Kuwait

Shaping the Future of Kuwait: Legal Reforms in the Pipeline

Kuwait’s third five-year National Development Plan, which began in 2020, seeks to increasingly utilise the private sector to help realise the Kuwait Vision 2040. This signals a significant change for Kuwait, where the nation has traditionally relied on government expenditure as a medium of economic growth, and a significant contributor to the GDP. In order to realise both the National Development Plan and Kuwait Vision 2040, Kuwait is updating its regulatory and legal framework to encourage foreign investment, driving its nationalisation ‘Kuwaitisation’ initiative, and tackling existing issues such as illegal residency.

Kuwait has made several strides in realising reforms, with the proposed development of the Ciyada Development Fund seeking to accelerate growth of the economy through strategic planning and the implementation of major development projects. It seeks to form a platform for partnership with the private sector, both domestically and abroad, marking a change in Kuwait’s traditionally protectionist framework.

To achieve Kuwait's strategic objectives, various legal reforms are currently in progress. The year 2024 is highly anticipated for significant changes, contingent upon the successful implementation of these amendments to the existing legal framework:

New Residencies Law: A new draft Residency Law sets forth the regulations for foreigners’ entry, deportation, iqama trade and penalties. The draft includes strict penalties of up to 2000 KWD for anyone who overstays a visit or commercial visa, and includes penalties of up to 3000 KWD for employees who are sponsored under one visa, and work for a third party. It also provides that visitors must leave the country upon the expiry of their 3-month visa unless he/she obtains a residency permit from the Ministry of Interior. It is apparent that Kuwait is seeking to intensify efforts to address illegal foreign residency.
Foreign companies to establish branches in Kuwait and conduct business without the necessity of a local agent: The Kuwaiti Parliament approved a law (which was also approved by the Amir of Kuwait on 14 January 2024) allowing foreign companies to establish branches in Kuwait and conduct business without the necessity of a local agent. The law amends Article 24 of the Kuwait Commercial Law and Article 31 the Public Tenders Law.

To achieve Kuwait's strategic objectives, various legal reforms are currently in progress. The year 2024 is highly anticipated for significant changes, contingent upon the successful implementation of these amendments to the existing legal framework.

Omar Handoush
Partner,
Head of Office - Kuwait

Such changes would render the business landscape in Kuwait more appealing, fostering a heightened competitive environment in the local market and will also align Kuwait with best practices of the wider region. Expected executive regulations are to be issued after the publication of the law in the Kuwait official Gazette.

The proposed changes in legislation, whilst not revolutionary, seek to reform the framework in Kuwait to allow for the economy to benefit from healthy competition and to promote increased foreign investment within the nation. With the development of a new sovereign wealth fund seeking to invest in critical infrastructure such as the Gulf Railway Project, the inclusion of private companies can increase competition and lower the cost for such projects in the future. When the laws are fully implemented, Kuwait is likely to refine the ‘Kuwaitisation’ initiative further in line with several other countries in the region which are implementing nationalization schemes to encourage the employment of their own nationals in the private sector.

Contact Partner:
Omar Handoush

Contributing Authors
Ola Saab
Lulwa Alhammad
Hassan Malik