What are the reasons for the limited migration of capital from Kuwait?

In a neighborhood in Kuwait City, a forty-year-old businessman, Abdul Rahman Al-Enezi, sat looking sadly at his empty office. Two years ago, this place was bustling with activity and employees, but today it has become almost deserted.

Al-Enezi, like some Kuwaiti businessmen, decided to transfer a large portion of his investments to neighboring countries in search of better opportunities. He is one of those included in the statistics of a report published by the Kuwait Chamber of Commerce and Industry last March, which stated that 15% of small and medium-sized companies in the country are either... It has closed its doors or moved its operations abroad within the past two years.

In this context, private sources revealed to Al-Araby Al-Jadeed that the Kuwaiti government is considering confronting multiple economic challenges at the present time, most notably capital migration and the failure to attract sufficient foreign investments. The sources pointed out that some investment opportunities in countries neighboring Kuwait appear more attractive, which calls for the need to reconsider the Kuwaiti economic system.

There are many reasons for this dire economic situation, according to a study conducted by the Kuwait Institute for Financial Studies last January. The Kuwaiti market is characterized by its limited size, as the Gulf country’s economy is relatively small compared to other regional economies.

The issue of developing legislation, laws and regulations is also of utmost importance in creating an attractive and safe investment environment for foreign investors. The experience of Dow Chemical, which left Kuwait due to legal problems, highlights a stark example of these challenges, according to a report published by Reuters last February.

Limited impact on capital

In this context, Ali Metwally, an economic consultant at a consulting company in London, points out in statements to Al-Arabi Al-Jadeed that Kuwait faces multiple “structural” economic challenges that negatively affect the investment climate and the country’s attractiveness to local and foreign investors alike, and these challenges are not new. The moment, rather, is the product of accumulations over many years.

Among the most prominent factors that negatively affect investment in Kuwait, according to Metwally, are the policies of localization of workers and industries, explaining that these policies make companies feel that their investments in the Gulf country are useless, as they face difficulties in benefiting from skilled foreign workers. Metwally points out the Kuwaiti government's focus on social spending and supporting citizens, which comes at the expense of investment in projects, infrastructure, and productive industries. He stresses that this trend, despite its goal of satisfying citizens, negatively affects the productive sectors and the country's attractiveness for foreign and local investments.

Regulations and legislation constitute another obstacle to investment in Kuwait, according to Metwally, who confirms that the legislative environment in Kuwait does not keep pace with the rapid developments in neighboring countries, which makes Kuwait less competitive in attracting investments. Metwally highlights the problem of the chronic deficit in the Kuwaiti budget, as the government tends to reduce investment spending instead of social spending when facing financial pressures, considering that this approach leads to a lack of financing for existing projects, which creates problems for companies in recovering their dues from the government.

To address these challenges, the economic consultant believes that Kuwait needs strong reform measures that may be unsatisfactory to citizens at first, noting that these measures may include reducing support, grants and subsidies, rationalizing salary growth, while increasing investment in infrastructure and productive sectors.

The New Arab