Kuwait’s Parliament has passed a law that permits foreign companies to establish branches and operate within Kuwait without the requirement of a local agent. This amendment also grants non-Kuwaiti companies the opportunity to participate in public tenders.
The decision was reached during a session on Tuesday, where it received overwhelming support with 57 votes in favor and only one vote against. Prior to this amendment, which updates a law from 1980, foreign companies were obligated to conduct their operations in Kuwait through a local agent, and non-Kuwaitis were restricted from engaging in trade unless they had a Kuwaiti partner holding a minimum share of 51 percent.
Public Tenders Law
Additionally, the Parliament modified the Public Tenders Law, allowing non-Kuwaitis to compete in public tenders. Furthermore, the authority of government agencies to restrict competition in public tenders exclusively to Kuwaitis has been abolished.
This move aligns Kuwait with other GCC countries that have already removed the requirement of a local agent for foreign companies, thus enabling these companies to actively participate in the economies of the UAE, Saudi Arabia, and Qatar.
Kuwait, an OPEC member heavily reliant on oil revenues, is actively pursuing economic liberalization measures aimed at reducing its dependence on oil and promoting greater participation of its citizens in the private sector.
In the past, Kuwait had permitted select foreign companies, under specific conditions and through the country’s Direct Investment Promotion Authority, to operate without a local agent. However, the recent amendments have significantly broadened employment prospects for foreign companies within the country. These changes reflect Kuwait’s commitment to fostering a more inclusive and diversified economy.
Growing competition among domestic and international companies
According to Kuwait’s Minister of Commerce and Industry Fahad Al-Shariaan, the newly passed law is expected to foster increased competition between local and foreign companies, leading to improvements in both product quality and pricing.
Al-Shariaan expressed his views to Reuters, stating that the law has opened up the market and promoted heightened competition. With multiple options available, competition in pricing will intensify, resulting in enhanced product quality.
The Parliamentary Finance and Economic Committee, responsible for drafting the law, emphasized in its report that the amendments would not impact the legal status of existing local agents. The law is not retroactive and therefore does not affect the standing of current agents.
Enabling open market access
According to the explanatory memorandum of the new law, the amendment aims to promote fair competition in the market, enabling consumers to access the best products and services at the most competitive prices. This, in turn, is expected to lead to improvements in the quality of products and services while reducing prices in the goods and services sector.
Al-Shariaan further commented that the local agent system had faced criticism for blending technical matters with social aspects and personal preferences. However, the new law will shift the focus towards technical considerations, fostering a more objective approach.
Additionally, Al-Shariaan emphasized that the Kuwaiti merchant should not be perceived as an obstacle. With the market opening up and clear guidelines established, capable and reputable traders with a strong track record can adapt to the new law and establish partnerships with global agencies, thereby expanding their business opportunities.
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