Imports

Before the discovery of oil in Kuwait, the economy thrived on exporting pearls around the world to be used for making luxury jewelry and other valuable products. The success of exporting pearls did not last indefinitely however, as the reduction in demand, as well as the increasing competition in the industry reduced the effectiveness of pearl exports as a primary source of income (Kpc, 2019). Demand for pearls kept decreasing even until the discovery of oil in 1938, which changed the country and how it came to operate economically. The discovery of oil gave Kuwait a completely different and far more valuable resource to harvest and export. Today, Kuwait’s primary export is oil, with the latter being non-oil goods and materials. The newfound oil and the wealth it brought to the country allowed the economy in Kuwait to boom, which subsequently allowed the country to import more goods and services from abroad, increasing the overall diversity of trade between Kuwait and the rest of the world. The purpose of this research paper is to analyze Kuwait’s trade with the rest of the world, and to attempt to identify any visible trends in export and import activities which may help in predicting the future of Kuwait’s international trade relations.

Kuwait’s Exports:

“Kuwait is an oil-based economy that adopts an export promotion policy as the fundamental strategy for economic growth” (Merza, 2007). Kuwait exports oil and non-oil products to many of its export partners around the world, with the largest percentages of exports going to India, Saudi Arabia, and the United Arab Emirates respectively. The products themselves are numerous and varied; however, products like Crude Petroleum, are traded in much larger volumes than most of the other exported goods. To understand and analyze the nature of exports leaving Kuwait, three points in time within this decade will be selected, and data related to the components and value of the exports will be charted. For the purpose of consistency, seven components of the total exports will be selected and compared for each of the chosen years. These components are: Crude Petroleum, Refined Petroleum, Petroleum Gas, Cyclic Hydrocarbons, Cars, Jewelry, and Scrap Copper.

Fig.1 (Atlas.media.MIT.EDU,2019).

The first selected year is 2012, where total exports measured up to $92.4 Billion. Crude Petroleum was responsible for 71% of all exports that year, followed by Refined Petroleum (20%), Petroleum Gas (3.9%), Cyclic Hydrocarbons (1.6%), Cars (0%), Jewelry (0.011%), and Scrap Copper (0.066%). Only 3.32% of the total exports were dedicated to all other products. Fig.1 displays these percentages in a pie chart for clarity (Atlas.media.MIT.EDU,2019).

In terms of export destinations, the countries receiving most of Kuwait’s exports were: South Korea, India, and Japan. Exports to South Korea Totaled $16.1B, and included products like: Crude Petroleum, Refined Petroleum, Petroleum Gas, Cyclic Hydrocarbons, Scrap Copper, and more. Similar materials were also exported to India, totaling $15.9B. Exports to Japan were slightly different, as they only included 3 materials: Crude petroleum, Refined Petroleum, and Petroleum Gas, which sold for a total of $13.4B (Atlas.media.MIT.EDU,2019).

Fig. 2 (Atlas.media.MIT.EDU,2019).

In 2014, exports totaled $87.4B, with a slight change in composition overall. In this year, export of crude petroleum went down to 66% of total exports, Refined Petroleum remained at 20%, and similarly, Petroleum gas stayed at 3.9%. Cyclic Hydrocarbons increased to 1.9%, and Kuwait begun to export Cars, making up 0.62% of overall exports. The export of Jewelry increased substantially, to 0.27% (from 0.011% in 2012), and finally, export of scrap copper increased slightly to 0.075%. Other products contributed to 7.2% of overall exports this year (Atlas.media.MIT.EDU,2019).

South Korea was still the country receiving the largest volume of exports by 2014, followed by India and Japan again. Exports to South Korea totaled $15.3B in this year, $13.8B to India, and finally, $11.1B to Japan. The materials traded to these export partners were similar in 2014, however, Japan saw an expansion in variety of products received compared to 2012, and purchased a small amount of vehicle parts, telephones, reaction and catalytic products, and “other furniture” (Atlas.media.MIT.EDU,2019).

Fig. 3 (Atlas.media.MIT.EDU,2019).

In 2017 Kuwait saw a massive reduction of almost half its export volume, earning $45.9B compared to $87.4B only three years earlier. Reliance on Crude Petroleum remained heavy, and it still comprised of the largest portion of sales in 2017 (68%). Refined Petroleum comprised of only 12% of the overall sales this year, while Petroleum Gas saw a small increase to 4.4%. Sales of Cyclic Hydrocarbons maintained a steady increase (2.2%), and the sale of Cars as a percentage of the whole increased to 1.3%. Jewelry and Scrap copper also increased by a small amount (0.38% and 0.15% respectively). In 2017, other products were sold in even greater proportions, and measured up to 11.57% of overall exports (Atlas.media.MIT.EDU,2019).

Exports Analysis:

Over a period of 5 years (2012-2017), the volume and components of Kuwait’s exports changed notably. Firstly, in 2012, Kuwait sold $94.4B worth of products and materials; a number that fell to $85.4B in 2014, and then to $45.9B in 2017. This can be explained by viewing the price of oil in each of these years, as the bulk of sales each year has been of oil products. In 2012 the price of oil was $111.65 per barrel, dropping to $98.89 per barrel in 2014, and then falling significantly to $54.15 per barrel in 2017 ("Average Brent Crude Oil Price By Year Chart 1990-2017"). This correlates directly to the overall fall in exports across this time period, and explains why Kuwait has been selling larger volumes of non-oil products. Since 2012, the export of cars has increased from none at all, to a steady increase towards 1.3% of overall exports. Jewelry and Scrap Copper followed a similar trend, and both increased relative to the overall composition of Kuwait’s exports. Another good indication of Kuwait’s increasing reliance on non-oil materials is the percentage of ‘other’ products sold each year. In 2012, other products only constituted 3.32% of total sales, steadily increasing to 11.57% in only 5 years (Atlas.media.MIT.EDU,2019). Kuwait’s top three export partners have consistently been South Korea, India, and Japan, and the data suggests that Kuwait has been diversifying the products it is exporting to these countries. Overall this trend suggests that Kuwait is slowly but steadily starting to rely more on non-oil materials; especially due to the unpredictable and less-than-favorable nature of oil prices in the recent years.

Imports:

The increase in Kuwait’s income due to the exporting of oil products gave way to an aggregate increase in imports and an improvement in quality of life for all of Kuwait’s residents. As a small developing country, Kuwait could not manufacture or produce a wide range of products, and so it compensated by importing a variety of materials from around the world, allowing the country to flourish by raising living standards. Even with the dramatic increase in importing, Kuwait’s balance of trade remained positive, as it exported much more than it imported at any given time. To analyze this further, a new group of products/materials will be chosen to represent imports in 2012, 2014, and 2017, as previously done with exports. This time however, the criteria selected will not focus on individual products; but instead, on groups of products, for example: Transportation (Cars, delivery trucks, vehicle parts, etc). This choice was made due to the fact that materials imported to Kuwait are far more varied and selecting specific products would not represent the majority of imports justly.

Fig. 4 (Atlas.media.MIT.EDU,2019).

Topping the list of imports in 2012 are Transportation products , with 27.2% of all imports being comprised of cars, delivery trucks, passenger and cargo ships, vehicle parts, etc. Imported machinery was valued at 21.5% , and included products like valves, gas turbines, air pumps, insulated wires, telephones, computers, etc. Metals such as iron pipes, iron structures, coated flat-rolled iron, aluminum foil, made up 9.2% of imports in 2012. Next, 6% of imports involved chemical products like packaged medicaments, reaction and catalytic products, beauty products, and perfumes. Animal products like poultry meat, sheep and goats, cheese, and butter, measured at 4.8% of imports. (6) 3.2% of imports that year were instruments, such as: Medical instruments , base metal watches, chemical analysis instruments, thermostats, optical fibers, etc. Finally, ‘other’ materials accounted for 27.6% of imports (Atlas.media.MIT.EDU,2019).

The import origins of all these products were spread across many countries; however the largest suppliers of imported goods to Kuwait were the United States ($2.33B), followed by China ($2.08B), then Japan ($1.87B). Other major contributors to Kuwait’s imports include South Korea, India, Italy, United Kingdom, and Germany (Atlas.media.MIT.EDU,2019).

Fig. 5 (Atlas.media.MIT.EDU,2019).

By 2014, the value of imports had grown by $16.4B, with some changes in the composition of the products imported. In this year, (transportation, machinery, metals, animal products, and instruments) accounted for smaller percentages of overall imports in general, however, the actual value of the imports increased due to the total import value being higher in 2014 than 2012. Chemical products increased both in value and percentage of total imports this year, and ‘other’ products saw an increase from 27.6% to 36.5%, indicating greater diversity of goods than seen in 2012 (Atlas.media.MIT.EDU,2019).

In 2014, Kuwait imported most of its goods from China ($4.46B), followed by the United States ($3.82B), and then the United Arab Emirates ($2.9B). Those three countries alone were responsible for over 32% of Kuwait’s total imports, with many other countries contributing in smaller amounts (Atlas.media.MIT.EDU,2019).

Fig. 6 (Atlas.media.MIT.EDU,2019).

In 2017, Kuwait’s imports were valued at $33.4B , a slight reduction from 2014. The constituents of the imports this year were similar to those of 2014, with almost all of the selected components increasing in percentage. Transportation imports were reduced both in dollar value and in percentage of total imports, and other products accounted for less this year than in 2014 (Atlas.media.MIT.EDU,2019).

China remained the largest contributor to Kuwait’s imports in 2017, supplying Kuwait with goods worth $5.31B. China was followed by the United States ($3.62B), and the United Arab Emirates ($2.88B). Similarly to 2014, over 35% of total imports originated from the aforementioned three countries (Atlas.media.MIT.EDU,2019).

Import Analysis

The data shows that the value of imports has increased since 2012 , and had remained steady at around $34B between 2014 and 2017. Of the many partners Kuwait imports from, China and the United States have consistently been major contributors, however, United Arab Emirates increased their involvement as the years progressed, accounting for larger percentages of Kuwait’s imports over time. Germany, Italy, Japan, and India were one of the few other major partners, preceding a number of countries selling to Kuwait in lesser amounts.

The majority of Kuwait’s imports consisted of transportation goods, machines, metals, and chemical products, while other goods accounted for relatively smaller percentages overall. While the amounts of each type of good stayed relatively stable; the diversity of goods being brought in saw an increase since 2012, which suggests that Kuwait will not have much fluctuation in the major constituents of their imports, but will also see a larger variety of more specialized materials and goods as the country develops further.

Conclusion:

Kuwait’s economy has clearly grown since the discovery of oil, and its heavy reliance on exporting oil has increased its income, potential for growth, and its capacity to import in larger volumes.

Oil exports have been the lifeblood of the country, and have consistently been the most significant factor in Kuwait’s exports by far. With time, however, oil prices have plummeted, and proven themselves inconsistent, which resulted in much smaller returns from oil exports. This is reflected in the data presented previously, and it is clear that Kuwait has increased the variety of its exports to some degree over the last decade, perhaps to compensate for the reduction in oil prices.

Imports almost doubled from 2012 to 2017, and Kuwait has been importing primarily from China, the United States, and more recently, the United Arab Emirates. The data loosely suggests that Kuwait’s imports will not increase greatly in volume any time soon, so long as oil prices remain low. Kuwait has been importing more varied goods however, and this will likely continue to be the case the more developed the country becomes, and the larger its demand is for specialized equipment and niche goods.

Citations

· "Average Brent Crude Oil Price By Year Chart 1990-2017". Coachmanenergyoperating.Com, 2019, https://www.coachmanenergyoperating.com/crude-oil-price-by-year-chart/. Accessed 4 May 2019.

· "Information Center Kuwait Oil History". Kpc.Com.Kw, 2019, https://www.kpc.com.kw/InformationCenter/Pages/Kuwait-Oil-History.aspx

· Merza, Ebrahim. "OIL EXPORTS, NON-OIL EXPORTS AND ECONOMIC GROWTH: TIME SERIES ANALYSIS FOR KUWAIT (1970-2004)". Krex.K-State.Edu, 2007, https://krex.k-state.edu/dspace/bitstream/handle/2097/293/EbrahimMerza2007.pdf?sequence=1&isAllowed=y. Accessed 29 Apr 2019.