Canada and Kuwait on Monday signed a trade and investment treaty, during the first visit by a Kuwait prime minister to this country.
The Foreign Investment Promotion and Protection Agreement sets out rules to ensure that foreign investors receive similar treatment to domestic investors.
It also guarantees that companies will not have their investments expropriated without prompt and adequate compensation and that they will not be subject to treatment lower than the minimum standard established in customary international law.
It must still be ratified by both Canada and Kuwait.
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"This agreement will encourage two-way trade and investment by providing greater predictability and certainty for investors in both countries," Prime Minister Stephen Harper said in a statement.
He said Kuwait offers "significant investment potential" for Canadians, particularly in manufacturing and infrastructure.
In recent years, Canada has grown its presence in Kuwait, largely in the healthcare and education sectors, engineering, oil and gas, as well as in a number of new retail franchises.
Bilateral trade between Canada and Kuwait reached $129 million last year.
Kuwait's prime minister, Sheikh Nasser Al-Mohammed Al-Ahmed Al-Jaber Al-Sabah, met with Harper to also discuss challenges currently facing the Middle-East and North Africa, including security in the region.