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Over the past decade Kuwait has worked to shore up its longstanding reputation as a centre for Islamic financial services, leading to the rapid expansion of sharia-compliant banks and investment companies in recent years. Islamic banking assets, at just over 20% of the total in 2005, grew to around 45% by the end of 2013, and an IMF report released in December 2014 showed Kuwait’s sharia-compliant banking sector is the fifth largest in the world, with more than $68.9bn in assets. Moving forward, the bond market appears poised for a resurgence, with a variety of private and state-owned firms recently announcing plans to issue sukuk, or sharia-compliant bonds. The government has also been preparing to introduce a new, independent insurance regulator since 2012, with draft legislation reportedly including a separate set of rules and regulations for providers of takaful, or Islamic insurance.

A series of reforms being implemented by the Capital Markets Authority are expected to benefit the country’s bourse, following on the comprehensive restructuring of the Kuwait Stock Exchange in the years following the 2007-08 economic downturn. In 2009 the Kuwait Stock Exchange introduced a new classification system that organised listed companies into 15 sectors, instead of just eight as under the previous system. The regulator is also moving forward with a plan to privatise the Kuwait Stock Exchange, which was converted to a privately managed company called Bourse Kuwait in April 2015, and eventually to take the bourse public in an IPO. The banking sector currently accounts for 49% of the total Kuwait Stock Exchange value by market capitalisation, followed by telecoms with 11%.

In recent years Kuwait has seen steadily expanding trade activity with neighbouring countries, the broader Middle East and a variety of key partners further afield. Dependence on oil income is one of the nation’s chief challenges: while the country has continued to diversify its economy away from hydrocarbons revenues, oil and other mineral fuels remain the country’s most important export products, accounting for 88.8% of total exports in the first quarter of 2015. Meanwhile, the government’s Foreign Direct Investment (FDI) Law, introduced in June 2013, is expected to boost FDI in coming years, as are alterations to the public-private partnership framework introduced in 2014. This chapter contains an interview with Yoon Sang-Jick, Korean Minister of Trade, Industry and Energy.

Kuwait’s banking system has improved markedly in the years since the global economic downturn: at the end of 2014, total customer and government deposits held by local banks stood at $129.6bn, up from $125.5bn at the end of 2013. Meanwhile, a series of new rules put in place by the Central Bank of Kuwait and other regulatory bodies in recent years have steadied the sector, providing a stable framework for future expansion. As of September 2014 the capital adequacy ratio in Kuwait’s banking industry was 18.3%, up from 15.6% at the end of 2008 and well above the 12% minimum. Kuwait’s sovereign net foreign assets, meanwhile, were valued at 269% of GDP at the end of the 2014 – the highest of any rated sovereign, according to Fitch – and government debt was at just 5.3% of GDP, an indication of Kuwait’s strong fiscal position. This chapter contains an interview with Mohammad Y Al Hashel, Governor, Central Bank of Kuwait.

Although the recent dip in oil prices is undoubtedly a concern for Kuwait’s economy should prices remain depressed, the successive budget surpluses of recent years and the country’s low breakeven price on oil production mean the country is strongly placed to cope with lower prices without increasing production. Meanwhile, the government remains committed to maintaining capital expenditures and delivering the project pipeline outlined under the National Development Plan 2015-20, and foreign direct investment continues to grow as the government works to encourage foreign involvement in the local economy in a bid to diversify sources of investment. A number of positive policy reforms aimed at diversifying industry and strengthening private sector participation are likely to continue to support steady growth going forward. This chapter contains interviews with Tariq Abdulsalam, CEO - Investments, Kuwait Projects Company; and Chairman, United Real Estate; Meshaal Jaber Al Ahmad Al Sabah, Director-General, Kuwait Direct Investment Promotion Authority; and Abdulwahab Al Bader, Director-General, Kuwait Fund for Arab Economic Development.