Kuwait Driving License Law Impacts Auto Sector

Kuwait’s population is approximately 4.6 million people, of which 3.3 million are expats working in both the public and private sectors. Kuwait does not have a permanent residency program and therefore, expats are expected to leave the country once their contracts are concluded.

Since 2017, Kuwait has experienced an average population increase of 1.5-2.0% annually, which puts Kuwait’s existing roads and infrastructure under additional pressure causing high congestion especially during peak rush hours. Until Kuwait completes its current infrastructure projects, this challenge is expected to continue for future years as the population keeps growing.

To ease the road congestion, Kuwait has passed a new law to reduce the number of drivers and implement specific criteria for foreigners who can obtain a driving license. According to the new law, any foreign national who desires to obtain a driving license must meet the following minimum requirements:

• A high degree (University and/or above)
• A monthly salary of KD 600 (Approximately $2,000)
• Completion of two years in the country.

Recently, the Ministry of Interior has withdrawn thousands of driving license of foreign national and more will be revoked. Last year, 37,000 driving licenses have been withdrawn. Many spouses of foreign workers’ driving license have not been renewed citing the growing traffic in Kuwait. The new law will also impact those above 60 years of age, whose residence permit will not be renewed due to a regulation expected to be effective in 2021.

The COVID-19 pandemic and the steep decline of oil prices has forced the Kuwait Government to cancel or postponed large infrastructure projects, which will also directly affect the number of foreigners working in Kuwait. As well, Kuwait National Assembly (the Parliament) is seeking to approve a bill to establish a quota system on the number of foreign workers in Kuwait. According to the bill, foreigners in Kuwait should be maximum 15% of the total population. If the bill passes, it will force local companies to terminate the service of foreign workers and replace them with Kuwaiti citizens wherever possible. The passage of this bill would result in a decrease in the number of new expats arriving and in return, the population growth rate is expected to slow.

Considering the implementation of the new drivers license law, the market for new vehicles and aftermarket industry will be heavily impacted in a negative way this year. New automobile sales have seen a steep decline cited by automotive experts. In the first two months of 2020, according to data reported by Kuwait’s Authority of Transportation, the market has a negative trend this year with 18.019 car sold (-3.1%) in Jan-Feb. In March 2020, Kuwait issued a country-wide lock-down and various curfews due to the pandemic. As a result, the car market decreased an astounding 51.5% in that month with 5.182 car sold, ending the first quarter of the year with 23.198 cars sold (-20.7%).

Kuwait Commercial Law permits a foreign company to carry out business activities in Kuwait through a local representative/distributor. A formal agreement is required for the local company to market and sell the brand in Kuwait, especially since only Kuwaiti nationals are permitted to import into the country. Based on that requirement, choosing the right business partner is crucial to the success of doing business in Kuwait. A well-connected partner who is established in the automotive market is desired.

CS Kuwait recommends the following to U.S. companies looking to enter the market or maintain market share during such a challenging time:

1- Choose a single local business partner and work with them closely to grow the business.

2- Sign an agreement after consulting with your legal advisor. The agreement should have easy exit terms and limited duration. Avoid complicated terms and conditions as Kuwait is a small market.

3- Be responsive and available to answer inquiries.

4- Be involved and work with your partner to develop and execute a business plan. Some companies in Kuwait ask for extended credit facilities and sharing of marketing cost that is similar to what is offered by Asian and European competitors.

For more information contact Commercial Specialist Xavier Muthu at Xavier.Muthu@trade.gov.