Kuwait's economic makeover is under threat as small businesses fight for life due to the pandemic.
19 August 2021, 12:00 AM
31 August 2021, 12:00 AM
Thousands of small and medium Kuwaiti businesses (SMEs), which involved about $500 million of state financing, has been undone by the COVID-19 outbreak, according to many industry experts.
This makes the private sector bomb the country's efforts to remake its unorthodox and oil-pumped economy.
The government, which spends more than half of its annual budget on the salaries of Kuwaitis who mostly work in state jobs, has encouraged citizens to set up their own businesses over the past decade in an effort to engineer a private sector.
The aim has been to ease state finances, reduce reliance on the imported labour of expatriates who make up most of the population, and also help Kuwait diversify away from oil, which brings in 90% of state revenues but is looking increasingly precarious as the world moves away from fossil fuels.
Most of the 25,000 to 30,000 SMEs in Kuwait were operating with limited cash reserves even before the pandemic struck and were unable to weather a halt in operations due to lockdowns, investment management firm Markaz said.
In an indication of the scale of the problem, Abdulaziz al-Mubarak, head of the Kuwait Federation for Small and Medium Enterprises, said that about 8,600 entrepreneurs were currently switching from working in the private sector to the government.
He warned that the cash crunch could "end the whole sector".