Economy of Kuwait
Encyclopedia
Kuwait
is a small, relatively open economy
with proven crude oil reserves of about 96 Goilbbl, i.e., about 9% of world reserves. Petroleum accounts for nearly half of GDP
, 90% of export revenues, and 95% of government income. Kuwait lacks water
and has practically no arable land
, thus preventing development of agriculture
. About 75% of potable water must be distilled or imported. Higher oil prices reduced the budget deficit from $5.5 billion to $3 billion in 1999, and prices are expected to remain relatively strong throughout 2000. The government is proceeding slowly with reforms. It inaugurated Kuwait's first free-trade zone in 1999 and will continue discussions with foreign oil companies to develop fields in the northern part of the country.
. Current GDP per capita reached astonishing peak growth of 439% in the 1970s. But this proved unsustainable and contracted by 58% in the 1980s. However rising global oil demand helped register growth of 91% in the 1990s. Diversification is a long-term issue for this over-exposed economy.
For purchasing power parity comparisons, the US Dollar is exchanged at 0.288 Kuwaiti Dinars only. Mean wages were $27.83 per manhour in 2009. As for skilled and experienced Kuwaiti (Engineers, Doctors, and Managers) the average monthly salary is hiked up tremendously, to an average of $10,000+ a month excluding living and other benefits. Please, also keep in mind that Kuwait is a tax free country so all the above figures reflect actual take home numbers.
Kuwait is a small country with massive oil reserves
, whose economy has been traditionally dominated by the state and its oil industry. During the 1970s, Kuwait benefited from the dramatic rise in oil prices, which Kuwait actively promoted through its membership in the Organization of Petroleum Exporting Countries (OPEC). The economy suffered from the triple shock of the 1982 Souk Al-Manakh stock market crash
, the mid-1980s drop in oil prices, and the 1990 Iraq
i invasion and occupation. The Kuwaiti Government-in-exile depended upon its $100 billion in overseas investments during the Iraqi occupation
in order to help pay for the reconstruction. Thus, by 1993, this balance was cut to less than half of its pre-invasion level. The wealth of Kuwait is based primarily on oil and capital reserves, and the Iraqi occupation severely damaged both.
In the closing hours of the Gulf War
in February 1991, the Iraqi occupation forces set ablaze or damaged 749 of Kuwait's oil well
s. All of these fires were extinguished within a year. Production has been restored, and refineries
and facilities have been modernized. Oil exports surpassed their pre-invasion levels in 1993 with production levels only constrained by OPEC quotas.
, jointly owned by the Anglo-Persian Oil Company (later British Petroleum Company
) and Gulf Oil Corporation In 1976, the Kuwaiti Government nationalized KOC. The following year, Kuwait took over onshore production in the Divided Zone between Kuwait and Saudi Arabia
. KOC produces jointly there with Texaco
, Inc., which, by its 1984 purchase of Getty Oil
Co., acquired the Saudi Arabian onshore concession in the Divided Zone.
In the Offshore Divided Zone, the Arabian Oil Co. – 80% owned by Japanese interests and 10% each by the Kuwaiti and Saudi Governments – has produced on behalf of both countries since 1961. The original concession agreements will expire in January 2003; negotiations to replace the concession with a technical service agreement should be completed in 2002.
The Kuwait Petroleum Corporation
. (KPC
), an integrated international oil company, is the parent company of the government's operations in the petroleum sector, and includes Kuwait Oil Company, which produced oil and gas; Kuwait National Petroleum Co., refining and domestic sales; Petrochemical Industries Co., producing ammonia and urea; Kuwait Foreign Petroleum Exploration Co., with several concessions in developing countries; Kuwait Oil Tanker Co.; and Santa Fe International Corp. The latter, purchased outright in 1982, gives KPC a worldwide presence in the petroleum industry.
KPC also has purchased from Gulf Oil Co. refineries and associated service stations in the Benelux nations and Scandinavia, as well as storage facilities and a network of service stations in Italy. In 1987, KPC bought a 19% share in British Petroleum, which was later reduced to 10%. KPC markets its products in Europe under the brand Q8
and is interested in the markets of the United States and Japan.
Kuwait has about 94 Goilbbl of recoverable oil reserves. Estimated capacity, before the war, was about 2.4 Moilbbl/d. During the Iraqi occupation, Kuwait's oil-producing capacity was reduced to practically nothing. However, tremendous recovery and improvements have been made. Oil production was 1.5 Moilbbl/d by the end of 1992, and pre-war capacity was restored in 1993. Kuwait's production capacity is estimated to be 2.5 Moilbbl/d. Kuwait plans to increase its capacity to 3.5 Moilbbl/d by 2005.
Industry
in Kuwait consists of several large export-oriented petrochemical units, oil refineries, and a range of small manufacturers. It also includes large water desalinization, ammonia, desulfurization, fertilizer, brick, block, and cement plants. During the invasion, the Iraqis looted nearly all movable items of worth, especially high-technology items and small machinery. Much of this has been replaced with newer equipment.
.
Government revenues are dependent on oil revenues. Kuwait's fiscal surplus in 2000 was some 15% of GDP, while it reversed to a deficit of more than 2% of GDP in 2001 on sliding oil prices.
The government's two reserve funds: the Fund for Future Generations and the General Reserve Fund, which totalled nearly $100 billion prior to the invasion in 1990, were the primary source of capital for the Kuwaiti Government during the war. While these funds were depleted to $40–$50 billion after the war, they currently are estimated around $208 billion. The bulk of this reserve is invested in the United States, Germany, the United Kingdom, France, Japan, and Southeast Asia. In order of importance, foreign assets are believed to be invested in stocks and bonds, fixed yield instruments (mostly short term), and real estate. Kuwait follows a generally conservative investment policy.
Kuwait has been a major source of foreign economic assistance to other states through the Kuwait Fund for Arab Economic Development
, an autonomous state institution created in 1961 on the pattern of Western and international development agencies. In 1974, the fund's lending mandate was expanded to include all – not just Arab – developing countries.
Over the years aid was provided to Egypt, Syria, and Jordan, as well as the Palestine Liberation Organization. During the Iran-Iraq war, significant Kuwaiti aid was given to the Iraqis. The Kuwait Fund issued loans and technical assistance grants totaling over $520 million during its fiscal year ending 30 June 2000.
The stock market capitalisation of listed companies in Kuwait was valued at $130,080 million in 2005 by the World Bank
.http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/0,,contentMDK:20394793~menuPK:1192714~pagePK:64133150~piPK:64133175~theSitePK:239419,00.html
6.6% of GDP (2005 est.)
Household income or consumption by percentage share:
Agriculture - products:
practically no crops; fish
Industrial production growth rate:
-5% (2002 est.)
Electricity:
Electricity - production by source:
Oil:
Natural gas:
Current account balance:
$31.51 billion (2005 est.)
Exports - commodities:
oil and refined products, fertilizers
Imports - commodities:
food, construction materials, vehicles and parts, clothing
Reserves of foreign exchange & gold:
$9.296 billion (2005 est.)
Exchange rates:
Kuwaiti dinars per US dollar - 0.3014 (2004), 0.298 (2003), 0.3039 (2002), 0.3067 (2001), 0.3068 (2000)
Kuwait
The State of Kuwait is a sovereign Arab state situated in the north-east of the Arabian Peninsula in Western Asia. It is bordered by Saudi Arabia to the south at Khafji, and Iraq to the north at Basra. It lies on the north-western shore of the Persian Gulf. The name Kuwait is derived from the...
is a small, relatively open economy
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
with proven crude oil reserves of about 96 Goilbbl, i.e., about 9% of world reserves. Petroleum accounts for nearly half of GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
, 90% of export revenues, and 95% of government income. Kuwait lacks water
Water
Water is a chemical substance with the chemical formula H2O. A water molecule contains one oxygen and two hydrogen atoms connected by covalent bonds. Water is a liquid at ambient conditions, but it often co-exists on Earth with its solid state, ice, and gaseous state . Water also exists in a...
and has practically no arable land
Arable land
In geography and agriculture, arable land is land that can be used for growing crops. It includes all land under temporary crops , temporary meadows for mowing or pasture, land under market and kitchen gardens and land temporarily fallow...
, thus preventing development of agriculture
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
. About 75% of potable water must be distilled or imported. Higher oil prices reduced the budget deficit from $5.5 billion to $3 billion in 1999, and prices are expected to remain relatively strong throughout 2000. The government is proceeding slowly with reforms. It inaugurated Kuwait's first free-trade zone in 1999 and will continue discussions with foreign oil companies to develop fields in the northern part of the country.
Economy in greater depth
Kuwait is one of the richest countries in the Muslim worldMuslim world
The term Muslim world has several meanings. In a religious sense, it refers to those who adhere to the teachings of Islam, referred to as Muslims. In a cultural sense, it refers to Islamic civilization, inclusive of non-Muslims living in that civilization...
. Current GDP per capita reached astonishing peak growth of 439% in the 1970s. But this proved unsustainable and contracted by 58% in the 1980s. However rising global oil demand helped register growth of 91% in the 1990s. Diversification is a long-term issue for this over-exposed economy.
Macro-economic trend
This is a chart of trend of gross domestic product of Kuwait at market prices estimated by the International Monetary Fund with figures in millions of Kuwaiti Dinars.| Year | Gross Domestic Product | US Dollar Exchange | Inflation Index (2000=100) |
Per Capita Income (as % of USA) |
|---|---|---|---|---|
| 1980 | 7,764 | 0.27 Kuwaiti Dinars | 55 | 171.08 |
| 1985 | 6,450 | 0.29 Kuwaiti Dinars | 68 | 71.58 |
| 1990 | 5,328 | 0.29 Kuwaiti Dinars | 80 | 37.00 |
| 1995 | 8,114 | 0.29 Kuwaiti Dinars | 92 | 62.14 |
| 2000 | 11,570 | 0.30 Kuwaiti Dinars | 100 | 48.92 |
| 2005 | 21,783 | 0.29 Kuwaiti Dinars | 108 | 64.35 |
For purchasing power parity comparisons, the US Dollar is exchanged at 0.288 Kuwaiti Dinars only. Mean wages were $27.83 per manhour in 2009. As for skilled and experienced Kuwaiti (Engineers, Doctors, and Managers) the average monthly salary is hiked up tremendously, to an average of $10,000+ a month excluding living and other benefits. Please, also keep in mind that Kuwait is a tax free country so all the above figures reflect actual take home numbers.
Kuwait is a small country with massive oil reserves
Oil reserves
The total estimated amount of oil in an oil reservoir, including both producible and non-producible oil, is called oil in place. However, because of reservoir characteristics and limitations in petroleum extraction technologies, only a fraction of this oil can be brought to the surface, and it is...
, whose economy has been traditionally dominated by the state and its oil industry. During the 1970s, Kuwait benefited from the dramatic rise in oil prices, which Kuwait actively promoted through its membership in the Organization of Petroleum Exporting Countries (OPEC). The economy suffered from the triple shock of the 1982 Souk Al-Manakh stock market crash
Souk Al-Manakh stock market crash
The Souk Al-Manakh stock market crash was the 1982 stock market crash of Kuwait's unofficial stock market, the Souk Al-Manakh. The Al-Manakh market was housed in an air-conditioned parking garage that had formerly been a camel trading venue, and specialized in highly speculative and unregulated...
, the mid-1980s drop in oil prices, and the 1990 Iraq
Iraq
Iraq ; officially the Republic of Iraq is a country in Western Asia spanning most of the northwestern end of the Zagros mountain range, the eastern part of the Syrian Desert and the northern part of the Arabian Desert....
i invasion and occupation. The Kuwaiti Government-in-exile depended upon its $100 billion in overseas investments during the Iraqi occupation
Invasion of Kuwait
The Invasion of Kuwait, also known as the Iraq-Kuwait War, was a major conflict between the Republic of Iraq and the State of Kuwait, which resulted in the seven-month long Iraqi occupation of Kuwait, which subsequently led to direct military intervention by United States-led forces in the Gulf...
in order to help pay for the reconstruction. Thus, by 1993, this balance was cut to less than half of its pre-invasion level. The wealth of Kuwait is based primarily on oil and capital reserves, and the Iraqi occupation severely damaged both.
In the closing hours of the Gulf War
Gulf War
The Persian Gulf War , commonly referred to as simply the Gulf War, was a war waged by a U.N.-authorized coalition force from 34 nations led by the United States, against Iraq in response to Iraq's invasion and annexation of Kuwait.The war is also known under other names, such as the First Gulf...
in February 1991, the Iraqi occupation forces set ablaze or damaged 749 of Kuwait's oil well
Oil well
An oil well is a general term for any boring through the earth's surface that is designed to find and acquire petroleum oil hydrocarbons. Usually some natural gas is produced along with the oil. A well that is designed to produce mainly or only gas may be termed a gas well.-History:The earliest...
s. All of these fires were extinguished within a year. Production has been restored, and refineries
Refinery
A refinery is a production facility composed of a group of chemical engineering unit processes and unit operations refining certain materials or converting raw material into products of value.-Types of refineries:Different types of refineries are as follows:...
and facilities have been modernized. Oil exports surpassed their pre-invasion levels in 1993 with production levels only constrained by OPEC quotas.
Oil
In 1934, the ruler of Kuwait granted an oil concession to the Kuwait Oil Co. (KOC)Kuwait Oil Co.
The Kuwait Oil Company is an oil company headquartered in Ahmadi, Kuwait. It is a subsidiary of the Kuwait Petroleum Corporation, a Government-owned holding company. KOC is the world's fourth-largest oil exporter...
, jointly owned by the Anglo-Persian Oil Company (later British Petroleum Company
BP
BP p.l.c. is a global oil and gas company headquartered in London, United Kingdom. It is the third-largest energy company and fourth-largest company in the world measured by revenues and one of the six oil and gas "supermajors"...
) and Gulf Oil Corporation In 1976, the Kuwaiti Government nationalized KOC. The following year, Kuwait took over onshore production in the Divided Zone between Kuwait and Saudi Arabia
Saudi Arabia
The Kingdom of Saudi Arabia , commonly known in British English as Saudi Arabia and in Arabic as as-Sa‘ūdiyyah , is the largest state in Western Asia by land area, constituting the bulk of the Arabian Peninsula, and the second-largest in the Arab World...
. KOC produces jointly there with Texaco
Texaco
Texaco is the name of an American oil retail brand. Its flagship product is its fuel "Texaco with Techron". It also owns the Havoline motor oil brand....
, Inc., which, by its 1984 purchase of Getty Oil
Getty Oil
Getty Oil is an oil company founded by J. Paul Getty. It was at its height during the 1960s. In 1971, the Getty Realty division was formed to manage the real estate needs of Getty stations. The division was later spun off, but now owns the rights to the Getty brand...
Co., acquired the Saudi Arabian onshore concession in the Divided Zone.
In the Offshore Divided Zone, the Arabian Oil Co. – 80% owned by Japanese interests and 10% each by the Kuwaiti and Saudi Governments – has produced on behalf of both countries since 1961. The original concession agreements will expire in January 2003; negotiations to replace the concession with a technical service agreement should be completed in 2002.
The Kuwait Petroleum Corporation
Kuwait Petroleum Corporation
Kuwait Petroleum Corporation is Kuwait's national oil company, headquartered in Kuwait City. It was founded on January 27, 1980 as an umbrella company, integrating KOC, KNPC, KOTC and PIC and effectively placing them under government control....
. (KPC
KPC
KPC is an abbreviation for* kiloparsec, a unit of measurement used in astronomyKPC is an acronym for* Kaltim Prima Coal, A thermal coal mining in Kalimantan Timur, Indonesia....
), an integrated international oil company, is the parent company of the government's operations in the petroleum sector, and includes Kuwait Oil Company, which produced oil and gas; Kuwait National Petroleum Co., refining and domestic sales; Petrochemical Industries Co., producing ammonia and urea; Kuwait Foreign Petroleum Exploration Co., with several concessions in developing countries; Kuwait Oil Tanker Co.; and Santa Fe International Corp. The latter, purchased outright in 1982, gives KPC a worldwide presence in the petroleum industry.
KPC also has purchased from Gulf Oil Co. refineries and associated service stations in the Benelux nations and Scandinavia, as well as storage facilities and a network of service stations in Italy. In 1987, KPC bought a 19% share in British Petroleum, which was later reduced to 10%. KPC markets its products in Europe under the brand Q8
Q8
Q8 is the Kuwait Petroleum CorporationQ8 may also refer to:* Q8 * Quad 8, the Quadraphonic version of Stereo 8* Q , 4th series of Spike Milligan's TV comedy sketch show...
and is interested in the markets of the United States and Japan.
Kuwait has about 94 Goilbbl of recoverable oil reserves. Estimated capacity, before the war, was about 2.4 Moilbbl/d. During the Iraqi occupation, Kuwait's oil-producing capacity was reduced to practically nothing. However, tremendous recovery and improvements have been made. Oil production was 1.5 Moilbbl/d by the end of 1992, and pre-war capacity was restored in 1993. Kuwait's production capacity is estimated to be 2.5 Moilbbl/d. Kuwait plans to increase its capacity to 3.5 Moilbbl/d by 2005.
Social benefits
Diversification
In 2007, hydrocarbon industries accounted for well over 95% of the Kuwaiti economy. Diversification of the economy into manufacturing industries remain a long-term issue.Industry
Industry
Industry refers to the production of an economic good or service within an economy.-Industrial sectors:There are four key industrial economic sectors: the primary sector, largely raw material extraction industries such as mining and farming; the secondary sector, involving refining, construction,...
in Kuwait consists of several large export-oriented petrochemical units, oil refineries, and a range of small manufacturers. It also includes large water desalinization, ammonia, desulfurization, fertilizer, brick, block, and cement plants. During the invasion, the Iraqis looted nearly all movable items of worth, especially high-technology items and small machinery. Much of this has been replaced with newer equipment.
Agriculture
Agriculture is limited by the lack of water and arable land. The government has experimented in growing food through hydroponics and carefully managed farms. However, most of the soil which was suitable for farming in south central Kuwait was destroyed when Iraqi troops set fire to oil wells in the area and created vast "oil lakes". Fish and shrimp are plentiful in territorial waters, and largescale commercial fishing has been undertaken locally and in the Indian OceanIndian Ocean
The Indian Ocean is the third largest of the world's oceanic divisions, covering approximately 20% of the water on the Earth's surface. It is bounded on the north by the Indian Subcontinent and Arabian Peninsula ; on the west by eastern Africa; on the east by Indochina, the Sunda Islands, and...
.
Shipping
The Kuwait Oil Tankers Co. has 35 crude oil and refined product carriers and is the largest tanker company in an OPEC country. Kuwait also is a member of the United Arab Shipping Company.External trade and finance
The Kuwaiti dinar is a strong currency pegged to a basket of currencies in which the U.S. dollar has the most weight. Kuwait ordinarily runs a balance-of-payments surplus.Government revenues are dependent on oil revenues. Kuwait's fiscal surplus in 2000 was some 15% of GDP, while it reversed to a deficit of more than 2% of GDP in 2001 on sliding oil prices.
The government's two reserve funds: the Fund for Future Generations and the General Reserve Fund, which totalled nearly $100 billion prior to the invasion in 1990, were the primary source of capital for the Kuwaiti Government during the war. While these funds were depleted to $40–$50 billion after the war, they currently are estimated around $208 billion. The bulk of this reserve is invested in the United States, Germany, the United Kingdom, France, Japan, and Southeast Asia. In order of importance, foreign assets are believed to be invested in stocks and bonds, fixed yield instruments (mostly short term), and real estate. Kuwait follows a generally conservative investment policy.
Kuwait has been a major source of foreign economic assistance to other states through the Kuwait Fund for Arab Economic Development
Kuwait Fund for Arab Economic Development
The Kuwait Fund for Arab Economic Development , commonly known as the Kuwait Fund, is the State of Kuwait’s agency for the provision and administration of financial and technical assistance to developing countries...
, an autonomous state institution created in 1961 on the pattern of Western and international development agencies. In 1974, the fund's lending mandate was expanded to include all – not just Arab – developing countries.
Over the years aid was provided to Egypt, Syria, and Jordan, as well as the Palestine Liberation Organization. During the Iran-Iraq war, significant Kuwaiti aid was given to the Iraqis. The Kuwait Fund issued loans and technical assistance grants totaling over $520 million during its fiscal year ending 30 June 2000.
The stock market capitalisation of listed companies in Kuwait was valued at $130,080 million in 2005 by the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
.http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/0,,contentMDK:20394793~menuPK:1192714~pagePK:64133150~piPK:64133175~theSitePK:239419,00.html
Other statistics
Investment (gross fixed):6.6% of GDP (2005 est.)
Household income or consumption by percentage share:
- lowest 10%: NA
- highest 10%: NA
Agriculture - products:
practically no crops; fish
Industrial production growth rate:
-5% (2002 est.)
Electricity:
- production: 38.19 billion kWh (2003)
- consumption: 35.52 billion kWh (2003)
- exports: 0 kWh (2002)
- imports: 0 kWh (2002)
Electricity - production by source:
- fossil fuel: 100%
- hydro: 0%
- other: 0% (2001)
- nuclear: 0%
Oil:
- production: 2418000 oilbbl/d (2005 est.)
- consumption: 400000 oilbbl/d (2006 est.)
- exports: 2.57 Moilbbl/d (2008)
- imports: NA
- proved reserves: 105 Goilbbl (2005 est.), including the divided zone.
Natural gas:
- production: 8.3 billion cu m (2003 est.)
- consumption: 8.3 billion cu m (2003 est.)
- exports: 0 m³ (2002 est.)
- imports: 0 m³ (2002 est.)
- proved reserves: 1.572 trillion cu m (2005)
Current account balance:
$31.51 billion (2005 est.)
Exports - commodities:
oil and refined products, fertilizers
Imports - commodities:
food, construction materials, vehicles and parts, clothing
Reserves of foreign exchange & gold:
$9.296 billion (2005 est.)
Exchange rates:
Kuwaiti dinars per US dollar - 0.3014 (2004), 0.298 (2003), 0.3039 (2002), 0.3067 (2001), 0.3068 (2000)