipment could also be used in the Kuwaiti market. However, it must be taken into account that there is a lot of competition on the market. It is necessary to obtain the appropriate certification and a reliable local distributor.
Embassy of the Czech Republic in Kuwait
e-mail: [email protected]