Kuwait Market Entry

Kuwait Market Entry

Subchapters:

  • Market entry
  • Forms and conditions of operation on the market
  • Marketing and Communications
  • Issues of intellectual property protection
  • Public procurement market
  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

According to cheeroutdoor.com, Czech goods have a chance of success on the Kuwaiti market, but they must be price competitive, original and innovative, e.g. advanced technologies and systems. Sales must be accompanied by a top-notch marketing campaign due to the high competition in the market. Business activities may, with exceptions, only be conducted through a local business entity that is registered and at least 51% owned by a Kuwaiti citizen. Business is thus firmly in the hands of established Kuwaiti business families. Their companies become a so-called sponsor, which is also needed for the implementation of public contracts. The sponsor usually guides the foreign company through the labyrinth of local rules and customs, takes care of permits and formalities and can ensure the necessary marketing. Key legal norms and regulations related to commercial and entrepreneurial activity in Kuwait:

  • Act No. 25/2012 on Companies (“Companies Law”), incl. the amendment contains key provisions on the establishment, forms, organization of statutory bodies, legal definition of responsibility, division of profits, etc.
  • Law No. 13/2016 on Commercial Agency (“Commercial Agency Law”), which sets the rules for commercial agencies of foreign companies in Kuwait. It introduces the possibility of using several sales representatives (agents or distributors) at the same time, which cancels the previously valid principle of an exclusive representative (exclusivity).
  • Law No. 116 of 2013 on the promotion of foreign direct investment specifies the supported economic sectors for the entry of foreign investors, the criteria that must be met, state support for the inflow of FDI into the country, etc. Under certain conditions, it allows up to 100% ownership of a Kuwaiti company by a foreign entity.

In terms of the level and friendliness of the business environment of the World Bank (World Bank Group – WBG) for 2020, Kuwait was ranked 83rd with a score of 67.4. The most problematic areas include establishing a company/starting a business, the possibility of obtaining loans/capital especially for SMEs, cross-border trade in goods, processing building permits or insolvency proceedings and the protection of foreign minority shareholders. Kuwait is bound by the Gulf Cooperation Council (GCC) Uniform Tariff, which exempts the movement of goods and services within the GCC from all duties and sets a Common External Tariff of 5% for most goods imported from outside the GCC GCC. Certain basic foodstuffs and medicines or medical devices are exempt from the external tariff. For selected products, esp. some products of the construction, chemical or petrochemical industry, materials, etc., on the other hand, are subject to an increased customs rate of 10-12% due to the protection of local industry. Tobacco products are subject to a 100% duty. Customs fees must be paid in local currency. In Kuwait, the import of alcohol, non-alcoholic beer and wine with residual alcohol content, or food containing alcohol is prohibited. The import of pork and pornography is prohibited. The import of weapons and ammunition is possible only after obtaining a special permit from the Ministry of the Interior. For deliveries of meat goods, it is necessary to attach a so-called Halal Certificate stating that the animal from which the meat comes was killed according to Muslim ritual. Kuwait continues to observe the boycott of Israeli goods and goods manufactured partly from Israeli components – for the current restrictions and conditions of the boycott, it is necessary to inquire with the Kuwait Ministry of Commerce and Industry (MOCI) or the Kuwait Chamber of Commerce (Kuwait Chamber of Commerce and Industry – KCCI). The import license is granted by MOCI to local companies registered with the Kuwait Chamber of Commerce, it is generally valid for one year, renewable and for multiple shipments. Special import licenses are also required for industrial machinery and spare parts issued by the Public Industry Office. Special permits and licenses from specialized authorities or ministries are required for special products, e.g. firearms, explosives, medicines or exotic animals. Only local sales representatives/agents are authorized to clear the shipment at the Kuwait Customs Office based on an official power of attorney, distribution/agency agreement, as well as a letter of approval from the end customer. An invoice, certificate of origin/country of origin, itemized shipment itinerary and bill of lading or air waybill must be submitted for customs clearance. Some types of goods may require additional specific licenses, permits or certificates. A certificate of the origin of the goods/country of origin is also required, which is issued by the Chamber of Commerce of the Czech Republic on request. As a rule, one original and two copies of the invoice and other attached export documents are required. The invoice, certificate and other export documents must be verified by the HK of the Czech Republic, subsequently legalized at the Department of Verification of the Ministry of Foreign Affairs and finally super-legalized at the Embassy of the State of Kuwait in Prague. Documents are normally sufficient in English. Detailed and up-to-date information on the procedure for legalization of export documents can be provided by the Chamber of Commerce of the Czech Republic and the Customs Administration of the Czech Republic.

Forms and conditions of operation on the market

In the case of the sale/distribution of goods or services to/in Kuwait, foreign exporters normally use the most widespread type of business relationship, which is an agency or distribution agreement, in accordance with the provisions of the amended Law on Commercial Representation of 2016 (Law No. 13/2016). This form can also be used for the purpose of participating in public contracts. The advantage is that it does not require the establishment of a new legal entity and allows most of the administrative burden to be left on the local representative (agent/distributor), who has the appropriate background, licenses, marketing apparatus, knowledge of the local market, environment and people. Although usually the Kuwaiti representative requires the foreign entity to conclude an exclusive contract, Law No. 13/2016 explicitly allows the use of several representatives (agents or distributors) at the same time. To be valid, the agency agreement must be drawn up in accordance with the laws of Kuwait as well as the country of origin of the foreign company. We therefore recommend using the professional services of one of the established legal consulting companies operating in Kuwait – an overview of highly rated legal companies is provided, for example, by The Lawyers Global.

Another form of entry of a foreign entity into the Kuwaiti market is the establishment of a trading company registered in Kuwait. The establishment of commercial companies in Kuwait is governed by Law No. 25/2012 on commercial companies (“Companies Law”). The majority of foreign exporters or investors for their business plans in the country use similar well-known s.r.o. in the Czech Republic, locally known as the so-called “Limited Liability Company”, for which the abbreviation WLL has been adopted. A WLL – like all other forms of business companies in Kuwait – allows a foreign entity to own a maximum of 49% of the company. The majority share (min. 51%) is in the hands of the Kuwaiti partner, in whose name the company is formally registered in the commercial register of the Kuwaiti Ministry of Commerce. The number of owners/partners in the company can be a maximum of 50 and the minimum share capital is KWD 1,000 (approx. CZK 75,000). According to the law, WLL may not operate in the field of banking, insurance or investment fund activities.

Another widely used instrument enshrined in Act No. 25/2012 is the so-called joint venture (“Joint Venture Company”), which is a combination of two or more business companies (legal entities) that does not have the nature of a legal entity and does not even require registration in the commercial register. It is common for several foreign suppliers to form a joint venture or consortium with a main Kuwaiti contractor in order to participate in the tender, which represents the consortium in Kuwait vis-à-vis the client (e.g. a ministry).

Marketing and communication

An extended local marketing tool is advertising in the press, advertising spots aimed directly at the Kuwaiti market on local television stations are rather rare. Television advertising with a broader regional focus is mainly seen, either on Kuwaiti or regional television stations (mainly originating from Egypt, Lebanon, KSA or UAE). It is appropriate to target the segment of consumers over 50 (especially women) in the Arabic language in TV advertising. The middle and younger generations often watch the English version of local television. Most local citizens read the Arabic press almost exclusively. Advertising on the Internet is also common. A number of Kuwaiti companies have their websites, but they do not pay as much attention to them as Czech companies. Websites in general do not have the same importance in Kuwait as in the Czech Republic or Europe. In the Czech Republic, we can also find the ubiquitous googleads/adwords in Kuwait, but they do not have the same massive presence. On the other hand, it is absolutely necessary to promote the company/product through social media – the most widespread is advertising/promotion on FB and Instagram. For some types of goods (e.g. fashion) it is said that there is no point in doing business in Kuwait without an Instagram account – especially younger and middle-aged Kuwaitis follow their favorite brands and fashion influencers through their Instagram accounts. Last but not least, we must not forget the extraordinary position of oral communication (so-called Word of Mouth or WoM marketing), which traditionally has a strong position among the local Kuwaiti community. In the environment of a very small country with a small population that Kuwait is, word of mouth spreads at lightning speed. This way of spreading information (and disinformation) is further enhanced by the power of social media, which is extremely popular in Kuwait. Mailing of flyers to residents’ addresses is not used especially since all residents of Kuwait receive mail via PO Box (home addresses are not delivered). However, leaflets can often be seen behind the wipers of cars in parking lots, and the delivery of goods is then ensured by cheap expat labor from India or Bangladesh. Demonstration or exhibition events (tastings in supermarkets, etc.) are a common form of promotion for consumer goods, which are mainly used by foreign importers. You can also see advertising on billboards of the most prestigious brands, especially in close proximity to major shopping centers such as Avenues Mall or 360 Mall. When rendering advertising campaigns, care must be taken to

Issues of intellectual property protection

Since 1995, Kuwait has been a member of the WTO and a signatory to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). As a member of the WTO and a signatory to TRIPS, Kuwait is obliged to ensure the minimum standards of protection and enforcement of intellectual property rights set forth in this agreement through the adoption of relevant legislation. Since 1998, Kuwait has also been a member of the World Intellectual Property Organization (WIPO). Kuwait has basic legislation for the protection of intellectual property rights (IPR), in recent years it has also amended some outdated laws or adopted new ones. The most important piece of legislation is the Law No. 22 of 2016 on Copyright and Related Rights adopted in 2016, which aimed to fundamentally modernize the protection of copyright works and related rights in Kuwait in accordance with current international standards. The issue of the protection of patents, industrial designs, designs and trademarks is dealt with in particular by the amendment to the Act on the Protection of Industrial Property from 2001 and the Patent Act from 2013. The issue of trademarks is regulated in the relevant specialized laws and partly also in general business legislation. The Kuwait National Library is the competent authority for the protection of copyrights, and the Ministry of Industry and Trade for the protection of industrial property, patents and trademarks. Despite the existence of relevant legislation, Kuwait is often criticized for its sluggish application in practice and insufficient mechanisms for its enforcement. For a long time (until May 2022), Kuwait was included in the so-called Watch List of the Office of the United States Trade Representative (USTR), which monitors developments in countries accused by the USTR of violating IPR. Among the main shortcomings are the low will and ability of the relevant Kuwaiti police and judicial authorities to ensure the withdrawal of counterfeit goods from the market and to recover compensation for the injured, the lack of transparency of administrative and judicial processes, and the lack of determination to punish offenders with heavy fines and imprisonment.

Public procurement market

All public tenders above KWD 75,000 (approx. USD 240,000) are tendered through the Central Agency for Public Tenders (CAPT), which was established by Law No. 49/2016 on Public Procurement (“New Public Tenders Law”) of 2016. Exceptions to this rule are the Ministry of Defence, the Ministry of Interior, the Kuwait National Guard (KNG) and the Central Bank (CBK), which issue their own tenders. Kuwait’s state-owned oil company Kuwait Oil Company (KOC) and its subsidiaries issue tenders worth up to KWD 5 million (approx. USD 16 million) separately, and above KWD 5 million are issued through CAPT. All tenders issued are published in the official gazette (“Al Kuwait Al Youm Gazette”). The new Public Procurement Law, compared to the previous amendment, introduces the principle of protecting Kuwaiti citizens (and companies) in the local market against foreign competition. The foreign supplier is now obliged to purchase at least 30% of the material and work for the implementation of the order from local suppliers registered with CAPT. In addition, the new law enshrines the preference for locally produced goods, which can be up to 10% more expensive than a comparable foreign product. The law also introduces a point evaluation system, which enables objective evaluation and comparison of individual bids, and establishes a so-called Grievance Committee, which enables complaints about unfair practices during the tender process. Although the new law formally allows foreign entities to submit bids for public procurement tenders directly without a local representative, in practice, a Kuwaiti sales representative/partner is essential for obtaining a contract and its subsequent implementation. In addition to the necessary local know-how, contacts and ties, in most cases it is necessary for the company applying for the contract to be registered with the CAPT, or with the individual ministries that tender the contract. This type of registration is called “prequalification” in the local jargon. A foreign bidder can apply for a contract through a registered local company, but sometimes it is necessary to register a foreign company as well. Registration can take varying lengths of time – usually several weeks to months, in exceptional cases even years. After registration, it is possible to apply for individual contracts and participate in tenders. After purchasing and collecting tender documents, the originals of which together with the confirmation of payment must be kept carefully, a so-called “pre-tender” meeting is sometimes organized between those interested in the contract and the project sponsor, where important information can be obtained or changes to the tender conditions can be announced. The offer must perfectly meet all the required requirements and formal criteria – failure to meet them irreversibly leads to exclusion from the tender process. When submitting a tender offer, it is necessary to submit a so-called unconditional bid bond to CAPT, usually 2% or 5% of the offered price. Bid bond may be in the form of a banker’s check or bank guarantee issued by a bank registered in Kuwait. The bid bond is returned to unsuccessful bidders after the end of the selection process, which should not exceed 90 days, but it is possible to extend it – in that case, bidders are invited to extend the bid bond. The procedure is concluded with the announcement of the winning bid and the conclusion of the contract on awarding the contract with the winner. If the tender winner does not sign the contract within 30 days from the end of the procedure, his CAPT bid bond will be forfeited. The winner of the tender must also submit a so-called performance bond with the signing of the contract, guaranteeing the execution of the contract. The performance bond takes the form of a bank guarantee document, and in the event that the client applies penalties to the contractor after the completion of the contract, they will be paid from the performance bond. The entire tender process requires a strong agent/partner with knowledge of the unwritten rules of the game and personal connections. Without a local entity, a foreign company does not have much chance of success, especially if it is, for example, a small or medium-sized company. Larger foreign companies that have been operating in the country for a long time and regularly bid for large tenders (e.g. investment units), they usually have a local agent/partner and at the same time an established seconded sales representative or a whole team. More detailed information can be obtained on the CAPT website, where the Public Procurement Act is also available.

Payment terms, payment ethics and resolution of commercial disputes

The OECD ranks Kuwait in the category of countries with a moderate investment risk of category 2 on a scale of 0 to 7, where the 7th category represents countries with the highest level of territorial risk. According to the riskiness barometer of the Czech Export and Guarantee Insurance Company (EGAP), Kuwait has a “B” rating on a scale of A to F. EGAP’s country riskiness rating is based on a comprehensive internal assessment of the country’s political, economic and financial situation. It takes into account not only the sovereign risk of the country, but also the payment experience of EGAP and OECD, risks arising from the structure of the economy, the political situation, the legal, security and business environment, the banking sector and others. Despite a relatively favorable assessment of business and investment risks, the Czech Embassy in Kuwait repeatedly received information from the local business community about delayed or slow-paid invoices, by both private clients and state institutions. The return of the bid/performance bond after the completion of the public contract can also be accompanied by complications. The slightest deviation from the original assignment/technical specifications in the contract may cause non-payment of the contract, requiring repair of the work at the supplier’s expense, or other unpleasant complications and delays in the payment of the order. Foreign companies often complain about delays in refunding the so-called withholding tax by the Ministry of Finance after the completion of the contract. Commercial disputes are usually resolved before local courts, especially when it comes to public contracts. Considering the high degree of interconnectedness of local extended families and clans, the Kuwaiti court might rather favor a Kuwaiti citizen over a foreigner. The return of the bid/performance bond after the completion of the public contract can also be accompanied by complications. The slightest deviation from the original assignment/technical specifications in the contract may cause non-payment of the contract, requiring repair of the work at the supplier’s expense, or other unpleasant complications and delays in the payment of the order. Foreign companies often complain about delays in refunding the so-called withholding tax by the Ministry of Finance after the completion of the contract. Commercial disputes are usually resolved before local courts, especially when it comes to public contracts. Considering the high degree of interconnectedness of local extended families and clans, the Kuwaiti court might rather favor a Kuwaiti citizen over a foreigner. The return of the bid/performance bond after the completion of the public contract can also be accompanied by complications. The slightest deviation from the original assignment/technical specifications in the contract may cause non-payment of the contract, requiring repair of the work at the supplier’s expense, or other unpleasant complications and delays in the payment of the order. Foreign companies often complain about delays in refunding the so-called withholding tax by the Ministry of Finance after the completion of the contract. Commercial disputes are usually resolved before local courts, especially when it comes to public contracts. Considering the high degree of interconnectedness of local extended families and clans, the Kuwaiti court might rather favor a Kuwaiti citizen over a foreigner. The slightest deviation from the original assignment/technical specifications in the contract may cause non-payment of the contract, requiring repair of the work at the supplier’s expense, or other unpleasant complications and delays in the payment of the order. Foreign companies often complain about delays in refunding the so-called withholding tax by the Ministry of Finance after the completion of the contract. Commercial disputes are usually resolved before local courts, especially when it comes to public contracts. Considering the high degree of interconnectedness of local extended families and clans, the Kuwaiti court might rather favor a Kuwaiti citizen over a foreigner. The slightest deviation from the original assignment/technical specifications in the contract may cause non-payment of the contract, requiring repair of the work at the supplier’s expense, or other unpleasant complications and delays in the payment of the order. Foreign companies often complain about delays in refunding the so-called withholding tax by the Ministry of Finance after the completion of the contract. Commercial disputes are usually resolved before local courts, especially when it comes to public contracts. Considering the high degree of interconnectedness of local extended families and clans, the Kuwaiti court might rather favor a Kuwaiti citizen over a foreigner. withholding tax by the Ministry of Finance after completion of the contract. Commercial disputes are usually resolved before local courts, especially when it comes to public contracts. Considering the high degree of interconnectedness of local extended families and clans, the Kuwaiti court might rather favor a Kuwaiti citizen over a foreigner. withholding tax by the Ministry of Finance after completion of the contract. Commercial disputes are usually resolved before local courts, especially when it comes to public contracts. Considering the high degree of interconnectedness of local extended families and clans, the Kuwaiti court might rather favor a Kuwaiti citizen over a foreigner.

Visas, fees, specific conditions for traveling to the territory

In 2021, Kuwait included the Czech Republic among 56 countries whose citizens can apply online for tourist visas, the so-called “e-visa”, through the portal of the Ministry of the Interior. It is no longer the case that a tourist visa can be obtained at the airport (the so-called “on arrival” visa). It still applies that the passport should be valid for at least 6 months from the date of entry. An Israeli visa must not be marked on the travel document. It is required to provide the address of residence in Kuwait and other details. A visa fee of KWD 3 is also payable online. It then takes 1-2 days to issue the visa. From that date, it is possible to enter the country within 1 month. However, the Kuwaiti authorities reserve the right to refuse entry without reason. The maximum length of stay on a tourist visa is 3 months. Tourist visas can also be used for business travel without any problems. You can also apply for a visa through the hotel. However, it is necessary to inquire directly at the hotel in question whether and under what conditions it provides this service. Another possibility are visas granted for the purpose of a business trip, mediated by a local business partner at his request. When leaving the country, the local authorities can demand the payment of all claims, e.g. payment of a fine for a traffic offence, etc. However, a person may also be banned from leaving the country in other cases, e.g. if he has unresolved financial disputes with local business partners. It is strictly forbidden to bring alcoholic beverages into the country – finding alcohol on a passenger can lead to his deportation. Current conditions regarding entry into the country are regularly published on if it has unresolved financial disputes with local business partners. It is strictly forbidden to bring alcoholic beverages into the country – finding alcohol on a passenger can lead to his deportation. Current conditions regarding entry into the country are regularly published on if it has unresolved financial disputes with local business partners. It is strictly forbidden to bring alcoholic beverages into the country – finding alcohol on a passenger can lead to his deportation. Current conditions regarding entry into the country are regularly published onwebsite of the embassy.

Getting around and getting around in Kuwait City – which is the main and de-facto only city in the country – is dominantly based on passenger motor vehicles. With the exception of a few bus lines, there is no well-known public transport in our country. We recommend using the ubiquitous taxis, which are affordable. Foreign credit and debit cards can usually be used in Kuwait without any problems, there is also a dense network of ATMs and bank branches. The local currency is the Kuwaiti dinar (KWD), which can be exchanged for EUR at the airport or at local currency exchange offices and bank branches with the need to present a passport. For accommodation, you can use a dense network of hotels of international chains, mostly four- or five-star hotels, which are relatively affordable. Tap water is drinkable almost everywhere and its quality is high enough (obtained by desalination of seawater). Crime is generally very low and visitors are not at risk of being mugged in most places in Kuwait City. Kuwait is an extremely safe country. Increased attention needs to be paid to the specifics of the country given the Muslim character of the state, e.g. the necessity of conservative clothing for women and the prohibition of alcohol. During the religious holiday of Ramadan, a number of restrictions apply from dawn to dusk, including prohibitions on drinking, smoking, eating, etc.

Employment of citizens from the Czech Republic

A Czech citizen can officially work in Kuwait for a company registered in Kuwait, which will thus become his sponsor in the country. It is only possible to obtain a work visa and a residence permit (residence) through a sponsor. First, the Kuwaiti sponsor needs to process a work permit at the relevant ministry, which takes about 2 weeks – during this time the applicant must not reside in Kuwait. The next step is to send the work permit to the applicant’s address in the Czech Republic. Based on the work permit, the Kuwaiti embassy in Prague will then arrange the necessary visa to enter the country. In addition to the mandatory medical examination and a doctor’s certificate, the embassy must provide an extract from the criminal record and university diplomas verified by the Ministry of Foreign Affairs of the Czech Republic. The total processing time varies in the order of days. After receiving the visa, it is possible to travel to Kuwait, further steps to obtain a work permit follow in Kuwait with the assistance of a sponsor/employer. Health insurance is automatically provided by the sponsor, but foreigners are not included in social insurance. The amount of salary varies according to the category of the profession. For salaried workers from the poorest countries, it can be around 300-500 dinars. On the contrary, in the case of highly qualified specialists from the West, e.g. doctors or engineers, even in the order of several thousand KWD. The salary is not subject to any taxation, a frequent benefit is an allowance for housing or transport. The standard notice period is 3 months. It is important to note that the residence permit is dependent on the Kuwaiti sponsor and expires upon termination of employment. Health care is still almost free in public hospitals. However, most expats also choose private health clinics, which are always fully paid for, due to the language skills of the staff. A significant number of wealthier Kuwaitis often use health care abroad.

Fairs and events

Kuwait’s offer of fairs and similar events is rather provincial and cannot compete with the renowned fairs and congresses in Dubai. Part of the local fairs is connected with the direct sale of consumer goods and is aimed exclusively at local consumers, not at B2B. Participation in these sales events does not make more sense for Czech companies. The representative office of the Czech Republic in Kuwait has selected several interesting trade fairs in the territory for Czech companies in the fields of energy, food, defense, security and aviation industry. For active Czech companies with a real interest in the territory, participation in one of these fairs can be a gateway to the Kuwaiti market. Most of these events are held at the Kuwait International Fair, which is the largest fair organizer in the country. An important event in the energy sector is the Kuwait Downstream Summit (KDS), which is a conference dedicated to the refining sector and distribution networks. More information about the event is available on the organization’s website, or from the organizer (tel.: 00968/24788476, e-mail: [email protected]).

For Czech exporters in the field of defense and security technologies and the aviation industry, the Gulf Defense and Aerospace Exhibition (GDA), which is the largest and most important event of its kind in Kuwait under the auspices of the Kuwaiti Ministry of Defense, the Ministry of Interior and the Kuwaiti National Guard, may be of interest. It takes place at two-year intervals. Participation is free for visitors after registration at gdavisitors.tntexpo.net. More information is available at www.gulfdefense.com, or from the organizer (tel.: 0040/213276651, e-mail: [email protected]). Right after the GDA, the Kuwait Aviation Show is held annually in January in Kuwait. More information about the event is available on the organization’s website, or from the organizer (tel.: 00965/22433765, e-mail: [email protected]).

For Czech producers of food and agricultural technology, the Kuwait International Agro Food Expo (KIAFE), which takes place every year in April, and the well-known Kuwait HORECA, which is held every year in January, can be an interesting fair. However, due to the pandemic, some regular events were atypically moved to alternative dates. Important events are usually published on the website of the Embassy of the Czech Republic in Kuwait.

Kuwait Market Entry