Ri Insights

Kuwaiti-Southeast Asian Relations Set to Flourish

 

By Muhammad Zulfikar Rakhmat and Giorgio Cafiero

Exclusively published in Kuwait by: Rai Institute

 

In March, Kuwait’s ambassador to Association of Southeast Asian Nations (ASEAN), Abdulwahab Abdullah Al Sager, sent a letter to the Secretary General of ASEAN, expressing Kuwait’s keen interest in strengthening ties with the regional organization comprised of ten Southeast Asian nations. Although Kuwait’s top economic partners in Asia are non-ASEAN members, the organization is becoming increasingly important to the Arabian Gulf country’s future foreign policy. Yet as Kuwait’s pursuit of closer partnerships with ASEAN members occurs in tandem with other Gulf Cooperation Council (GCC) members which have substantially deepened their ties with Southeast Asian countries, the emirate is doing so on its own unique and special terms.

 

Kuwaiti-Southeast relations are free from ideological and political constraints that have shaped other GCC states’ ties with ASEAN. With a dynamic foreign policy rooted in diversification of allies and based on the legacies of anti-colonialism movements throughout the international community, Kuwait formed official ties with Southeast Asian countries during the late 1960s and 1970s. In the years which followed Kuwait’s 1991 liberation, when rapid industrialization and skyrocketing energy consumption took place across Southeast Asia, Kuwaiti-ASEAN relations began developing significantly.

 

Today, Kuwait and ASEAN are deeply interconnected by the hundreds of thousands of mainly unskilled Southeast Asian workers in Kuwait. Although Indians represent the largest group of foreign workers in the Arab Gulf state, communities from ASEAN countries contribute to the composition of Kuwait’s migrant workers, who constitute an estimated 70 percent of the emirate’s population of 4.3 million. Last year, there were about 220,000 Filipinos in Kuwait, up from 188,000 in 2014.

 

As Kuwait and the Southeast Asian organization grow closer, Kuwaiti officials have worked with their ASEAN counterparts to attract foreign investment and foster the growth of trade relations. To do so, in recent years the emirate and members of the organization have signed avoidance of double taxation agreements and increased government-to-government exchanges at high levels. Institutional frameworks such as the ASEAN-GCC Ministerial Meetings, the ASEAN Committee in Kuwait (established in 2011), and Asia Cooperation Dialogue, of which Kuwait was a founding member in 2002 and later joined in 2004, have augmented such developments. Organizations such as the Malaysia-Kuwait Business Council and Indonesia-Kuwait Business Forum have also supported the growth of Kuwaiti-Southeast Asian ties at bilateral levels.

 

As trade and investment between Kuwait and ASEAN have expanded in recent years, diplomatic ties have also strengthened. Today, Kuwait has embassies in each ASEAN country’s capital. In October, Brunei’s Sultan Hassanal Bolkiah Mu’izzaddin Wad’daulah expressed his support for Kuwait joining the UN Security Council as a non-permanent member. The Bruneian leader affirmed his support for this position in a joint statement released during the Emir of Kuwait’s visit to the Southeast Asian sultanate, in which officials from both countries discussed Middle Eastern security crises.

 

Energy

 

Unquestionably, the fundamental basis of Kuwait’s ties with Southeast Asian countries has been energy. Although in Kuwait’s early years as a leading global oil producer/export the emirate’s trade was rather limited, since the 1990s Kuwaiti-Southeast Asian trade increased substantially. To keep things in perspective, however, ASEAN currently plays a relatively small role in Kuwait’s energy exports to Asia. The biggest Southeast Asian buyer of Kuwaiti oil is Singapore, which is the destination of 4.3 percent of the emirate’s exports and Kuwait’s seventh largest export partner behind (in the following order) South Korea, China, India, Japan, the United States, and Pakistan. Currently Kuwaiti-Indonesian trade stands at approximately USD 415 million with only six percent of bilateral trade being outside petroleum sectors, underscoring the extent to which energy continues to shape Kuwait’s ties with the largest ASEAN’s most populous country.

 

Kuwaiti-Malaysian trade reached USD 1.4 billion in 2014. In 2015, Kuwaiti-Vietnamese trade reached USD 691 million and the emirate’s trade with the Philippines reached USD 779 million in 2015. Bruneian exports to Kuwait reached USD 57.59 million in 2015, according to the United Nations COMTRADE database on international trade. Kuwait’s bilateral trade with Southeast Asian countries, despite being on a much smaller scale than the Arab Gulf state’s trade with Asia’s largest economies, is only set to increase as ASEAN is expected to reach its predicted Gross Domestic Product of USD 10 trillion by 2030.

 

Acknowledging these bright prospects, Kuwait’s government has devoted resources to develop downstream refining and petrochemical infrastructure across the Gulf that would contribute to facilitate greater procurement of Kuwaiti energy in the coming years. ASEAN is a stakeholder in such efforts. For example, the Kuwait Petroleum Corporation (KPC), has signed a deal with PetroVietnam to develop Vietnam’s second oil refinery, Nghi Son. KPC covers 35 percent of the total cost of USD 6-9 billion of the refinery construction that is expected to have the capacity of 200,000 bpd. In Indonesia, KPC has explored the potential of developing a refinery in West Java with the country’s national energy firm with an estimated capacity of 300,000 bpd costing USD 7 billion. KPC has also partnered with Pertamina (an Indonesian state-owned oil and natural gas company) to develop another refinery in Tuban, East Java.

 

Relations Beyond Oil

 

Despite the fact that oil continues to dominate Kuwaiti-Southeast Asian trade, the Arab Gulf state and ASEAN members are deepening cooperation across a host of other sectors. These areas range from investment to agriculture, finance to culture, and education to humanitarian aid.

 

Regarding investments, most concentrate on agriculture-related business as part of Kuwait’s food security program. The emirate has signed a number of agricultural agreements with most ASEAN countries, worth a total of approximately USD 27 billion. Such deals have involved Kuwait’s major institutions such as Kuwaiti Investment Agency, Kuwait Flour Mills and Baker Co, the KPC, and the Kuwait Fund take part.

 

In 2011, a joint venture between Kuwait and China, the Kuwaiti-Chinese Investment Company (KCIC), acquired the Philippines-based engineering and construction company Atlantic Gulf Pacific (AGP) for USD 39.7 million. The Kuwaiti government is reported to have offered Cambodia loans totaling USD 546 million for dams and roads in return for 50,000 ha of farmland, possibly on a 99-year lease, to grow crops. Kuwait Investment Authority is also a cornerstone investor in IHH Healthcare Bhd, Asia’s largest hospital operator. The Kuwait Fund has played a pivotal role in enhancing Kuwait-ASEAN relations. Since the 1970s the Kuwaiti agency has been active in Southeast Asia’s agricultural, energy, and industrial sectors, having supplied ASEAN countries with USD 524 million between 1976 and 2004.

 

Kuwait has strong footholds ASEAN’s banking sector, especially Islamic banking which has grown rapidly in Southeast Asia. The Kuwait Finance House became the first licensed foreign Islamic bank in Malaysia in 2005. In addition, Sukuks, or Islamic bonds, are also crucial part of Kuwait’s foothold in the region. The Kuwait-based Gulf Investment Cooperation actively purchased a Malaysian sukuk in 2011, worth around USD 455 million.

 

Kuwaiti-Southeast Asian cooperation has expanded into other fields including sandalwood plantations, fisheries, electronics, as well as halal products and logistics. Tourism between Kuwait and ASEAN is also becoming pronounced, albeit gradually. A number of Kuwaiti tourists travel to two major Southeast Asian destinations, Thailand and Malaysia, on an annual basis. Other regional countries such as Indonesia and Cambodia have decided to ease their visa regulations, which has led to more Kuwaiti tourism in the region beyond Thailand and Malaysia.

 

Educational exchanges are bringing the emirate and ASEAN closer too. Increasing numbers of students from Kuwait are currently studying in Indonesia, Malaysia, and Singapore. The Kuwaiti government also offers scholarships to students from ASEAN countries. Additionally, there are also exchanges in governmental and administrative practices such as the MoU between Kuwait and Singapore on e-government.

 

To strengthen its presence, aid and assistance have played an important role in Kuwait’s ASEAN foreign policy. In 2012, for instance, during the first ACD summit in Kuwait City, the government Kuwait pledged to support a USD 2 billion fund for mid-sized projects to be realized in underdeveloped Asian countries, including some ASEAN members. Other Kuwait-based entities such as the Kuwait Fund and KGL Investments have contributed in these charity efforts. In 2013, Kuwait also offered USD 10 million in urgent relief aid to the Philippines after a typhoon ravaged the country. Among these groups is Revival of Islamic Heritage Society, which has carried out aid projects in the region since 1982. The projects include agricultural development, orphanage, medical centers, and scholarships. Even though in 2008 it faced a moment of closure after the White House designated it as a financial supporter of terrorist groups such as al-Qaeda, with Kuwaiti support the entity still maintains a presence in ASEAN countries.

 

Security

 

Important security factors drive Kuwait’s turn to ASEAN. Both Kuwait and Southeast Asian countries face the threat posed by extremist forces that plague Muslim countries. With Islamic State (ISIS) losing its grip the so-called caliphate’s strongholds in Mosul and Raqqa, Southeast Asian security officials are increasingly alarmed by the potential return home of ASEAN nationals who joined ISIS’ ranks in the Levant. With a history of Sunni fundamentalist forces waging acts of terrorism in Indonesia, Philippines, and other ASEAN members, officials in the region are concerned about ISIS refocusing its attention on targets in Southeast Asia. It will be key for Kuwaiti and other GCC officials to better coordinate counter terrorism efforts with their ASEAN counterparts. As the home to many foreign workers from Southeast Asia, the Arab Gulf states face the threat of ISIS loyalists entering the GCC for work and establishing more terror cells in the Arabian Peninsula.
Recently there have been some wake up calls. In March and April, Kuwaiti and Philippian authorities arrested a Kuwaiti and his Syrian wife. Both are suspected of affiliating with ISIS and plotting terrorist attacks on Kuwaiti soil targeting US military forces and a hussainiya. The Philippines deported the Kuwaiti to Kuwait and his spouse to Qatar (the country from where she entered the Philippines). Last summer, authorities in Kuwait arrested a Filipina whom they accused of being an ISIS loyalist and seeking to wage terrorism in the emirate. The woman came to Kuwait as a housemaid and later established communication with ISIS’ offshoot in Libya, according to Kuwait’s Interior Ministry.

 

Manila’s struggle against ISIS-affiliates and other Sunni Islamist terror networks is important for the Philippines’ tourism industry, particularly in the country’s central region where Western governments are warning their citizens to avoid due to the security circumstances. At the same time, given the Philippines’ interest in shoring up more GCC investment, officials in Manila have every reason to better coordinate their counter terrorism efforts with Arab Gulf states, particularly given the potential for ASEAN countries to benefit from closer ties with the Gulf.

 

Conclusion

 

As an important US ally, Kuwait’s foreign policy has long aligned with the West. Yet the emirate’s close ties with Washington and Europe do not thwart Kuwait from joining other GCC states in turning to Asia for deeper links across a range of sectors. As East-East relations grow, bringing the Middle East and Asia closer, the ten members of ASEAN, especially Singapore, are likely to open the door to growing links between Kuwait and Asia. Unquestionably, as thousands of GCC nationals and Southeast Asians have fallen to the trap of radicalization and joined global terrorist networks, Kuwait and other Arab Gulf sheikdoms must enhance their cooperation with ASEAN governments to protect their people and societies from the menaces of ISIS and al-Qaeda. Kuwait’s pragmatic foreign policy, often aimed at promoting peaceful resolutions to conflicts such as Yemen’s and providing humanitarian assistance to those suffering from Middle Eastern wars, offers much potential for the emirate to enhance its growing relationship with ASEAN in pursuit of solutions to global crises.

 

Economically, although non-ASEAN Asian countries dominate Kuwait’s ‘Look East’, Southeast Asia is growing in its importance to all GCC members as a region which is home to over half a billion people. Whereas the sale of Kuwait’s oil once dominated the Arab Gulf state’s relations with ASEAN, and still does, the emirate’s ties with the organization are gradually diversifying. In the years to come, odds are good that agriculture and food security, Islamic banking, education, and investment will cement stronger relations between Kuwait and ASEAN.


**Muhammad Zulfikar Rakhmat is an advisor at Gulf State Analytics (@GulfStateAnalyt), a Washington, DC-based geopolitical risk consultancy. Giorgio Cafiero is the CEO of Gulf State Analytics.


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