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