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Local sponsorship no longer necessary for foreign businesses in Kuwait

02 September 2023

The Parliament in Kuwait has approved a proposal to abolish local sponsorship for foreign companies that open branches in Kuwait.

This initiative taken by Financial and Economic Affairs Committee of the Parliament, is considered by analysts as a step towards encouraging foreign investment and diversifying the economy.

The proposal permits companies to operate directly without the need of a local agent, including for those bidding government contracts.

According to the Economic Affairs Committee rapporteur Abdulwahab Al-Issa, this opens door for a good competition and reflects positively in improving the quality of services in the state, irrespective of whether provided in commercial work or through government contracts.

In the recent years, there has been complaints among opposition MPs against foreign firms having the need to have a local agent, as they pointed out the need to diversify the energy-dependent Kuwaiti economy, and improve inward investment.

According to a Kuwaiti economic expert, the old sponsorship system increased cost for foreign companies, and this made Kuwait less attractive to hold foreign businesses, as other Gulf states have made their economies more attractive to foreign investors by liberalising sponsorship laws.

The expert believes that the changes introduced by the Parliament can increase the price competition by introducing more products into the market, although some sectors such as car sales, may not be affected.

Kuwait is ranked 38th out of 64 countries in the 2023 IMD World Competitive Ranking, the lowest among Gulf States with UAE falling in 10th place, Qatar 12th, Saudi Arabia 17th and Bahrain 25th.

Robin Vinod

Writer/blogger who writes on topics such as travel, real estate, employment and everyday life on GCC countries.

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