WORLD  TRADE  
ORGANIZATION   
WT/TPR/S/258/Rev.1 
28 February 2012  
 
(12-1123) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
THE STATE OF KUWAIT 
 
Revision 
 
 
 
 
This report, prepared for the first Trad e Policy Review of The State of Kuwait, 
has been drawn up by the WTO Secretariat on its own responsibility.  The 
Secretariat has, as required by the Agreement establishing the Trade Policy 
Review Mechanism (Annex 3 of the Ma rrakesh Agreement Establishing the 
World Trade Organization), sought clarification from the State of Kuwait on its 
trade policies and practices. 
 
Any technical questions arising from this report may be addressed to 
Mr. Richard Eglin (tel:  022 739 5148), Mr. Ricardo Barba (tel:  022 739 5088), 
Mrs. Zheng Wang (022 739 5288) and Mrs. Mena H assan (tel:  022 739 6522). 
 
Document WT/TPR/G/258 contains the policy statement submitted by 
The State of Kuwait. 
 
 
 The State of Kuwait WT/TPR/S/258/Rev.1 
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CONTENTS  
    P a g e  
SUMMARY   vii 
 (1) E CONOMIC ENVIRONMENT  vii 
 (2) I NSTITUTIONAL FRAMEWORK  viii 
 (3) T RADE POLICY INSTRUMENTS  ix 
 (4) S ECTORAL POLICIES  x 
I. ECONOMIC ENVIRONMENT 1 
 (1) M AJOR FEATURES OF THE ECONOMY  1 
 (2) R ECENT ECONOMIC DEVELOPMENTS  1 
 (3) T RADE PERFORMANCE AND INVESTMENT  4 
 (i) Trade in goods and services 4 
 (ii) Foreign direct investment 7 
 (4) O UTLOOK  9 
II. TRADE AND INVESTMENT REGIMES 10 
 (1) G ENERAL FRAMEWORK  10 
 (2) T RADE AGREEMENTS AND ARRANGEMENTS  11 
 (i) World Trade Organization 11 
 (ii) Regional trade agreements 12 
 (3) F OREIGN INVESTMENT REGIME  16 
 (i) Legislative and regulatory framework 17  (ii) Direct taxation and incentives for foreign investment 20 
 (iii) Incentives and institutional framework 21 
 (iv) Double taxation arrangements 22 
III. TRADE POLICIES AND PRACTICES BY MEASURE 23 
 (1) M
EASURES DIRECTLY AFFECTING IMPORTS  23 
 (i) Customs procedures 23  (ii) Tariffs 24 
 (iii) Other fees and charges 28 
 (iv) Free trade zones 29  (v) Import prohibitions, restrictions and licensing 29 
 (vi) Contingency measures 31 
 (vii) Standards and other technical requirements 34 
 (2) M
EASURES DIRECTLY AFFECTING EXPORTS  39 
 (i) Procedures 39 
 (ii) Export prohibitions and licensing 39 
  (iii) Export duties, duty concessions, and subsidies    41 
  (iv) Export promotion and marketing assistance     41 
  WT/TPR/S/258/Rev.1 Trade Policy Review 
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    P a g e  
 (3) M
EASURES AFFECTING PRODUCTION AND TRADE  42 
  (i) Taxation and subsidies       42 
 (ii) State trading, state-owned enterprises, and privatization 43 
 (iii) Government procurement 44 
 (iv) Competition law and price controls 48 
 (v) Intellectual property rights 49 
IV. TRADE POLICIES BY SECTOR 54 
 (1) A GRICULTURE AND FISHERIES  54 
 (i) Main features 54  (ii) Policy developments 54 
 (2) E
NERGY   57 
 (i) Petroleum 57  (ii) Natural gas 61 
 (iii) Petrochemicals 62 
 (iv) Electricity and water 64 
 (3) S
ERVICES  65 
 (i) Overview 65 
 (ii) Financial services 65 
 (iii) Telecommunications and postal services 71 
  ( i v )  T r a n s p o r t         7 3  
 (v) Foreign workers, and professional services 75 
REFERENCES   77 
APPENDIX TABLES  79 
 The State of Kuwait WT/TPR/S/258/Rev.1 
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CHARTS 
 
    P a g e  
 
I. ECONOMIC ENVIRONMENT 
 
I.1 Composition of merchandise trade, 2006 and 2009 5 
I.2 Direction of merchandise trade, 2006 and 2010 6  
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 
III.1 Breakdown of import duty rates, 2011 27 
III.2 Tariff escalation by ISIC 2-digit industry, 2011 28  
 
TABLES 
 
I. ECONOMIC ENVIRONMENT 
 I.1 Selected economic indicators, 2006-11 3 
I.2 Balance of payments, 2006-11 7 
I.3 Foreign direction investment, 2006-10 8  
II. TRADE AND INVESTMENT REGIME 
 II.1 Overview of Kuwait's regional trade agreements, October 2011 13 
II.2 GAFTA trade, 2004-08 15 
II.3 Requirements for establishing a foreign-invested company in Kuwait, 2010 18 II.4 FDI obstacles and proposed solutions, 2011 20 
II.5 Proportional weight schedule for FDI, 2011 22 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE  
III.1 Kuwait's preferential rules of origin, 2011 24 III.2 Summary analysis of the MFN tariff, 2003, 2007, 2011 25 
III.3 Customs duty and fees, 2003-10 28 
III.4 Import licences, 2004-10 30 III.5 Imports requiring special permission       30 
III.6 Notifications on sanitary and phyto sanitary measures, 13 October 2011 38 
III.7 Products banned from exportation, 2011 39 
III.8 Export licensing  40 
III.9 Tax revenue and percentage in total taxes, 2006-10 42 III.10 Selected SOEs, 2011 43 
III.11 Public and private sectors in the economy, 2009-12 44 
III.12 Government procurement methods and corresponding legislation 45 III.13 Government procurement value, 2009-11 46 
III.14 IPR legal framework 49 
III.15 Trade marks, 2008-10         52 III.16 Intellectual property rights application, 2001-10      53 
 
IV. TRADE POLICIES BY SECTOR  
IV.1 Subsidiaries of the Kuwait Petroleum Corporation (KPC)     58 
IV.2 Exports of crude oil, and refined products, by region, 2009-10 59 IV.3 Regulated prices of refined petroleum and gas products, 2011     60 
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IV.4 Gas production and utilization, 2005-10       61 
IV.5 Kuwait's production capacity of petrochemical products, 2010 62 IV.6 Kuwait's petrochemical companies, 2011       63 
IV.7 Banks, 2011          67 
IV.8 Securities  69 
IV.9 Telecommunication statistics, 2000-September 2011 71 
IV.10 Telecom services providers, 2011 72 
IV.11 Shipping and maritime transport services, 2010      74 
 
 
APPENDIX TABLES 
 
II. TRADE AND INVESTMENT REGIME 
 
AII.1 Main trade-related laws, 2011 81 AII.2 Main departments/agencies involved in trade policy implementation, 2011 83 
AII.3 Notifications under WTO Agreements, October 2011 84 
AII.4 Bilateral economic and commercial agreements, other than investment and 
 DTA agreements, 2011 87 
AII.5 Bilateral investment agreements and d ouble taxation avoidance agreements, 2011 90 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 AIII.1 Applied MFN tariff averages by HS2, 2011 94 
AIII.2 Import prohibitions, 2011 97 
AIII.3 Productions subject to technical regulations ("regulated products"), 2011  99  
 
IV. TRADE POLICIES BY SECTOR  
AIV.1 Bilateral civil aviation agreements, 2011 101 
AIV.2 Summary of Kuwait's specifi c commitments in services 104 
 
 
  The State of Kuwait WT/TPR/S/258/Rev.1 
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SUMMARY 
1. The State of Kuwait is implementing a new development strategy centred on a liberal trade 
regime with the objective of reducing the economy' s high dependence on crude oil and natural gas, 
which accounts for nearly half of GDP, 95% of export revenues, and more than 80% of government 
income.  To this end, steps are being taken to improve the country's business environment, increase 
productivity growth of the non-energy sectors, and increase the participation of the private sector 
(local and foreign) in the economy from its current low level of about 25%.  
2. Kuwait also needs to further improve its infrast ructure and logistics, reduce the State's heavy 
involvement in many economic activities, make the leasing of land more predictable over the long-
term, and facilitate the establishment of new busin esses in order to achieve its goal of becoming the 
international trade, logistical, energy, and fi nancial services hub in the Northern Gulf region. 
(1) E CONOMIC ENVIRONMENT  
3. Reflecting developments in world oil markets, Kuwait's real GDP grew  at an annual average 
rate of 5% during 2006-08, contracted in 2009 due  to the impact of the global economic crisis, and 
resumed growth in 2010-11 at about 4.5%. 
4. Large fiscal surpluses, accumulated over the year s from government ownership of the energy 
sector, reached a record of 40% of GDP in 2007.  Th is has largely obviated the need to levy taxes, 
although a new comprehensive income tax law is in  preparation and the introduction of a VAT by 
2014 is under consideration.  The fiscal surpluses have  been used, in part, to finance social welfare 
policies including subsidized public utilities and housi ng.  There are concerns that pricing policy for 
public services reduces incentives to introduce effi ciencies and cut waste, and promotes higher 
consumption than would otherwise be the case.  Gradual phasing-out of such high government 
subsidies would be beneficial in the context of encouraging a more diversified and energy-efficient 
economy. 
5. Kuwait has established reserve funds to ensure  inter-generational economic equity in the 
exploitation of its non-renewable resources. 
6. The Kuwaiti dinar is pegged to an undisclosed  currency basket (between 2003 and May 2007 
it was pegged to the U.S. dollar).  In December  2009, Bahrain, Kuwait, Qatar and Saudi Arabia 
ratified an agreement to establish a monetary union.  The date to achieve a single currency is yet to be 
determined. 
7. Kuwait's external accounts reflect the dominance  of energy exports and display the volatility 
created by its reliance on world oil markets.  It had large and sustained current account surpluses of 
between 24% and 45% of GDP during the period under  review.  The economy is highly dependent on 
international trade, with the ratio of merchandi se and services trade to GDP averaging almost 90% 
during 2007-09.  Kuwait is a net importer of services, with a deficit that rose from about US$2.2 billion in 2006 to an estimated US$5.9 billion in 2010. WT/TPR/S/258/Rev.1 Trade Policy Review 
Page viii 
  
8. During the last few years, Kuwait has increased  its investment abroad;  annual FDI outflows 
averaged some US$7.5 billion in 2006-10.  FDI infl ows, on the other hand, are still relatively low.  
This is explained by strict limitations in the p ast on the sectors in which foreigners could invest, a 
relatively complex business environment (e.g. extens ive licencing procedures, red tape, and out-of-
date laws and regulations), and by corporate inco me tax that is applied only on profits made by 
foreign companies.  Thus, a possible amendment to its 2001 Foreign Investment Law is being 
evaluated, inter alia , to set up a "one-stop shop" for foreign i nvestors.  The Government's intention to 
encourage more foreign investment is demonstr ated by the recent decision to allow foreign 
partnership, for the first time, in the development of Kuwait's energy resources, specifically natural 
gas production, which aims to facilitate the acquis ition of the technology and know-how necessary to 
exploit these resources more effectively. 
9. An important economic and social challenge, acco rding to the authorities, is for Kuwait to 
provide more employment opportunities for its citi zens.  The "Kuwaitization" programme is being 
implemented to help scale-back reliance on the pub lic sector to absorb domestic labour and encourage 
more Kuwaitis to seek and find employment opport unities in the private sect or. Nonetheless, public 
sector wages and benefits remain very attractive. 
(2) I NSTITUTIONAL FRAMEWORK  
10. Formulation and implementation of Kuwait's trad e policy is the responsibility of the Ministry 
of Commerce and Industry (MCI), in coordination with other ministries.  The private sector participates in trade policy formulation main ly through the Kuwait Chamber of Commerce and 
Industry. 
11. The public sector is the largest employer in Ku wait, and the State has direct and strong 
influence in the economy.  In 2010, a new privatization law was passed based on a process of transferring ownership to the private sector (bu ild-operate-transfer schemes)  by identifying suitable 
partners from home and abroad and issuing shar es through initial public offerings.  However, a 
number of amendments to the law might reduce its im pact since the healthcare, education, and energy 
sectors have been excluded.  The Government is to retain an important share in all newly privatized 
companies, and the sale of major stakes in public holdings is expected to take place only slowly. 
12. Meeting the objectives of Kuwait Vision 2035  and the Medium-term Development Plan 
(2010-14), in particular expanding the role of the private sector and a ttracting foreign investment, will 
require the Kuwait Government to speed-up the pr omulgation of new laws to modernize the business 
environment;  and to start tackling excessive ad ministrative and procedur al obstacles to doing 
business, while increasing the transparency, accountability, and effectiveness of government 
administration. 
13. Kuwait became a GATT signatory in 1963 and has been a WTO Member since 1995.  It is a 
signatory to the WTO Information Technology Agreemen t.  Kuwait has participated, as a third party, 
in one case under the WTO Dispute Settlement M echanism.  Kuwait lowered its outstanding 
notifications from 44 at the end of March 2011 to  22 by the end of June 2011 as part of its 
preparations for this first Trade Policy Review. The State of Kuwait WT/TPR/S/258/Rev.1 
 Page ix 
 
 
14. Kuwait participates in two overlapping regional trade agreements, the GCC, and the Greater-
Arab Free Trade Area (GAFTA) in which all six st ates of the GCC participate.  Kuwait has been 
harmonizing trade policies and practices under the G CC.  GCC citizens and companies are allowed to 
exercise all economic activities and occupations  in Kuwait as Kuwaiti nationals, with a few 
exceptions.  As a group, the GCC has concluded FTAs with the EFTA states and Singapore, which 
are in the process of ratification.  The GCC is al so involved in trade negotiations with Australia, 
China, EU, India, Iran, Japan, Jordan, Korea, ME RCOSUR, New Zealand, Pakistan, and Turkey.  In 
most cases, the GCC is negotiating these FTAs as  a group.  Nonetheless, some GCC members (e.g. 
Bahrain and Oman) have also agreed FTAs on an in dividual basis, notably with the United States. 
(3) T RADE POLICY INSTRUMENTS  
15. Goods imported are subject only to customs tariffs, since Kuwait does not impose VAT, 
excise duties or any other internal tax or charge on either domestically produ ced or imported products.  
Kuwait started applying the GCC co mmon external tariff in 2003.  As  a result, the simple average 
MFN applied tariff declined from 7.7% in 2002 to 4.8% in 2011.  On the basis of the WTO definition, tariffs average 5.7% on agricultural products and 4.6% on non-agricultural products;  98.6% of all 
tariff lines are ad valorem , with 19 mixed tariff lines on tobacco  and tobacco products.  Kuwait bound 
all tariff lines, except on oil, petroleum, and petroche micals.  All bound rates are at 100%. Of total tax 
revenue (about 2% of government revenue), th e customs tariff accounts for more than 60%. 
16. Kuwait applies the GCC common laws on custom s procedures and valuation.  It requires 
documents to be authenticated, and charges consular fees on commercial invoices, certificates of 
origin, health and halal meat certificates, and manifests for all imports.  A "general" import licence is 
required for all imports from all sources, and special permission from competent authorities is 
required for specific goods.  Kuwait prohibits certain imports for security, health, safety, or religious 
reasons, or to meet the requiremen ts of international conventions. 
17. Kuwait has adopted the GCC Treaty provisions on contingency trade remedies, and notified 
the WTO that these were amended in December 2010.  Kuwait has never imposed any anti-dumping, 
countervailing or safeguard measures.  The GCC Ministerial Committee has not applied any trade 
remedy measures, although it initiate d two safeguard investigations, which were terminated due to 
lack of injury in both cases. 
18. Kuwait and other GCC countries are devel oping common GCC standards and technical 
regulations, which will replace the standards and t echnical regulations of individual GCC member 
countries.  Kuwait standards are based on internati onal standards with limi ted deviations due to 
climatic, geographical, and infrastructural conditions.  
19. Export procedures are simple, and any natural pe rsons or companies (including foreign ones) 
may export in Kuwait.  Some goods are prohibited from exportation, while other are restricted and 
require a licence from the competent authority.  Ku wait applies no export taxes, charges or levies. 
20. In 2010, government procurement accounted fo r about 12% of GDP.  Kuwait's procurement 
regime allows for a price preference of 10% fo r local products and 5% fo r GCC products.  Persons 
who wish to submit tenders must be either Kuwa iti suppliers, or foreign s uppliers with a Kuwaiti 
partner or agent.  Also, an offset programme re quires foreign firms that win government contracts 
above certain thresholds to make an investment that will add value to the Kuwaiti economy.  Kuwait 
is not a party or an observer to the WTO Plur ilateral Agreement on Government Procurement. WT/TPR/S/258/Rev.1 Trade Policy Review 
Page x 
  
21. Kuwait's competition legislation was approve d by the National Assembly in 2007.  The 
Government is preparing its by law, and to set up a Competition Protection Authority.  However, the 
competition legislation does not apply to facilities and projects owned and managed by the State. 
22. Kuwait has national laws on some IPRs, while at  the GCC-level there is a law on patents and 
a law on trade marks is in the pipeline.  Once the GCC trade mark law is implemented, it will replace 
the Kuwait national law on trade marks.  Both G CC-legislation and Kuwaiti legislation on patents are 
effective;  dual protection is allowed. 
(4) S ECTORAL POLICIES  
23. The oil and gas sector has underpinned Kuwait' s economic development.  Kuwait is the 
world's 9th-largest crude oil producer, has almost 8% of the world's proven crude oil reserves, and 
ranks 18th in global natural gas reserves.   The MFN applied tariff on oil, gas, and petroleum products 
is 5%. Foreign investors may carry out economic activities in industries other than oil and gas 
exploration and production.  Kuwait aims to become  a key world player in petrochemicals on the 
basis of its comparative advantage in natural gas a nd through joint-ventures w ith foreign enterprises.  
The fully state-owned Kuwait Petroleum Corporati on (KPC) and its subsidiaries benefit from certain 
concessionary rights and privileges w ith respect to oil and gas.  
24. Electricity is highly subsidized by the Govern ment.  A newly promulgated law allows foreign 
investment in the electricity and water sectors,  through public-private  partnership whereby 
independent water and power projects (IWPP) w ill be established. Under the IWPPs, private 
companies may generate electricity and water a nd sell to the Ministry, which will then sell to 
consumers.  Foreign investors are allowed up to 26%  ownership of the projects.  The first IWPP is 
under way. 
25. Services is the largest non-oil sector in the ec onomy, accounting for about half of GDP and over 
80% of total employment.  The sector is dominated by several state-owned enterprises, and in some 
activities, for example fixed-line telephony, ther e are state monopolies.  Kuwait has opened some 
services subsectors to foreign investment, including financial services, air transport, mobile telephone 
services, and professional services.  
26. Under the GATS, Kuwait scheduled commitments in 61 subsectors and 8 main sectors: 
business;  construction and related engineering serv ices;  distribution;  environmental services;  
health-related and social services;  tourism and travel-related services;  recreational and sporting services;  and financial services.  It maintains MFN exemptions under Article II of the GATS on air 
transport services and the promotion and protection of investment.  
27. Despite the presence of a significant foreign working population (over 60% of the population 
are non-Kuwaitis), Kuwait made no commitments on the movement of natural persons under the 
GATS, except for entry and temporary stay of managers, specialists, and skilled technicians. 
28. Although the share of agriculture and fisherie s to GDP is very small and continues to 
decrease, the sector is important for the economy  because of Kuwait's food security objective.  
Kuwait is a net importer of agricultural products, and food security is mainly promoted through 
relatively low applied MFN tariffs (3.2%), while priv ate companies are being encouraged to invest in 
farm projects abroad. Government assistance in agri culture and fisheries is mainly provided through 
domestic support, such as subsidies and low cost credits to domestic producers.