Kuwaits International Trading Policy Related to Crude Oil

Introduction Kuwait is a rich country with high per capita income of about 30,000 USD. Its GDP has experience a growth rate of more than !0" uring the past fi#e years. $he country has %" of the wor& oi& reser#es. Kuwait is promoting to p&ace itse&f as the entrance oor to in#estors who want to wor' in the area. $he pub&ic sector ominates the economy. It represents three fourths of GDP. $he go#ernment is current&y trying to transfer the %(" of Kuwaitis who wor' for the go#ernment from the pub&ic sector to the pri#ate sector. Kuwait was affecte by the financia& crisis of !00) an the centra& ban' ha to pro#i e its he&p to one of the main ban's of Kuwait which was experiencing cash shortage. $he country*s income has a&so roppe at the en of !00) ue to the fa&& of oi& prices. $he country*s most popu&ar sectors ha#e been hurt by this crisis too. Main industries Agriculture activity is very limited due to lack of water and arable land Agriculture contributes less t!an "# to $%P Industry in Kuwait is based on oil e&'loitation( t!is sector re'resents more t!an !alf of $%P and more t!an )*# of e&'orts T!e non+oil sector is dominated by services ,or furt!er informationconsult t!e .%oing /usiness in Kuwait. guide by t!e 0ational /ank of Kuwait ,oreign trade overview Kuwait is !ig!ly de'endent on foreign trade T!e s!are of foreign trade in t!e countrys $%P is nearly )1# T!e amount of Kuwait2s im'orts totals "3 billion 45% T!e country de'ends !eavily on im'orts in foodstuffs- consumer goods 67*# of total8 and intermediate 'roducts 69:# of total8 Kuwaits largest su''liers are $ermany- t!e 4nited 5tates and 5audi Arabia Im'orts from ot!er $ulf countries !ave increased since t!e introduction of t!e $CC 6$ulf Coo'eration Council8 Kuwaits e&'orts re'resent 13 billion 45% ;&'orts of crude oil and refined 'roducts account for )1# of total e&'orts T!e remaining consists of re+e&'orts- mainly mac!inery and trans'ortation e<ui'ment T!e trade balance of Kuwait is largely 'ositive due to t!e !ig! 'rices of oil

,%I Kuwait !as always been a country o'en to foreign investment and wit! t!e introduction of new laws in recent years- t!e country is even more o'en to foreign ca'ital and e&'ertise In early =**9- a new law for ,%I came into force It allows "**# foreign owners!i' in a number of sectors T!is law also makes available a number of ta& breaks and ot!er benefits w!ic! can attract new investors w!o in return must guarantee a set of <uotas regarding t!e em'loyment of Kuwaiti nationals T!e current 'olicy to 'romote ,%I focuses on a number of sectors w!ic! can benefit most from foreign investment and e&'ertise T!ese include infrastructure investment suc! as water- waste+water treatment- 'ower- and communications Kuwait also tries to 'romote t!e investment in t!e banking and financial sectors( investment aidinsurance- information tec!nology and software develo'ment Investment in !os'itals and '!armaceuticals is also 'laced forward Aut!orities are also keen to attract foreign ca'ital into ot!er sectors suc! as land and sea freig!t- tourism- real estate and urban develo'ment >it! t!e financial crisis of =**:+=**)- t!e influ& of foreign ca'ital !as decreased slig!tly Internationa& $ra e from Kuwait an the issue of tra e is ne#er far from my min . $ra e an finance are c&ose&y &in'e , an in our mo ern wor& they ten to etermine a nation+s ba&ance of payments an , therefore, its economic fortunes. $hese are momentous, crucia& ays for the country, an the outcome of the current efforts to enforce internationa& &ega&ity in Kuwait wi&& certain&y ha#e an impact on the f&ow of goo s an ser#ices between the region an the rest of the wor& . Kuwait is notably Member of t!e following international and regional organi?ations $he ,or& $ra e -rgani.ation /,$-0 1 $he Unite 2ations -rgani.ation an its main specia&i.e institutions /,or& 3an', I45, etc...01 $he -rgani.ation of the Is&amic 6onference /-I60 1 $he Gu&f 6ooperation 6ounci& /G.6.60 1 7rab 8eague. Kuwait has a&so signe numerous economic an commercia& or technica& cooperation agreements with most of its tra ing partners of 9urope, 7sia, 7frica an 7merica. TRA%; 5TR4CT4R;( T!e main e&'orted 'roducts( Crude oil@ refined oil 'roducts@ 0atural gas

T!e main im'orted 'roducts: 4isce&&aneous foo pro ucts, 3ui& ing materia&s, misce&&aneous capita& goo s Trading 'artners( Main customers ;apan South Korea In ia $aiwan Phi&ippines Singapore Main su''liers Unite States of 7merica ;apan Unite 7rab 9mirates Germany 9ng&an Sau i 7rabia

,OR;I$0 TRA%; CO0TROA( Genera&&y spea'ing, Kuwait practices a re&ati#e&y &ibera& tra e po&icy1 its mar'et is open an foreign tra e po&icies are f&exib&e. Im'orts regulations( Kuwait practica&&y imposes no <uantitati#e restrictions in the fie& of internationa& tra e1 a few pro ucts on&y are prohibite for imports on hea&th, security an mora& groun s. $o be a&&owe to un erta'e internationa& tra e exchanges, importers must -n the one han , ha#e a Kuwaiti nationa&ity, in other wor s, (=" at &east of the capita& of the importing company must be he& by in i#i ua&s of Kuwaiti nationa&ity 1 an to ha#e themse&#es registere at the importers register ;&'orts regulations( $a'ing account of the pro ucts concerne exports are not submitte to any particu&ar restriction. Ot!er formalities and documents( Some oi& pro ucts imports are submitte to #ery strict pro#isions concerning, sa&es time &imit an the mar'eting con itions in genera&1 in this e#ent, a sanitary certificate is often re<uire for customs c&earance. ,I0A0CIAA R;$4AATIO05 O, ,OR;I$0 TRA%; OP;RATIO0( /anking system( $he Kuwaiti 3an'ing System is re&ati#e&y of #ery &arge imension comparati#e&y with the country*s area an the &oca& popu&ation number. 7s a matter of fact owing especia&&y financia& resources yie& e by oi&, Kuwait owns a o.en commercia& ban's an a centra& ban' entruste with imp&ementing the monetary po&icy of the country.

;&c!ange system( $he exchange regu&ations of Kuwait o not impose any particu&ar restriction. 7t internationa& &e#e&, pro#isions in this fie& a&&ow both a free con#ertibi&ity an a tota& transferabi&ity. Met!ods and means for international 'ayment( 3roa &y spea'ing, Kuwaiti foreign tra e operators are so&#ent an rare&y ha#e any isputes with their foreign partners the payment means that are most use in Kuwait is the irre#ocab&e an confirme ocumentary cre it. $he other payment means, such as ocumentary remittance or internationa& transfer /Swift0 are uti&i.e on&y in the e#ent of trustworthy re&ationships between se&&er an buyer. C45TOM5 TABATIO0( 7fter its a hesion to the G7$$ an the inception of the Gu&f 6ooperation 6ounci&, Kuwait has consi erab&y re uce its tariff barriers with the member 6ountries of these two organi.ations. Customs tariff( Importe goo are in genera& submitte to a customs uty of >", ca&cu&ate on coast insurance freight basis. ?owe#er, some goo s that are at the same time pro uce by &oca& in ustries can be sub@ecte to higher customs uties in 'eeping with tariff protection po&icy of omestic in ustries. 5'ecial 'rovisions( ,ithin the framewor' of the po&icy aiming at promoting the omestic mar'et in#estments an supp&ies in raw materia&s an stap&e commo ities, some e<uipment, spare parts, foo pro ucts an raw materia&s are exempte from customs uties. ,OR;I$0 TRA%; AO$I5TIC( International Trans'orts( Kuwait gi#es specia& attention to roa infrastructure. 7s matter of fact, the roa networ' p&ays a <uasiAexc&usi#e ro&e in the fie& of goo s transports between the main cities of the country: Kuwait, ;arhea , ?awa&&i, 7&& 7hma i an 5arawania. In the area of maritime transport, Kuwait is pro#i e with three &arge tra ing ports which p&ay a pi#ota& ro&e in foreign tra e operation, these are: Shuwai'h, Shuaiba an Doha. Kuwait is a&so pro#i e with a re&ati#e&y important merchant f&eet: )) ships, (0 of which are nationa&. In a ition to oi& ships, Kuwait is a&so en owe with numerous container ships. 7s concerns air transport, the ma@or part of air traffic is ensure by Kuwait Internationa& airport. Telecommunication( Kuwait is pro#i e with a performing an mo ern communications networ'1 automatic te&ephone, te&ex, mobi&e te&ecommunications etc... 7t internationa& &e#e& Kuwait has irect &in's with its tra ing partners of 9urope, 7frica, 7sia an 7merica... %istribution 5ystem(

In Kuwait, foreign pro ucts istribution can be carrie out: 9ither by irect sa&es to omestic tra ers -n the who&e, Kuwait owns twenty importA9xport companies Kuwaits issue regarding crude oil over t!e years Kuwait*s troub&e re&ationship with neighboring Ira< forme the core of its foreign po&icy from &ate =%)0s onwar s. Its first ma@or foreign po&icy prob&em arose when Ira< c&aime Kuwaiti territory. Ira< threatene in#asion, but was issua e by the Unite King om*s rea y response to the 7ir+s re<uest for assistance. Kuwait presente its case before the Unite 2ations an successfu&&y preser#e its so#ereignty. UK forces were &ater with rawn an rep&ace by troops from 7rab 8eague nations, which were with rawn in =%B3 at Kuwait*s re<uest. -n 7ugust !, =%%0, Ira< in#a e an occupie Kuwait. 8arge&y through the efforts of King 5ah bin 7b u& 7.i. of Sau i 7rabia who was instrumenta& in obtaining the he&p of the U.S., a mu&tinationa& coa&ition was assemb&e , an , un er U2 auspices, initiate mi&itary action against Ira< to &iberate Kuwait. 7rab states, especia&&y the other fi#e members of the Gu&f 6ooperation 6ounci& /Sau i 7rabia, 3ahrain, Catar, -man, an the Unite 7rab 9mirates0, 9gypt, an Syria, supporte Kuwait by sen ing troops to fight with the coa&ition. 4any 9uropean an 9ast 7sian states sent troops, e<uipment, an Dor financia& support. 7fter its &iberation, Kuwait &arge&y irecte its ip&omatic an cooperati#e efforts towar states that ha participate in the mu&tinationa& coa&ition. 2otab&y, many of these states were gi#en 'ey ro&es in the reconstruction of Kuwait. 6on#erse&y, Kuwait*s re&ations with nations that ha supporte Ira<, among them ;or an, Su an, Eemen, an 6uba, ha#e pro#e to be either straine or nonexistent. Since the conc&usion of the Gu&f ,ar, Kuwait has ma e efforts to secure a&&ies throughout the wor& , particu&ar&y Unite 2ations Security 6ounci& members. In a ition to the Unite States, efense arrangements ha#e been conc&u e with the Unite King om, Fussia, an 5rance. 6&ose ties to other 'ey 7rab members of the Gu&f ,ar coa&ition G 9gypt an Syria G a&so ha#e been sustaine . Kuwait*s foreign po&icy has been ominate for some time by its economic epen ence on oi& an natura& gas. 7s a e#e&oping nation, its #arious economies are insufficient to in epen ent&y support it. 7s a resu&t, Kuwait has irecte consi erab&e attention towar oi& or natura& gas re&ate issues. ,ith the outbrea' of the ,ar on Ira<, Kuwait has ta'en a strong&y proAU.S. stance, ha#ing been the nation from which the war was actua&&y &aunche . It supporte the 6oa&ition Pro#isiona& 7uthority, with particu&ar stress upon strict bor er contro&s an a e<uate U.S. troop presence. Kuwait is a member of the U2 an some of its specia&i.e an re&ate agencies, inc&u ing the ,or& 3an' /I3FD0, Internationa& 4onetary 5un /I450, ,or&

$ra e -rgani.ation /,$-0, Genera& 7greement on $ariffs an $ra e /G7$$01 7frican De#e&opment 3an' /75D30, 7rab 5un for 9conomic an Socia& De#e&opment /759SD0, 7rab 8eague, 7rab 4onetary 5un /7450, 6ounci& of 7rab 9conomic Unity /679U0,9conomic an Socia& 6ommission for ,estern 7sia /9S6,70, Group of HH /GAHH0, Gu&f 6ooperation 6ounci& /G660, I247FS7$,Internationa& De#e&opment 7ssociation /ID70, Internationa& 5inance 6orporation, Internationa& 5un for 7gricu&tura& De#e&opment, Internationa& 8abour -rgani.ation /I8-0, Internationa& 4arine -rgani.ation, Interpo&, I-6, Is&amic De#e&opment 3an' /ID30, 8eague of Fe 6ross an Fe 6rescent Societies /8-F6S0, 2onA7&igne 4o#ement, -rgani.ation of 7rab Petro&eum 9xporting 6ountries /-7P960, -rgani.ation of the Is&amic 6onference /-I60, -rgani.ation of Petro&eum 9xporting 6ountries /-P960, an the Internationa& 7tomic 9nergy 7gency /I7970. International dis'utes In 2o#ember =%%>, Ira< forma&&y accepte the U2A emarcate bor er with Kuwait which ha been spe&&e out in Security 6ounci& Feso&utionsB)H /=%%=0, HH3 /=%%!0, an ))3 /=%%301 this forma&&y en s ear&ier c&aims to Kuwait an to 3ubiyan an ,arbah is&an s1 ownership of Curush an Umm a& 4ara im is&an s ispute by Sau i 7rabia. Kuwait an Sau i 7rabia continue negotiating a @oint maritime boun ary with Iran1 no maritime boun ary exists with Ira< in the Persian Gu&f. $here ha#e been isagreements between the &essA e#e&ope countries an the in ustria& countries about mar'et accessibi&ity. $he importance of this ispute is ref&ecte in its recurrence throughout most internationa& an regiona& 9conomic forums. In recent years, the issues of free tra e, protectionism, an export subsi i.ation ha#e become ma@or points of contention among the &ea ing in ustria& countries. $he growths of tra e, current account imba&ances among the ma@or economies, an shifts in unemp&oyment tren s, ha#e contribute to the resurrection of tra e as an issue of isagreement among these economies. In spite of isagreements about the f&ow of tra e, the tota& exports of the in ustria& countries ha#e expan e rapi &y uring the past few years, from I=!3B bi&&ion in =%)( to o#er I!000 bi&&ion in =%)%, i.e. an increase of B=" within fi#e years. 7nother important shift in wor& tra e has been in the currency composition of tra e, as the US o&&ar has expan e its ro&e in tra e finance o#er the past few eca es, to become the pre ominant currency. -f course, the use of the o&&ar as the unit of pricing or #a&uaA>tion for cru e oi&, an as a means of actua& payment for oi& transactions, has enhance its ro&e in tra e finance. $he member countries of the Gu&f 6ooperation 6ounci& /G660, of which Kuwait is a member, represent the most open an tra e epen ent economies in the 7rab ,or& . $he characteristics of the G66 omestic mar'ets an the pattern of resource en owment, in a ition to a commitment to open mar'ets that goes bac' into history, ha#e ma e our region a strong a herent of the concept of free tra e. $he

exports of this group of countries ha#e been #ery unstab&e o#er the &ast two eca es. $his instabi&ity has been ue to shifts in the Bwor& eman for our pre ominant export, cru e oi&, an to changes in its price. Some members of this group, inc&u ing Kuwait, ha#e been see'ing to stabi&i.e their economies through i#ersification of the economic base, an through expansion into ownstream oi& acti#ities in #arious parts of the wor& . A Kuwaiti Pers'ective on Trade 5oreign tra e has a&ways been an important e&ement in Kuwait+s economic &ife. During the preAoi& era, Kuwait e#e&ope into a regiona& tra e centre, base on its geographica& &ocation an its &arge f&eet of pear&A i#ing an tra ing ships. $he Secon ,or& ,ar &e to a pro&onge interruption of tra e, but the commencement of oi& exports in =%>H fun amenta&&y a&tere the structure of Kuwait+s foreign tra e, an in ee its who&e economy. -n the export si e, oi& has since been pre ominant, forming about %0" of tota& exports. $he oi& tra e a&so create con itions that ha#e change the structure of Kuwait+s imports. Increase oi& re#enues create a boom economy, with higher consumer purchasing power, an a rush to bui& )an a e<uate infrastructure for e#e&opment. Conclusion( ?owe#er, there are certain gi#en fixe factors that ensure that Kuwait wi&& <uic'&y resume its tra itiona& ro&e as a regiona& financia& an tra e centre, in spite of the present interruption of externa& tra e. 5irst, Kuwait has been, an wi&& become again, a surp&us economy. 7&though our tra e surp&us ec&ine in the mi &e =%)0s to I=.%) bi&&ion in =%)B, our estimates in icate that it grew to about I >.% bi&&ion in =%)%. Secon , Kuwait has ha a &ong an consistent tra ition of economic free om with minima& restrictions on externa& tra e. $his tra ition wi&& certain&y continue, an the usua& openness an the competiti#eness of the economy wi&& enhance tra e in the near future. $hir , the Kuwaiti pri#ate sector ha accumu&ate eca es of experience in tra e an finance e#en before the oi& perio . $he imports not on&y met omestic eman , but were a&so acti#e&y reexporting to neighbouring countries. $his experience wi&& be #ery he&pfu& in the postAreconstruction perio . $hey are confi ent that their commitment to free internationa& tra e wi&& continue into the future. $heir strong commercia& an financia& re&ations with the rest of the wor& wi&& resume, for the mutua& benefit of a&& parties. ?owe#er, the e#ents of the past few months ha#e se#ere&y un ermine the stabi&ity of our region as a who&e. ,e a&& 'now that stabi&ity is of the utmost importance in creating the proper en#ironment for the growth of tra e an finance, which are c&ose&y inter&in'e . It is therefore of paramount importance to ensure that stabi&ity pre#ai&s in the future in the Gu&f an the 7rab ,or& . Such stabi&ity wi&& epen on the c&ose

cooperation of a&& countries in the region an the support of the internationa& community 3ottom of 5orm