Kuwait country brief
The State of Kuwait is situated in the north-east corner of the Arabian Peninsula, bordered by the Republic of Iraq to the north and the Kingdom of Saudi Arabia to the south and west. It also shares a maritime border with the Islamic Republic of Iran. Kuwait covers an area of 18,000 square kilometres, approximately a quarter of the size of Tasmania, and has a population of about 3.5 million (2009 est.), including approximately 1.3 million Kuwaiti nationals.
Kuwait's modern history began in the 18th century with the founding of the city of Kuwait by Arab tribes from the Arabian Peninsula. Kuwait became a British protectorate in 1897 and gained independence in 1961.
Oil production in Kuwait began in the 1940s and was controlled by a joint British-American firm until 1974, when Kuwait nationalised most of its oil industry. Kuwait is a member of the Organization of Petroleum Exporting Countries (OPEC).
In August 1990, Kuwait was invaded and forcibly annexed by Iraq under Saddam Hussein. The seven month-long Iraqi occupation came to an end after direct military intervention by United States-led coalition forces, in which Australia participated. Kuwait's infrastructure was badly damaged during the war, but it was able to repair nearly all the damage and, by the end of 1992, had restored its oil output to almost the pre-occupation levels.
Kuwait is a constitutional monarchy with a parliamentary system of government. The head of state, the Emir, is chosen from the ruling Al-Sabah family and confirmed by the National Assembly (Majlis Al-Umma). The Emir has the power to appoint the Prime Minister, dissolve the Parliament and suspend certain parts of the Constitution. The current Emir is HH Sheikh Sabah Al-Ahmed Al-Jaber Al-Sabah, who acceded to the throne in February 2006.
Kuwait's constitution is regarded as one of the most liberal in the region and Kuwait was the first member of the Gulf Cooperative Council (GCC) to establish a directly elected parliament. Established in 1963, the National Assembly is comprised of 50 directly elected members who serve four-year terms. The Assembly has the power to question and dismiss ministers, including the Prime Minister. Although political parties are banned, there are various interest groupings or 'blocs'.
The Council of Ministers (cabinet) forms the executive level of government and advises and assists the Prime Minister, who is appointed by the Emir. The current Prime Minister is HH Sheikh Nasser Al-Mohammed Al-Ahmed Al-Jaber Al-Sabah, who was appointed in 2006. Cabinet members are also ex-officio members of the National Assembly with the same voting rights as elected MPs, except in cases of no confidence motions. The most recent parliamentary election was held in May 2009, Kuwait's third since 2006. This election resulted in four women elected for the first time since women were granted the right to vote in 2005. The next election is scheduled for May 2013.
In addition to being a member of the GCC, which includes Bahrain, Oman, Qatar, the United Arab Emirates (UAE) and Saudi Arabia, Kuwait is also a member of: the Arab League; the Organization of the Islamic Conference (OIC); the Organization of Petroleum Exporting Countries (OPEC); the World Trade Organization (WTO); and the United Nations (UN) and its various agencies.
Kuwaiti foreign policy is founded on a long-standing strategic alliance with the United States.
Kuwait has a small, relatively open economy dominated by the oil industry and government sector. Oil revenues comprise about 95 per cent of exports and 95 per cent of total government revenues. In 2009, Kuwait's oil production capacity was approximately 2.5 million barrels per day (bpd). Kuwait plans to increase its capacity to 3.5 million bpd by 2015 and 4.0 million bpd by 2020. According to OPEC's official figures, Kuwait has the fifth largest oil reserves (approximately 100 billion barrels) in the world. Kuwait is the world's seventh richest country per capita.
Kuwait has one of the oldest and most financially stable economic systems in the Middle East, with a stock exchange that dates back over 50 years and a well developed banking system. Other major industries include real estate, shipping, construction, cement, water desalination, construction materials and financial services.
While healthy oil prices over recent years have created record budget and current account surpluses, Kuwait has not been immune to the fall-out of the Global Financial Crisis, with a significant increase in the banking and investment sector's exposure to bad debts. In 2009, the Central Bank of Kuwait introduced a US$5.15 billion stimulus package to help boost the economy.
In February 2010, the National Assembly passed a five year development plan, the first passed in more than 20 years. Under the plan, $120 billion will be spent on a range of major infrastructure projects. The government has also taken steps to diversify the economy, including reducing the corporate tax rate placed on foreign businesses to a flat tax of 15 per cent and the May 2010 passage by the National Assembly of a privatisation bill. Foreign investment, however, remains relatively low in comparison with other GCC states. The Kuwait Investment Authority (KIA) is the primary sovereign wealth fund (SWF) investment vehicle of the Government of Kuwait, with assets estimated at US$264 billion by the SWF Institute. Kuwait appropriates around 10 per cent of budget revenue to the Future Generations Fund, which is managed by KIA. KIA's major investments include substantial holdings in Citigroup, Daimler, St Martin's Property Group, and BP.
Australia and Kuwait enjoy a friendly and cooperative relationship and share a broad commitment to stability and development through the region. Kuwait recognises Australia's support for Kuwait's independence and territorial integrity through Australia's contribution to the coalition force that liberated Kuwait from the Iraqi occupation in 1991. Relations are underpinned by our strong commercial ties and increasing people-to-people linkages.
Diplomatic relations between the two countries were established formally in 1974 and Australia opened an Embassy in Kuwait City in December 2004. The Foreign Minister, the Hon Stephen Smith MP, formally opened the Australian Embassy at its current premises when he visited Kuwait in June 2008. Austrade opened an office in February 2010. Kuwait upgraded its Liaison Office in Canberra to an Embassy in January 2002 and opened a Cultural office in 2008.
Bilateral trade relationship
The trade relationship is substantial, with strong potential for further expansion in commodities and manufactures, services and investment. Two-way trade amounted to over $843 million in 2009. This figure understates the level of trade as Australian exports transhipped to Kuwait through the regional entrepot of Dubai would not be captured in these figures. Kuwait is a significant market for Australian dairy and food products and a growing market for information technology exports. Kuwait is also an important market for Australian exports of passenger motor vehicles, wheat and live animal. In 2009, Kuwait was Australia's biggest market for live sheep in the Middle East, importing 950,000 heads worth A$78 million and representing 26 per cent of Australia's total livestock exports.
Australia and Kuwait have signed a Memorandum of Understanding (MoU) on the Trade in Live Animals. The MoU outlined conditions for the trade and includes assurances that livestock (sheep, cattle, goats) will be treated in line with international animal welfare Standards.
Service exports are increasing, in 2009-10 around 2,000 Kuwaiti tourists visited Australia. Increasing numbers of Kuwaiti students are favouring Australia as a study destination. As at April 2010, nearly 500 Kuwaiti students were enrolled in Australian institutions, an increase of 100 per cent on the 2009 academic year. The establishment of the Australian College of Kuwait in 2004 and Box Hill College of Kuwait in 2007 have assisted in expanding educational linkages. Over 1000 Australians reside in Kuwait, employed mainly in the education, banking and security industries.
Joint ventures between Australia and Kuwait are becoming increasingly common. Major Australian companies with operations in Kuwait include Leightons, Worley Parsons (supply of management services), and the Snowy Mountains Engineering Corporation (SMEC — various infrastructure, sanitary and environmental projects).
Kuwait's significant investment in Australia in real estate, hotels, banking and a liquid natural gas project has more than doubled to A$1,338 million in 2009 from A$590 million in 2008. The Kuwait Foreign Petroleum Exploration Company (KUFPEC) has stakes in a number of oil and gas fields and is a partner in the Wheatstone LNG project. Kuwait Finance House, one of the largest Islamic banks in Kuwait, recently opened an office in Melbourne, while private companies, including Agility Logistics, Action Group Holdings and the Al-Ghanim Group have also invested in Australia.
There is considerable scope for Australia to further develop the bilateral commercial relationship with Kuwait. Kuwait currently has long term plans to develop around $325 billion worth of infrastructure and development projects, representing significant opportunities for Australian companies. English is widely spoken in Kuwait, and opportunities for Australian companies are further enhanced by Kuwait's low import tariffs and taxes.
The Australian Government is committed to expanding Australia's strong and growing investment relationship with GCC states and, in 2007, entered into negotiations for a Free Trade Agreement with the GCC as a whole.
For further information, please see Business Guide to Kuwait and More than Oil: Economic Developments in Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates.
Updated 5 August 2010