Kuwait new amendment frees foreign firms from local sponsorship rule

Proposal enhances competition, service quality in the state
Kuwait new amendment frees foreign firms from local sponsorship rule
Kuwait's new amendment empowers foreign companies

A proposal to eliminate local sponsorship for foreign companies opening branches in Kuwait has been approved by the country’s parliament.

The financial and economic affairs committee of the parliament’s decision to abolish local sponsorship for foreign companies opening branches is viewed by analysts as a measure to promote foreign investment and enhance economic diversification. 

Under the proposal, companies would have the opportunity to operate directly without local sponsors. This applies to all companies, including those participating in government contract bids.

Abdulwahab Al-Issa, the rapporteur of the economic affairs committee, stated that the proposal opens up significant opportunities for competition and has a positive impact on enhancing the quality of services in the state. This applies to both commercial work and government contracts.

Read more: Kuwait reports first budget surplus in 9 years

Al-Issa clarified that the new amendment does not imply the elimination of existing agencies.

Analysts have highlighted the consequences of the previous sponsorship system in Kuwait. This system led to increased costs for foreign companies. As a result, it diminished Kuwait’s attractiveness as a destination for foreign businesses. In contrast, other Gulf states have implemented reforms in sponsorship laws. These steps have been taken to make their economies more enticing to external investors.

According to Reuters, Kuwait has been pursuing a legislative amendment since July 2023.

Additionally, in the 2023 IMD World Competitiveness Ranking, Kuwait was positioned at the 38th spot among 64 countries.

FDI in Kuwait

Furthermore, in Q1 2023, foreign direct investment (FDI) in Kuwait observed a quarterly growth of 4.8 percent, amounting to approximately 4.84 billion dinars ($15.8 billion). On a year-on-year basis, FDI showed a significant increase of 14.17 percent compared to the end of the first quarter of 2022, when it stood at 4.242 billion dinars.

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