Kuwait


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Kuwait has the fifth-largest oil reserves in the world. It is the third-largest oil producer in the Arab world, providing considerable wealth to a population of less than 3 million. In 2009, petroleum accounted for 43 percent of gross domestic product and 93 percent of exports. In 2010 the sector generated 83 percent of government revenue.


Kuwait's Performance on the Resource Governance Index

Kuwait ranked 42nd out of 58 countries and received a "weak" score of 41, with particularly poor performance on the Institutional & Legal Setting component.

Rank
(out of 58)
Score
(out of 100)
42 Composite Score 41
52 Institutional & Legal Setting 28
Freedom of information law 0
Comprehensive sector legislation 67
EITI participation 0
Independent licensing process 33
Environmental and social impact assessments required 50
Clarity in revenue collection 67
Comprehensive public sector balance 33
SOC financial reports required 0
Fund rules defined in law 0
Subnational transfer rules defined in law N/A
37 Reporting Practices 43
Licensing process 67
Contracts 0
Environmental and social impact assessments 0
Exploration data 33
Production volumes 17
Production value 44
Primary sources of revenue 0
Secondary sources of revenue 100
Subsidies 0
Operating company names 0
Comprehensive SOC reports 100
SOC production data 86
SOC revenue data 28
SOC quasi fiscal activities 100
SOC board of directors 50
Fund rules 100
Comprehensive fund reports 0
Subnational transfer rules N/A
Comprehensive subnational transfer reports N/A
Subnational reporting of transfers N/A
47 Safeguards & Quality Controls 36
Checks on licensing process 33
Checks on budgetary process 100
Quality of government reports 50
Government disclosure of conflicts of interest 0
Quality of SOC reports 67
SOC reports audited 100
SOC use of international accounting standards 100
SOC disclosure of conflicts of interest 0
Quality of fund reports 0
Fund reports audited 17
Government follows fund rules 0
Checks on fund spending 0
Fund disclosure of conflicts of interest 0
Quality of subnational transfer reports N/A
Government follows subnational transfer rules N/A
16 Enabling Environment 57
Corruption (TI Corruption Perceptions Index & WGI control of corruption) 69
Open Budget (IBP Index) N/A
Accountability & democracy (EIU Democracy Index & WGI voice and accountability) 32
Government effectiveness (WGI) 59
Rule of law (WGI) 66
Satisfactory Weak
Partial Failing
To explore all data and compare
scores, use the RGI Data Tool.

Institutional & Legal Setting (Rank: 52nd/58, Score: 28/100) learn more

Kuwait's "failing" score of 28 reflects the lack of a comprehensive legal framework.

Kuwait does not grant licenses for oil extraction; the state-owned Kuwait Petroleum Corporation (KPC) is the sole concessionaire. However, KPC and its subsidiaries do sign service contracts, in which international oil companies participate as subcontractors in upstream oil operations in exchange for a fee per barrel extracted. A handful of state-owned companies also subcontract services for downstream activities; these contracts are awarded following open bidding rounds with sealed bids.

Laws governing extractive activities provide only guiding principles and do not clearly designate regulatory responsibilities. In practice, the Oil Ministry and the Supreme Petroleum Council share oversight of the industry. KPC collects oil revenues from its subsidiaries and transfers them to the Kuwait Investment Authority.

There is no freedom of information law. Kuwait requires environmental impact assessments but does not make public the results.

Reporting Practices (Rank: 37th/58, Score: 43/100) learn more

Kuwait received a "weak" score of 43, the product of a lack of contract transparency and disaggregated revenue data.

KPC publishes information on subcontracting policies, the value of contracts, and the names of subcontracting companies, but the details of agreements are not disclosed.

The Supreme Petroleum Council does not publish revenue data. The Finance Ministry publishes only historical information on prices, the value of resource exports, and production costs in certain annual Minister Statements. The Oil Ministry publishes an online magazine with historical information on reserves, production volumes, prices, and estimates of investment in exploration and development, but does not publish information on disaggregated revenue streams. The Central Bank issues public reports that include historical comparisons of production volumes and prices, as well as current information on the value of resource exports.

Safeguards & Quality Controls (Rank: 47th/58, Score: 36/100) learn more

With insufficient mechanisms to ensure competition and prevent mismanagement of the oil sector, Kuwait received a "failing" score of 36.

Parliament plays a significant oversight role, although its activities often appear to be politically motivated. Lawmakers must approve all contracts with foreign companies, but there are no clear procedures for other parties to appeal contracting decisions.

The Supreme Audit Authority reviews state accounts and its reports are presented annually to lawmakers. However, government officials and executives of state-owned companies are not required to disclose their financial interests in the extractive industry. A weak legislative framework, political interference, and disputes over regulatory responsibilities have created inefficiencies and opportunities for corruption.

Enabling Environment (Rank: 16th/58, Score: 57/100) learn more

Kuwait received a "partial" score of 57, the product of mediocre rankings for corruption control and the rule of law, and a poor democracy and accountability score.


State-Owned Companies (Rank: 18th/45, Score: 63/100) learn more

KPC is entirely state-owned and monopolizes oil industry. Together with its ten subsidiary companies, KPC manages all aspects of the upstream and downstream oil sector. The company publishes comprehensive, up-to-date information on revenue generation but its figures do not include disaggregated revenue streams, aside from income tax data. KPC's annual reports are audited, and it provides information on its board of directors, but rules governing the board's decision-making are not available.

Natural Resource Funds (Rank: 19th/23, Score: 15/100) learn more

The General Reserve Fund (GRF) and the Future Generations Fund (FGF) concentrate revenues from the extractive industries. The GRF receives all state revenues, most of which come from oil, and holds all government assets. Each year, 10 percent of these revenues are deposited in the FGF. The Kuwait Investment Authority manages both funds. Rules for deposits are set by executive decree and published. Internal, classified publications include information on the funds' assets, transactions, and investments, but it is illegal to disclose the information. The funds are audited, but the results are not made public.

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