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E/ESCWA/EDID/2019/WP.7
6 May 2019
ORIGINAL: ENGLISH
Economic and Social Commission for Western Asia
TRADE PERFORMANCE AND STRUCTURE PROFILES1 Kuwait
1 For additional information on the used data and the techniques of estimation, please contact Mr. Mohamed Chemingui, Chief of Regional Integration section at EDID, email: [email protected] and/or Mr. Mehmet Eris, Economic Affairs Officer at the Regional Integration section/EDID, email: [email protected] . Note: This document has been reproduced in the form in which it was received, without formal editing. The opinions expressed are those of the authors and do not necessarily reflect the views of ESCWA.
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TABLE OF CONTENTS
TRADE PERFORMANCE AND STRUCTURE PROFILES: KUWAIT ________ 3
I. Trends in Trade and Investment _______________________________________ 3
II. Merchandise trade structure and indicators performance ____________________ 6
Exports ___________________________________________________________ 6
Imports ___________________________________________________________ 6
Exported Products ___________________________________________________ 7
Imported Products ___________________________________________________ 7
III. Trade Policy ___________________________________________________ 16
TABLE OF FIGURES
Figure 1: Merchandise Exports and Imports, as a share of GDP ........................................ 3
Figure 2: The share in world merchandise exports and imports ......................................... 4
Figure 3: Kuwait’s Services Trade, 1995-2017, as a share of GDP .................................... 5
Figure 4: Net FDI inflows and outflows, 1996-2017, percent of GDP .................................. 5
Figure 5: Top export destinations and import sources, as a share of total exports and
imports, 2016 ...................................................................................................................... 6
Figure 6: Top products exported and imported, 2016 (as a share of exports and imports) . 7
Figure 7: Trade Intensity Index ........................................................................................... 8
Figure 8: Trade Complementarity Index ............................................................................. 8
Figure 9: Hirschman-Herfindahl Index (bilateral export portfolio diversification) ................ 9
Figure 10: Export Diversification Index ............................................................................. 10
Figure 11: Export Sophistication ....................................................................................... 10
Figure 12: Export Market Penetration Index ..................................................................... 11
Figure 13: Export Similarity Index ..................................................................................... 11
Figure 14: Hummels-Klenow intensive and extensive margins (product) ........................ 12
Figure 15: Hummels-Klenow intensive and extensive margins (market) .......................... 13
Figure 16: Intra-industry Trade Index ............................................................................... 14
Figure 17: The composition of the change in bilateral merchandise exports between 2000
and 2016 along intensive and extensive margins ............................................................. 14
Figure 18: MFN and applied tariff rates for all products, simple and weighted means ...... 16
Figure 19: Services Trade Restrictiveness Index, 2010 .................................................... 16
3
TRADE PERFORMANCE AND STRUCTURE
PROFILES: KUWAIT
I. Trends in Trade and Investment
Figure 1: Merchandise Exports and Imports, as a share of GDP
Source: ESCWA calculations using the World Development Indicators database (accessed October 2018).
Kuwait’s merchandise exports have fluctuated considerably over the past two decades,
closely tracking movements in oil prices. For instance, the sharp decline in the GDP share
of exports since 2014 coincide with a large drop in oil prices in the same period.
Merchandise imports on the other hand appear more stable or slow-moving than
merchandise exports.
0%
10%
20%
30%
40%
50%
60%
70%
80%
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95…
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96
19
97
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98
19
99
20
00
20
01
20
02
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20
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20
10
20
11
20
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20
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20
14
20
15
20
16
20
17
Imports to GDP (%) Exports to GDP (%)
Kuwait’s performance in trade and attracting foreign direct investment over the past two decades have been weak. Kuwait’s merchandise exports, expressed as a share of GDP, have closely tracked developments in oil prices and its merchandise imports have been mostly steady in the 2000s and early 2010s and appear to have plateaued at a slightly higher level since 2015. Kuwait’s services trade, measured as a share of GDP, has been rather volatile over the past two decades, in part driven by fluctuations in oil prices and its impact on GDP. Net FDI inflows have been negligible, with the notable exception of the five-year period starting in 2008. Net FDI outflows, however, have been rather large and sustained since the mid-2000s. Traditional destinations for Kuwait’s exports have mainly been PAFTA and ASEAN+++ countries. PAFTA and sub-Saharan African countries hold relatively favorable prospects for Kuwait’s exports, which show limited extent of diversification and sophistication.
4
Figure 2: The share in world merchandise exports and imports
Source: ESCWA calculations using COMTRADE data (accessed October 2018).
After a surge between 2000 and 2006, Kuwait’s share in world export has gone down
steadily and is slightly higher than the level attained in 2000. Kuwait’s world import share,
after having increased steadily, albeit somewhat weakly, in the 2000s, has surged since
2010.
0
0.0005
0.001
0.0015
0.002
0.0025
0.003
0.0035
0.004
0.0045
2000 2006 2010 2016
share in world exports share in world imports
Although Kuwait’s merchandise imports currently stand at levels comparable to the late 1990s, between the late 1990s and early 2010s, the share of merchandise imports in GDP practically halved.
5
Figure 3: Kuwait’s Services Trade, 1995-2017, as a share of GDP
Source: ESCWA calculations using the World Development Indicators database (accessed October 2018).
Kuwait’s services trade, as a share of GDP, has been rather volatile over the past two
decades, in part driven by fluctuation in oil prices and its impact on GDP. Kuwait’s services
trade, as a share of GDP, had halved between 1998 and 2013, but as of 2016, has regained
the level reached in 1998.
Figure 4: Net FDI inflows and outflows, 1996-2017, percent of GDP
Source: ESCWA calculations using the World Development Indicators database (accessed October 2018).
0
5
10
15
20
25
30
35
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95
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97
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98
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00
20
01
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%
-15
-10
-5
0
5
10
15
-2.5
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
1996…
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97
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98
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99
2000
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2003
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2006
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2009
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%%
FDI outflows (right axis) FDI inflows (left axis)
6
Net FDI inflows into Kuwait are generally low but sustained relatively high levels over the
five-year period following the global financial crisis of 2008. Net FDI outflows on the other
hand have been much larger in magnitude and negative net FDI outflows, reflecting the
dominance of disinvestment of the residents of Kuwait of their assets abroad, were the norm
in the late 1990s, up until 2004. Since 2004, Kuwait has recorded substantial net FDI
outflows.
II. Merchandise trade structure and indicators performance This sect ion assesses the trade performance and structure of Kuwait, employing a range of indicators and indices created using highly disaggregated product-level data.
Figure 5: Top export destinations and import sources, as a share of total exports and imports, 2016
Source: ESCWA calculations using COMTRADE data (accessed October 2018).
Based on COMTRADE data, which rely on data declared by countries and
might miss partner-level detai l2, PAFTA has been the top partner for the
exports of Kuwait and its share has increased substant ial ly since 20 00.
ASEAN+++ fo llows PAFTA as the second most important destinat ion for
Kuwait ’s exports.
2 This appears to case with Kuwait, for which a large share of its merchandise exports is not assigned to an identified partner in COMTRADE data.
Exports Imports
7
Figure 6: Top products exported and imported, 2016 (as a share of exports and imports)
Source: ESCWA calculations using COMTRADE data (accessed October 2018).
Mineral fuels, oils and their distillation products has by far been the most important product
group in Kuwait’s merchandise exports, though its share has moderated somewhat in 2016.
Kuwait’s merchandise imports have been distributed fairly evenly across different products.
Nuclear reactors, boilers, machinery and mechanical appliances, vehicles and vehicle parts,
and electrical machinery and equipment have been notable products with high import shares.
Exported Products Imported Products
ASEAN+++ is also the top source for Kuwait’s imports, overtaking the EU which stood atop in 2000.
8
Figure 7: Trade Intensity Index
Source: ESCWA calculations based on COMTRADE data (accessed October 2018).
The trade intensity index captures whether the value of trade between a reporter and partner
is greater or smaller than would be expected on the basis of their importance in world trade.
Kuwait traditionally traded more intensively with PAFTA countries, though even with PAFTA,
Kuwait’s trade is not particularly intensive. As of 2016, Kuwait’s trade is in line with what
PAFTA’s world trade share implies.
Figure 8: Trade Complementarity Index
Source: ESCWA calculations based on COMTRADE data (accessed October 2018).
0
0.2
0.4
0.6
0.8
1
1.2
2000 2006 2010 2016
ASEAN EFTA EU28 JPNCHNIND NAFTA
PAFTA RestAfrica RestAmerica RestAsia TUR
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
2016 2000 2006 2010
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The trade complementarity index captures how well the structures of a country’s exports
and its partner’s imports match, showing the extent of prospects for further exchange. The
index takes on the value zero when no goods are exported by one country or imported by
the other and 1 when the export and import shares exactly match.
The index for Kuwait attains relat ively h igher values with PAFTA, fo llowed by
sub-Saharan Afr ican countries.
Figure 9: Hirschman-Herfindahl Index (bilateral export portfolio diversification)
Source: ESCWA calculations based on COMTRADE data (accessed October 2018).
Kuwait appears to have diversified its export portfolio vis-à-vis most of its partners, with the
notable exception of Latin American countries, as measured by the Hirschman-Herfindahl
Index. The diversification of Kuwait’s export portfolio visa-à-vis ASEAN, EU and PAFTA
countries and Turkey is marked. The Hirschman-Herfindahl Index captures how diversified
a bilateral export portfolio is.
A country with a perfectly diversif ied export portfol io will have an index close
to zero, whereas a country which exports only one product would atta in the
value of unity ( least d iversif ied).
0
0.1
0.2
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2016 2000 2006 2010
10
Figure 10: Export Diversification Index
Source: ESCWA calculations based on COMTRADE data (accessed October 2018).
The Export Diversification Index measures whether a country is highly dependent on
relatively few products or its export portfolio is diversified. The lower the index, the less
concentrated are a country’s exports. As measured by this index, Kuwait’s exports have
become less diversified since 2000, despite small gains in the second half of 2000s.
Figure 11: Export Sophistication
Source: ESCWA calculations based on COMTRADE data (accessed October 2018).
Total, 0.644
Total, 0.844Total, 0.801
Total, 0.856
0
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0.3
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0.5
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0.9
1
2000 2006 2010 2016
90
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105
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1200
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3500
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Average of EXPS Average of rank EXPS (right axis)
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Kuwait has managed to specialize in more sophisticated products over the past decade and
has climbed by some ten spots in global rankings as of late, albeit from a rather low global
rank.
Figure 12: Export Market Penetration Index
Source: ESCWA calculations based on COMTRADE data (accessed October 2018).
Kuwait’s penetration into export markets had deteriorated significantly in the 2000s, before
slightly improving in the first half of the 2010s, as measured by the Export Market
Penetration index. The index is essentially the share of the actual number of export
relationships (at the country-product level) forged by the country in question in the maximum
possible number of export relationships it can form given its exports.
Figure 13: Export Similarity Index
Source: ESCWA calculations based on COMTRADE data (accessed October 2018).
Total, 0.019
Total, 0.016
Total, 0.011
Total, 0.014
0
0.005
0.01
0.015
0.02
0.025
2000 2006 2010 2016
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
2010 2000 2006 2016
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The export similarity index captures the extent to which two entities in question are
competitors in a common market. The index value of zero suggests that there is no
competition between the two countries and of one that they are perfect competitors. Based
on the export similarity index, Kuwait’s main competitors in world markets are PAFTA
countries.
Figure 14: Hummels-Klenow intensive and extensive margins in products
Source: ESCWA calculations based on COMTRADE data (accessed October 2018).
It is interesting to explore whether Kuwait exports larger quantities or a greater variety of
goods. To measure the first, the Hummels-Klenow intensive margin in products could be
employed, which essentially captures the share of Kuwait’s exports in the world exports of
products that Kuwait exports. This index has almost doubled between 2000 and 2016 and
reached around 0.07 per cent as of 2016, after a sharp increase in the first half of the 2000s
and an increase in the first half of the 2010s offsetting a decline in the second half of 2000s.
Kuwait a lso exper ienced a rather s izable decl ine in the share of the products
Kuwait exports in total wor ld exports of al l goods, also referred to as the
Hummels-Klenow extensive margin in products and gives an indication of how
comprehensive the set of goods a country exports is.
0
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0
0.001
0.002
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2000 2006 2010 2016
Hummels-Klenow intensive margin (product) Hummels-Klenow extensive margin (product) (right axis)
13
Figure 15: Hummels-Klenow intensive and extensive margins in markets
Source: ESCWA calculations based on COMTRADE data (accessed October 2018).
It is also of great interest is to see as to whether Kuwait exports larger amounts to its existing
trade partners or expands into new markets. As a measure of the former, Kuwait’s share in
the total world exports to only those countries that Kuwait exports to, also referred to as the
Hummels-Klenow intensive margin in markets, had gone up significantly in the second half
of the 2000s but since has declined steadily.
Kuwait has managed to increase, part icularly in the first half of the 2010s, its
share in the world exports to only those countries that Kuwait exports to in
tota l world exports of al l goods, referred to as the Hummels -Klenow extensive
margin in markets and captures the extent of expansion into new export
markets.
0.945
0.95
0.955
0.96
0.965
0.97
0
0.0005
0.001
0.0015
0.002
0.0025
0.003
0.0035
0.004
0.0045
0.005
2000 2006 2010 2016
Hummels-Klenow intensive margin (market) Hummels-Klenow extensive margin (market) (RHS)
14
Figure 16: Intra-industry Trade Index
Source: ESCWA calculations based on COMTRADE data (accessed October 2018).
The intra-industry trade index measures the extent to which products that belong to the
same industry were being traded between two countries, ranging between 0 and 1 and with
values close to 1 corresponding to a high level of intra industry trade. Kuwait has engaged
in intra-industry trade primarily with PAFTA countries.
Figure 17: The composition of the change in bilateral merchandise exports between 2000 and 2016 along intensive and extensive margins
Source: ESCWA calculations using COMTRADE data.
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
2000 2006 2010 2016
-3
-2
-1
0
1
2
3
4
2016 2016 2016 2016 2016 2016 2016 2016
ASEANplus3 EFTA EU28 NAFTA PAFTA RestAfrica RestAmerica WLD
Existing products to new markets New products to new markets Discontinued products
New products to existing markets Existing products to exisiting markets
15
Notes: The abbreviations and the list of the countries included in each group are as follows. The Association of Southeast Asian Nations (ASEAN) is created using Indonesia, Malaysia, Philippines, Thailand, and Vietnam, not including Brunei, Cambodia, Laos, Myanmar, and Singapore. [to be completed]
Between 2000 and 2016, only very limited share of the change in the exports of Kuwait has
come from expanding into new products and/or markets. This share is around 60% for the
United Arab Emirates and Bahrain, and 25% for Viet Nam. Across different destinations, the
EU, ASEAN+++, and sub-Saharan Africa stand out as the destination to which new products
have a relatively high share in Kuwait’s exports. Latin American and EU countries have been
dynamic markets for Kuwait’s exports, with high value shares of new markets.
NAFTA members are relatively stagnant export markets for Kuwait, with a relatively low value share of new products or markets.
16
III. Trade Policy Figure 18: MFN and applied tariff rates for all products, simple and weighted means
Source: ESCWA calculations using the World Development Indicators database (accessed October 2018).
Little change has been recorded by Kuwait since 2002 on tariff protection, possibly on
account of already low MFN and applied rates.
Figure 19: Services Trade Restrictiveness Index, 2010
Source: Borchert, Gootiiz and Mattoo (2014).
0
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5
6 1998
1999
2000
2001
2002
2003
2004
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2006
2007 2008
2009
2010
2011
2012
2013
2014
2015
2016
Applied rate, simple mean Applied rate, weighted mean
MFN rate, simple mean MFN rate, weighted mean
0
20
40
60
80
100
| | | | | |
KWT
Financial Professional Retail Telecommunications Transportation Overall Arab World
17
Policies and regulations on Kuwait’s services trade are somewhat restrictive, more stringent
than the world and Arab averages. In particular, telecommunications services and retail
trade appear to have substantially more restrictive policies and regulations in place, as
compared to the world and Arab region averages.
END NOTE
Kuwait’s weak trade and investment performance in the past two decades appears to have
been driven by its failure to diversify its export portfolio and to specialize in more
sophisticated products, and restrictive services trade policies and regulations in place.
Addressing this performance gap requires a broad and comprehensive policy response,
including but not limited to undertaking reforms in the services sector and identifying and
following up with opportunities to transform Kuwait’s economy structurally.