PESTEL also known as PESTLE or PEST Analysis is a strategic tool which has been utilized by the strategists and marketers to determine and analyze the external or Macro-environmental factors that could have positive and negative impact on Organization. This articles will discuss the PESTEL or PEST analysis of Kuwait to perform analysis of external factors ( Political, Economic, Social, Technological, Environmental and Legal ) that have impact on the Country.
Kuwait shares borders with Saudi Arabia and Iraq and its capital is also Kuwait, which is the largest city of that country. Its main natural resource is oil and that’s the money generating engine of this country. Saddam Hussain of Iraq captured this country and made it part of Iraq by calling it 19th state. In 2011 Kuwait got its freedom again. It is the only country in the world which has no supply from natural water. Falcon is their national bird because they can be seen flying everywhere in Kuwait. Rainfall is around 2 times in the year and that makes it one of the hottest countries in the world in summer, however sandstorms come very often. Islam is the most dominant and official religion of Kuwait. (Facts about Kuwait, 2015)
It’s a U.S. alliance country, in 2011 when it got freedom from Iraq there was some political disturbances in which other parties wanted the Prime Minister to resign, because of his policies making Kuwait a closed economy. Other political parties wanted a liberalized economy in order to benefit from foreign activities on their grounds. Recently Saudi Arab’s tactics of putting other high cost oil production countries out of business have given Kuwait a lot of problems. Their economy is not as vibrant as Saudi Arab’s and it is heavily dependent on export of Oil, therefore any fluctuation in oil prices proves to be a severe blow for their economy. Another major political issue that all Muslim and particularly Middle Eastern companies face is that of no business law with Israel and once Kuwait Airlines was sued by an Israeli citizen for not issuing him ticket.
In the early nineties their economy was based on exports of hides and pearls. But after 1940s oil was discovered and since the exploration of this mineral, it is nearly half of the contributor to GDP and accounts for 95% of the export and governmental income. Efforts need to be put by the government to diversify the dependency on oil and make Kuwait an open economy. The government supported increase in life style through infrastructure investments and rise in salaries, when oil prices were stable and proved to be an excellent revenue source for the country, which it needs to revisit and make rational decisions. Kuwait’s economy isn’t doing well recently and GDP surplus has reduced but in the coming years the situation will be improved and growth rate will increase from 0.8% to 3% per year. (Tamimi, 2014)
Kuwait is the hub of expatriates who come from foreign countries to earn their living in this region of the world where salaries are relatively better. It is a small country with only one natural resource that plays a significant role in GDP growth but it attracts a large number of labors from other developing countries who aren’t as rich as Kuwait. The most important social issue faced by the citizens is to make sure that these people do not enter illegally and get work permit so that their activities can be monitored. Recently authorities have deported many illegal workers back to their countries for multiple law breaking activities. Kuwait’s government has been under immense pressure by the citizens to limit the number of migration and distribution of employment opportunity among locals first. (HAGAGY, 2013)
Central Bank of Kuwait not only acts as financial intermediary and custodian of Kuwaiti’s wealth but also finances technological projects in order to promote technological transfer and help Kuwait advance in diversified industries. National Investment Authority formed by their National Assembly also makes sure that oil mining and exploration projects are carried out with the aid of most modern technology imported from the West. Certain incentives are also offered by the government for setting up industries in government suggested fields, like tax holidays, import free duties, security of investment, ease of financing etc.
Oil drilling and exploration is also creating environmental mess not only air pollution but also water pollution through oil spills during export of oil. Gulf war was a huge environmental law trespassing when Saddam Hussain ordered his troops to fire all the oil wells while they are retreating from Kuwait. It was estimated that on average 3-5 million barrels per day was burnt and there was even danger of acid or nuclear rain as a result of this environmental violation. Financially it was damaging too but it did more damage on the health side. Sun was partially blocked by the black smoke of the oil burning which lead to major changes in climate and temperature. The situation will be hazardous for future generations too just like Hiroshima Nagasaki where children born even after the nuclear bombing were disable and abnormal due to exposure to traces of radiation during pregnancy. (KUWAIT–The effects of oil drilling )
Most astonishing and amazing law that is enforced in Kuwait is there are no taxes on salary and wages. However other laws have to be strictly followed. If you were a citizen and have to pay some debts then your exit permit won’t be issued for leaving the country unless you have cleared all previous dues, bills and financial claims to your property etc. Kuwait has been rated as a safe and secure place to live in by US. Researchers. The threat for crimes here are relatively low. Due to sudden atmosphere and weather changes like sandstorms, heavy rain falls, the greatest risk that an average Kuwaiti faces is during driving and therefore proper safety signs have been posted on roads to guide citizens and avoid fatalities as much as possible.
Facts about Kuwait. (2015, July 20). Retrieved December 20, 2015, from Kuwait up 2date: http://www.kuwaitup2date.com/top-10-facts-about-kuwait/
HAGAGY, S. W. (2013, June 12). Economic, social pressures behind Kuwait crackdown on foreign workers. Retrieved December 25, 2015, from Reuters: http://uk.reuters.com/article/uk-kuwait-labour-idUKBRE95B0N420130612
KUWAIT–The effects of oil drilling . (n.d.). Retrieved December 25, 2015, from http://web1.cnre.vt.edu/lsg/3104/Main%20Page-revised/Oil%20Exploitation/Main%20Page/Kuwait-1/Kuwait-Environmental.html
Tamimi, A. T. (2014, October 16). Oil keeps Kuwait’s economy strong, for now. Retrieved December 25, 2015, from Al Monitor: http://www.al-monitor.com/pulse/business/2014/10/kuwait-oil-wealth-disparities-infrastructure.html