1. MACRO-ECONOMIC CONTEXT
a) Business report
In spite of the recurrent argument that the actual capacity of the world oil reserves is overestimated, it is assumed that Kuwait possesses the 10% of such reserves (almost 100 billions of barrels), ranking 5th in the world’s classification after Saudi Arabia, Canada, Iran and Iraq. The economy of the Emirate is based almost entirely (95%) on the production and sell of crude oil and its by-products, which account nearly for the total of its exports. The production capacity of crude varies between 2,25 and 2,7 millions of barrels per day.
Following the recent discovery, common to other countries in the area, of huge reservoirs of natural gas (estimated - in Kuwait – in almost 35 trillions of cube feet), the Government has started a policy of support and promotion of investments, public and private, intended to the exploitation of such reserves. In May 2006, the Kuwait Oil Company (K.O.C.) had started the drilling of a new well in the area of “Arifijan” (north of Kuwait); it is estimated that it could reach a capacity of extraction of more than 5.300 barrels of oil per day and of 8 millions of cubes feet of gas per day. The Emirate has also substantial financial investments abroad (above all, in the United States and in Europe), managed by “Kuwait Investment Authority” . The complete value of public investments is around 166 billions of US$, while in the private sector, it reaches approximately 70 billions of US$. In the last three years, the Kuwaiti investments in Italy have tripled, passing from 750 millions of US$ to 2,2 billions.
The main economic sectors (industries, transports, services) are run by public companies that occupy 94% of the local manpower.
The 2002-2006 Economic Development plan, directing the Country’s economic and financial policies, has identified some strategical priorities in order to accelerate the process of modernization of the economy:
1) Diversification of the economy by widening the production sectors (excessive dependence on oil outcome, where price is subject to fluctuations;
2) Reduction of public employment (that constitutes at present condition, the highest entry of State budget expenditure);
3) Privatization of certain public companies;
4) Gradual retrenchment of the social security and welfare system (which up to now foresees a number of benefits/contributions for all the Kuwaiti citizens; credit facilities for loans).
The public budget for the financial year 2005/2006 (Economic Intelligence Unit estimations), expects a State gross revenue equal to 42,3 billions of US$ , of which 39,7 billions coming from oil revenues, and outlay of 24,8 billions of US$ , and with a surplus of budget equal to 17,5 billions of US$. It is the 7th consecutive year of surplus and the current fiscal year (1st April 2006-31st march 2007) – according to the E.I.U. estimations – will register once more a record in the budget surplus.
The second war in Iraq and the fall of the regime of Saddam Hussein, have resulted in a high degree of confidence in an economic recovery and a steady growth, facilitated also by the opening of the country to foreign investments. In such context, the Government Authority has launched big projects for the future. Kuwait aims at becoming the main gate to Iraq, for the activities related to its reconstruction and development.
Since the war ended, there has been a continuous and regular flow of staff from foreign companies, for the activities linked to the reconstruction in Iraq and, therefore, the business related to the services and to the logistics has increased in a considerable way.
Besides, the Central Bank of Kuwait has recently presented to the Cabinet an ambitious project which would make Kuwait the financial center of the Region (GCC-Iran-Turkey).
Main economic indicators
| |
2002 |
2003 |
2004 |
2005 (*) |
| GDP (millions US$) at competitive costs |
38,113 |
46,122 |
55,023 |
79,727 |
| Of which : oil |
14,505 |
19,409 |
26,577 |
43,358 |
| non oil |
24,915 |
28,106 |
31,082 |
38,607 |
| per capita GDP (US$) |
16,127 |
18,569 |
17,707 |
26,000 |
| Variations % of effective GDP Annual |
+ 5.1 |
+ 9.7 |
+ 7.8 |
+ 8.1 |
| Inflation (%) |
1.3 |
1.2 |
1 |
3.5 |
| Foreign debts (million $) |
13,100 |
13,200 |
13,200 |
14,400 |
| % on GDP |
34 |
29 |
24 |
18 |
| Exchange K.D.= US$ |
3.29 |
3.35 |
3.40 |
3.43 |
| Exchange K.D.= Euro |
3.49 |
2.98 |
2.5 |
3 |
Sources: Ministry of Planning; E.I.U.(The Economic Intelligence Unit)
(*) estimations
b) International commerce
Kuwait is a country that is relatively open to international commerce, being an importing country , without its own manufacturing industry.
The relation between the exchange with the rest of the world and GDP (level of opening to the international commerce) is very high, close to 80%. But such percentage is in great part attributed to the value of oil exports from the Emirate.
For the same reason (price trend of the crude oil in the international markets) Kuwait is characterized for a commercial scale structurally in surplus: from 8 billions of US$ in 2001 to 20 billions of US$ estimated for 2006.
According to the last E.I.U. (Economic Intelligence Unit) report, the main outlets markets are:
- Japan 17,3%,
- South Korea 12,7%
- United States 10,4%
- Singapore 9,5%
- Holand 3,3%
- Pakistan 3,3%
- Indonesia 2,4%
- United Kingdom 2,3%
While the main suppliers remain the following:
United States 13,2%
Germany 12,6%
Japan 8,2%
China 6,2%
United Kingdom 5,7%
Italy 5,3%
France 5,2%
India 4,6%
c) Exchange trend with Italy
Our commercial relations with Kuwait are satisfactory, but certainly susceptible to growth.
Italia-Kuwait Commercial exchange
(Values in millions of Euro and variations %)
|
2003 |
2004 |
% Variations 2003/2004 |
2005 |
% Variations 2004/2005 |
| Exports |
449,943 |
475,928 |
5.78 |
416,756 |
- 12.43 |
| Imports |
47,142 |
39,702 |
- 15.78 |
120,864 |
+ 204.43 |
| Balance |
402,081 |
436,226 |
|
295,892 |
|
Source: ISTAT
ISTAT figures for the year 2005 have revealed, after years of continuous growth, a decline of our export of 12,4%. Official figures are not available on the trend of provisions from our main competitors, but from the information available it seems that many partners of the euro region last year have experienced a fall-off similar to our, to the advantage of the East Asia countries, specially China. It remains to be verified if, among the factors that make our export towards the Country weak, there is also the influence of referable components specifically to a minor relative power of attraction of the “Made in Italy” (for example: elements of price/quality).
Nevertheless, from the figures available related to the first semester 2006, the Italian exports towards Kuwait are growing up again in high rates, increasing to more than 31% comparing to the same period of the year before, passing in value from 182 to 238,5 millions of Euro.
|
Jan-Jun 2005 |
Jan-Jun 2006 |
% Variations Jan-Jun 05/06 |
| Exports |
181,950 |
238,489 |
+ 31,07 |
| Imports |
21,254 |
61,656 |
+ 190,10 |
| Balance |
160,696 |
176,833 |
|
Source: ISTAT
Also our imports from Kuwait of oil and by-products have registered a considerable raise.
As consequence , the total exchange in the referred period has registered a relevant growth (+47,71%) , passing from 203 millions of Euro of the first semester 2005 to more than 300 millions of Euro in the first semester 2006.
Total exchange Italia – Kuwait
| 2001 |
2002 |
2003 |
2004 |
2005 |
| 586 |
472 |
497 |
516 |
538 |
(Values in million euro)
Italian Export to Kuwait
| 2001 |
2002 |
2003 |
2004 |
2005 |
| 433 |
443 |
450 |
476 |
417 |
(Values in million euro)
Total Italia–Kuwait exchange January - June 2005 & 2006
| Jan-Jun 2005 |
Jan-Jun 2006 |
| 203 |
300 |
(Values in million euro)
Italian Export to Kuwait January-June 2006
| Jan-Jun 2005 |
Jan-Jun 2006 |
| 182 |
239 |
(Values in million euro)
The sectorial analysis shows as traditional sections of strength of our export :
- (i) machines and mechanical equipment ;
- (ii) products of worked minerals non metal , among which the marble;
- (iii) clothing items.
In 2005 , many of such sectors registered a fall-off . But the sectorial partials 2006 already reveal a steady recovery of all such sectors:
Italian Export to Kuwait
(Values in thousands Euro)
| Sector |
January-June 2005 |
January-June 2006 |
% Variations |
| Machines and mechanical equipments, electrical appliances |
52,962 |
71,341 |
+ 34.70 |
| ICT products, electrotechnics, precision instruments |
22,919 |
24,895 |
+ 8.62 |
| Metallurgic products, metal tools and structures |
9,345 |
31,881 |
+ 241.16 |
| Glass, ceramic, non metallic materials for construction |
16,728 |
20,951 |
+ 25.25 |
| Clothing items |
15,442 |
16,170 |
+ 4.72 |
| Furniture |
11,023 |
11,903 |
+ 7.98 |
Source: ISTAT
The main competing countries in the driving sectors of the Italian export are:
- Spain (for the ceramics and construction materials);
- USA & France (for clothes of medium-hight target);
- India (for gold and jewellery products) ;
- Germany (electronics and machineries);
- South East Asia countries and China (footwear and clothes).
While the growth of the Kuwaiti exports to Italy is imputable to one only entry :
Ø Mine and quarry products, raw
Obviously, as it didn’t happen for the last four years, our country restarted to import crude oil also from Kuwait.
legals
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credits | F.A.Q.