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Corruption is a hurdle for businesses investing in Kuwait. The ruling family and the Kuwaiti elite control key economic activities and sectors. Informal monopolies and oligopolies exist, and connections between the administration and private companies have resulted in uneven market competition. Kuwaiti law criminalizes abuse of office, extortion, money laundering and active and passive bribery, among other corruption offenses, but not the bribery of foreign officials. Bribery, facilitation payments and giving and receiving gifts are widespread in Kuwait despite being illegal. The government does not implement anti-corruption laws effectively, and public officials reportedly engage in corrupt activities with impunity.
Last Updated: October 2016
The judiciary may carry some moderate corruption risks to companies. The law provides for an independent judiciary, however, pressure from the executive on the institution has been reported (BTI 2016). Bribes and irregular payments are sometimes exchanged in return for favorable court decisions (GCR 2015-2016). In one instance, the Kuwaiti opposition published files documenting the transfer of GBP millions by Al-Sabah, the Kuwaiti prime minister, into the accounts of high-ranking judicial figures (Alakhbar, June 2014). Despite the aforementioned, all judicial officials reportedly underwent corruption and transparency obligations training in 2014 (HRR 2015). Companies perceive the efficiency of the legal framework to settle disputes and to challenge government regulations to be rather poor (GCR 2015-2016). Foreign citizens involved in court cases in Kuwait often claim the courts are biased in favor of Kuwaiti citizens (HRR 2015). Kuwaitis and non-Kuwaitis involved in unresolved financial disputes with local business partners are restricted from leaving the country until the matter is resolved (ICS 2016).
The Kuwaiti judicial system is well-developed and aligns with international commercial laws. However, dispute resolution in court can be very time-consuming, and the enforcement of court rulings remains a problem (ICS 2014). Arbitration is also a possible form for dispute resolution, but few contracts contain an arbitration clause (ICS 2016). Kuwait is a member of the International Centre for the Settlement of Investment Disputes (ICSID) and has ratified the New York Convention 1958.
The police represent moderate risks for business. Corruption and practices of favoritism among Kuwaiti police officials are common. Corruption is most likely to occur when a party involved in a dispute has personal connections to the police officer assigned to the case (HRR 2015). Police officers also at times refrain from investigating criminal acts after receiving bribes from an involved party (HRR 2015). Reports show that the police tend to favor citizens over non-nationals (HRR 2015). Authorities have effective mechanisms to investigate and punish abuse among officers, however, these were not applied and the police engaged in abuse with impunity (HRR 2015). Businesses report the police services are moderately reliably in enforcing law and order in Kuwait (GCR 2015-2016).
The Kuwaiti administration suffers from corruption and abuse of functions, thus presenting business with high corruption risks. Companies report that bribes and irregular payments are often exchanged in return for obtaining public utilities (GCR 2015-2016). Similarly, citizens complain of having to pay intermediates to acquire basic government services (HRR 2015). Bureaucrats allegedly postpone administrative decisions to incite the public to pay bribes or facilitation payments to expedite processes (The Peninsula, Mar. 2015). Practices of favoritism are widespread within the Kuwaiti administration, and administrative decisions are sometimes arbitrary and can involve corruption, thus fostering unfair competition (BTI 2016). The public administration lacks professionalism and is understaffed (BTI 2016). Indeed, businesses rank inefficient government bureaucracy as the most problematic factor to doing business in Kuwait (GCR 2015-2016). Businesspeople complain about red-tape formalities; for instance, starting a business is much more time-consuming than the regional average (DB 2016).
In one example of corruption within the public administration, corrupt officials from the Ministry of Social Affairs and Labor collected bribes from private companies during inspections in return for adjusting the percentage of national employees working at the companies (Arab Times, Mar. 2015). In another corruption case, widespread visa fraud at the Ministry of Social Affairs and Labor and the Ministry of Interior was reported in 2015. The mastermind behind the traffic had recruited 1,500 foreign workers on fake work permits which had been falsified by several officials at the Ministry of Interior, who had also profited from the sale of visas, which counted to USD 5000. The visa trafficker and the officials from the ministries have been arrested (HRR 2015). The investigation also revealed the involvement of 1,368 firms in the scheme, 336 of which have been referred to prosecution (HRR 2015).
Property rights are well defined under Kuwaiti law, but the protection of these rights in practice is moderate (BTI 2016, GCR 2015-2016). Furthermore, official corruption has decreased public confidence in sound implementation and enforcement of property rights in recent years (IPRI 2013). There are restrictions on non–Gulf Cooperation Council citizens’ rights to own land in Kuwait; some foreign investors cite this as a major deterrent to foreign direct investment and to starting businesses in Kuwait (ICS 2014). Registering property is more time-consuming in Kuwait than in other regional countries (DB 2016).
The taxation sector does not present a significant corruption risk for companies in Kuwait. Bribery occurs rarely in meetings with tax officials (GCR 2015-2016). The government disregards taxation as a source of revenue, and the tax burden remains low (BTI 2014). New foreign investors can be exempted from all taxes for up to 10 years under the new Direct Capital Investment Law (ICS 2015). Dealing with tax payments in Kuwait is less time-consuming and less costly than the regional average (DB 2016).
There is a high risk of corruption for companies trading across the borders of Kuwait. Businesses report both that the border administration is moderately transparent, however irregular payments in relation to exports and imports often occur (GETR 2014, GCR 2015-2016). Furthermore, companies feel customs procedures are very burdensome (GCR 2015-2016). Trading across Kuwait’s borders is generally more time-consuming than the regional average (DB 2016).
Businesses contend with high corruption risks when dealing with public procurement in Kuwait. Companies report that public funds are often diverted to companies, individuals or groups due to corruption and that government officials show favoritism when deciding upon policies and contracts (GCR 2015-2016). Furthermore, bribes and other irregular payments are very often exchanged to secure public contracts and licenses (GCR 2015-2016). Kuwait’s public procurement process is cumbersome and susceptible to corruption – and many investigations and trials involving government officials accused of wrongdoing in the procurement process are ongoing (ICS 2016). Companies bidding on procurement in Kuwait have at times been accused of attempted bribery or of offering other inducements (ICS 2016). Companies securing contracts with the government valued at KWD 100,000 or more are required to report all payments made to agents or advisors during the procurement process (ICS 2016). The Kuwait Commercial Code (in Arabic) states that foreign companies may not engage in commercial activities in Kuwait unless the Kuwaiti share of the business or joint venture equals or exceeds 51% of the total capital of the company. Unsuccessful bidders can complain to the Central Tenders Committee but cannot challenge the decision in a court of law. Kuwait is not a signatory to the WTO Government Procurement Code.
On several occasions, Kuwait’s parliamentary Committee on the Protection of Public Funds announced inquiries into alleged misuse of public funds, however, no prosecutions were reported during 2015 (HRR 2015). In late 2015, the Minister of Electricity, Water and Public Works, Ahmad Al-Jassar, was sentenced, along with 14 former and current officials from his ministry, to two-years imprisonment and dismissal from service (Global Construction Review, Sep. 2015). The offenders were found guilty in a graft case dating back to 2007 when the ministry imported faulty power generators for at a high cost (). Nevertheless, Ahmad Al-Jassar appealed the sentenced and was acquitted of the charges in early 2016 after which he was reappointed to his post and sworn in as a member of parliament (Kuwait Times, Feb. 2016).
The oil company Petrofac has allegedly paid USD 2 million to Unaoil, which functioned as an intermediary to bribe government officials in Kuwait in order to secure an oil contract in the country (Arabian Business, Apr. 2016). Unaoil has denied the allegations, yet is being investigated by the UK’s Serious Fraud Office over bribery in several countries (Arabian Business, Apr. 2016). Petrofac is conducting an internal investigation of the allegations (The Telegraph, Apr. 2016). Foreign investors considering bidding on public tenders are advised to use a specialized public procurement due diligence tool on public procurement to help mitigate corruption risks.
The natural resources sector in Kuwait is riddled with corruption. Kuwait has one of the largest oil reserves in the world, and its economy is mainly based on revenues from petroleum, which comprises 80% of the government’s income. The oil and petrochemicals sectors are entirely state-owned (BTI 2016). Kuwaiti law forbids the disclosure of any information on the Kuwait Investment Authority, as well as any information on their transactions, investments or assets of the Natural Resources Funds authority, leading to a general lack of transparency in government spending (RGI 2014).
The subsidized oil and diesel budget is reportedly subject to ‘organized theft’. In 2012, Member of Parliament Khalid Al-Saadoun claimed that there is obvious official corruption involved in the subsidizing of oil and diesel and that theft and smuggling occurred since the subsidy increased in 2002. The value of oil smuggled daily through Kuwait’s borders is estimated at almost USD 2.5 million, totaling more than USD 912.5 million per year (Arab Times, Oct. 2012).
Kuwait has a legal anti-corruption framework in place, implementation, however, is lacking (HRR 2015). The Penal Law 31/1970 criminalizes corruption in Kuwait, covering passive and active bribery, attempted corruption, extortion, money laundering and abuse of office; the Law does not criminalize bribing a foreign official. The anti-corruption and wealth disclosure decree criminalizes the manipulation of public tenders and auctions, bribery, counterfeiting, forgery, and graft. This decree includes articles on financial disclosure and money laundering, and it provides criminal penalties of up to seven years in prison for these corrupt practices. Under the Anti-Money Laundering and Combating the Financing of Terrorism Law, organized criminal groups and non-governmental organizations convicted of money-laundering can be sent to prison for up to 20 years. Kuwait has ratified the UN Convention against Corruption (UNCAC) and is a signatory of the UN Convention against Transnational Organized Crime.
Freedoms of speech and of the press are guaranteed under Kuwait’s Constitution, but the government restricts these freedoms in practice (HRR 2015). Freedom of the press in Kuwait is limited due to self-censorship, intimidation and governmental pressure, and journalists and media outlets occasionally face physical harassment (FotP 2015). All publication and distribution of informational materials are controlled by the Ministry of Information. The Commission for Mass Communications and Information Technology regulates digital communication and has broad powers over companies providing internet, mobile, cable and satellite services (FotP 2015). The government owns the majority of broadcasters but has started giving licenses to private operators. Critical journalism is restricted and journalists routinely practice self-censorship (FotP 2015). Despite the aforementioned limits, journalists in Kuwait are among the freest and outspoken in the region when reporting on the subjects other than politics or religion (BTI 2016). The Kuwaiti government strictly controls the internet (HRR 2015). Public access to government information is not provided for by Kuwaiti law (FotP 2015). Kuwait’s media environment is deemed ‘partly free’ (FotP 2015).
Freedom of assembly and association are provided by law, but the government limits these freedoms in practice (HRR 2015). The government often restricts the registration and licensing of NGOs and has thus severely curbed the freedom of forming organizations (BTI 2016). The political leadership in Kuwait does not interact with NGOs in any institutionalized way (BTI 2014), and NGOs are not permitted to engage in any political activity (HRR 2015). The government uses licensing to exercise political control over NGOs in Kuwait, and members of licensed NGOs are required to obtain permission from the Ministry of Social Affairs and Labour (MOSAL) to attend international conferences (HRR 2015). There are dozens of unlicensed and unofficial CSOs and NGOs operating in Kuwait (HRR 2015), and Kuwait’s civil society has become more active since the Arab Spring (BTI 2014). In mid-2015, the government shut down the local chapter of Transparency International, claiming that the NGO exaggerated the level of corruption in the country (HRR 2015).
- World Bank & IFC: Doing Business 2016.
- US Department of State: Investment Climate Statement – Kuwait 2016.
- Bertelsmann Foundation: Transformation Index – Kuwait 2016.
- World Economic Forum: Global Competitiveness Report 2015-2016.
- Arabian Business: ‘Petrofac exec “paid $2 million bribe” to secure Kuwait oil contract – report’, 7 April 2016.
- The Telegraph: ‘Petrofac calls in auditors to tackle bribery allegations’, 7 April 2016.
- Kuwait Times: ‘Ex-electricity minister reappointed’, 29 February 2016.
- US Department of State: Human Rights Practices Report – Kuwait 2015.
- Freedom House: Freedom of the Press – Kuwait 2015.
- Global Construction Review: ‘Kuwaiti Construction Review’, 30 September 2015.
- Arab Times: ‘GMRP Uncovers Anomalies At Ministry’s Labor Sector’, 24 March 2015.
- The Peninsula: ‘Why there is so much corruption in Kuwait’, 5 March 2015.
- US Department of State: Investment Climate Statement – Kuwait 2014.
- Bertelsmann Foundation: Transformation Index – Kuwait 2014.
- Industrial Resource Governance Institute: Kuwait 2014.
- World Economic Forum: Global Enabling Trade Report 2014.
- Alakhbar: ‘KuwaitGate. Alleged coup, billions of dollars abroad, and struggles for succession’, 18 June 2014.
- Kuwait Times: ‘Rampant corruption fuels massive visa trafficking’, 21 January 2014.
- Property Rights Alliance and Americans for Tax Reform: 2013 International Property Rights Index.
- Arab Times: ‘We are facing widespread theft: Al-Saadoun’, 12 October 2012.