The New Laws Proposed by the Government and Recent Developments

Introduction

Since nearly four decades, the fortunes of the Kuwaiti economy have depended heavily on the prices of oil. With the drop in petroleum prices in 1999, the income from oil revenue declined sharply affecting the state's fiscal deficit for that period. Various structural reforms, and prudent budget analysis were proposed to revive the Kuwaiti economy and to make it less susceptible to oil market fluctuations.

A series of draft legislation proposed by the Council of Ministers in May 1999, unveiled the government's plan for increasing participation of multinationals, both direct as well as indirect in all sectors, including the prestigious and so called "forbidden" oil sector. These draft laws marked a revolutionary change in government policy and decision making process. What appeared to be unthinkable a few years ago became the need of the hour. These draft proposals have since been enacted by the legislature and now enjoy the force of law.

At the core of Kuwait's reform process lies the desire to increase multinational participation. This is for two main reasons. The first being the need to acquire new technology especially in areas of oil field exploration and information technology. Such technology is considered essential for growth and development of modern society. It is well established from the Kuwaiti point of view that Kuwait by itself cannot develop its own technology for fulfilling its ambitious plans. The other reason for multinational participation and investments is, for strategic purposes. The presence of foreign companies, especially in the oil sector, in the northern oil fields region, along Kuwait's border with Iraq, would guarantee security as foreign countries would have a vested interest in protecting Kuwait's borders.

Another new legislation has opened up the Kuwait Stock Exchange to foreign investors. The Kuwait Stock Exchange is one of the largest and liveliest stock market in the Middle East. In the past it was open only to Kuwaitis and Arabian Gulf citizens for buying and selling securities on the Kuwait Stock Exchange. Foreign investors could not participate except through mutual funds. This change is expected to revive the local market and the business community.

The Legislature has also introduced changes in the existing trademarks and patent laws and passed a new law on copyrights. This is mainly aimed at removing Kuwait from the Special 301 List released by the United States Trade Representative. Being a World Trade Organization ("WTO") member, Kuwait, is obliged to take measures for complying with the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS).

As a part of the planned economic reforms, the government has also shown interest in privatization of certain public sectors like water, electricity and telecommunication. Privatization is also being considered for some oil sector companies. In the words of the ex-minister of oil, Sheikh Saud Nasser Al Sabah "The trend of the government is to go for privatization as much as we can, in as many fields as we can". Privatization has been viewed by many, as an alternative route for increasing revenues for the State. However, the government also realizes that privatization cannot be at the expense of Kuwaiti employment. From 1994 - 1999, the State divested itself of nearly 24 companies yielding about US$ three billion. A further sale of assets is proposed for the future which could yield similar amounts.

We shall briefly deal with some of the significant changes, giving the reader an insight into the various laws that aim to bring about a new economic and social order of Kuwait.