Why Kuwait? - Discover the Many Reasons to Visit Kuwait

For the past decade, Kuwait has managed the Gulf Cooperation Council to change its perspective in the financing of infrastructure by adopting Public-Private Partnerships. Although the collaborations have been seen only in the power sector, it is expected that as the new decade dawns, the implementation of such cooperation would help enhance the growth of the region. For instance, Kuwait has incorporated the partnerships in the expansion of its pipeline (Joyce, 2014). The economy of the country has significantly grown, leading to changes in the economic, political, and socio-cultural sectors. It is illustrated by the increased number of women acquiring education and those working in the oil industry (Elsayed, 2020). The accounting system has changed, and the IFRS has been adopted. Kuwait is a critical example of an economy that enforces its accounting and auditing standards to achieve efficiency. 

A Brief History of Kuwait 

Kuwait is a country that has a petroleum-based economy. Winstone & Freeth (2017) state that Kuwait is among the wealthiest countries globally that balances social welfare and the modern economy. The history of Kuwait provides a roadmap to its economic, political, and socio-cultural activities in the contemporary world. During the 19th century, the country became a British protectorate through the Anglo-Kuwaiti Agreement that ensured its protection from the security alarms raised by the Ottoman Empire (Joyce, 2014). During the 20th century, Kuwait was drastically affected by the Great Depression, causing a decline in its international trade, which was the main economic activity before oil. The need for oil began to rise following the end of WWII, and thus Kuwait started to experience prosperity from the oil industry (Joyce, 2014). By midcentury, the republic had already become the most significant regional oil exporters. This economic development attracted individuals and corporations globally (Crystal, 2016). Importantly, in 1962, Kuwait gained its independence from the protection of Britain. Additionally, the country was also the initial pioneer of diversifying its investments other than the exportation of oil. Over the years, the prices of oil have fluctuated, causing an economic crisis. 

Economy of Kuwait 

Primarily, the currency used in Kuwait is referred to as the Kuwaiti dinar (KWD). Kuwait relies mostly on oil as the foundation of its economy. The reliance on an exhaustible resource is likely to cause issues to its general economy in the future. Kuwait also depends on a large portion of skilled labor from immigrants (Al-Moosa, & McLachlan, 2017). Additionally, future problems caused by the exhaustibility of its vital minerals could adversely aggravate its economy (Al-Sabah, 2017). Moreover, Alessa (2017), the swift growth of the country’s economy, led to increased employment opportunities that could not be filled by the locals. The expatriate workforce was therefore required to ensure the proper running of the industry. It is, however, ironic that a wealth republic like Kuwait lacked an efficient information infrastructure that makes it hard for the introduction of e-government (Abdullah, Naser & Fayez, 2018). The Kuwait accounting system is influenced by its economic, political, and legal factors. Almujamed et al. (2017) stipulate that the primary economic development experienced in the country is contributed by mimetic and normative pressures that have led to the constant need to change the accounting system to the adoption of the IFRS. The Kuwait Investment Authority specializes in the international investment of the nation’s sovereign wealth (Elsayed, 2020). Nevertheless, one of the main notable advances taken to ensure that the country develops accordingly has been the inclusion of females in oil wealth. The society has experienced rapid growth of female education. This social transformation has significantly contributed to Kuwait’s economic growth. 

Kuwait Boursa 

The Boursa Kuwait was formerly referred to as the Kuwait Stock Exchange (KSE). The latter was formed in 1977 to help the country regulate its stock market, which is mainly controlled by four central bodies, including the Ministry of Finance, Boursa, Central Bank of Kuwait, and Ministry of Commerce and Industry (Al-Ghanem & Hegazy, 2011). In 2016, KSE was transformed to Boursa Kuwait, which outlines that the benefits of linking with evolving market indices include an increase in the desirability of the capital market, entries of international investment, enhanced investment, and reassuring the contribution of qualified investors in the economy (Boursa Kuwait). The Boursa has enhanced the evolution of the requirements needed for the listing of new companies (Algharaballi, 2013). According to Elkalla (2017), the high earnings in the MENA region have been significantly contributed by the adoption of IFRS. Investors face potential risks from share prices in companies listed on Boursa Kuwait (Al-Yatama et al., 2020). According to AlAli et all. (2018), one of the main functions of the Boursa Kuwait is to list companies, for instance, telecommunication corporations. One can, therefore, seek annual reports of a company from Boursa Kuwait’s website.  

Corporate Financial Reporting and Regulation in Kuwait 

The accounting rules in Kuwait are not intrinsically complex. The tax year begins on 1st January and ends on 31st December. Although Kuwait lacks a mandatory accounting system, numerous companies are advised to use the IFRS. The leading regulatory bodies are the Boursa Kuwait and the Public Authority for Industry. Law No. 5 of 1981 governs and controls the procedures of account certification (Ali, 2018). Kuwait has adopted a new financial execution strategy that was introduced in the Capital Markets Law No. 7 of 2010 (CML) and 2014 and revised again in 2015 (Ali, 2018). Additionally, the country has various requirements for the accounting reports. 

All commercial companies are required to keep several records in Arabic. They primarily include the stock shares evolution account, inventory, general ledger, sales journal, and an expenditures analysis manuscript. For fiscal analysis, corporations are obligated to make a statement of financial position and a record of its profits and losses ( Lessambo, 2016 ). Firms are provided with three months after their financial year to present these reports to the Ministry of Commerce and Industry (Alotaibi, 2014). International corporations aiming to trade in the Kuwait stock market should ensure that they generate accounting publications. They should, therefore, conduct their journals two years before the moment they wish to begin indicating their profits and their general structure. Moreover, the Council of Directors of the Boursa Kuwait has the legal capacity to demand other components before sanctioning the firm (Almujamed et al., 2017). After approval, the companies publish their reports after every fiscal year within the next three months. In contrast, for periodic accounts, the businesses are allowed a timeframe of two months after the financial year ( Alfaraih & Alanezi, 2011 ). Furthermore, auditing and certification are conducted by independent bodies from the corporations and listed by the Ministry of Commerce. 

Conclusion 

Kuwait is an excellent example of a country that balances its social and democratic factors to enhance its economic growth. Evaluating Kuwait provides insights into the issues influencing the private-public partnerships that were developed to help grow the region. Additionally, the country has strict financial and accounting systems that have ensured its continued prosperity. It emphasizes that new companies should have a record of their financial statements published. The adoption of IFRS has helped Kuwait to grow economically. Fiscal regulators have faced various challenges in the stock and securities markets, causing a financial crisis in Kuwait. Kuwait is a nation in the MENA region, and thus, analyzing its economy through understanding its accounting and auditing standards provides a clear depiction of the factors affecting the area. 

References 

Abdullah, A., Naser, K., & Fayez, F. (2018). Obstacles toward adopting electronic government in an emerging economy: Evidence from Kuwait. Asian Economic and Financial Review, 8(6), 832-842. 

Al Dabbous, N. (2012).  Corporate governance transformation: the case of Kuwait  (Doctoral dissertation, University of Aberdeen). 

Al Mutairi, M., Tian, G., Hasan, H., & Tan, A. (2012). Corporate governance and corporate finance practices in a Kuwait Stock Exchange market listed firm: a survey to confront theory with practice. Corporate Governance: The international journal of business in society. 

AlAli, M. S., Bash, A. Y., AlForaih, E. O., AlSabah, A. M., & AlSalem, A. S. (2018). The Adaptation Of Zmijewski Model In Appraising The Financial Distress Of Mobile Telecommunications Companies Listed At Boursa Kuwait.  Management ,  5 (4), 129-136.  

Alessa, S. Y. (2017). The manpower problem in Kuwait. Routledge. 

Alfaraih, M., & Alanezi, F. (2011). The usefulness of earnings and book value for equity valuation to Kuwait stock exchange participants.  International Business & Economics Research Journal (IBER) ,  10 (1). 

Al-Ghanem, W., & Hegazy, M. (2011). An empirical analysis of audit delays and timeliness of corporate financial reporting in Kuwait. Eurasian Business Review, 1(1), 73-90. 

Algharaballi, E. (2013).  Earnings management practices and subsequent firm performance of companies listing on the Kuwait Stock Exchange (KSE)  (Doctoral dissertation, University of Southern Queensland). 

Ali, L. M. A. B. Enforcement in financial regulation: an analysis of mechanisms in Kuwait and the UK. 

Al-Moosa, A., & McLachlan, K. (2017). Immigrant labour in Kuwait. Routledge. 

Almujamed, H., Tahat, Y., Omran, M., & Dunne, T. (2017). Development of Accounting Regulations and Practices in Kuwait: An Analytical Review. Journal of Corporate Accounting & Finance, 28(6), 14-28. 

Alotaibi, B. M. (2014). Corporate governance and voluntary disclosure in Kuwait. 

Al-Sabah, Y. S. F. (2017). The oil economy of Kuwait. Routledge. 

Al-Wasmi, M. E. (2011).  Corporate governance practice in the GCC: Kuwait as a case study  (Doctoral dissertation). 

Al-Yatama, S. K., AlAli, M. S., AlIbtahim, N. F., & Al Abdulhadi, A. J. (2020). Investors risk perception effect on share prices: A case study on Kuwaiti cement companies. 

Boursa Kuwait. KUWAIT THE EMERGING ECONOMIC LANDMARK Globally recognized and upgraded by the world’s leading indices. Retrieved from  https://www.boursakuwait.com.kw/MSCI/index_en.html 

Crystal, Jill.  Kuwait: The transformation of an oil state . Routledge, 2016. 

Elkalla, T. (2017).  An empirical investigation of earnings management in the MENA region  (Doctoral dissertation, University of the West of England). 

Elsayed, M. A. M. (2020). Preferences of institutional investors: Evidence from the Arab region.  

Joyce, M. (2014).  Kuwait, 1945-1996: An Anglo-American Perspective . Routledge.  

Lessambo, F. (2016).  The international corporate governance system: Audit roles and board oversight . Springer. 

Winstone, H. V. F., & Freeth, Z. (2017).  Kuwait: prospect and reality . Routledge.