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Industrial Scope
Industrialization is very important for Kuwait's economy, which is
largely dependent on oil production and exports. Diversification of
production base has always been an important issue for the government of
Kuwait.
Kuwait is experiencing a major boom in several industries thanks to the
government's interest in light and medium industries. A Center for
Boosting Kuwait Exports is being setup which will focus on promoting
Kuwait industrial products through industrial exhibitions and study the
possibilities of venturing into new markets in the GCC region and
beyond.
According to the studies published by the Public Authority for Industry
and the Gulf Organisation for Industrial Consultancy, Kuwait has good
scope for industrialization and could easily establish basic or even
advanced petrochemical industries based on its massive oil reserves
which are estimated at 96.5 billion barrels.
Geological surveys in Kuwait have shown the existence of 10 to 15
million cubic meters of sand pebbles and abundance of limestone used in
the construction industry. It also indicated that some stone structures
in the northern part of Kuwait could be used to manufacture cement.
Agriculture has a very limited scope as less than 0.5 per cent land in
Kuwait has been earmarked for agriculture. Fishing is so limited that it
cannot meet more than 50% of the local demand. However, the studies show
that the existent scrap metal offers a potential for melting and forging
industry and animal skin from slaughter houses can support leather
industry in Kuwait.
Kuwaiti economy is largely dependent on oil and most of its industrial
activity is focused on transformation of this natural mineral wealth.
Production of crude oil and refined products accounts for nearly half of
Gross Domestic Product (GDP) and more than 94 per cent of exports.
Efforts and emphasis on developing industry sector in recent years has
yielded results. Developing the national industry sector is important to
reduce the dependence of national economy on oil revenue which
fluctuates with international rates and poses insecurity for national
income. The government is providing more facilities and encouragement so
that the industrial sector growth is ensured.
The government provides infrast-ructure, support and facilities to
national industries by providing state owned properties and low priced
electricity, water and fuel to the private sector to build industrial
areas in addition to incentives such as custom exemptions tax exemption
and preference given to national products. To protect the local products
from the imported goods a draft law to encourage the Kuwaiti Industry is
being prepared by the Public Authority for Industry (PAI). The PAI has
also allocated KD 7 million to establish new power generators for
industrial areas in Al-Shuaiba. The government has participated in joint
private venture medium and large manufacturing enterprises which produce
foodstuffs, beverages, paper, carton, wooden and metal furniture,
chemicals, paints, plastics, construction materials etc. for encouraging
the private sector for establishing new industrial enterprises.
The Industrial Bank of Kuwait K.S.C. (IBK)
The government has participated in the establishment of The Industrial
Bank of Kuwait (IBK) which offers soft loans to the industrial sector,
was established in late 1973 as a joint venture between the Ministry of
Finance, the Central Bank of Kuwait, commercial banks, investment
companies and some large industrial establishments.
The primary aim of IBK is to promote industrial development in Kuwait by
participating in the development of long-term strategyfor industrial
growth in Kuwait and identifying sectors and activities which best suit
local conditions and constrains.
The cumulative industrial loan commitments since the Bank started until
the end of 2001 reached KD 489.652 million, provided to 607 industrial
projects. IBK's financing represented, on an average 49.7 per cent of
the total cost of any project.
Industrial loan commitments in 2001 increased by 203.7 per cent compared
to 2000 level. Total industrial loan commitments in 2001reached KD
20.365 million provided to 27 industrial projects, compared to KD 6.705
millon provided to 15 industrial projects in 2000.
The agriculture credit portfolio, terminated due to Iraqi aggression of
1990, restarted its operations in 2001. From the restart of its
operations till the end of 2001, the total agricultural loan commitments
by the portfolio reached KD 4,052,850, provided to 43 agricultural
projects.
Public Authority for Industry (PAI)
PAI is responsible for issuing industrial licences and developing local
industry. Its objectives include encouraging, protecting and supporting
the local industry. Its functions include drawing up an industrial plan,
proposing industrial sites, providing the necessary infrastructure and
industrial services. PAI is responsible for rules and procedures
regulating the granting or cancellation of industrial licences. It
supervises the compliance with the Kuwaiti, Gulf and International
standards and specifications dictated by the regulations for imported
and local products. It is also responsible for verifying the compliance
of any industrial project with the domestic and international rules
governing the environment protection. Its functions include carrying out
studies relevant to the industrial activity and ways to support it and
determine the means for protection of domestic products.
Industrial Areas and Plots
Clause (1), Article (15) of the Industrial law allows industrial to
apply for land plot to set up the industry. Such applications may be
submitted to the competent authority which allocates these land plots
with the consent of the Ministry of Commerce and Industry.
While the preparation and provision of infrastructure and services cost
the government more than one KD per sq. meter the subsidised offer to
industries may be only 5 - 10 fils per sq. meter for periods up to 50
years. In Sabhan and Mina Abdullah areas the subsidised cost is about
200 fils per sq. meter.
The number of industrial areas in Kuwait may reach ten. While some areas
are fully developed with all necessary services provided, some new areas
are still under development.
According to the Ministry of Commerce and Industry 1997 statistics, 33%
of the industrial establishments are in Shuwaikh Industrial area, 27%
are in Sabhan and the rest are distributed in other industrial areas as
follows.
It is worth mentioning that most industrial sectors are concentrated in
two main areas; namely ,Shuwaikh and Subhan, except the sector of the
mining products which concentrate in Amghara and Senior Contractors
areas.
Kuwait Oil Industry
Production of crude oil and refined products accounts for nearly half of
Gross Domestic Product (GDP) and over 90 per cent of exports.
Kuwait Petroleum Corporation
Kuwait Petroleum Corporation (KPC), an independent wholly state-owned
public body, is responsible for all hydrocarbon-related operations in
Kuwait and abroad. KPC buys the crude oil it extracts from the ground
from the State through the Ministry of Oil at a selling price that is
related to world market prices. KPC then sells and distributes the oil,
or refines it and markets the petroleum products.
The international marketing of oil, products and liquefied gas is
carried out from KPC's headquarters in Kuwait City. But all other main
operations, such as exploration, production, refining, petrochemicals,
transport, and distribution, are effected through KPC's subsidiaries,
and the Corporation has a worldwide vertically integrated network of
businesses extending from the wellhead to the petrol pump, including
refineries and petrol stations in Europe.
Petrochemicals
PIC, KPC's wholly-owned subsidiary, produces, markets and distributes
petrochemicals. It has fertiliser and salt and chlorine plants in Kuwait
and is involved in joint ventures abroad. PIC has a petrochemicals
complex in Shuaiba.
The complex includes a polypropylene plant and plants for processing
olefins. The polypropylene plant takes feedstock of propylene from
KNPC's refinery in Mina al-Ahmadi and converts it into three types of
plastic material: homopolymer (clear plastic), random polymer (a strong
plastic used for bottles and lids) and high impact copolymer (used for
suitcases and car bumpers, etc).
The olefins plants, which began operations in November 1997, are owned
by EQUATE, a joint venture between PIC and Union Carbide of the USA.
Using local feedstocks, they produce polyethylene (one of the most
commonly used plastics) and ethylene glycol (which is used to make
polyester for fabrics and plastic bottles). There are plans to add an
aromatics plant, for making industrial solvents, to the complex in the
near future.
The plans for increasing the crude oil production capacity from an
average of 2.5 million bd to over 3 million bd by year 2005 encompass a
number of projects. Emphasis is on the projects concerning developing
the Kuwait Oil facilities and equipping them with the latest
technologies for enhancing the production rates of existing reservoirs.
Existing gathering centres are being enhanced and new gathering centres
are being developed. The Supreme Petroleum Council has recommended the
completion of the procedural requirements for the proposed KPC project
to draw on the technological, financing and marketing capabilities of
international oil companies to develop certain Kuwaiti oil fields,
specially the oil fields situated northwest of the country, namely Al-Rawdhatain,
Al-Sabriya, Ritqa, Abdali, Bahra, Manaqeesh and Um Qadeer.
KPC has plans to execute several projects for production of natural gas
with the technical consultancy of the American 'Shell' company. KOC has
also announced a project for building a new gas liquefaction plant north
of the country at a cost of US $ 150 - 175 million.
PIC, subsidiary of KPC, has several petrochemical industry projects. PIC
is implementing a project for establishment of a new plant to produce
methanol at an average capacity of 2000 metric tons per day. The
production will rely on using natural gas and maximizing the utilization
of the plant's available equipment. Methanol is used in production of
unleaded fuel, paint solvents, adhesives and insulation materials.
The year 2001 witnessed the completion of the first catalyst production
plant by Kuwaiti Company for the Manufacturing of Catalysts (KCMC). The
plant started operation in April 2001, and aims to produce various types
of catalysts needed by the refined petroleum products industry, the
chemical and petrochemical industries and water distillation.
The Supreme Petroleum Council has decided in July 2001 to approve an
increase in production quota of Kuwait Foreign Petroleum Exploration
Company (KUFPEC) to a minimum 100,000 barrels and increasing
productivity of KUFPEC to 200,000 bpd by 2010. The council also approved
the second olefines venture costing 2.2 billion US dollars and approved
in principle the aromatics project of the Petrochemical Industries
Company, estimated at US dollars 1.4 billion. Both projects belong to
Petrochemicals Industries Company (PIC). The Aromatics project,
scheduled for completion in the year 2005, includes two units , one for
the production of para-xylene (at a capacity of 650,000 tons per year)
and the other for producing styrene (500,000 tons per year).
The second olefines project, also scheduled for completion by the year
2005, is complimentary to the Equate venture, comprises a unit for
division of ethane and propane for the production of ethylene with
productivity estimated at 850,000 tons per year, two units for the
production of low-density polyethylene with productivity estimated at
450 tons a year in addition to ethylene glycol estimated productivity of
650,000 tons a year and propylene 70,000 tons per year.
According to the latest available statistics the natural gas reserves in
the State of Kuwait are estimated at 52400 million cubic meters. KPC
plans to execute several projects to benefit from the natural gas
reserves available in the Kuwaiti underground. Work was initiated in mid
2000 for the establishment of the plant for de-sulfurization of natural
gas at a cost of $92 million.
Non-Oil Industries
A wide range of products are being manufactured in Kuwait covering food
products, household durable products, textile, paper, detergents,
construction materials, furniture, decor and electrical, mechanical and
industrial products.
Small industrial set ups (employing less than 10 workers) represent 84%
of the total industrial units, while medium industrial set ups
(employing 10 - 49 workers) represent about 14 %.
The majority of the small set ups manufacture textiles and ready-made
garments. Metal products industry occupies second position, manufacture
of wooden products and furniture and foodstuff follow next.
The value added in the non-oil sectors (excluding the refined petroleum
products) at current prices rose by KD 146.3 to KD 5026.1 million in the
year 2001 compared to an increase of KD 112.1 million in the year 2000.
This development, along with the decline in the total value added in the
oil sectors (encompassing the production of crude oil, natural gas and
the refined petroleum products industry) led to the increase of the
relative contribution of non-oil sector to the GDP at current prices
from 44.4% in the year 2000 to 50% in 2001.
According to data prepared by the Ministry of Commerce and Industry, the
value of the Kuwaiti private sector exports of goods, for which
national-origincertificates were issued, declined in the year 2001 to KD
129.6 million from KD 139.6 million. Nonethe less, the relative
importance of the Kuwaiti private sector exports of national-origin
goods in the total value of Kuwaits non-oil exports of national-origin
goods incresed to 42.4% in the year 2001 from 41.9% in the previous
year.
The Kuwait Free Trade Zone
The Kuwait Free Trade Zone, established in 1998 at Shuwaikh harbour,
offers state-of-the-art facilities ranging from warehousing, light
industries, offices, open land for development, kiosks and traders
exchange market and exhibition facilities. These combined products with
a continued commitment to providing premium and timely services to
clients enables KFTZ investors to focus on growth and business
development.
The information industry is getting special attention and efforts are
being exerted to attract international entrepreneurs to Kuwait. Kuwait
Free Trade Zone has reserved around 700,000 square meters for such
industries. The strategic location of Kuwait is a plus point in
attracting foreign companies to the Kuwait Free Trade Zone.
Attracting Foreign Investors
With an aim to attract foreign investments, the draft law on foreign
investment which was approved by the Cabinet in June 1999, got approval
of the Parliament in April 2001 as Law 8/2000. It is supposed to provide
the best incentives in the region for foreign investors. It aims at
transferring tecnology and funds besides creating new jobs. It allows
upto 100 per cent foreign ownership of Kuwaiti companies. The Council of
Ministers will determine the economic sectors of the projects. Upon
recommendation from Foreign Investment Committee and approval of the
concerned authorities, the minister will issue a licence to the foreign
investor.
As per the law investment projects can be exempted from income tax for a
period of upto ten years, as well as be allotted land and real estate
required for the project. Part or full exemption from custom duties may
also be granted on the import of machines, equipment, spare parts, raw
materials, semi-processed goods, and wrapping and packaging materials.
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