A GLOBAL / COUNTRY STUDY AND REPORT ON “Microanalysis of Different Industries of Kuwait” Submitted to Gujarat Technological University IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION UNDER THE GUIDANCE OF Faculty Guide (Meetali Saxena) Submitted by Batch: 2011-13 L.J.Institute of Computer Applications MBA SEMESTER IV MBA PROGRAMME Gujarat Technological University Ahmedabad May, 2013 Students’ Declaration We, Students of L.J.Institute of Computer Application, Section : D , hereby declare that the report for Global/Country Study Report entitled “ Microanalysis Of Different Industries in kuwait is a result of our own work and our indebtedness to other work publications, references, if any, have been duly acknowledged. Place: Ahmedabad (Signature) Akash Tiwari Date : (Class Representative) Institute’s Certificate “Certified that this Global /Country Study and Report Titled “Microanalysis of Industries Of Kuwait” is the bonafide work of Students of L.J.Institute of Computer Application, who carried out the research under my supervision. I also certify further, that to the best of my knowledge the work reported herein does not form part of any other project report or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this or any other candidate. Director Faculty Guide 2 (Dr. P. K. Mehta) (Meetali Saxena) Place: Ahmedabad Date : Executive summary 3 This report describes the findings and outlook of the business volume, products, and investment analysis of Kuwait. Kuwait is in Middle East, bordering the Arabian Gulf, between Saudi Arabia and Iraq. Climate of Kuwait Dry desert; short, cool winters; intensely hot summers. The economy of Kuwait is a small, comparatively open economy with proven crude oil reserves of about 96 billion barrels, i.e. about 10% of world reserves. Petroleum accounts for almost half of GDP, 90% of export revenues, and 95% of government income. Currency of Kuwait is Kuwaiti Dinar (KWD) Kuwait city is home to Kuwait's parliament, the headquarters and most governmental offices, of most Kuwaiti banks and corporations. It is the political, economic and cultural centre of the emirate. Booming economy of Kuwait has allowed many international hotel chains to enter agreements to open hotels in the country. The financial organization of the world’s fourth-largest oil bourgeois has given the loosely regulated investment corporations 2 years to befits more durable leverage rules once risk management at several was found lamentably lacking within the money crisis. Kuwait’s various commercialism and holding firms called investment homes were laborious hit by the meltdown, that prompted a government economic rescue package price KUWAIT DINAR one.5 billion ($5.15 billion) last year. The financial organization demanded in its new directives to any or all investment firms that their debts not exceed double the dimensions of their capital. money and money equivalents ought to cowl a minimum of 100 percent of liabilities, and a company’s investments or contracts outside the country were now not allowed to account for over 50percent of its capital ,the regulator aforementioned. In Associate in Nursing interview with native daily al-Rai revealed on fifteenth Gregorian calendar month, financial organization governor, swayer Salem Abdul-Aziz al-Sabah, aforementioned forty nine of the one hundred investment firms already befits all of those laws. The business volume of Kuwait increased from 2005 to 2012 constantly. In 2005 it was 4 11827.3 and in 2012 it is 25995.3. so we can say that it increased around 120 percent. Business volume includes trading, construction, agriculture and fishing, non-bank financial institution, consumer loans, installment loans, real estate, crude oil and gas and public services. There are a total of 100 investment companies operating in Kuwait with 54 operating within the confines of the Islamic Sharia provisions and the rest operating as conventional investment companies. Additional, 51 of these companies are listed on the KSE. Kuwait's economy in general recovered at a slower pace than expected in the first half of 2010, after reduction 21% in nominal terms in 2009 due to the economic crisis and depressed oil prices. The government intervened with a stimulus package of Kuwait Dinar 1.5 billion to help stabilize the financial sector. Nevertheless, there still remain obstacles for the general economy to reverse the downtrend. At present the investment sector is in the process of going under a key renovated by the regulatory agencies due to the numerous defaults and regulatory breaches by the various companies that were affected by the financial crisis. This could assist with improving transparency and prevent excessive leverage in the system reducing the overall systematic risk. One of the repercussions of the financial crisis on Kuwait was that the investment sector - consisting of listed companies - lost approximately a cumulative KUWAIT DINAR 864 million in 2009, which followed the losses of KUWAIT DINAR 927 million in 2008, and record profits of KUWAIT DINAR 903 million in 2007. Moreover, the 2009 losses were marginally lower than 2008 which in effect signaled the very slow pace of recovery in the investment sector in Kuwait. Kuwait's investment sector witnessed strong growth from 2003 until 2007. Nevertheless most of this growth was attributed to the availability of cheap credit as opposed to fundamental growth in the economy. The investment and real estate sectors contributed positively to the overall economy and helped with the development of a more dynamic capital market which encouraged the private sector to vigorously increase their contributions in various funds operating both on a local and international scale leading to a subsequent surge in prices across all asset classes. The Kuwaiti investment sector continued to witness significant losses in comparison to the other Gulf countries. As of 2Q 2010, the total losses in Kuwait amounted to Kuwait Dinar 422.7 million. Although Kuwait is the largest investment sector in GCC, the significant losses are mainly attributed to the relatively risky business model of the companies in Kuwait. Reasons 5 for the reduced performance and liquidity problems of Kuwaiti Investment Companies like Excessive short term debt, which created asset-liability difference, Aggressive expansionary policies during the boom economy duration, Insufficiency of risk management etc. To handle the money crisis, variety of investment firms resorted for rescheduling of debt obligations and/or merger activities. firms like international Investment House and Investment Dar that had sweet-faced giant debt compensation issues had to resort to restructuring their debt payment schedules and implement varied steps like quality sell-offs, cut and reducing their exposure to risky assets that that they had accumulated throughout the pre-crisis period. From analysis of CSR on the “Restructuring Debt Obligations – Kuwait” It had been ascertained that largely firms within the investment sector had to structure debt from short term to medium term. On the opposite hand, merger agreements ar virtually at the ultimate stages for Gulf Investment House – initial nondepository financial institution The total debt of the full investment sector peaked in 2008 with associate degree accumulated figure of Kuwait Dinar of eight,853 million. Total debt grew at a CAGR of twenty fifth from 2003 until 2008. This was owing to a budget credit accessible in previous years and therefore the aggressive expansionary policies undertaken by these firms. Since 2009, the full debt within the sector has been showing a declining trend. As of Q3-2010 the full debt amounted to Kuwait Dinar of seven,416 million. Assets grew steadily from 2003 till 2008 for both conventional and Sharia compliant investment companies. Nevertheless, this growth was attributed to the liquidity available and the composition of the assets which were significantly impaired during the crisis. The large impairments resulted in defaults by investment companies across the GCC and Kuwait. The inability of these companies to refinance their debts was mainly due to the high asset encumbrance and the act of more leveraging the assets during the pre-crisis duration. The ultimate deliberating process resulted in triggering defaults across a spectrum of both conventional and Islamic investment companies. The country aims to become a money centre within the next four years, a part of a development decide to diversify its state-dominated economy and shift weight to the personal sector. Sfakianakis believes competitory against Bahrain, Dubai, Associate in Nursingd Asian nation are an “enormous” challenge as a result of those markets “have been higher regulated, 6 additional capital adequate, additional clear, larger in size, less risky, additional international and diversified”. As per the Kuwaiti Ministry of Interior, there are about 6 lacs Indians, who constitute the largest expatriate community in Kuwait. The Indian community is regarded as the community of first preference among the expatriates in Kuwait. India is viewed by Kuwait as a fast growing economy and a source of highly qualified professional and technical personnel. A large proportion of the Indian expatriates are unskilled and semi-skilled workers. Professionals like engineers, doctors, scientists, chartered accountants, software experts, architects, management consultants; skilled workers like