VIII. TRADE AND PROJECT FINANCING A. Description of the Banking System Under the supervision and authority of the Central Bank of Kuwait, the Kuwaiti financial sector is made up of seven commercial banks that follow international banking standards. These banks provide traditional banking services such as savings accounts, traveler's checks, credit cards, money market accounts, remittances, etc. In addition, Kuwaiti banks can provide U.S. companies and individuals with financial assistance and support. The Kuwait Finance House is the only Islamic bank in Kuwait providing services and products comparable to those of a Western-style commercial bank. There are also three specialized government banks in Kuwait which provide medium and long term financing. For example, the Industrial Bank of Kuwait helps finance industrial and agricultural projects. The Kuwait Real Estate Bank (KREB), on the other hand, helps finance lending for real estate purposes. The role of the Credit and Savings Bank is to help Kuwaiti individuals with financial support for housing and personal residential development. Kuwaiti banks have full correspondent relationships with major U.S. banks. The banks most frequently mentioned as providing a wide range of correspondent services are Citibank, Bankers Trust and Chemical Bank. There are, however, numerous other American banks providing specific services such as investment advice, credit card processing, traveler's check processing and foreign exchange trading services. In addition, many non-U.S. banks with operations in the United States also have firm correspondent relationships with Kuwaiti banks. These include Credit Lyonnais, Deutsche Bank, Dresdner Bank and Standard Chartered. Due to the broad and sophisticated nature of operations at Kuwaiti banks, there are expectations that foreign correspondent banks should be able to respond to a full range of banking needs. Kuwaiti banks have a global perspective and expect their foreign correspondents to work with them at that level. B. Foreign Exchange Controls Affecting Trading There are no foreign exchange restrictions in Kuwait. The Kuwaiti Dinar is freely convertible for all current and capital account transactions at an exchange rate calculated daily on the basis of a basket of currencies which is weighted to reflect Kuwait's trade flows. In practice, the Kuwaiti Dinar has closely followed the exchange rate fluctuations of the U.S. dollar over the past year. C. General Financing Availability Financing is available through a Kuwaiti bank upon the presentation of required documentation and the opening of an account. A U.S. company may also receive financing through their local agent or by a joint venture partnership formed with its Kuwaiti counterpart. Banks are able to provide facilities direct to the U.S. company based on its financial or supported by a counter guaranty from a reputable bank in the U.S. Facilities can be made available in Kuwaiti Dinars or other major currencies. Alternatively, to obtain the necessary facilities, the U.S. firm through its agent, could assign the proceeds of the contract in favor of the local bank (the lender). Requirements to Open a Company Account in a Kuwaiti Bank: -- Memorandum of Association -- Articles of Association -- Board Resolution - stating the persons authorized to open and operate the account on behalf of the company and obtain any form of credit facilities. This resolution should also state who has the authority to amend the signatories to the account. -- All of the above documents should be notarized by a chamber of commerce and the Kuwaiti Embassy in Washington D.C. -- Account Opening Forms duly signed (in the presence of the Bank Officer) -- Photocopies of the passport of the U.S. firm's representative In addition, U.S. companies may approach local lead agents such as investment companies and/or banks to issue KD bonds on their behalf under the company name. Approval for the issuance of the bonds is subject to the financial standing of the company, a market study, and the approval of the Central Bank of Kuwait. The advantage of using bonds as a financing tool is to avoid foreign exchange fluctuations over the term of the contract. Products and services available through Kuwaiti banks include: -- Bid bonds, performance bonds, advance payments, guarantees, retention bonds, etc. -- Sight and usance letters of credit in any major currency -- Cash facilities (i.e. lines of credit, loans) in Kuwaiti dinars or other major currencies -- Foreign exchange hedging lines -- Day-to-day banking transactions for the company and its employees D. Means of Financing Exports/Methods of Payment Subject to the nature of the consignment, financing by Kuwaiti banks can be offered on a variety of terms. These include: -- direct payment -- cash in advance -- documentary collection -- letters of credit -- letters of guarantee The Kuwaiti banking system is extremely professional and fully capable of handling short and medium term financing for all types of transactions in the major currencies of the world. E. Types of Available Export Financing and Insurance Eximbank facilities are available for public sector imports of U.S. goods and services through the Kuwait Investment Authority (the sole government body to borrow on behalf of the state, government ministries and agencies.) Private sector firms can obtain their financing through local banks either in the name of their local agent, the U.S. firm, or jointly. F. Project Financing Available Gulf Investment Corporation (GIC), headquartered in Kuwait and formed by the six Gulf Cooperation Council (GCC) countries, namely Bahrain, Kuwait, Saudi Arabia, Qatar, Oman and the United Arab Emirates, is a multi-service financial institution. GIC's objective is to provide a range of financial services to both corporate and private investors. These include portfolio management, syndications, new bond and equity issues, financial advisory services, other capital market activities and direct investment. GIC's strategy for direct investment is to promote joint venture partnerships in such fields as manufacturing, agriculture, minerals and other industrial services in the form of equity and debt funding. The International Investor (TII), also specializes in the design and delivery of a range of international and local investment products and services. TII provides corporations and individuals with custom-made financial services and products designed to meet the specific needs and requirements of U.S. companies. G. Banks with Correspondent U.S. Banking Arrangements Local Bank Correspondent Bank Commercial Bank of Kuwait Chemical Bank P.O.Box 2861 Safat Commercial Bank of Kuwait, 13029 Kuwait N.Y. Branch Tel: (965) 241-1011 Fax: (965) 245-0150 Chief General Manager: Mohamad A. Al Yahya Gulf Bank Citibank P.O.Box 3200 Safat Bankers Trust 130032 Kuwait Tel.: (965) 244-9501 Fax.: (965) 244-6126 Chief Executive Officer: John Harris National Bank of Kuwait National Bank of Kuwait, P.O.Box 95 Safat N.Y. Branch 13001 Kuwait Tel.: (965) 242-2011 Fax.: (965) 264-1456 Chief General Manager: Ibrahim Dabdoub Ahli Bank Bank of America P.O.Box 21923 Safat 13014 Kuwait Tel.: (965) 244-4444 Fax.: (965) 242-4557 Acting General Manager: Masoud Hayat Bank of Kuwait & the Middle East Bankers Trust P.O.Box 71 Safat Hong Kong Shanghai Banking 13001 Kuwait Group Tel.: (965) 245-9771 Chemical Bank Fax.: (965) 246-1430 Managing Director: Ali Abdul Rahman Al-Rasheed Al-Bader Burgan Bank Bankers Trust P.O.Box 5389 Safat Citibank 13054 Kuwait Tel.: (965) 243-9000 Fax.: (965) 246-1148 Chairman & Managing Director: Sheikh Ahmed A. Al Sabah Bank of Bahrain & Kuwait Citibank P.O.Box 24396 Safat Gulf International Bank 13104 Kuwait Tel.: (965) 241-7140 Fax.: (965) 244-0937 Chairman: Rashid A. Al Zayani Kuwait Finance House Citibank P.O.Box 24989 Safat 13110 Kuwait Tel.: (965) 244-5050 Fax.: (965) 245-5135 Managing Director: Bader A. Al Mukhazeem Industrial Bank of Kuwait Morgan Guaranty Trust P.O.Box 3146 Safat 13032 Kuwait Tel.: (965) 245 7661 Fax.: (965) 246 2057 Chairman & Managing Director: Saleh M. Al Yousef Kuwait Real Estate Bank Bank of America P.O.Box 22822 Safat 13089 Kuwait Tel.: (965) 245 8177 Fax.: (965) 2462516 General Manager: Mohamed A. AL Farhan