Kuwait’s economic makeover under danger as little companies fight for life

By Ahmed Hagagy

KUWAIT (Reuters) – Thousands of compact and medium Kuwaiti firms could go to the wall soon after getting walloped by the pandemic, potentially torpedoing a private sector central to the country’s initiatives to remake its unorthodox and oil-pumped economic climate.

The government, which spends a lot more than 50 % of its annual finances on the salaries of Kuwaitis who primarily function in condition work opportunities, has encouraged citizens to established up their personal organizations in excess of the earlier ten years in an effort and hard work to engineer a private sector.

The purpose has been to ease state funds, reduce reliance on the imported labour of expatriates who make up most of the populace, and also enable Kuwait diversify absent from oil, which delivers in 90% of state revenues but is seeking significantly precarious as the world moves away from fossil fuels.

But significantly of that 10 years of perform to foster modest and medium-sized enterprises (SMEs), which included about $500 million of condition financing, has been undone by the COVID-19 outbreak, according to many industry industry experts.

Most of the 25,000 to 30,000 SMEs in Kuwait had been functioning with limited dollars reserves even just before the pandemic struck and were unable to climate a halt in functions due to lockdowns, investment management organization Markaz stated.

In an indicator of the scale of the trouble, Abdulaziz al-Mubarak, head of the Kuwait Federation for Little and Medium Enterprises, reported that about 8,600 entrepreneurs ended up presently switching from operating in the non-public sector to the federal government.

He warned that the cash crunch could “conclude the complete sector”.

That is a important problem for Kuwait, exactly where SMEs deliver 11.9% of GDP by gross value included, employ tens of 1000’s of men and women and play an vital job in sectors like wholesale and retail trade, foodstuff and drinks, hospitality and design.

Choose Mohammed al-Blushi. His manufacturing facility creating trucks and good residences from gentle steel experienced major losses due to COVID-19 restrictions. He has been compelled to shrink his staff to just a few workforce from about 60.

He came up with 50 percent of the 800,000-dinar ($2.7 million) funding to get started his organization four several years back, with the rest coming from a mortgage from a point out fund.

The 36-calendar year-old now fears he could default on the financial loan, and is keeping out for even more assistance from the governing administration these types of as payment for its pandemic losses or exemptions from particular money owed.

“I will not give up,” he claimed. “The disaster will subside, God eager.”


Expatriates, mostly from Arabic and Asian nations, make up about 70% of the 4.6 million-solid inhabitants of Kuwait, a tiny state on the Persian Gulf sandwiched by bigger regional gamers Saudi Arabia and Iraq.

Kuwait, like other oil exporters, was slammed by the double shock of small crude selling prices and the COVID-19 pandemic, main to the economy shrinking by 8% final yr.

On March 30 this yr, parliament passed a legislation on financing for SMEs, but for some small business homeowners it will show far too late.

The regulation presents individuals affected by the pandemic accessibility to funding of up to 250,000 dinars, of which the govt assures 80%. Lots of SME entrepreneurs say financial institutions impose onerous financing conditions less than the scheme, like proving the operational performance of jobs. The repayment period is five a long time with a feasible additional two years of grace.

A senior govt resource, who declined to be named, said some SMEs ended up reluctant to make use of the regulation due to the fact it offered financial loans fairly than compensation, the state didn’t totally assure the funding and the restrict on the reimbursement time.

However the official claimed the laws could be amended to provide extra assist organization entrepreneurs, if vital. “All alternatives are obtainable to the governing administration to aid proprietors of SMEs,” he additional, without the need of elaborating.

An modification to Kuwait’s individual bankruptcy legislation, which commenced to be carried out past thirty day period and freed SME proprietors from the danger of imprisonment from financial debt defaults, has presented some reduction.

Nonetheless business people are nonetheless exposed to pitfalls these types of as seizure of property or insolvency if they can not settle their debts, said Fawaz Khaled Alkhateeb, an tutorial at the Kuwait Global Law Faculty.

(Reporting by Ahmed Hagagy Enhancing by Yousef Saba, Saeed Azhar and Pravin Char)