BEAR­ING FRUITS

Kuwait’s COVID-19 busi­ness up­dates co­in­cide with a broader ef­fort to up­grade its busi­ness and in­vest­ment land­scape.

The Business Year Special Report - - Focus -

KUWAIT SE­CURED A PLACE IN THE TOP-10 ECONOMIES with the most no­table im­prove­ments in the World Bank’s “Do­ing Busi­ness 2020” re­port. Tak­ing a deeper dive, Kuwait’s re­forms have fa­cil­i­tated pro­cesses in the fol­low­ing ar­eas: start­ing a busi­ness, deal­ing with con­struc­tion per­mits, get­ting elec­tric­ity, reg­is­ter­ing prop­erty, get­ting credit, pro­tect­ing mi­nor­ity in­vestors, and trad­ing across borders. More­over, The World Eco­nomic Fo­rum’s Global Com­pet­i­tive­ness 2019 re­port also rec­og­nized Kuwait as the most im­proved coun­try in the re­gion, mov­ing up eight spots from 2018.

Though these recog­ni­tions came be­fore the out­break of the novel coro­n­avirus, Kuwait is con­tin­u­ing its tra­jec­tory, lever­ag­ing both the mo­men­tum of pre­vi­ous re­forms and the op­por­tu­nity to ad­vance dig­i­tal­iza­tion.

With re­gard to the for­mer, Kuwait has im­ple­mented sev­eral mea­sures to main­tain eco­nomic sta­bil­ity through­out the cri­sis. Be­fore the pan­demic, de­lay of pay­ments from the pub­lic sec­tor was a sig­nif­i­cant chal­lenge and caused is­sues of liq­uid­ity down the sup­ply chain. There­fore, an im­por­tant mea­sure as a re­sult of COVID-19 was ex­pe­dit­ing govern­ment pay­ments to pri­vate sec­tor ven­dors and con­trac­tors.

An­other crit­i­cal area of con­cern is sup­port­ing SMEs through such un­cer­tain times, es­pe­cially as SMEs will be even more fun­da­men­tal in the post-COVID-19 era. In­stall­ments for loans funded by the Kuwait SME Fund and In­dus­trial Bank have been post­poned, as well as so­cial se­cu­rity con­tri­bu­tions and pay­ments bank loans and fa­cil­i­ties for six months. Re­gard­ing the lat­ter, in­ter­est on such pay­ments was can­celed. More­over, var­i­ous re­sources were mo­bi­lized, and stop­gaps im­ple­mented to pro­tect work­ers’ jobs, salaries, and over­all fi­nan­cial se­cu­rity.

Look­ing at for­eign in­vest­ment, the Kuwait Di­rect In­vest­ment Pro­mo­tion Agency (KDIPA) im­ple­mented sev­eral mea­sures to sup­port cur­rent in­vestors and as­sure con­tin­ued in­ter­est and FDI. HE Dr. Me­shaal Jaber Al-Ahmed Al Sabah, Di­rec­tor Gen­eral of KDIPA, noted that com­mu­ni­ca­tion is crit­i­cal for meet­ing in­vestor needs and cre­at­ing a con­ducive in­vest­ment en­vi­ron­ment. “From the start of the pan­demic, KDIPA launched a COVID-19 Response Team to sup­port its part­ners and dis­sem­i­nate rel­e­vant up­dates through mul­ti­ple on­line out­lets.” What’s more, “The un­ex­pected out­break of COVID-19 played a cat­alytic role to speed up em­brac­ing the new dig­i­tal chan­nels such as de­vel­op­ing needed e-ap­pli­ca­tions, de­liv­er­ing govern­ment e-ser­vice, uti­liz­ing e-com­merce, man­ag­ing vir­tual teams, and hold­ing on­line events and meet­ings.”

Ac­cord­ing to an up­date re­leased by EY in May 2020, KDIPA’s ma­jor amend­ments to sup­port in­vestors in­cluded: ex­ten­sion of the tax and cus­toms in­cen­tives to all KDIPA-reg­is­tered en­ti­ties, re­vised mech­a­nism for grant­ing tax ex­emp­tion, and re­duc­tion of ser­vice fees by 50% through De­cem­ber 31, 2020.

In an exclusive in­ter­view with TBY, EY Part­ner and MENA Govern­ment and Pub­lic Sec­tor Tax Leader Alok Chugh ex­plained how EY was sup­port­ing the govern­ment largely re­lated to en­hanc­ing dig­i­tal ca­pa­bil­i­ties. In terms of fa­cil­i­tat­ing dig­i­tal trans­for­ma­tion and in­te­gra­tion of tech­nol­ogy, “[EY] pro­vides the tech­nol­ogy so the govern­ment can in­ter­act with ci­ti­zens and busi­nesses as well as across pub­lic bod­ies. We also help in terms of de­vel­op­ing the fi­nan­cial and eco­nomic stim­u­lus pack­ages to achieve var­i­ous ob­jec­tives, whether it is cre­at­ing more liq­uid­ity or pro­vid­ing more fund­ing in terms of lend­ing.” Though there were afore­men­tioned ef­forts to sup­port SMEs, Chugh goes on to point out the im­por­tance of data when it comes to SMEs. “With proper data on the num­ber and size of SMEs, the govern­ment can bet­ter for­mu­late mea­sures to sup­port them. This has been a huge chal­lenge but is get­ting in­creased at­ten­tion.”

This pub­lic-sec­tor sup­port from EY and its ef­fects point to a rein­vig­o­ra­tion of the coun­try’s New Kuwait Vi­sion 2035, which had lost steam be­fore the pan­demic.

The Cen­tral Bank of Kuwait is an­other piv­otal stake­holder in terms of en­abling eco­nomic sta­bil­ity. A tes­ta­ment to the cen­tral bank’s suc­cess in this re­gard is the main­te­nance of Kuwait’s scores from var­i­ous rat­ing agen­cies. To in­crease liq­uid­ity, the cen­tral bank’s reg­u­la­tory stim­u­lus pack­age raised do­mes­tic banks’ lend­ing ca­pac­ity by KWD5 bil­lion, and the in­sti­tu­tion low­ered its cap­i­tal ad­e­quacy in­struc­tion for banks from 13% to 10.5%. Fur­ther­more, the cen­tral bank low­ered the dis­count rate to 1.5%.

Kuwait may have been a first-time ad­di­tion to the World Bank’s Do­ing Busi­ness top-10 most im­proved coun­tries, but it cer­tainly may not be the last.

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