The globalisation of business has led to changes of great significance in the business world. The emergence of China and India as centres of manufacturing and services, with equal skills and fractional costs, have led to significant global migration work and far-reaching realignment in the British basket of financial services. In this globalised scenario, the British financial services industry has over time evolved, among other things, into a supplier of high end services in areas of finance, banking and allied information technology. British banks like UKB (assumed name) have been active outside the UK for many decades, especially in former British ruled territories like India and have built up significant expertise in Asian markets.
Apart from China, India and the countries of East Asia, the GCC (Gulf Coordination Council) countries have lately emerged as very significant growth areas for banking and financial services. UKB has also opened an office and started banking and financial services operations in Kuwait, pursuant to the changes in Kuwaiti law, in 2004, allowing foreign banks to operate in the country. The bank has ambitious plans for its operations in the Gulf and has accordingly stationed a large team of ten British employees at Muscat to direct UKB’s international business in the GCC states.
The bank places great importance on its international plans and has committed significant financial and personnel resources to its plans for business expansion in the GCC countries and is extremely serious in its ambition to become a significant player among the banks and financial institutions providing financial services in Kuwait. The management is confident in its belief that it possesses both domain skills of a very high order and the financial strength required to make a strong success of its operations in Kuwait and thus open the way for further expansion in the GCC countries.
The management of UKB has, of late, reasons to believe that the British team at Muscat has operational, managerial and personal issues that need to be resolved to improve job satisfaction and productivity. The relevant issues mainly relate to divides in culture, working methods, value systems and managerial beliefs between the British expatriates and the local Kuwaitis, with whom there is constant contact, as co-employees, customers, suppliers and regulators.
The management believes that the situation is serious enough to merit intervention and has asked the author to prepare a report for the attention of all the expatriate employees based in Kuwait. The author has extensive experience of the operations of the GCC countries, both in the capacity of line manager and as consultant to companies operating in the region. This report has been prepared for the use of the bank’s expatriate staff working in Kuwait and will be useful to employees working in other overseas locations as well.
The author has tried to provide reasons for UKB’s choice of Kuwait as a business destination, the various issues that are likely to come to the fore when British banking experts have to operate outside the UK for long periods of time, the various managerial, operational, personal and cultural challenges that employees have to face in the course of their everyday life and the best way to deal with them. The author wishes to point out that the text provided in this report is in the nature of general information and the suggestions recommended need to be studied and modified for personal use. The use of “one size fits all” is patently incorrect, if not downright ludicrous in such situations and the staffs are requested to make the best possible use of the suggestions and recommendations.
General Economy of Kuwait
Kuwait is a small country situated in the Middle East and a member of the GCC. It holds 8 % of the worlds’ known oil reserves and with the recent explosion in the price of petroleum products has seen significant increases in dollar inflows coming into the country. The country has had a troubled past. It was invaded by Iraq in 1990 under Saddam Hussein and subsequently freed by US intervention. With the removal of Saddam Hussein, the region has now entered a period of stability and oil revenues riding on high prices are driving the country into an economic boom. Travel and tourism is increasing rapidly.
Kuwait is in the midst of a sea change, sparked by two recent developments. The unprecedented rise in the price of oil over the last two years has dramatically increased the wealth of the country. Revenues from petroleum sales now priced at more than seventy dollars a barrel were three times projections in 2005. These revenues have brought unplanned riches to this oil-wealthy GCC country. As holder of 8 % of the worlds’ known oil reserves and with annual surpluses in the region of US $ 23 bn,  Kuwait is awash with funds and learning to digest this windfall; a flood of dollar inflows which do not show signs of abatement.
The death of the Amir Sheikh Jaber and the transition of authority to the new Amir, Sheikh Sabah Al-Ahmed Al-Jaber Al-Sabah, have set the stage for huge economic developments, which are mainly concerned with further development of the emirate’s oil reserves. Revenues from oil make up 50 % of Kuwait’s GDP. The new Amir is in the process of making significant changes in both the oil and non-oil sectors and with erstwhile neighbour, Saddam Hussein out of the picture there is greater confidence to invest.
Banking and Financial Services in Kuwait
The country, till recently, allowed foreign companies to own up to 49 % of local banks. In 2004, this restriction was removed and full foreign ownership is now allowed, allowing foreign banks like BNP Paribas and UKB to start operations in the country. The major opportunity in the region lies in extending brokerage and financial services to the local population and UKB is trying to actively enter and consolidate its’ presence in these sectors.
“Over the medium term, Kuwait’s financial position is projected to remain strong. The large external current account and fiscal surpluses are expected to lead to a build-up of a large stock of financial assets for future generations.” The country’s sound group of commercial banks, led by the premier Arab bank, National Bank of Kuwait, is well managed and profitable. Kuwaiti Banks have shown remarkable performances. Led by the Bank of Kuwait, the Middle East (BKME) and Kuwait Finance House (with approximately 60 % increases in pre-tax profits), the consolidated assets of the 14 Kuwaiti banks touched record heights in 2005.
Banking, financial markets and financial services are preparing a platform for the forecasted boom years. Many international and local banks and financial services companies are vying with each other to improve service and make Kuwait a significant GCC financial center.
These plans face two main challenges. Firstly, the stock markets have, after a period of sharp growth, entered a phase of correction, earlier this year with stock values plummeting across the region, eroding shareholder wealth and burning investors. This stock market correction (a drop of a record 14% in March) and larger market declines elsewhere in the Gulf, , have given bankers cause for concern. Rating agency Moody’s has recently cautioned about an asset bubble in the region and that banks may not know the full extent of the possible problem until loans can be assessed at the end of this year.
Banking companies operating in Kuwait’s fledgling banking, brokerages and financial services sector have to wrestle with this downturn in investor confidence and face stiff competition from the other financial centers in the GCC countries. The vision of the current Amir’s new regional financial centre needs strategic design, focus, commitment and implementation to succeed.
Saudi Arabia, Bahrain, Dubai and Qatar all have financial centers competing for supremacy in the Gulf sweepstakes. In this context, with the viability of five regional financial centers yet to be established the financial institutions in Kuwait need to play a very significant role if the country is to become a strong financial hub. The financial and brokerage institutions have to design their strategy in this context and plan their work considering the challenges provided by the availability of substantial local wealth, strategic geographical location, intense regional competition and a slow moving bureaucracy.
All companies operating in the field of share and securities brokerage and financial services have to take account of these two developments, which have the potential to act as force multipliers and propel Kuwait’s development manifold. A dynamic leadership wishing to achieve ambitious objectives and armed with adequate resources can achieve far-reaching changes that may be out of the ordinary.
To summarize, Kuwait’s banking, brokerage and financial services must find their way to service their customers, optimize performance and create a strategic design with a horizon of at least ten years in a market with many challenges and yet tremendous opportunity. The circumstances under which they need to operate, thrive and grow are as under.
Their immediate environment is immensely rich, witness to strong cash inflows and has strong potential for brokerages and companies offering financial services
The region is now comparatively stable after the removal of Saddam Hussein and the government is planning significant and far reaching investments in oil development and infrastructure
The country is witnessing sharp growth in travel. Investments in top end luxury hotels are increasing with the entry of large international chains. This increase in travel has led to the formation of new regional airlines and additional flights from the big airlines.
The region has very active stock markets that are currently in a corrective phase after sustained and dizzy growth. The dip in stock prices has made shares more attractive and increase in buying activity is forecasted
The official Kuwait Stock Exchange (KSE), restructured in 1983 after the collapse of the unofficial stock market in 1982, has become, despite the Iraqi invasion in 1990, the most sophisticated market in the region.
The GCC region has five financial services centers, Saudi Arabia, Dubai, Bahrain, Doha and Kuwait. The other four centers already have a head start over Kuwait and experts doubt whether the region can support five strong centers.
The KSE, which is the second largest Stock Exchange in the GCC countries and has a sophisticated and fully automated computerized system is urging its members to provide self-service technologies to its’ clients. It has published APIs and guidelines on the mode of integrating online trading with its’ gateway.
A number of international financial institutions and banks are re-entering the region with more skills and expertise as well as deeper pockets. These banks will bring strong competition and international state of art practices to the market places. Though operating under restrictions they will forge alliances with local businesses and strive to increase their service portfolio and business in the region. “According to the bank’s Kuwait chief executive Nick Nicolaou, HSBC has already built up a staff of 42 and is developing a comprehensive training programme. “We think we can add value. With our regional and global footprint, we can do a lot that local banks cannot do.”  HSBC is likely to emphasise its sub-custodian capabilities for foreign investors among other services.”
It is evident that these are momentous times for the banking, financial services, wealth management and brokerage companies in Kuwait. Their choice of strategy during this particular sunrise period will determine largely their survival, prosperity and growth in the coming decade.
A number of these companies have also started offering self-service technologies to their clients. This is seen as a big step forward in their client offering. KMEFIC and KAMCO are two brokerage companies who have been frontrunners in adopting this technology. KMEFIC’s services have proved to be notably successful and they are now able to provide services, which cover most of the GCC countries and the US market.
The Role of UKB managers
The analysis of political and economic analysis provided in the previous two sections indicates the enormous business opportunities present for companies operating in the banking sector. UKB is one of the few foreign banks operating in Kuwait and has substantial early mover advantage. The free space available and lack of strong competition will not last for very long and UKB officials need to exploit the business advantage fully.
Banks and financial institutions are also rapidly introducing Self Service Technologies for brokerage and internet banking activities. UKB managers must also thus work towards leveraging their superior banking and technological skills and ensure that their technology on offer is the best possible. Any introduction of modern technology is going to be more stressful in Kuwait than what managers from the UK would have experienced before and managers would do well to remember that technology that does not live up to its promises causes intense customer dissatisfaction. Implementation of technology will need to be done with care, especially with respect to maintenance, back up and support services.
Kuwait and the other GCC countries have business environments that are radically different from the UK, the USA and countries of West Europe. The differences in history, culture, traditions and mores as well as the predominance of religion in everyday life contribute towards creating an environment that appears to be alien and is often a cause for great discomfiture for westerners who wish to put down anchor for extended periods and operate in business environments. It is thus essential to understand the Kuwaiti way of doing business in order to respond adequately to business challenges.
The recommendations provided below are common for most of the Arab world and will stand all British expatriates negotiating business contracts in Kuwait. UKB officers should try, as far as possible to follow the following guidelines, extracted from the Australian Government’s website for doing business with Arab states. 
Information is often unreliable and efforts to expand sources of information will aid understanding of a business situation. This includes advice from other westerners who have more experience of local conditions. Statistics and market data are often imprecise and can lead to wrong forecasting.
Budgets must be realistic, timelines conservative as slippages are very common, and transactions take longer than expected.
Extensive networking helps in generating business leads
Complex business procedures are common and a contract may take take many visits and apparently unnecessary negotiations.
Once contracts are finalized, the clients or business partners often want to move fast often based on a handshake.
Finally, everything moves on price and UKB managers must work towards delivering beneficial and tangible price outcomes.
Religion, in this case Islam, plays a very definitive role in the life of people of governs interpersonal dealings. A knowledge of the Islamic calendar helps and it is wise not to fix any important meetings for Friday, the Islamic Sabbath, when many offices and shops remain closed. The holy festival of Ramadan occupies one whole month and its dates vary every year. Kuwaitis fast for the whole day and while they are used to the yearly ritual, business activities slow down. UKB managers should plan their work accordingly and factor in these considerations into their budgets and commitments.
Business meetings are also very different from the west and are frequent causes of frustration for expatriates used to the professionalism of UK business. Some characteristics  of Arab meetings, very capable of disturbing UKB managers are as follows.
The meeting may be disturbed and that too quite often, by phone calls and assistants coming in to sign documents or take instructions. The business world is far more informal and interruptions are the norm, rather than the exception. Totally unconnected people may also come in and remain present, without contributing anything towards the proceedings. Meetings are also often interrupted because of prayer timings. Any show of frustration is looked at with amusement and UKB managers must learn to be patient and impassive in their attitude.
The Kuwaitis are very good negotiators and quite adept at sensing the unease of their business counterparts. It thus, remains advisable to stay focused, keep the main negotiating points in play, stay firm but exceedingly polite and never show frustration or impatience at the conduct of proceedings. They will be looking for sincerity and trust and it is important that these reassurances are provided continuously, through word, action and reinforcement of capability.
Expatriates living in foreign locales feel the need to occasionally relax in familiar surroundings. Kuwait has a number of luxury hotels with good cuisine and health club facilities and it is strongly recommended that the British staff make good use of them. It is also however important to mix with important local clients and prominent members of the bureaucracy and gradually build up networking contacts. While engaging with Kuwaitis socially it is important to remember a few local traditions and customs.
The right hand is always used for eating and it is impolite to eat with the left. The art of small talk, especially about local events helps in social and business settings. Handshakes are often clasps and should be avoided with females. Regular eye contact is desirable and firmness, as separate from arrogance, leads to respect. The most commonly used term is Inshallah, which stands for “god willing” and underlines the predominance of religion in all dealings.
The success of a strategic international thrust depends upon a number of things, the most important being viable business opportunities, excellent domain knowledge, awareness of local political processes and economic conditions and the ability to deliver, technically and economically, a superior product or service. UKB is fortunately placed. It is at the right place at the right time and needs to convert its first mover advantage to consolidate its position as a significant player in the banking and financial circles of Kuwait.
The banks expatriate team has the responsibility of carrying forward the objectives of the bank to fruition and economic success. They will need to handle a number of challenges on their road towards their objective. A proper reading of the various suggestions and recommendations provided in the course of this report should certainly make their assignment easier to handle.
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 Timewell, S, 2005, A changed terrain for banks
 Timewell, S, 2006, A future to plan for, Page 1
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 Doing Business with Qatar