Through tax concessions, Kuwait welcomes foreign investment in heavy and light industries, but continues to resist foreign investment in the oil sector. In May 2000 the government passed the Indirect Foreign Investment Law, allowing the purchase of up to 100% of the stock of companies listed on the Kuwait Stock Exchange except for banks. In March 2001 the government passed a liberalized Foreign Investment Law that, together with a five-year privatization plan announced July 2001, is expected to substantially increase foreign investment in Kuwait. Previously, foreign investment was not permitted in certain sectors such as banking or insurance, and was restricted to less than 49% of ownership shares in permitted areas. Foreign investors are no longer required to have a Kuwaiti sponsor, but are subject to a 55% corporate tax that Kuwaiti companies do not pay. Major foreign investors in Kuwait as of 2001 included Japan's Arabian Oil Company and US-owned Texaco. In July 1995, the Union Carbide Corp. and Kuwait's Petrochemical Industries Co. began construction of a $2 billion petrochemical plant, the biggest joint venture involving a foreign company to date in Kuwait. Foreign investment totaled $110 million in 1995. Foreign direct investment (FDI) has historically been low and not encouraged by a government concerned "Kuwaitization" of the economy. In 1997, FDI was reported at $20 million, rising to $59.1 million in 1998, and reaching $72.3 million in 1999. However, FDI inflow fell to $16.3 million in 2000, and then in 2001 turned into a net outflow of -$39 million.
Low inward investment contrasts with remarkably high outward investment, though the government does not publish any statistics for these activities. Kuwaiti outward investment consists of portfolio investments held by the Kuwait Investment Authority (KIA), other direct investments by other government entities, and outward investments by private citizens. The KIA portfolio was estimated to have reached about $60 billion in 2002. Entities like the Kuwait Petroleum Corporation have sizeable investments in production, refining and marketing activities abroad, but only the roughest estimates as to their value can be made. Investments by private citizens are thought to at least equal the government's holdings.