Kuwait

This publication contains the 2022 Second Round Peer Review on the Exchange of Information on Request for Kuwait. It refers to Phase 1 only (Legal and Regulatory Framework).

This report identifies the opportunities that Islamic finance presents for donors. To achieve these, Arab and OECD Development Assistance Committee donors need to mobilise innovative forms of financing and deliver the call to deepen the transformation of development finance systems. DAC members could do so by broadening and deepening exposure to alternative forms of financing, such as Islamic finance. Islamic finance represents USD 2.5 trillion – a share of which could be mobilised for development – and its tenets resonate across the member countries of the Organisation for Islamic Cooperation and beyond. Arab donors could harness Islamic finance, as a means to strengthen partnerships with DAC members, whilst increasing the effectiveness of existing aid flows in countries and contexts where they have considerable access. Doing so could create a more equitable and stable development finance order capable of delivering the SDGs and achieve greater impact in partner countries. Both communities would then be able to chart a path for all development actors, notably the private sector, development finance institutions and other bilateral donors. This report provides a set of action points for Arab and DAC donors, highlighting the benefits of engaging in and co-operating through Islamic finance.

Kuwait provides development co-operation under the broad framework of its commitment to the 2030 Agenda for Sustainable Development.The Kuwait Fund for Arab Economic Development (KFAED) – the first fund to be established in the Arab world – primarily provides concessional loans for development projects that are a high priority to recipient countries, following a demand-driven approach. Kuwait’s total official development assistance (ODA) (USD 256.3 million, preliminary data) decreased in 2022, representing 0.15% of gross national income (GNI). This was mainly due to a decrease in its bilateral grants and loans.

This report analyses the implementation of the AEOI Standard in Kuwait with respect to the requirements of the AEOI Terms of Reference. It assesses the legal frameworks put in place to implement the AEOI Standard.

This chapter presents an overall assessment of Kuwait’s innovation system and policy, reflecting analytical findings of the review. It identifies the strengths and weaknesses of the national innovation system, and develops specific policy recommendations designed to facilitate Kuwait’s transition towards “Smart Kuwait”, a knowledge-driven society, which is the stated goal of the national development plan. Specific recommendations address the issues of governance of the overall innovation system, framework conditions for innovation, strengthening human resources, fostering critical mass and excellence in public research, intensifying diversification, fostering business innovation, and increasing and diversifying the sources of knowledge for enterprises.

This chapter presents the Higher education and research activity in Kuwait. It starts with a brief overview of the general principles that govern effective higher education and research based on international experience. It then successively reviews the main public and private higher education institutions, and the research institutes, KISR in the first place. A final section discusses KFAS supports to research activities.

This chapter presents the business innovation activity in Kuwait. It starts with some background concerning the diversification issue and the imperative for Kuwait to develop into a knowledge-based economy and society. It then gives a brief overview of the characteristics of an efficient business innovation system, based on international experience, discussing the role of research and development in enterprises, innovative entrepreneurship, knowledge diffusion, and business-academia linkages. The chapter then analyses the structure of the Kuwaiti business sector, which is dominated by state-owned enterprises in oil and other strategic sectors, with a relatively underdeveloped small and medium-sized enterprise sector. The chapter moves on to discuss the innovation and R&D performance in enterprises, followed by an analysis of business-academia co‑operation and linkages. The final section discusses Kuwaiti policies in favour of innovation and R&D in the business sector, which has many opportunities for improvement.

The OECD Review of Kuwait’s Innovation Policy is part of a series of OECD country reviews of innovation policy (www.oecd.org/sti/innovation/reviews). It was requested, and entirely funded, by the authorities of Kuwait, represented by the Kuwait Foundation for the Advancement of Science (KFAS) and the General Secretariat of the Supreme Council for Planning and Development (SCPD), and was carried out by the OECD Directorate for Science, Technology and Innovation.

Oil has provided Kuwait with wealth and well-being for the past 80 years. Slowing demand for oil is threatening the sustainability of the current economic and social model, emphasising the need to transition towards a knowledge-based society – where value creation, the resolution of societal challenges and the well-being of society at large will be based on the production, diffusion and implementation of knowledge.

This chapter first discusses Kuwait’s macroeconomic performance, and in particular, the benefits and long-term risks caused by Kuwait’s exceptional resource endowment, the diversification challenge, and its labour market and social contract. The second section discusses Kuwait’s framework conditions, especially those related to the business environment and entrepreneurship. The last section reviews Kuwait’s aggregate innovation performance. It starts by examining input indicators: R&D expenditure across sectors, education input and outcomes, and the availability of human resources for innovation. It then reviews indicators of innovation output to highlight qualitative and quantitative characteristics of Kuwait’s innovation system, in particular the quantity and quality of research outcomes, the number of patents, and the share of high R&D-intensive activities in its total exports.

This chapter presents the structure and mechanisms of governance of the STI system in Kuwait. Following a short summary of some general principles regarding effective STI governance structures, this Chapter presents a general overview of the Kuwaiti political and policy systems and discusses successively the three main levels of an STI governance structure: STI strategy and coordination; STI policy formulation and funding; and STI policy implementation.

Kuwait’s legal framework implementing the AEOI Standard is not in place in accordance with the requirements of the AEOI Terms of Reference. While Kuwait’s international legal framework to exchange the information with all of Kuwait’s Interested Appropriate Partners (CR2) is consistent with the requirements, the domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) has significant deficiencies in areas that are fundamental to the proper functioning of the AEOI Standard. More specifically, deficiencies have been identified in Kuwait’s enforcement framework.

This chapter draws lessons from the Korean experience and identifies what can be learned from the catching up strategy and the progressive integration of regional concerns into the country’s growth strategy: from the evolution of regional development policy, and the recent paradigm shift towards regional competitiveness, to the current challenges that Korea is facing to advance further in regional development. The chapter concludes by underlining that beyond sharing knowledge on general lessons, there is no single response to development challenges. Each country needs to identify its current opportunities and challenges, establish its own priorities and develop its own strategy, mixing continuity in effort with experimentation of new policies to address new challenges, as Korea has been doing.

State-owned enterprises have been an important feature of the Kuwaiti economy since the establishment of the nation state. As highlighted in this chapter, their importance in the Kuwaiti economy has only increased over the years, and today they play an important role in the provision of basic services, employment and fiscal revenue. This analysis outlines the development of the state-owned sector in Kuwait, in order to situate the current structure of the sector and its governance practices in a historical context. Following the introduction of the privatisation legislation in Kuwait in 2010, the privatisation process, which until now has been slow, is expected to accelerate with the initial disposal of a stake in the Kuwaiti Airways Corporation.