Kuwait parliament allows foreign firms to operate without local sponsors

Kuwait's parliament has approved a proposal to abolish local sponsorship for foreign companies that open branches in the Gulf state.

The move by parliament's financial and economic affairs committee is seen by analysts as a step towards encouraging foreign investment and diversifying the economy, The New Arab's Arabic-language sister service Al-Araby Al-Jadeed reported.

The proposal allows companies to operate directly without a local agent, including those bidding for government contracts.

"[This] opens the door wide for competition and reflects positively on improving the quality of services in the state, whether provided in commercial work or through government contracts," said economic affairs committee rapporteur Abdulwahab Al-Issa.

In recent years, there has been criticism of the requirement for foreign firms to have a local agent, particularly among opposition MPs, due to the need to diversify the energy-reliant Kuwaiti economy and encourage inward investment.

Kuwaiti economic expert Ali Al-Anzi told Al-Araby Al-Jadeed that the old sponsorship system increased costs for foreign companies, making Kuwait a less attractive place for foreign businesses. Other Gulf states have made their economies more attractive to outside investors by liberalising sponsorship laws.

Kuwaiti economic expert Mohammed Ramadan believes the changes introduced by the parliament could increase price competition by bringing more products into the market, but some industries, such as car sales, will likely not be affected.

Kuwait ranked 38th out of 64 countries in the 2023 IMD World Competitiveness Ranking, the lowest among Gulf states with the UAE placed 10th place, Qatar 12th, Saudi Arabia 17th, and Bahrain 25th.