KUWAIT
Economic Freedom Score
25
World Rank:
74
Regional Rank:
7
Least
free 0
espite efforts to modernize and diversify Kuwait’s
D
economy, oil production remains dominant. The private sector is largely dependent on government spend-
50
75
Most
100 free
62.7
Freedom Trend
65
ing and expatriate labor, and the labor market is highly
segmented. The public sector employs about 80 percent
of the labor force; expatriates are employed mostly in the
small private sector.
ECONOMIC FREEDOM SNAPSHOT
• 2016 Economic Freedom Score: 62.7 (up 0.2 point)
• Economic Freedom Status: Moderately Free
• Global Ranking: 74th
• Regional Ranking: 7th in the Middle East/North Africa Region
• Notable Successes: Trade Freedom and Monetary Freedom
• Concerns: Rule of Law, Business Freedom, and Labor Freedom
• Overall Score Change Since 2012: +0.2
Kuwait performs relatively well in promoting many
aspects of economic freedom, but institutional deficiencies stemming from state bureaucracy and an entitlement
culture still stifle economic dynamism. The judicial system remains vulnerable to political influence, lacks transparency, and cannot defend property rights effectively.
BACKGROUND: Kuwait, the first Arab country in the Gulf to
create an elected parliament, is a constitutional monarchy
ruled by the al-Sabah dynasty. After Islamists scored major
gains in parliamentary elections in February 2012, Amir
Sabah al-Ahmad al-Jabr al-Sabah annulled the results and
changed the election laws. This sparked protests and triggered a boycott of the new election in December, the results
of which were annulled by the Constitutional Court. In new
balloting in July 2013, pro-government Sunni candidates
achieved a significant majority. Political tensions remain
high, and economic policymaking has been constrained by
disputes between the royal family and parliament. Kuwait
controls roughly 6 percent of the world’s oil reserves. Oil and
gas account for nearly 60 percent of GDP and 95 percent of
export revenues.
How Do We Measure Economic Freedom?
See page 467 for an explanation of the methodology
or visit the Index Web site at heritage.org/index.
64
63
62
61
2012
2013
2014
2015
2016
Country Comparisons
Country
62.7
World
Average
60.7
Regional
Average
62.6
Free
Economies
83.9
0
20
40
60
80
100
Quick Facts
Population: 4.0 million
GDP (PPP): $284.0 billion
1.3% growth in 2014
5-year compound annual growth 3.3%
$71,020 per capita
Unemployment: 3.0%
Inflation (CPI): 2.9%
FDI Inflow: $485.8 million
Public Debt: 7.1% of GDP
2014 data unless otherwise noted.
Data compiled as of September 2015.
267
KUWAIT (continued)
THE TEN ECONOMIC FREEDOMS
Score
RULE OF
LAW
Property Rights
Freedom from Corruption
Country
World Average
45.0
44.0
0
20
40
60
80
Rank
1–Year
Change
65th
69th
0
+1.0
100
The opposition is pressuring the government to address corruption, but the ruling family has
obstructed parliamentary efforts to investigate it. Inadequate transparency in government
spending and operations is exacerbated by the weak rule of law. The legal system is not well
developed, and foreigners face difficulties enforcing contract provisions in local courts. Only
citizens of Gulf Cooperation Council countries may own land.
Fiscal Freedom 97.7
GOVERNMENT
Government Spending 57.7
SIZE
6th
116th
0
20
40
60
80
0
–3.4
100
Kuwait does not tax individual income. In practice, foreign-owned firms and joint ventures are
the only businesses subject to the corporate income tax, which is a flat 15 percent. Duties on
international trade and transactions account for most other tax revenue. Government spending equals 37.5 percent of GDP, and public debt is less than 10 percent of GDP. Oil revenues
allow tax rates to be kept low while maintaining government revenue.
REGULATORY
EFFICIENCY
Business Freedom
Labor Freedom
Monetary Freedom
63.4
62.7
74.2
96th
77th
119th
0
20
40
60
80
+4.8
–1.5
+0.2
100
Progress in regulatory reform has been gradual and uneven. Bureaucratic hurdles add to the
cost of completing licensing requirements. Labor regulations lack flexibility, and the labor market remains highly segmented. Reflecting the reality of long-term lower oil prices, the government has initiated a five-year (2015–2019) development plan to phase out Kuwait’s extensive
system of subsidies, currently 9 percent of GDP.
OPEN
MARKETS
Trade Freedom
Investment Freedom
Financial Freedom
77.2
55.0
50.0
89th
102nd
72nd
0
20
40
60
80
+1.0
0
0
100
Kuwait’s average tariff rate is 3.9 percent. Government procurement processes favor domestic
firms. The government screens new foreign investment and restricts investment in some sectors of the economy. The financial sector continues to evolve. The number of non-performing
loans is declining, and the banking sector remains well capitalized. The Capital Markets
Authority took on a supervisory role in September 2011.
Long-Term Score Change (since 1996)
RULE OF LAW
Property Rights
Freedom from
Corruption
268
–45.0
–26.0
GOVERNMENT
SIZE
Fiscal Freedom
Government
Spending
–2.2
+46.8
REGULATORY
EFFICIENCY
OPEN MARKETS
Business Freedom –21.6
Labor Freedom
–17.5
Monetary Freedom –7.5
Trade Freedom
+0.2
Investment Freedom +25.0
Financial Freedom
0
2016 Index of Economic Freedom