International Economics
Kuwait
Name
: Abdurahman
NIM
: 0111003006
Dept
: Accounting
Lecture
: Drs. Zulkarnain Ishak, M. Sc
Economic Faculty
Sriwijaya University, Indralaya
Chapter 1
Brief Information of Country
Main Country Kuwait
Country information
Area : 17,820 km2
Population : 3.6 million (2011 Est.)
Capital City : Kuwait City
People : Kuwaitis (est. 33% of population), Egyptians, Syrians, Iranians, Palestinians, Asians (Indians, Sri Lankans, Bangladeshis, Pakistanis, Filipinos, Afghanis, Chinese), Americans and Europeans
Language(s) : Arabic (official); English (the official second language) Religion(s) : Kuwait is an Islamic society and the overwhelming majority
Currency : Kuwaiti Dinar. (KWD) Major political parties : None. Parties are illegal.
Government : Constitutional Hereditary Emirate
Head of State : HH the Amir, Sheikh Sabah Al Ahmad Al Jaber Al Sabah Heir Apparent : HH the Crown Prince, Sheikh Nawwaf Al-Ahmed Al-Jaber
Al-Sabah
Prime Minister : HH Sheikh Jaber Al-Mubarak Al-Sabah
Foreign Minister : HE Sheikh Sabah Al-Khaled Al-Hamad Al-Sabah Membership of
Brief Information About Kuwait 1. General information
The State of Kuwait is situated in the north-east corner of the Arabian Peninsula, Kuwait, officially the State of Kuwait / k uː ˈ w eɪ t / (Arabic: تيوكلا ةلود Dawlat al-Kuwayt ), is a sovereign Arab state situated in the north-east of the Arabian Peninsula in Western Asia. It lies on the north-western shore of the Persian Gulf and is bordered by Saudi Arabia to the south (at Khafji) and Iraq to the north (at Basra). The name Kuwait is derived from the Arabic
تاوكأ ākwāt, the plural of توك kūt, meaning "fortress built near water".[5] The country covers
an area of 17,820 square kilometers (6,880 square miles) and has a population of about 3.5 million.[2]
Historically, the region was the site of Characene, a major Parthian port for trade between Mesopotamia and India. The Bani Utbah tribe were the first permanent Arab settlers in the region, laying the foundation for the modern emirate. By the 19th century, Kuwait came under the influence of the Ottoman Empire. After World War I, it emerged as an independent sheikhdom under the protection of the British Empire. Kuwait's large oil fields were discovered in the late 1930s.
After Kuwait gained independence from the United Kingdom in 1961, the state's oil industry saw unprecedented economic growth. In 1990, Kuwait was invaded and annexed by neighboring Iraq. The seven month-long Iraqi occupation came to an end after a direct military intervention by United States-led forces. Around 773 Kuwaiti oil wells were set ablaze by the retreating Iraqi army, resulting in a major environmental and economic catastrophe.Kuwait's infrastructure was badly damaged during the war and had to be rebuilt.
2. Political overview
Kuwait is a constitutional monarchy with a parliamentary system of government. The head of state, the Emir, is chosen from the ruling Al-Sabah family and confirmed by the National Assembly (Majlis Al-Umma). The Emir has the power to appoint the Prime Minister, dissolve the Parliament and suspend certain parts of the Constitution. The current Emir is HH Sheikh Sabah Al-Ahmed Al-Jaber Al-Sabah, who acceded to the throne in February 2006.
Kuwait's constitution is regarded as one of the most liberal in the region and Kuwait was the first member of the Gulf Cooperative Council (GCC) to establish a directly elected parliament. Established in 1963, the National Assembly is comprised of 50 directly elected members who serve four-year terms. The Assembly has the power to question and dismiss ministers, including the Prime Minister. Although political parties are banned, there are various interest groupings or 'blocs'.
The Council of Ministers (cabinet) forms the executive level of government and advises and assists the Prime Minister, who is appointed by the Emir. The current Prime Minister is HH Sheikh Nasser Al-Mohammed Al-Ahmed Al-Jaber Al-Sabah, who was appointed in 2006. Cabinet members are also ex-officio members of the National Assembly with the same voting rights as elected MPs, except in cases of no confidence motions. The most recent parliamentary election was held in May 2009, Kuwait's third since 2006. This election resulted in four women elected for the first time since women were granted the right to vote in 2005. The next election is scheduled for May 2013.
In addition to being a member of the GCC, which includes Bahrain, Oman, Qatar, the United Arab Emirates (UAE) and Saudi Arabia, Kuwait is also a member of: the Arab League; the Organization of the Islamic Conference (OIC); the Organization of Petroleum Exporting Countries (OPEC); the World Trade Organization (WTO); and the United Nations (UN) and its various agencies. Kuwaiti foreign policy is founded on a long-standing strategic alliance with the United States.
3. Economic overview
nearly half of GDP, 95% of export revenues, and 95% of government income. Kuwaiti officials have committed to increasing oil production to 4 million barrels per day by 2020. The rise in global oil prices throughout 2011 is reviving government consumption and economic growth. Kuwait has experienced a 20% increase in government budget revenue, which has led to higher budget expenditures, particularly wage hikes for many public sector employees. Kuwait has done little to diversify its economy, in part, because of this positive fiscal situation, and, in part, due to the poor business climate and the acrimonious relationship between the National Assembly and the executive branch, which has stymied most movement on economic reforms. In 2010, Kuwait passed an economic development plan that pledges to spend up to $130 billion over five years to diversify the economy away from oil, attract more investment, and boost private sector participation in the economy.
4. Geography And Climate
Located in the north-east corner of the Arabian Peninsula, Kuwait is one of the smallest countries in the world in terms of land area. It lies between latitudes 28° and 31° N, and longitudes 46° and 49° E. The flat, sandy Arabian Desert covers most of Kuwait. The country is generally low lying, with the highest point being 306 m (1,004 ft) above sea-level. It has nine islands, all of which, with the exception of Failaka Island, are uninhabited. With an area of 860 km2 (330 sq mi), the Bubiyan is the largest island in Kuwait and is connected
to the rest of the country by a 2,380 m (7,808 ft) long bridge. The land area is considered arable and sparse vegetation is found along its 499 km long coastline. Kuwait City is located on Kuwait Bay, a natural deep-water harbor.
Kuwait has some of the world's richest oil fields with the Burgan field having a total capacity of approximately 70 billion barrels (1.1×1010 m3) of proven oil reserves. During the
1991 Kuwaiti oil fires, more than 500 oil lakes were created covering a combined surface area of about 35.7 km2 (13.8 sq mi). The resulting soil contamination due to oil and soot
accumulation had made eastern and south-eastern parts of Kuwait uninhabitable. Sand and oil residue had reduced large parts of the Kuwaiti desert to semi-asphalt surfaces. The oil spills during the Gulf War also drastically affected Kuwait's marine resources.
Country as Comparison United States
Country information
Area : The total area is over 9.8 million km2
Population : 313.2 million (July 2011 est.) Capital City : Washington, District of Columbia
People : The United States is a multicultural country with people from all over the world who have now made the USA their home. The Ethnic Groups are: White 79.96%, Black 12.85%, Asian 4.43% American Indian and Alaska native 0.97%, Native Hawaiian and Other 0.18%.
Language : The main language is English although Spanish is spoken by a sizeable minority.
Religion(s) : Protestant 51.3%, Roman Catholic 23.9%, Mormon 1.7%, Jewish 1.7%, Muslim 0.6%, Others 2.5%, no religious affiliation 12.1%
Currency : Dollar: 1 US Dollar is made up of 100 cents.
level.
Government : Constitution-based Federal Republic with a strong democratic tradition.
Head of State : President Barack Obama (January 2009); Vice President Joe Biden (January 2009).
Foreign Minister : Hillary Rodham Clinton (January 2009). Membership of
international
Saudi Arabia
Country Information
Area : 2.15 million km2
Population : 28 million (UN, 2011)
Capital City : Riyadh
People : Arabs; 8.5m of the total population are foreigners. Languages : The official language is Arabic, although English is widely
spoken in business circles.
Religion : Islam; about 90% of the Muslim population is Sunni and 10% is Shi’a. Publicly practising any other religion is illegal
Currency : Saudi Riyal (SR)
Major political parties : Political parties are not permitted
Government : Islamic Absolute Monarchy
Head of State and Prime
Minister : King Abdullah bin Abdul Aziz Al Saud, Custodian of the Two Holy Mosques
First Deputy Prime
Minister : HRH Crown Prince Salman bin Abdul Aziz Al Saud
Second Deputy Prime
Minister : Vacant
Membership of international
groups/organizations: World Trade Organisation, Arab League,
Gulf Co-operation Council, Organisation of the Islamic Conference, United Nations, Organisation of Petroleum Exporting Countries, International Monetary Fund and World Bank.
Chapter 2
2001 34,890,773,740 $ 10,233,900,000,000 $ 183,012,268,442 $
2002
2003 47,875,837,662 $ 11,089,300,000,000 $ 214,572,800,000 $
2004 59,440,511,982 $ 11,797,800,000,000 $ 250,338,933,333 $
2005 80,797,945,205 $ 12,564,300,000,000 $ 315,580,048,571 $
2006 101,561,153,806 $ 13,314,500,000,000 $ 356,630,440,587 $
2007 114,721,830,986 $ 13,961,800,000,000 $ 384,891,141,942 $
2008
2010 124,348,317,665 $ 14,419,400,000,000 $ 450,792,000,000 $
2011 176,590,075,215 $ 14,991,300,000,000 $ 576,824,000,000 $
Growth 406.12% 46.49% 215.18%
Sources : Country Metadata – World Bank Data
b. Population
Year Kuwait United States Saudi Arabia
2001 2,009,588
284,968,955 20,681,576
2002 2,069,816 287,625,193 21,463,072
2003 2,126,786 290,107,933 22,334,371
2004 2,189,485 292,805,298 23,213,767
2005 2,264,014 295,516,599 24,041,116
2006 2,351,441 298,379,912 24,799,436
2007 2,447,818
301,231,207 25,504,176
2008 2,548,351 304,093,966 26,166,639
2009 2,646,286 306,771,529 26,809,105
2010 2,736,732 309,349,689 27,448,086
2011 2,818,042 311,591,917 28,082,541
Growth 40.23% 9.34% 35.79%
Sources : Country Metadata – World Bank Data
If we compare the population among the three countries, Kuwait has the lowest one and USA has the biggest one. But during 2001-2011, the growth of the population is highly dominated by Kuwait followed by Saudi Arabia and United States respectively 40.23%, 9.34% and 35.79%.
c. GDP per Capita
GDP Per Capita
Year Kuwait United States Saudi Arabia
2002 $ 18,426.18 $ 36,819.45 $ 8,784.91
2003 $ 22,510.89 $ 38,224.74 $ 9,607.29
2004 $ 27,148.17 $ 40,292.30 $ 10,784.07
2005 $ 35,687.92 $ 42,516.39 $ 13,126.68
2006 $ 43,191.03 $ 44,622.64 $ 14,380.59
2007 $ 46,866.98 $ 46,349.12 $ 15,091.30
2008 $ 57,842.27 $ 46,759.56 $ 18,202.75
2009 $ 40,022.63 $ 45,305.05 $ 14,050.95
2010 $ 45,436.79 $ 46,611.98 $ 16,423.44
2011 $ 62,664.10 $ 48,111.97 $ 20,540.31
Growth 260.92% 33.97% 132.12%
Sources : Kuwait Country Metadata – World Bank Data
compared Saudi Arabia and United States that respectively reach twenty and fourty millions USD.
It means that one person that live in Kuwait earns sixty millions a year. It’s big enough for one person and can be categorized as the wealth nation. So, we conclude that eventhough Kuwait has lower GDP than United States and Saudi Arabia but if we see from the wealth side, Kuwait is more wealth than them where it’s showed with its big GDP per Capita
d. Openness
To know, how interactive Kuwait in trading their commodities include the exports and the imports in the world (or we can say that how much contribution Kuwait’s trade influencing the world trade , we just have to find the openness by using this formula :
Openness = Total Export + Total Import GDP
From the graph above, Saudi Arabia had been more open than Kuwait since 2005. These two countries have big openness that reach at point 0.8 , and even Saudi Arabia ever reached it over point 1 in 2007 and 2008 that reflect Saudi Arabia to have tendency to trade to be contributed to GDP. While, United States isn’t too open in which it just reach at point 0.2. It means GDP of United States isn’t fully contributed by not only trade, but also other elements that may affectable to enhance their economy.
e. Remmitances
A remittance is a transfer of money by a foreign worker to his or her home country. Remittance is one of potential income that can be able to increase the economy in one country, and even the remittance become the major income that is very contibutable in some countries. The amount of Remittances in which Kuwait, United States, and Saudi Arabia just had during 2001 until 2010 will be shown by this table below.
2007 $ - $ 5,101,000,000 $ 123,542,239
2008 $ - $ 5,181,000,000 $ 216,186,667
2009 $ - $ 5,478,000,000 $ 214,400,000
2010
$ -
$
5,641,000,000
$ 236,480,000
2011
$ -
$
5,810,000,000
$ 243,733,333
Growth 0% 28.74% 259.46%
Sources : Country Metadata – World Bank Data
Chapter 3
Kuwait’s Partners In Trading Commodities A. The Most Export and Import Partners of Kuwait
The Most Export Partners of Kuwait (1990-2011 (Average))
No County Partner Value in Million U.S Dollar
1 Japan 8935.27
2 Korea, Repubilc Of 7075.76
3 India 5157.97
4 United States 4747.61
5 Singapore 3436.59
6 China, P.R. Mainland 2483.73
7 Netherlands 2244.81
8 Pakistan 1788.89
9 Indonesia 1213.50
10 United Kingdom 971.65
From the table above, we can conclude that Kuwait is more intensive to export their goods and services to Japan during 1990 until 2011 followed by Korea, Republic of , India, United States and Singapore. The most proportion of Kuwait’s Income, especially for export side comes from the big country, that is Japan. Asian still becomes the big proportion of export’s income to Kuwait including Japan, Korea, India, Singapore, China, Pakistan, and Indonesia.
The Most Export Partners of Kuwait (2011)
Sources : Direction of Trade Statistics (DOTS) – www.imf.org
No County Partner Value in Million U.S Dollar 1 Korea, Repubilc Of 15415.94
2 India 13315.70
3 Japan 11931.65
4 China, P.R. Mainland 8335.10
5 United States 7281.91
6 Singapore 3273.94
7 Netherlands 2893.72
8 Pakistan 2719.76
9 Egypt 2527.70
The latest export of Kuwait (2011) is mostly distributed to Republic of Korea followed by India and Japan. It is still hold by Asian. Due to the background of Kuwait’s export, Kuwait sent out its commodities to the nearest country. However, little country outside Asian like United States and Netherland still takes out some commodities from Kuwait.
The Most Import Partners of Kuwait (1990-2011 (Average))
No County Partner Value in Million U.S Dollar
1 United States 2987.67
2 Japan 2042.49
3 Germany 1735.84
4 Saudi Arabia 1378.08
5 China, P.R. Mainland 1235.34
6 United Kingdom 1098.68
7 Italy 1097.46
8 France 927.61
9 India 869.42
Sources : Direction of Trade Statistics (DOTS) – www.imf.org
Kuwait is mostly depend on United States in the Import side during 1990-2011. From the data above, we conclude that averagely, Kuwait imports commodities from the big country (Familiar with their each technologies) like United States and Japan.
The Most
Import Partners of Kuwait (2011) No County Partner Value in Million U.S Dollar
1 United States 3000,25
2 China, P.R. Mainland 2342,91
3 Saudi Arabia 2023,40
4 Korea, Repubilc Of 1579,77
5 India 1557,17
6 Japan 1489,37
7 Germany 1205,80
8 United Arab Emirates 1031,22
9 Italy 871,38
Sources : Direction of Trade Statistics (DOTS) – www.imf.org
As the recent import’s data (2011), still United States is the major target of import for Kuwait, followed by China and Saudi Arabia. Now, Kuwait tends to take some commodities from the nearest country than taking in them from the big country. May be, Kuwait try to minimize their cost, by limiting or focusing the import’s activities to little big country or just one like United States, and the rest it would be the nearest countries that’re available for fulfilling Kuwait’s needs.
Chapter 4
Prime Commodity Trade
a. Commodity Intensive by comparing the three main product (Agriculture, Fuel and mining, Manufactured Product)
Year AgricultureProd Fuels and MiningProd Manufacture Prod
Commodity (In Million USD) Saudi Arabia
Year Agriculture Prod Fuels and MiningProd ManufactureProd
2001 $ 527 $ 58,678 $ 7,450
bigger than Kuwait one. As the result, Saudi Arabia still produces effective Agriculture Products like kurma that’s very familiar in the world.
Commodity (In Million USD) USA
Year AgricultureProd Fuels and MiningProd ManufactureProd
As developed countries, United States is always associated with the technology, that’s why one main commodity they have comes from Manifactured Company, followed by Agriculture and Fuels and Mining Products.
In this case, from previous data, among Kuwait, Saudi Arabia, and United States can fulfill their need by trading like export and import their each potential commodity. For example (Based on data export-import partners), Kuwait exports their fuels to United States and imports manufacture products from United States.
b. Revealed Comparative Advantage (RCA)
The RCA index is defined as the ratio of two shares. The numerator is the share of a country’s total exports of the commodity of interest in its total exports. The denominator is share of world exports of the same commodity in total world exports.
These table shows the RCA of Kuwait, United States, and Saudi Arabia during 2006-2010.
Year Kuwait UnitedStates ArabiaSaudi
2006 6.66 0.24 6.26
2007 6.70 0.26 6.25
2008 5.37 0.33 5.08
2009 6.42 0.37 6.02
2010 6.13 0.42 5.71
Sources : http://legacy.intracen.org
From data above, we conclude that Kuwait hold bigger RCA than Saudi Arabia in 2010. In this case, Saudi Arabia has the biggest value in its Fuels Production compared with Kuwait’s production in fuel. But, the denominator of fuel’s export is taken by Kuwait. Why this can be happen?. In this case, almost the whole export activities of Kuwait is hold by Fuel in other case Saudi Arabia not only focus the Fuel but may be others. However, Kuwait got decrease from 2006 to 2010 while Saudi Arabia wa getting fluctuation. Unlike them, United States has lower RCA of fuel, because basicly Factor Endowment of United States doesn’t support it.
B. Specialization
Every country has their each potential commodity that can be their strength to trade. These data will show us what commodity in every country to be specialized (data 2010).
Country Commodity Percentage
(%)
Value In Million USD
Kuwait Mineral fuels, oils,
distillation products, etc. 91.98 59,387
Saudi Arabia Mineral fuels, oils,
distillation products, etc. 85.71 215,249
United States Boilers, machinery;nuclear
Sources : http://legacy.intracen.org
Chapter 5
FDI and Exchange Rate
a. FDI
Foreign direct investment (FDI) is direct investment into production in a country by a company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is done for many reasons including to take advantage of cheaper wages,and/or for special investment privileges such as tax exemptions offered by the country as an incentive to gain tariff-free access to the markets of the country or the region
US$ Dollars in Millions
FDI
Year Kuwait United States Saudi Arabia
2001 $ 1,802,194,458 $ 24,670,000,000 $ 19,640,000
2002
$ 80,285,804
$
(70,087,000,000)
$ (614,133,333)
4,892,763,859 (85,814,000,000) (586,506,667)
2004
$
(2,557,516,118)
$
(170,256,000,000)
$ (334,320,000)
2005 $ (4,907,876,712) $ 76,402,000,000 $ 12,456,888,691
2006 $ (8,089,222,334) $ (1,772,000,000) $ 18,356,141,522
2007 $ (9,672,642,456) $ (192,876,000,000) $ 24,468,633,650
2008 $ (9,096,510,277) $ (18,990,000,000) $ 35,958,651,563
2009 $ (7,521,862,602) $ (145,024,000,000) $ 34,280,396,667
2010 $ (1,987,514,351) $ (115,125,000,000) $ 17,653,324,667
2011
$
(178,377,000,000)
$
13,238,388,000
Growth -210% -823% 67305%
Sources : Country Metadata – World Bank Data
activities and foreign portfolio investment through the Kuwait stock exchange may not exceed 49% in any listed company. That’s why FDI in Kuwait grew unsignificantly, even the people in Kuwait prefer to invest in abroad that effect the FDI outward exceeds FDI inward (Minus FDI).
On the other hand, United States got unstable FDI during 2001-2011. It had ever reached the lower point at $ (192,876,000,000) in 2007. That’s caused by unfix ecomomic climate there. So, sometimes Investors are very heavy to invest their fund there, but sometimes they dn’t do the same.
Unlike them, Saudi Arabia just get stable FDI and moreover the growth are positive that’s showed by the increase of net FDI around 67305% during 2001-2011.
b. Exchange Rate
These are the exchange rate of Kuwait with its partner
Exchange Rate for 1 KWD Dinnar (Kuwait)
US$ Dollar (United States) and SAR Riyadh (Saudi Arabia) to USD
In this case, By detetermining US Dollar as the basic currency, Saudi Arabia get the biggest exchange rate. The exchange rate between Riyadh (Saudi Arabia) with Dollar (USA) reaches at point 3.75 and the growth is constant during 2001-2011.
Kuwait has lower exchange rate than the two countries. Compared with Dollar (USA), Dinnar (Kuwait) just reaches at point between 0.2 and 0.3. and along 2001-2011, the Growth decreases as much as 10.10%.
c. Tariff
Tariff rate, applied, simple mean
Kuwait
Year Manufactured Prod Primary Prod All Prod
2001
2002 3.98 1.47 3.53
2003 2004
2005 4.28 3.21 4.13
2006 4.27 3.21 4.13
2007 4.4 3.48 4.29
2008 4.31 3.33 4.17
2009 4.21 3.36 4.09
United States
Sources : Country Metadata – World Bank Data
Chapter 6 Balance Of Payment a. Balance Of Payment
The Balance of Payment accounts summarize international transactions for a specific period, usually a year, and are prepared in a single currency, typically the domestic currency for the country concerned. Sources of funds for a nation, such as exports or the receipts of loans and investments, are recorded as positive or surplus items. Uses of funds, such as for imports or to invest in foreign countries, are recorded as negative or deficit items. In this case, we will analyze the BoP of Kuwait both Current Account and Capital Account.
The Comparison of Current Account BoP in Each Country in Million USD Current Account is the sum of the balance of trade (like net revenue on exports minus payments for imports), factor income (earnings on foreign investments minus payments made to foreign investors) and cash transfers.
Current Account
Year/Cou
ntry Kuwait United States Saudi Arabia
2001 $ 8,323,614,606 $ (396,598,894,289) $ 9,353,446,133
2002 $ 4,264,689,770 $ (457,250,096,629) $ 11,873,093,333
2004 $ 15,507,974,211 $ (628,523,736,614) $ 51,925,973,333
2005 $ 30,070,547,945 $ (745,779,979,478) $ 90,060,713,889
2006 $ 45,311,775,629 $ (800,618,466,000) $ 99,066,129,916
2007 $ 41,330,130,543 $ (710,298,754,000) $ 93,379,454,661
2008 $ 60,239,349,741 $ (677,140,573,000) $ 132,313,570,234
2009 $ 25,774,064,878 $ (376,554,079,000) $ 20,954,610,933
2010 $ 36,821,982,839 $ (470,902,198,000) $ 66,751,011,167
2011 $ - $ (473,441,151,000) $ 158,493,852,800
Growth 342.38% -18.74% 613.65%
Sources : Country Metadata – World Bank Data
The Comparison of Capital Account BoP in Each Country in Million USD
Net capital account includes government debt forgiveness, investment grants in cash or in kind by a government entity, and taxes on capital transfers. Also included are migrants' capital transfers and debt forgiveness and investment grants by nongovernmental entities. Data are shown below ( in current U.S. dollars ).
Capital Account
Year/Cou
ntry Kuwait United States Saudi Arabia
2001 $ 2,931,378,356 $ 13,198,250,000 $ -
2002 $ 1,672,182,194 $ (141,276,000) $ -
2003 $ 1,431,488,281 $ (1,820,610,000) $ -
2004 $ 348,489,990 $ 3,048,951,000 $ -
2005 $ 709,931,507 $ 13,115,856,522 $ -
2006 $ 743,686,014 $ (1,787,903,000) $ -
2007 $ 1,487,611,666 $ 383,556,000 $ -
2008 $ 1,728,612,221 $ 6,010,173,691 $ -
2009 $ 1,065,453,571 $ (140,127,000) $ -
2010 $ 2,158,031,315 $ (152,347,000) $ -
2011 $ - $ (1,159,706,000) $ -
Growth -26.38% -101.15% 0.00%
United States gets unstable capital account (Fluctuation). It ever reached the highest capital account as much as $ 13,198,250,000 in 2005. Also, it ever reached the lower capital account as much as $ (1,820,610,000) in 2003. The condition of capital account in United States is almost the same with the condition of its FDI in which there is fluctuation climate.
Kuwait has normal capital account and always get the surplus condition during the 2001 and 2010 but there is a decrease as much as 26.38% while there is no capital account in Saudi Arabia.
b. Debt Ratio
Year Kuwait ArabiaSaudi UnitedStates
2001 36.33% 93.70% 56.40%
2002 32.25% 96.90% 58.80%
2003 24.54% 82.00% 61.60%
2004 18.55% 65.00% 62.90%
2005 14.14% 38.90% 67.90%
2006 10.57% 27.30% 66.60%
2007 11.83% 18.50% 67.20%
2008 9.77% 13.20% 69.40%
2009 11.33% 15.90% 89.90%
2010 10.53% 9.90% 98.50%
2011 7.53% 7.50% 103.00%
Growt
h -79.27% -92.00% 82.62%
We compares the debt among four countries (Kuwait, United States, and Saudi Arabia), and we conclude the most debtholder is taken by United States in which the debt increases 82.62% along 2001-2011 . Unlike United States, Kuwait and Saudi Arabia just decrease their debt 79.27% and 92% respectively during the period.
Chapter 7
Trade Agreements and Arrangements World Trade Organization
So far, Kuwait has participated in one dispute settlement proceeding at the WTO, as a third party. Based on information from the WTO Central Registry of Notifications (CRN), as of 30 June 2011, Kuwait had 22 outstanding notifications.
As a small and trade-dependent nation, Kuwait values highly its membership in the multilateral trading system. Liberal trade means greater access to world markets, a higher level of employment and a better living standard for Kuwait's population. The authorities considered that Kuwait must participate in international trade negotiations to pursue its commercial interests, enhance the negotiation leverage, and protect its existing rights. Furthermore, Kuwait considers it better to protect its rights through the WTO than through regional and bilateral arrangements. The authorities stated that for a small economy, absence from negotiations would mean Kuwait could not influence the content of the rules affecting its trade relations, nor ensure that its rights are fully respected.
In the Doha Round, Kuwait supports a UAE proposal that emphasizes tariff elimination for products of substantive interest to developing countries. In particular, Kuwait considers that the primary aluminium industry, which is one of the most important emerging industries in some GCC countries, would benefit from tariff eliminations as suggested in the UAE proposal. In the area of intellectual property rights, Kuwait does not import or export any alcohol, for religious reasons, and considers that participation in the registration system for GIs should be voluntary and without any legal effect.
In September 2010, Kuwait joined the WTO Information Technology Agreement. Kuwait is not a party, nor an observer, to the WTO plurilateral Agreement on Government Procurement.
Regional Trade Agreements
Kuwait's view is that regional trade agreements and arrangements should be complementary, and not compete with the multilateral trading system. They should be building blocks for liberalization of international trade and must be in conformity with the provisions of Article XXIV of the GATT 1994, the Enabling Clause, and Article V of GATS.
II.1), and is preparing to review the legal text of an FTA with New Zealand. It has ongoing negotiations with Australia, China, the EU, India, Japan, Korea, MERCOSUR, Pakistan, and Turkey. Further, the GCC has received requests for FTA negotiations from ASEAN, Azerbaijan, Cambodia, COMESA (Common Market for Eastern and Southern Africa), UEMOA (West African Economic and Monetary Union), Georgia, Hong Kong, China, Indonesia, Malaysia, Peru, Philippines, Thailand, Ukraine, and Viet Nam.
In the resolution of the first Arab Economic and Development Summit held in Kuwait in January 2009, Arab countries decided to create an Arab Customs Union, and accomplish all the necessary requirements by 2015, with the objective of establishing an Arab common market.
However, all current negotiations of free-trade agreements have been suspended. In September 2010, the GCC decided that negotiations need to be on hold pending completion of an internal study. According to the authories, this study is in its final stage, and is expected to be submitted to the GCC Ministerial Council for consideration before end 2011. The regional organization followed by Kuwait is presented below.
I. Gulf Cooperation Council (GCC)
The GCC was created on 25 May 1981, by Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. The main objectives were regional cooperation and integration in all economic, social, and cultural affairs, including trade, industry, investment, finance, transport, communications, and energy. One of the GCC's first achievements was an agreement for free trade among member states in 1983, whereby originating goods have been exempt from customs tariffs.
II. GAFTA
The Greater-Arab Free Trade Agreement entered into force on 1 January 1998. Its members include the six GCC countries, as well as Egypt, Iraq, Jordan, Lebanon, Libya, Morocco, Palestinian Authority, Sudan, Syria, Tunisia, and Yemen. In 2005, Algeria participated as the 18th member.
III. GCC–EFTA
Trade between the European Free Trade Association (EFTA) and GCC grew rapidly, on average 25% annually, between 2003 and 2008. A Free Trade Agreement was signed in June 2009, covering trade in goods and services, competition, government procurement, and intellectual property rights. GCC and each EFTA state concluded bilateral agreements on trade in agricultural products. These agreements form part of the instruments establishing the free-trade area. According to the authorities, the EFTA–GCC Agreement has not entered into force, although Kuwait ratified it in 2011.
IV. GCC–Singapore
The GCC–Singapore FTA, signed on 15 December 2008, covers trade in goods, rules of origin, customs procedures, trade in services, and government procurement. This agreement has not entered into force yet, although Kuwait ratified it in 2011. Under the Agreement, GCC countries abolish customs duties on 99% of Singaporean exports, with key benefiting sectors comprising telecommunications, electrical and electronic equipment, petrochemicals, jewellery, machinery, and iron and steel-related industry. Tariffs are either eliminated immediately, or after a five-year transition period. The remaining 1% of Singapore's exports are prohibited from entering the GCC market for health, safety, security and religious reasons.
V. Other bilateral or preferential trade agreement
Appendix
Balance of payments, 2006-11 (US$ billion)
2006 2007 2008 2009 2010a 2011b
Current account 45.3 42.2 60.2 25.9 36.9 57.6
Goods (trade balance) 40.2 43.4 64.0 34.4 47.9 69.4
Exports 56.5 62.6 87.0 51.7 67.0 92.5
Oil exports 53.2 59.1 82.6 46.6 61.7 85.9
Non-oil exports including
re-exportsc 3.3 3.5 4.4 5.1 5.3 6.6
Of which: re-exports 0.9 1.2 1.7 1.6 1.8 2.7
Imports -16.2 -19.1 -22.9 -17.3 -19.1 -23.1
Services -2.2 -3.2 -3.8 -2.5 -5.9 -7.2
Transportation 0.2 -0.1 -0.6 -1.4 -1.7 -2.0
Insurance -0.1 -0.1 -0.1 -0.2 -0.2 -0.3
Travel -5.4 -6.4 -7.3 -6.1 -6.5 -7.9
Investment income 11.0 12.4 10.7 7.0 7.9 9.2
Receipts 12.5 16.3 14.0 8.6 9.6 10.4
General governmentd 7.1 8.5 8.8 6.3 7.4 7.8
Other sectorse 5.4 7.8 5.1 2.3 2.2 2.5
Payments -1.5 -3.9 -3.2 -1.6 -1.8 -1.2
General government 0.0 0.0 0.0 0.0 0.0 0.0
Other -1.5 -3.9 -3.2 -1.6 -1.8 -1.2
Current transfersf -3.7 -10.5 -10.7 -13.0 -13.0 -13.8
Capital and financial account -48.8 -33.4 -49.6 -25.3 -32.6 -53.3
Capital accountg 0.7 1.5 1.7 1.1 2.2 2.3
Financial account -49.6 -34.9 -51.3 -26.4 -34.7 -55.5
Direct investment -8.1 -9.7 -9.1 -7.5 -2.0 -8.0
Abroadh -8.2 -9.8 -9.1 -8.6 -2.1 -8.0
In Kuwait 0.1 0.1 0.0 1.1 0.1 0.1
Portfolio investment -29.1 -34.9 -28.1 -8.2 -7.7 -29.9
Other investment (net) -12.4 9.7 -14.1 -10.7 -25.0 -17.7
Net errors and omissionsi 7.1 -5.5 -10.0 1.2 -3.3 0.0
Overall balance 3.6 3.3 0.7 1.7 1.0 4.4
Foreign direct investment, 2006-10
(US$ million and %)
2006 2007 2008 2009 2010
FDI inflows 121 112 -6 1,114 81
FDI inward stock 778 940 943 6,301 6,514
FDI inward stock (% of GDP) 0.8 0.8 0.6 5.8 5.0
FDI outflows 8,211 9,784 9,091 8,636 2,069
FDI outward stock 4,616 16,884 15,385 19,340 18,676 FDI outward stock (% of GDP) 10.7 12.8 10.4 17.7 14.2
Source: UNCTAD (2011), World Investment Report, Geneva.
Overview of Kuwait's regional trade agreements, October 2011
GCC Agreement in force
Title Gulf Cooperation Council (GCC)
Parties Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates Coverage and type Goods and services, customs union
Date of signature/entry into force
and Common Market launched on 1 January 2008
11% of Kuwait's imports were from other GCC member states, and 2% of its exports went to other GCC member states in 2009
WTO document series WT/REG276, and WT/COMTD/N/25
GAFTA Agreement in force
Title Greater-Arab Free Trade Area Agreement
Parties Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libyan Arab Jamahiriya, Morocco, Oman, Qatar, Saudi Arabia, Sudan, Syrian Arab Republic, Tunisia, United Arab Emirates, Yemen, and later joined by the Palestinian Authority of the West Bank and the Gaza Strip, and Algeria
Coverage and type Goods, free-trade agreement
10 years, but shortened to 8 years (full implementation realized in 2005 instead of 2007)
Main products excluded from liberalization (Kuwait)
Some products excluded for health, religious, or security reasons
Services covered On-going negotiations among Kuwait, Egypt, and Jordan Kuwait merchandise trade
(2010)
13% of Kuwait's imports were from other GAFTA member states, and 3% of its exports went to other GAFTA member states
WTO document series WT/REG223
GCC–EFTA Agreement signed but not in force
Title EFTA–GCC
Parties GCC 6 members, and Iceland, Liechtenstein, Norway, Switzerland Coverage and type Goods and services, free-trade agreement
Date of signature FTA signed on 22 June 2009 Date foreseen to enter into
force
2011, pending completion of internal procedures by the parties. According to the authorities, Kuwait ratified in 2011
Includes: mixtures of odoriferous substances, retreaded or used pneumatic tyres of rubber, hides and skins of swine; prohibited items include mainly cocaine and crocidolite, and materials containing asbestos GCC merchandise trade (2010) 1.6% of GCC’s imports were from the EFTA, and 0.0% of its exports went to
the EFTA
GCC–Singapore Agreement signed but not in force
Title Singapore–GCC
Parties GCC 6 members, and Singapore
Coverage and type Goods and services, free-trade agreement Date of signature 15 December 2008
Date foreseen to enter into force
Not in force, although Kuwait ratified in 2011
Transition for full implementation (goods)
5 years
Main products excluded from liberalization (Kuwait)
Some products excluded for health, safety or religious reasons
Services covered Yes
GCC merchandise trade (2010) 0.5% of GCC’s imports came from Singapore, and 0.1% of its exports went to Singapore
Summary analysis of the MFN tariff, 2003, 2007, 2011
(%)
2003 2007 2011
Bound tariff lines (% of all tariff lines) 99.5 99.5 99.5
Simple average rate 5.0 4.7 4.8
Agricultural products (HS 01-24) 5.4 5.4 5.4
Industrial products (HS 25-97) 4.9 4.6 4.6
WTO agricultural productsa 5.7 5.7 5.7
WTO non-agricultural productsb 4.9 4.6 4.6
By ISIC sectorc
ISIC 1 - Agriculture, hunting, forestry, and fishing 3.3 3.2 3.2
ISIC 2 – Mining and quarrying 5.0 4.9 4.9
ISIC 3 - Manufacturing 5.1 4.8 4.9
By stage of processing
First stage of processing 4.0 3.9 3.9
Semi-processed products 4.9 4.8 4.8
Fully processed products 5.2 4.9 4.9
Domestic tariff "spikes" (% of all tariff lines)d 0.3 0.6 0.6 International tariff "peaks" (% of all tariff lines)e 0.3 0.6 0.6 Overall standard deviation of tariff rates 5.2 5.3 5.3 Coefficient of variation of tariff rates 1.0 1.1 1.1 Tariff quotas (% of all tariff lines) 0.0 0.0 0.0 Duty-free tariff lines (% of all tariff lines) 5.8 10.6 9.4
Non-ad valorem tariffs (% of all tariff lines) 1.1 1.3 1.4
Non-ad valorem tariffs with no AVEs (% of all tariff
lines) 1.1 1.3
1.4
Nuisance applied rates (% of all tariff lines)f 0.0 0.0 0.0
Number of lines 7,154 7,121 7,100
Live animals and products thereof 2.8 2.7 2.7
Dairy products 5.0 5.0 5.0
Coffee and tea, cocoa, sugar, etc. 4.0 4.0 4.0
2003 2007 2011
Fruit and vegetables 3.5 3.5 3.5
Grains 0.5 0.5 0.5
Oil seeds, fats, oils, and their products 4.9 4.8 4.8
Beverages and spirits 5.0 4.9 4.9
Leather, rubber, footwear, and travel goods 5.0 5.0 5.0
Wood, pulp, paper, and furniture 4.6 4.5 4.6
