Out-Law / Your Daily Need-To-Know

Kuwaiti government to suspend scheme requiring foreign contractors to invest in local economy

Out-Law News | 11 Sep 2014 | 3:44 pm |

The Kuwaiti government is to suspend its 'offset programme', through which foreign companies that win large government contracts are required to invest in the local economy, in order to attract more overseas investors to the state.

Anas al-Saleh, Kuwait's finance minister, told Reuters that many international firms had been critical of the scheme; and that it needed to be "revised and then… [implemented] in a more moderate way". New rules should be ready within six months, he said.

The Kuwait Offset Programme was established in 1992 and has been managed by the National Offset Company, a state-owned shareholding company, since 2006. It was set up to encourage the "transfer of economic benefits", such as new technologies and training, to Kuwait through strategic partnerships between foreign contractors and Kuwaiti businesses.

Offset obligations have traditionally been applied to defence contracts worth over 3 million Kuwaiti dinars (£6.5m), and civil contracts worth over 10 million Kuwaiti dinars £21.5m). Contractors are generally required to provide offset benefits worth 35% of the total monetary value of the supply contract, although deductions can be made if subcontracts are awarded to Kuwaiti companies or local goods or services are used.

Offset obligations must fulfil one of the three primary objectives of the programme: the transfer of "advanced technologies" to Kuwait and their integration into the local economy; the advancement of professional education and job training; and the creation of high-skill professional jobs for Kuwaiti nationals.