Kuwait

Business America, Nov, 1996

Kuwait imports a wide variety of U.S. military, industrial and consumer products. Kuwait is the fifth largest market for U.S. exports in the Middle East and North Africa. The U.S. is Kuwait's largest trading partner.

Leading military imports in the past three years have included aircraft and parts, air defense systems, radar and tanks. Leading industrial imports include oilfield equipment! parts, aircraft parts and generators. Leading consumer imports include passenger vehicles and trucks. Other significant imports include: air conditioning and refrigeration equipment, carpeting, cigarettes, computers, construction equipment, fire fighting equipment, fishing boats, hardware, housewares, medical equipment, office furniture, pleasure boats/yachts, process controls, processed foods, telecommunications equipment and water treatment equipment.

The Commercial Environment

Kuwait is a highly price-competitive market because it has low tariffs (generally only 4 percent), few import barriers and no exchange controls. Procurement for large public sector projects dominates the business scene; there is almost no manufacturing and little non-oil exporting. American firms generally need to work through a local agent or distributor, and should monitor an agent's performance and potential conflicts of interest. American business negotiators find that Kuwaiti buyers have a strong bias in favor of the lowest price, despite a higher priced product's technical advantages or long-term savings.

Kuwaitis are interested in American products and business proposals because of ongoing goodwill toward the U.S. as a result of the Gulf War, local media coverage of American news and popular culture, and because large numbers of Kuwaitis have studied in the U.S. or travel there regularly for business or family vacations. Kuwaitis appreciate American products' high quality and association with a convenient, comfortable, modern, affluent lifestyle.

Kuwaitis readily buy American products that are competitive in price and quality.

Major Business Opportunities

Prospects for U.S. consumer goods export growth are excellent. Kuwait's oil wealth (10 percent of world oil reserves) and substantial investments abroad (estimated at $40-$43 billion) have created an affluent population: in 1995 its 1.58 million people had a per capita income of $16,464. As Kuwait's young population (48 percent under 15 years of age, 70 percent under 24) grows up, U.S. exporters will find opportunities supplying items needed for household formation, e.g., building materials, furniture, appliances, home furnishings and clothing. Traditionally popular consumer items, such as jewelry, cosmetics, women's clothing, giftware, fast food and automobiles, will remain so.

Because Kuwait lacks an agricultural sector and has a growing number of U.S. restaurant franchises, it will continue to import U.S. foodstuffs.

Progress in intellectual property protection may generate opportunities for U.S. suppliers of computer software, entertainment products (movies and audio/video cassettes) and pharmaceuticals.

Export prospects for U.S. industrial products and services are very good. Government procurement, privatization efforts and new foreign investments in this country have the potential to open up $37 billion in U.S. export opportunities. The time frame for the creation of these opportunities, however, depends on the rate of Kuwait's privatization efforts. Areas of near-term activity are: defense systems, oil facilities, housing and other infrastructure.

Plans to expand oil production capacity to 3 million barrels per day by 2000 will provide opportunities for suppliers of oilfield equipment, process controls, pumps, valves, compressors, security systems and other industrial equipment. Plans to build 40,000 new public housing units open opportunities for U.S. construction firms. Defense purchases will likely continue for the rest of the decade, but at a slower pace than in the past.

Privatization will create new opportunities for U.S. exports of power, medical and communications equipment as well as consulting and training services. U.S. joint ventures inKuwait, such as the Equate petrochemical complex of Union Carbide and Kuwait's Petrochemical Industries Company, will be new customers for U.S. exports and may create others, such as new plastics, specialty chemical and synthetic fiber plants in downstream industries.

Export prospects are tempered somewhat by the annual deficits that the Kuwait Government is expected to run through the end of the decade as it sustains a welfare state for Kuwait nationals, repays Gulf War and reconstruction debts, and pays for large defense purchases. The projected deficit for 1996 is $4 billion, down 10 percent from the 1995 level. The government intends to eliminate its budget deficit entirely by the year 2001.

A number of high-value U.S. food products have strong market potential in Kuwait: frozen poultry and beef, almonds, snack foods, cheeses, fresh apples and pears, fresh eggs, canned fruits and vegetables, frozen vegetables, packaged rice, hot sauces, salad dressings, breakfast cereals, fresh carrots and lettuce, frozen dough mixes, fruit juices and coffee whiteners. Also, growth in the local food processing industry is driving up demand for semi-processed products such as vegetable oils, beverage bases, dried pulses, specialty flours and a variety of food ingredients.