Strategic Analysis of Kuwait's Economy using Porter's Diamond Model

This paper discusses the current economic situation of Kuwait and suggests strategic outlooks that need to be undertaken by the Kuwaiti government for reviving the economy. It incorporates Porter’s Diamond Model as a strategic model and other economic strategies for carrying out the needed analysis. The paper also critically discusses four main strategies, including export control policy, protectionism policy, anti-trust and competition policy, and foreign direct investment (FDI) policy. The document type is an academic paper, and the type of assignment is not mentioned. The subject is economics, and the course code, course name, and college/university are not mentioned.

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Making Sense of Strategy

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Table of Contents
The Business Issue...........................................................................................................................3
Porter’s Diamond Model.................................................................................................................3
Application of Porter’s Diamond Model.........................................................................................5
Critical discussion of four main strategies.......................................................................................7
Export Control Policy..................................................................................................................7
Protectionism Policy....................................................................................................................7
Anti-trust and Competition Policy...............................................................................................8
Foreign Direct Investment (FDI) Policy......................................................................................8
References........................................................................................................................................9

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The Business Issue
A business tour carried out along Kuwait reflected a threatening situation for the economy of
Kuwait owing to the shutting down of large number of shopping establishments and trading
centres. Shops, showrooms, restaurants and even hotels were observed to reflect sign boards like
‘shop closed’, ‘shop on sale’, ‘factory closed’ while some others carrying out sale held sign
boards like ‘stock on sale’ and ‘clearance sale’.
The paper thus focuses on highlighting on strategic outlooks that need to be undertaken by the
Kuwaiti government for reviving the current economic situation. Incorporation of Porter’s
Diamond Model as a strategic model and other economic strategies would be undertaken for
carrying out needed analysis regarding the same.
Porter’s Diamond Model
Porter’s Diamond Model reflects on four different factor conditions that contribute in evaluating
the level of competitive advantage enjoyed by different economies. The Diamond Model
introduced by Michael Porter reflects that some industries along a specific economy are more
competitive in the international landscape than that of other industries operating in the same
industry. Moreover, the model reflects that factor considerations within the economy tend to
influence the level of competition of the firms and industries operating in it. Porter reflected that
the relative level of the opportunity costs tends to determine that whether current economic
activities can be undertaken in an economy or not in comparison to other economies (Jhamb,
2016). Michael Porter further argues that industries that tend to require considerable amount of
technological and skilled labour resources tend to be affected in a lesser fashion than those

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industries that require reduced amount of technological resources. The reduced dependency on
technological resources for the industries in turn tends to enhance the level of input costs for the
firm. The model is reflected as under.
(BPP Learning Media, 2014, pp.35-36)
The different factor conditions are essentially grouped under basic and advance factors. The
basic factors like suitable climatic conditions, abundance of natural resources and also the
existence of potential labour resources are unsustainable and uncontrollable in nature for
increasing and sustaining the level of competitive advantage (Kharub & Sharma, 2016). The
advance factors like technological and infrastructural competencies, existence of needed know-
how and also the presence of capital competencies helping in generation of needed investment in
potential sectors all contribute in the production of differentiated products and services that in
turn enhances the level of competitive advantage for the economy (Rao, 2018, ch.15). Regarding
demand conditions the ability to anticipate the demands and expectations of the consumers, rate
of market saturation and growth of markets and also the ability to render goods and services
based on identification of market segments all contribute in increasing the level of competitive
advantage for the nations (Riasi, 2015). Again, the existence of supporting industries in the
region ideally helps in the existence of quality suppliers in needed abundance. The same helps

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the manufacturing and production firms for sourcing of quality materials from competent
suppliers for production of goods and services. Further, the level of competitive advantage is
gained and enhanced in that the culture of the existent industries ideally matches the cultural
paradigms of the nation (BPP Learning Media, 2014).
Application of Porter’s Diamond Model
Kuwait is observed to face the impact of continual climate change with also the rise in sea-water
levels. Further, the growth of deserts in the region has also impacted the spread and existence of
biodiversity amongst diverse regions in Kuwait. Moreover, the rise in the level of temperature
with also the erratic nature of rainfall has further affected the agricultural productivity of Kuwait.
Again, the rise in sea-water levels also accounts for the growth of events like flooding of urban
areas and infrastructural resources spread around the coastal areas and also the affecting of
groundwater resources to a considerable extent. The same thereby affects the development and
growth of human and industrial settlements along the coastal regions of Kuwait (Park, 2018).
The availability of water at a per-capita level in Kuwait at around 100 litres on an average daily
basis is also observed to be quite scanty in meeting the per-capita demand for water resources at
around 450 litres on an average daily basis. The same makes the domestic and industrial
requirements in Kuwait to be met based on the use of desalinated and also groundwater resources
that tend to be unfit for human consumption (Barghouthi, 2017). Further, the overexploitation of
water resources at the hands of the government with also the lack of essential infrastructural and
water policies make it difficult for Kuwait to counter the impacts of continual climate change.
The scarcity of the right quality of water resources potentially affects the growth of ecosystems
and also the fishing industry based in Kuwait and other GCC regions. Along with the above

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problems the natural environment of Kuwait is observed to be increasingly polluted owing to the
growth of emissions of greenhouse gases that potentially affects the socio-economic situation of
the region. The government of Kuwait is focusing on the development of renewable energy
resources in terms of encouraging investments to be carried out regarding the generation of
power from solar, thermal, photovoltaic and also wind based turbines (Silvast, 2017).
Kuwait’s economy in 2019 is taken to be significantly impacted owing to the government’s
decision of imposing VAT which in turn is taken to enhance the level of inflation in the region in
a three-fold fashion as compared to 2018. The level of inflation in Kuwait during 2019 is taken
to reach a figure of 4.5 percent. The flow of FDI in Kuwait is also observed to gain a drop by
around 28.2 percent during 2017. The government has however long set up KDIPA or the
Kuwait Direct Investment Promotion Authority that functions under the Ministry of Commerce
encouraging the flow of FDI to different economic sectors and industries (Sab, 2014).
Kuwait’s government is strongly focusing on the development of the infrastructural potential of
the region in terms of carrying out the five-year plan ranging from the period 2015 to 2020. The
government is looking forward to fuel a growth of around 15 to 20 percent in the infrastructural
potential of the region. Large scale infrastructural projects like the development of the Metro
City to the generation of residential and commercial or industrial properties are being undertaken
by Kuwait’s government along the five-year period. The expansion of the international airport of
Kuwait along with maritime areas and expressways are also in the cards. Project support
concerning materials and equipments are being continually gained from United States by
Kuwait’s government (Mallakh, 2019).
Kuwait’s Stock Exchange in collaboration with a group of large scale firms operating in the
region has agreed on the significance of privatisation and the role to play by the private sector in

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meeting the strategic objectives of the 2035 Kuwait development plan. The focus of the plan is to
boost the operations of the private sector firms operating in the region and also to encourage the
privatisation of government bodies like the services and education ministry (Mallakh, 2019).
Critical discussion of four main strategies
Export Control Policy
BIS or the Bureau of Industry and Security based in Kuwait focuses on the developing,
implementing and also in interpreting the export control measures exercises by United States
associated with dual-use merchandises and software. The dual-use products, technologies and
software are targeted by BIS in that they have both commercial and military usage. In addition
the BIS also focuses on both the interpretation and also the implementation of anti-boycott rules
associated with the legislations concerning export provisions. It encourages the removal of
boycott on such products that the US Government did not permit (Mallakh, 2019).
Protectionism Policy
The Government of Kuwait is required to focus on the generation of different types of trade
protectionist policies like tariffs, quotas, antidumping policies and also regarding controlling of
the exchange rates. The development and implementation of the trade protectionist regimes is
taken to help in protecting the operations of the local and regional industries from the harmful
effects of international competition posed by foreign players entering the developing economy.
The generation of tariffs and quotas is taken to help in reducing the level of imports of products
and services from foreign economies (Goldin, 2018, p.28). Likewise, the generation of
antidumping policies ideally helps in restricting the practice of selling of goods to foreign

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countries at a price below than that of the production costs. The application of exchange rate
controls would help in enhancing the price of imports while in reducing the price levels of
exports. The same would thus help Kuwait in promoting its products and services in international
markets (Goldin, 2018, p.28).
Anti-trust and Competition Policy
The competition law in Kuwait contributed in the formation of the authoritative body that
monitors and manages the growth of competition in the region. It restricts the fixation and also
manipulation of prices based on the conducting of fictitious transactions in sharp contrast to
existing market related rules and that which in turn would affect the competitor firms (Akbar,
2017, p.134). It also restricts both the inward and outward movement of merchandises without
effective justifications and also in selling of merchandises at prices less than their production
costs. Further, the competition authority also contributes in dividing the total market based on
consumer needs, geographical parameters, seasonal demands and distribution networks (Bergh,
2017).
Foreign Direct Investment (FDI) Policy
The new FDI regime in Kuwait encouraged the development of the Direct Investment Promotion
Authority or DIPA to act as a one-stop station to render different types of licenses associated to
employment and commercial needs. The same is taken to help in reducing the bureaucratic
delays concerning inviting of FDI along the different sectors. The new FDI law also focuses on
identification of new sectors or areas for attracting foreign direct investment in the region.
Finally, the new FDI policy is focused on being carried out to ideally meet the objectives of the
development plan concerning Kuwait 2035 (Wiafe-Amoako, 2018, p.268).

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References
Akbar, Y.H., 2017. Global Antitrust: Trade and Competition Linkages. New York : Routledge.
Barghouthi, O.A., 2017. Analysis of Competitive Advantage of the Basic Industries in Palestine
Based on the Porter’s Diamond Model. International Journal of Marketing Research Innovation
, 1(1), pp.25-39.
Bergh, R.J.V.d., 2017. Comparative Competition Law and Economics. United Kingdom :
Edward Elgar Publishing.
BPP Learning Media, 2014. ACCA Essentials P3 Business Analysis Study Text 2014. United
Kingdom: BPP Learning Media.
Goldin, I., 2018. Development: A Very Short Introduction. United Kingdom : Oxford University
Press.
International Monetary Fund , 2017. Trade and Foreign Investment—Keys to Diversification and
Growth in the GCC. Kuwait: International Monetary Fund.
Jhamb, P., 2016. An Application of Porter's Diamond Framework: A Case of Sports Goods
Cluster at Jalandhar. Pacific Business Review International, 8(8), pp.141-46.
Kharub, M. & Sharma, R.K., 2016. Investigating The Role Of Porter Diamond Determinants For
Competitiveness In Msmes. International Journal for Quality Research , 10(3), pp.471-86.
Park, L.S., 2018. A Long Walk to Water: Based on a True Story. Sudan : Oneworld Publications.
Rao, C.B., 2018. India’s Economic Resurgence: A Modified Paradigm for a Welfare State. New
Delhi: Notion Press.

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Riasi, A., 2015. Competitive Advantages of Shadow Banking Industry: An Analysis Using
Porter Diamond Model. Business Management and Strategy, 6(2), pp.15-27.
Sab, R., 2014. Economic Impact of Selected Conflicts in the Middle East: What Can We Learn
from the Past? Geneva: International Monetary Fund.
Silvast, A., 2017. Making Electricity Resilient: Risk and Security in a Liberalized Infrastructure.
New York : Taylor & Francis.
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Wiafe-Amoako, F., 2018. Africa 2018-2019. South Africa: Rowman & Littlefield.