Business Level Strategy: Kuwait's National Competitive Advantage

This report provides a comprehensive analysis of Kuwait's business-level strategy, focusing on policies designed to enhance its national competitive advantage. The paper begins by examining policies that stimulate factor conditions, such as investments in science, technology, infrastructure, and labor. It then explores policies promoting firm strategy, structure, and rivalry, including fiscal, taxation, and foreign direct investment policies, as well as the SME policy. The report further investigates policies that promote demand conditions in Kuwait, including economic, e-commerce, and trade policies. Finally, it delves into policies encouraging related or support industries, such as the Kuwait 2035 master plan, tourism policy, and industrial policy. The report concludes by suggesting strategies to enhance employment creation within Kuwait, such as reducing interest rates, investing in infrastructure and agriculture, and offering tax incentives. The report draws on various sources to support its analysis and provides valuable insights into Kuwait's economic landscape.

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BUSINESS LEVEL STRATEGY
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27/04/2018

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Policies enabling national competitive advantage in Kuwait
Introduction
This paper focuses on the enabling policies that elevate Kuwait’s national competitive
advantage. To begin with, it first explores the policies that stimulate the factor conditions that would
attract multinational corporations. Secondly, policies that promote firm strategy, structure and rivalry
are discussed. Thirdly, it inquires the enabling policies under the demand conditions in Kuwait. Lastly,
the paper delves into Kuwait’s policies encouraging related or support industries as antecedents for
national competitive advantage (Fainshmidt, Smith & Judge 2016).
Policies that stimulate the factor conditions in Kuwait
The first policy is the national science, technology, and innovation policy. Under this policy,
Kuwait has invested heavily in the progress of science and technology disciplines. The policy
encourages responsive innovations to the local population. Already over 80 percent of Kuwaitis use
internet technology and 97 percent use credit cards for e-commerce this is an attraction to
multinationals. There are e-commerce laws to protect local businesses (International Business
Publications [IBP] 2008).
Kuwait has a competitive labour policy enshrined in the Labour Laws, the critical human
resource necessary to spur development into the country has been made possible. Over 60 percent of
the population consists of expatriates who offer specialized skilled labour. The ministerial decree of
2006 allows expatriates’ invitation documents to be turned into work permits. However, immigration
laws restrict work that can be performed by local firms (Elkhafif, Taghdisi-Rad & Elagraa 2016).
A responsive infrastructure policy is a huge attraction to multinationals. The government of
Kuwait through the short-term to the mid-term development plan for the year 2016 to 2020 has set

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aside 2.3 billion Dinars for development of infrastructure suitable to attract multinationals in the fields
of human resource, renewable energy, and other related infrastructure. Already Doha and Kuwait City
are very urbanized and populated hence a huge market for potential foreign multinationals (Vought
2018).
Lastly, Kuwait has a reformed land ownership policy. Currently, over 95 percent of the land is
owned by the Kuwait Government. The land ownership policy seeks to explore public-private
partnerships to fully utilize this critical factor of production. The Government seeks to for instance
lease the land to multinationals companies to spur growth (Barakat & Batwala 2014).
Policies that promote firm strategy, structure, and rivalry
To begin with, Kuwait has a vibrant fiscal policy. Under this policy, Kuwait has set aside over
51 billion dinars to targeting the attraction of multinationals to diversify the economy of the country by
among other things streamlining the ease of doing business to promote competition in select sectors
necessary to spur innovation and product improvement(Organization for Economic Co-operation and
Development [OECD] 2012).
The government through the taxation policy encourages small and medium enterprise start-ups
and protects local firms by not taxing them on income tax to increase their competitiveness. However,
the taxation policy from the year 2016 has been amended to tax foreign companies to the tune of 15
percent on all income earned within the country (Arabian Business 2017).
According to Vought (2018), Kuwait has hatched an ambitious foreign direct investment policy.
The government ascended to Law number 8 that allows full ownership of foreign firms in certain
sectors of the economy. Previously, all foreign firms had to include a Kuwait National in order to
establish businesses (Hamdi & Sbia 2013)

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Lastly, Kuwait has come up with an enterprising SME Policy. In the year 2015, the government
approved Kuwait's National SME fund. There are currently over 30,000 SMEs in Kuwait and
contributing to just about 3 percent of the GDP. This fund will catalyze growth in the SMEs sector
which in turn will increase local rivalry and ultimately lead to more innovation (Elali & Al-Yacoub
2016).
Policies that promote the Demand condition in Kuwait
In order for a country to increase its national competitiveness, there must a local population that
is very assertive about the products and services that they demand so as to force the firms to be
innovative and continuously improve their products and services (Fainshmidt, Smith & Judge 2016).
Kuwait has an empowering economic policy. Already, Kuwait is the third largest economy in
the Middle East with a gross domestic product of approximately $114 billion USD and income per
capita of $84,000 USD. This means that the country has a high purchasing parity necessary to promote
demand for goods and services (Elali & Al-Yacoub 2016).
To promote e-commerce, the country has supporting electronic transaction policies. Kuwait has
enacted Law number 20 that came into effect in 2014 to regulate electronic transactions (Barakat &
Batwala 2014). The laws allow for free exchange of goods for cash electronically and facilitate
ownership of electronic credit cards. Currently, over 2.4 million transactions are done electronically
which has soured demand both inside and outside the country (Elkhafif, Taghdisi-Rad & Elagraa
2016).
Kuwait has both protective and enabling trade policies. The country has an import law that
specifies that only fully owned foreign multinationals and Kuwait companies can import goods. Any
other importations have to be undertaken by authorized Kuwait agents and distributors. This has given

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wholly owned multinationals an edge to meet the rising demand for foreign products such as
consumable products, fruits, and vegetables (Turki 2014).
Finally, the country has a very modern foreign policy. In accordance with the Gulf Cooperation
Council (GCC), Kuwait has a large market consisting of six Arab member states (OECD 2012). The
GCC also bargains for favorable trade terms with the other countries. Following improved trade terms
Kuwait now has over 145,000 super-rich individuals with preferential demand for luxury products that
can be profitably met by multinationals.
Kuwait’s policies encouraging related or support industries
Related or support industries not only enable a country to be competitive based on efficient
supplier relationships that reduce the cost of sourcing raw materials, but also introduce an element of
competition. Though, firms working in the country benefit from affordable raw materials they have to
be wary of their suppliers integrating forward to become direct competitors. For this reason, the firms
have to continually improve their products (Fainshmidt, Smith & Judge 2016).
One policy encouraging related industries is the Kuwait 2035 master plan. Accordingly, Kuwait
has set aside a trust fund to catalyze investments in healthcare, public administration and, infrastructure
among other areas which seek to create a diverse economy that depends less on oil economy as it
currently depends on over 90 percent of its GDP from oil. This will attract many multinational
companies in the construction and support industries while protecting local firms (Vought 2018).
The country has a futuristic tourism policy. To diversify its Economy Kuwait has set aside over
one billion USD for the sole purpose of boosting tourism by over 62 percent thus attracting over
400,000 tourists in less than 6 years. This will encourage tourism support industries such as transport,
hotel and catering and tour firms and cultural attraction centers where both local and multinational
firms can invest (Arabian Business 2017).

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A comprehensive industrial policy in Kuwait establishes the Free Trade Zones at the port of
Shuwaikh. Its main goal is facilitating value addition for export products. Within the zone, several
related companies complement each other from supply of raw materials to the shipping of finished
products. Companies established in the FTZ have to incorporate majority Kuwaitis to protect local
firms (Husain et al. 2016).
The market liberalization policy brings more competition to the market by allowing both
multinationals to compete with local firms albeit in select sectors. Kuwait has also liberalized SMEs by
creating laws that allow them to operate from homes (Elali & Al-Yacoub 2016).
Strategies that can enhance the capacity of firms to create more employment in Kuwait
Reduction of interest rates to ease access to credit
Many firms do have business ideas that can be capitalized to spur more production thus
increasing the chances of employment in the country. This can be done by the Central Bank of Kuwait
by regulating the capped interest and base lending rates of the commercial banks by applying subsidies
or quotas (Toreev 2016). The effect will be easily available credit that can be used by many firms in the
manufacturing or start-up SMEs to create employment opportunities. Already, in many countries such
as the United Arab Emirates, SMEs makeup over 90 percent of all investments in the country and
employ over 40 percent of the workers (OECD 2012).

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Investments in infrastructure
The propensity of infrastructure to offer direct employment to the workforce is unquestionable.
Statistics suggest that investing one billion dollars in infrastructure creates direct employment to 20,000
people. This is a solid strategy especially because governments are some of the biggest spenders in
infrastructure through public-private partnerships (Husain et al. 2016).
Investment in agriculture
Agriculture throughout the world has employed numerous people in the workforce. In Kuwait, many
firms are involved in agriculture by use of hydroponics and employing reliable biotechnology. The
firms that practice agriculture can be given subsidies to accelerate production and employment of more
people (Toreev 2016).
Tax reduction for firms hiring a specified workforce
As an incentive to promote employment, companies can be offered tax holidays, tax exemption or
rebates by the government if they employ a specified number of people. This will increase the morale
of companies to hire more people in order to enjoy tax exemption. This will also increase their
purchasing parity hence make them reliable consumers who can provide a ready market for companies
products and therefore create a sustainable cycle of production and consumption(Hamdi & Sbia 2013).

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Conclusion
In conclusion, this paper examines the various ways in which Kuwait increases its national competitive
advantage by employing a variety of policies. Those policies have been discussed at length to show
how the country can attract foreign multinationals while at the same time protecting and nurturing the
local firms. By extension, the paper finally explores four strategies that can be used to create
employment by firms in Kuwait.

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References
Arabian Business (2017). Kuwait's tourism industry to be worth $1 billion by 2027. [online] Arabian
Business. Available at: http://www.arabianbusiness.com/kuwait-s-tourism-industry-be-worth-1-billion-
by-2027-668115.html [Accessed 25 Apr. 2018].
Barakat, A. and Batwala, A. (2014). Foreign Direct Investment Report: Kuwait - Overview of FDI in
the Jurisdiction. [online] International Financial Law Review. Available at:
http://www.iflr.com/Article/3306914/2014-FDI-Report-Kuwait.html [Accessed 24 Apr. 2018].
Elali, W. and Al-Yacoub, B. (2016). Factors affecting entrepreneurial intentions among
Kuwaitis.World Journal of Entrepreneurship, Management, and Sustainable Development, 12(1),
pp.18-34.
Elkhafif, M., Taghdisi-Rad, S., and Elagraa, M. (2016). Economic and trade policies in the Arab world.
London: Routledge, pp.52-62.
Fainshmidt, S., Smith, A., and Judge, W. (2016). National Competitiveness and Porter's Diamond
Model: The Role of MNE Penetration and Governance Quality. Global Strategy Journal, 6(2), pp.81-
104.
Hamdi, H. and Sbia, R. (2013). Re-Examining Government Revenues, Government Spending And
Economic Growth In GCC Countries. Journal of Applied Business Research (JABR), 29(3), p.737.
Husain, A., Fraker, F., Burton, E., Young, K. and Abdulla Al Absi, A. (2016). Economic Reform and
Political Risk in the GCC: Implications for U.S. Government and Business. Middle East Policy, 23(3),
pp.5-12.
International Business Publications (2008). Kuwait telecom laws and regulations handbook.
Washington DC: International Business Publications, pp.26-77.

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Organisation for Economic Co-operation and Development (2012). Competitiveness and Private Sector
Development: Policies to Support Women's Entrepreneurship Development in the MENA Region. Paris:
OECD Publishing, pp.72-76.
Toreev, V. (2016). Youth Employment Strategies. Sociological Research, 55(2), pp.138-147.
Turki, B. (2014). The Kuwait Fund for Arab Economic Development and Its Activities in African
Countries, 1961–2010. The Middle East Journal, 68(3), pp.421-435.
Vought, A. (2018). International Policy Digest: The “New Kuwait”. [online] International Policy
Digest. Available at: https://intpolicydigest.org/2017/02/14/the-new-kuwait/ [Accessed 24 Apr. 2018].