KUWAIT CITY, Sept 30: The Investment Monitor magazine highlighted Kuwait's struggle to attract foreign direct investment (FDI), primarily attributing it to an overreliance on oil and a multitude of other issues. Despite being one of the wealthiest countries globally with strong economic indicators like low public debt and high GDP per capita, Kuwait faces challenges in drawing significant FDI inflows, reports Al-Rai daily.

The magazine emphasized Kuwait's oil-centric FDI landscape, indicating that oil dominates the investment scenario in the country. Approximately 7 percent of global oil reserves are held by Kuwait, with oil contributing substantially to its GDP, exports, and government revenues. Consequently, a significant portion of FDI is directed towards large oil and gas infrastructure projects, often overseen by government or quasi-government entities.

However, Kuwait's excessive dependence on oil has become a hindrance. Economic recovery in 2022 showed promising growth of 8.2 percent, but the forecasted real GDP growth for 2023 and 2024 is relatively low due to a decline in the oil sector's growth attributed to production cuts.

The magazine quoted Derek Silva, a research director at Market Securities, underlining Kuwait's vulnerability to fluctuating oil prices despite its significant wealth and economic stability. Foreign investors remain cautious due to the country's reliance on oil revenues and consistent public spending.

Despite these challenges, Kuwait's non-oil sectors are projected to grow by 3.8 percent in 2023, presenting potential opportunities for foreign companies. The Kuwait Vision 2035 initiative aims to diversify the economy by encouraging FDI in strategic sectors such as information and communications technology, renewable energy, tourism, healthcare, and education.

However, the business environment in Kuwait is seen as unfriendly to foreign investors, facing hurdles like ownership restrictions, bureaucracy, a complex legal system, and corporate taxes. Government dominance in the economy further complicates the process for foreign investors, requiring approval from various governmental bodies.

To improve FDI attractiveness, Kuwait must diversify its economy, reduce its dependency on oil, and enhance the business environment through legal and regulatory reforms. Political reform at the local level is also deemed crucial for substantial progress, but this might require a national consensus or prolonged low oil prices to prompt lawmakers into action. As neighboring countries progress, Kuwait faces the challenge of overcoming stagnation in its FDI scene.