Barriers at Home: Why Kuwaiti Investors are Looking Abroad

This article is the first of a two-part series on the challenges of domestic investment in Kuwait.

Facing fiscal and economic barriers at home, Kuwaiti investors are increasingly looking beyond their borders to find opportunities for growth and expansion. Despite Kuwait’s ambitious efforts to attract Foreign Direct Investment (FDI) through initiatives led by the Kuwait Direct Investment Promotion Authority (KDIPA) and collaborative projects with the World Bank, a significant number of Kuwait’s private sector leaders are choosing to invest abroad. This trend spans various industries, including agriculture, construction, manufacturing, healthcare, and pharmaceuticals. At a time when Kuwait is actively working to create favorable conditions for foreign investors, why are locals choosing to invest their money elsewhere? 

On the surface, Kuwait should offer plenty of domestic investment opportunities as its food, healthcare, and pharmaceutical industries expand to accommodate a rapidly growing population. However, issues with the country’s broader economic growth have festered for over a decade. The country’s capital outflow reached 0.64% in 2013, a sign that too many business opportunities have left the country instead of building it from within. And while several sectors of Kuwait’s economy continue to grow, expansion in neighbouring countries has lured investors toward more promising opportunities abroad.

For example, according to Statista, the Kuwait food and beverage industry reached $13 billion in 2025 and is expected to grow by at least 5 percent over the next five years. Kuwaiti citizens are a major driving force behind this change. More Kuwaiti and expatriates are seeking healthier food options, convenient online delivery services, and sustainable brands. Dairy and eggs are among the fastest expanding niches, while confectioneries and snacks are the biggest markets overall. However, some of Kuwait’s largest food and beverage companies have begun investing in neighbouring countries to hedge against relatively limited growth at home. KDD, a juice and dairy brand, and KITCO, a well-known snack brand, have started relocating to Saudi Arabia and the United Arab Emirates. KLC Virtual Restaurants, an indigenous brand of cloud kitchens—delivery-only food businesses that operate without physical dine-in spaces— is seeking development opportunities in the United Arab Emirates and Qatar.

The healthcare sector also exemplifies the limits of Kuwait’s current infrastructure. Due to an increase in chronic health conditions such as obesity and diabetes, as well as rising rates of cancer, the health services sector is expected to grow exponentially. However, Kuwait currently sends thousands of patients abroad for care because the country lacks high-quality medical infrastructure.

To address these shortfalls, Kuwait is actively prioritizing infrastructure development as a central component of its Vision 2035 initiative, which seeks to transform the country into a regional financial and trade hub. This vision has begun to resonate with domestic investors interested in emerging areas such as sustainable infrastructure, service delivery, as well as the traditional industries of petrochemicals and oil refining. The main challenge remains retaining the interest of a capital class that sees greater profits to be made investing elsewhere.

Why Neighbouring Countries are Attracting Kuwaiti Investors

Struggling Public-Private Partnerships

Public-Private Partnerships (PPPs), which form a major pillar of the country’s local investment model, have faced several obstacles. Law No. 116 of 2014 established the current PPP framework in Kuwait, which provides tax exemptions and allows foreign investors to own up to 100 percent of local businesses across the healthcare, education, transportation, and industrial sectors.

At first glance, PPPs are an excellent method of stimulating domestic business opportunities. However, PPPs in Kuwait suffer from a lack of government support. Recent reports have found that many Kuwaiti PPPs fail to qualify as a “government priority,” leading to less public sector buy-in and more failed initiatives. Since the PPP model is most effective in the long term, rapidly developing and emerging industries tend to fail to receive financing and approval. 

The PPP model is also complex and often comes with a high cost for both procurement and management. This mixture of budgetary and structural limitations also makes the PPP model rather inflexible. By only approving projects of a certain budget, scope, and focus, the Kuwaiti government is leaving money on the table for businesses that fall outside of those parameters. 

Wasteful spending also threatens the sustainability of Kuwaiti investment projects. In 2016, the government abruptly cancelled a project estimated at around $700 million, impacting a consortium of investors and leaving many others doubting the viability of their projects.

In contrast, other Gulf countries like the United Arab Emirates and Saudi Arabia have more robust and effective PPP frameworks. The United Arab Emirates has utilized the PPP model for far longer than Kuwait—since 1971—and Abu Dhabi’s PPP laws allow greater flexibility for approved projects. For its part, Saudi Arabia is currently the most active PPP market in MENA and is expanding its PPPs to sectors such as healthcare and education. As a result, the country has become increasingly appealing to private-sector investors in Kuwait who had been locked out of public-sector-funded opportunities. While Riyadh is still developing legal frameworks to support more PPP investments, the Kingdom clearly appeals to wealthy Kuwaitis as an investment destination.

Second-Class Financing and Incentives

Kuwaiti investors also face limited access to financing options and disadvantageous incentive structures that dampen domestic investment. Indeed, the government’s focus on attracting FDI often results in foreign investors receiving preferential treatment under Law No. 116/2013, such as tax exemptions of up to 10 years and full foreign ownership rights, and expedited licensing procedures through KDIPA’s One-Stop Shop. These incentives grant foreign entities more favourable terms for investing in Kuwait than are made available to Kuwaiti citizens themselves. Local investors frequently face bureaucratic delays, higher operational costs, and limited access to similar incentives, creating a disparity in investment conditions. This imbalance can disincentivize local investors, pushing them to explore opportunities in other GCC countries, particularly where specific sectors are being promoted as part of broader economic diversification efforts. By offering tax benefits, subsidies, and more competitive PPPs, neighboring countries have created an ecosystem where the interests of private capital are not just welcomed but actively supported.

Stifling Regulations and Bureaucracy     

Kuwaiti investors often encounter significant regulatory hurdles and bureaucratic delays, such as licensing requirements, zoning restrictions, and protracted approval processes, that pose significant barriers to investment. While foreign investors may face similar procedural challenges, entities like the KDIPA provide streamlined services—such as the One Stop Shop—to facilitate approvals and licensing. However, despite these support mechanisms, the number of foreign companies operating in Kuwait remains relatively low, reflecting the complexity and time-consuming nature of investment procedures. These hurdles can be amplified by a general lack of government transparency, which discourages investors from fully committing their resources to projects in Kuwait. Furthermore, inconsistently-applied regulations add an extra layer of uncertainty for Kuwaiti businesses trying to navigate the system.

When Kuwaiti investors look abroad, they see streamlined regulatory frameworks in the United Arab Emirates and Saudi Arabia, specifically designed to attract investment. These systems create a business environment where investors can move more swiftly to take advantage of market opportunities. Saudi Arabia’s regulatory reforms and accessible government services—especially those that support the Kingdom’s giga-projects—are paving the way for more investment opportunities. Recent projections suggest major promise for the Saudi business and real estate sectors, and a mouth-watering opportunity for Kuwait’s private lenders.

 A Limited Market     

The Kuwaiti market itself is a factor in investors’ decisions to seek opportunities elsewhere. The country’s small population and limited market size can cap the growth potential of certain industries, especially those requiring scale to achieve profitability. As a result, even highly capable local businesses reach a point where they face diminishing returns from continuing to operate Kuwait. In search of larger, more dynamic markets, many Kuwaiti investors turn to neighbouring GCC countries with larger consumer bases.

Additionally, businesses that operate in industries with high infrastructure requirements, such as healthcare and pharmaceuticals, often find it challenging to establish a strong domestic foothold in Kuwait. These sectors require partnerships and specialized support, which neighboring countries sometimes facilitate more effectively through targeted policies and support programs. Kuwait often lacks these networks, which can sometimes make the difference between succeeding and going under.

Implications for Kuwait

Kuwaiti capital flight has major consequences for the country’s economic future. Rather than contributing to domestic job creation and innovation, Kuwaiti funds are being deployed in the same way in other nations. This is a missed opportunity for Kuwait as it seeks to diversify its economy and reduce its dependency on oil. 

This challenge is compounded by structural contradictions baked into Kuwait’s government itself. While the KDIPA advocates for foreign investors to bring capital into Kuwait, the Kuwait Investment Authority (KIA) actively promotes investing Kuwait’s funds abroad. Consider other, more effective, regional sovereign wealth funds, such as the Mubadala global investment firm of the United Arab Emirates and the Saudi Public Investment Fund, and Kuwait’s predicament is clear.

Without a coherent vision that values both foreign and local investment, Kuwait risks losing the expertise and ambition of its private sector leaders. This talent drain and drag on investment weaken Kuwait’s potential to build a sustainable knowledge-based economy and reduce its ability to compete with its fellow Gulf monarchies.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of Gulf International Forum.