Kuwait Times, Sunday, Jun 26, 2022 | Zul Qaadah 26, 1443
Kuwait laws fail to provide SME entrepreneurs with financial motivation: Economist
Kuwait:
According to Kuwait’s Chamber of Commerce and Industry and Ministry of Commerce
and Industry, there was a decline in the number of micro, small and medium
enterprises after the pandemic. Before the pandemic, the number of registered
businesses reached around 25,000 licenses under the third chapter of Kuwaiti
labor law, and a total of 45,000 companies in Kuwait under the third and fifth
chapter of Kuwaiti labor law. Kuwait Times spoke with Mohammad Bader Al-Jouan, a
Member of the Board of Directors of the Kuwait Economic Society about the
obstacles facing small and medium entrepreneurs.
Regarding the challenges that face entrepreneurs, Jouan said that there is a
lack in Kuwait’s law and legislation related to small and medium businesses that
motivate entrepreneurs economically, while there were no solutions for the
obstacle they face. “Small enterprises are an essential building block in any
sustainable economy, while the international economy relies on business
sponsorship and development,” he said. “For example, in the United States,
entrepreneurship contributes to 50 percent of the gross domestic product, while
this sector in South Korea employs more than 80 percent of its population,
unlike Kuwait’s business culture that depends on financial support only.”
Jouan pointed out that small and medium businesses around the world have the
opportunity to develop and grow, and to become international companies that
provide job opportunities for their citizens. Meanwhile, enterprises in Kuwait
struggle to grow due to local legislations, while the government in Kuwait
fights every year to provide 98,000 vacancies in its public sector.
Obstacles to growth
Regarding the main legislations that hinder the growth of small enterprises in
Kuwait, Jouan stressed the confusion in decisions that Kuwait is experiencing.
“The Financial Security Law that was approved by the government in 2021 during
the pandemic to protect the small and medium enterprises has not entered into
force,” he said. “Meanwhile, the government has supported businesses that are in
the shadow of the National Fund for Small and Medium Enterprises Development,
although most outstanding businesses that deserve financial support are not
related to the fund.”
“More than 1,900 entrepreneurs’ requests have been submitted to benefit from the
Financial Security Law, and less than one percent have succeeded to take
advantage of it,” he noted. “This is due to the unmotivating regulations such as
having banks bear the cost of borrowing for businesses, while the government
only covers 80 percent of the borrowing amount, which is not suitable for banks
and entrepreneurs alike.”
As for the reasons for the importance of supporting small businesses despite
their weak contribution to the gross of the national product, Jouan said that
“some of segments of society believe that due to the lack of added value of
enterprisers in contributing in the gross of the national product and not being
a part of the recruitment process of the national labors, these kind of
enterprises should not be supported. Therefore, they have deliberately been
ignored, especially the consumer and luxury sectors.”
He continued, “these reasons are not accurate at all levels. The current rentier
economy has affected the business culture in Kuwait. There is a three percent of
national GDP that enterprisers contribute directly with, and this ratio shows
the enterprises’ importance when we compare it with the four percent that
communications and telecom companies contribute to the GDP. Not to mention,
medium and small business has left a mark on GCC and Arab countries which
contribute indirectly to Kuwait’s GDP.”
“Kuwait has laws that benefit the small and medium business entrepreneurs;
however, they must be activated to create a healthy business environment, even
if the government did not provide any financial support for them,” Jouan said.
“The entrepreneurs need to grow their business.”
In Kuwait, several successful enterprises have lost their businesses due to the
weak laws that protect their intellectual property. Regarding that, Jouan
stressed that every new business should have its lawyer to protect its rights.
Al-Jouan told Kuwait Times that the Kuwait Economic Society has proposed a draft
law to the Capital Markets Authority (CMA) to provide unconventional support to
small and medium enterprises through crowdfunding platforms, adding that it is
expected to be approved soon.