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Economics and Business in Kuwait

According to countryaah, Kuwait's rapid economic development - from a trade center to a modern state - since the 1950s is primarily linked to the large oil deposits that were discovered just before the Second World War. With large oil revenues for a small country, not least following the 1973 price increases, Kuwait became one of the world's richest states, with high average income and extensive welfare schemes. State revenues are largely controlled by the almost single-family al Sabah family, and wealth is unevenly distributed. The same applies to the welfare goods, which are guaranteed to Kuwaiti nationals, but do not automatically accrue to others, including the many foreign guest workers, who have largely contributed to the construction of modern Kuwait. Until the 1991 war, more than half of the population were foreign nationals, and it has not succeeded in making itself less dependent on imported labor, although it has long been a political goal. Modernization and wealth development have been based on oil exports, which normally account for 90-95% of total export value, and approx.2/5 of GNI. Kuwait has few other resources, and has only to a limited extent established other business avenues, beyond the financial ones. An unofficial exchange, Souq al-Manakh, collapsed following unregulated speculation in 1982, with major social and political consequences. The land has little cultivable land and suffers from a lack of water - and is therefore not suitable for agriculture. Kuwait also has no significant mineral resources - beyond oil and natural gas. The country, on the other hand, holds as much as 8% of the world's known oil reserves. Prior to the oil age, economic activity was essentially about fishing and trading - i.a. to India and Africa. Until the late 1920s, pearls were the foremost export item; pearl fishing employed up to 30,000 people. Commercial oil recovery increased after the Second World War, and eventually brought large profits - even after financing modernization. Until Iraq's invasion in 1990, Kuwait built up a fund, reserves for future generations (Reserve Fund for Future Generations, et al. 1976), and invested, among other things. in foreign property, including petrol dealer links. About. half of these assets were realized to finance the costs of the war; from wages to Kuwaiti in exile to the participating countries' war efforts, then for reconstruction. Privatization is complicated by the need to secure Kuwaiti citizens' work; they are substantially employed in the public sector, including public enterprises. Kuwait's values ​​abroad were estimated at approx. $ 65 billion. The war had widespread economic consequences for Kuwait. Blue. the Iraqi occupation forces robbed public offices and private homes, and also took $ 1.5 billion in gold and cash from the central bank. In addition, the country's infrastructure, including the vital oil industry, was severely damaged. With reduced production capacity and low oil revenues in the first years after the war, Kuwait borrowed and suffered a large trade deficit. As part of economic liberalization, a controversial law was also passed that opened up access to foreign majority ownership in Kuwaiti business, but - with few exceptions - except for the oil sector. In 1999, the country's first free trade zone was opened in Shuaikh. The Kuwaiti state as well as individuals and companies have received war damage compensation from Iraq, but almost all claims were met when the US-led regime was deployed there in 2003, and it was taken to cancel Iraq's debt raised under the deposed regime. A significant cost of rebuilding Kuwait has been the building of a new defense. One consequence of the economic crisis the war inflicted on Kuwait has also been that parts of the public subsidies - which made Kuwait the world's leading welfare society - were reduced. Until the war, Kuwait was a significant aid provider, with a level of development aid well above western countries. The aid was channeled in particular through the Kuwait Fund for Arab Economic Development (KFAED), and went to both Arab states and other countries. Kuwait was a major financial contributor to the 2003 war against Iraq. The same year, the Kuwaiti dinar was linked to the US dollar.

Business and Economy of Kuwait

Agriculture and fishing

Kuwait is poor in water, and the agricultural sector in 2003 accounted for only approx. 0.5% of GNI. Almost all food and all agricultural raw materials must be imported. With the help of artificial irrigation, melons, tomatoes, onions and dates, which are also partly exported. There is also, partly on an experimental basis, breeding cattle, sheep and goats; Animal husbandry was an important industry among the nomadic population before the oil age. The fisheries, including after shrimp, are relatively modest.


In 1938, oil was discovered in Burgan, the world's largest oil field outside Saudi Arabia, but due to. World War II began commercial production for export only in 1946. The British company Kuwait Oil Company (KOC) was responsible for the extraction, which in 1948 was 6 million tons, 1956 at 54 million tons, when Kuwait was the largest producer in the Middle East. With operations in new oil fields, production rose to 148 million tonnes in 1972; the year before, Kuwait was among the states that lowered production and raised prices as a political tool for the West, putting pressure on Israel.

Kuwait secured full national control of the oil industry when it was nationalized in 1975, run by the Kuwait National Petroleum Company (KNPC). Besides the fields in Burgan, Maqwa and Ahmadi, which are the oldest and most important - with approx. 70 billion barrels, there is a large field in Raudhatayn in the north, several offshore fields in the Gulf of Persia and smaller fields in Kuwait's part of the former neutral zone between Kuwait and Saudi Arabia. The oil reserves are (2005) estimated at 102 billion barrels, which corresponds to around 8% of the world's known reserves, and are the third largest in the world after Saudi Arabia and Iraq. In 2004, daily production was approximately 2.5 million barrels; plans are set for a level of 4 million barrels/day in 2020. This is part of "Project Kuwait", an ambitious 25-year plan to increase production, especially in the north of the country.

Most of the production is exported as crude oil, but an increasing part of it is refined in Shuaibah, Mina Abdullah and Mina al-Ahmadi, the largest with a capacity of just over 440,000 barrels/day. The high sulfur content of the oil has made it necessary to build oil desulfurization plants. During the 1991 Gulf War, Iraq set fire to approx. 650 of Kuwait's about 1,000 oil wells, but after the war it took less than a year before the fires were extinguished and production resumed. Mina al-Ahmadi, the country's most important export terminal for crude oil, was almost completely destroyed during the war, but has been rebuilt. Kuwait has invested in the oil sector in several countries, including Asia, the North Sea and the United States.

Natural gas is extracted in connection with oil production. such as liquid wet gas. In 2002, the reserves were estimated at 293 billion cubic feet. Kuwait seeks to increase the use of natural gas for power generation, both using its own gas and gas imported from Qatar; an agreement on import from Qatar was signed in 2000, and an agreement on the construction of a gas pipeline from there was signed in 2003. Kuwait is also looking into the possibility of importing gas from Iran; Before the war, Kuwait imported significant quantities of gas from Iraq. Kuwait, Iran and Saudi Arabia are contending for border demolitions in the rich offshore gas field of Dura. Kuwait's installed capacity for electricity generation was 2004 at 9.4 GW, from five power stations. Power has been heavily subsidized for years, and Kuwait has one of the highest per capita consumption in the world. used for air conditioning and desalination of water.


Kuwait has, with government incentives, invested a lot in building industry beyond the oil-related, and the industrial zone around Ash-Shuaybah includes, in addition to oil refineries and other petrochemicals, several power plants and seawater desalination plants. Fertilizers (urea and ammonia), cement, foodstuffs, mineral water, etc. The building industry, with the production of building materials, is also of great importance. Rather than investing in major national heavy industry projects, as several Gulf states have done, Kuwait has sought partnership with neighboring countries on such developments. As of 2003, the industry (including oil refining) accounted for 7% of GNI.

Foreign Trade

Crude oil and petroleum products normally account for 90-95% of Kuwait's exports by value, and their exports give Kuwait substantial foreign trade surpluses. The exception was in the early 1990s, due to the war and the subsequent production failure - combined with borrowing to finance reconstruction. Imports include: machinery, transport equipment, food and various industrial products. Kuwait has long traditions as a transit trading country, and still serves as an intermediate station for much of the Gulf trade.

Transport and Communications

Kuwait has a well-developed road network, which has been rebuilt and further modernized after the war in 1991. The capital of Kuwait has an international airport, which was severely damaged during the war, but was quickly rehabilitated. The country has a significant trading fleet. The main port cities are Ash-Shuwaikh and Shuaibah; both modern container ports. Mina al-Ahmadi is the export port for oil. In recent years, a modern communication network has been developed.

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