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Friday , September 25 2020

Government floundering hits hard private business sector

MoCI receives dozens of requests to cancel commercial licenses

KUWAIT CITY, July 15: The repercussions of the COVID-19 crisis on employers seem clearly evident, as it has been revealed that the Ministry of Commerce and Industry received dozens of requests to cancel commercial licenses or reduce the number of branches of companies because of the heavy economic consequences of the pandemic, which has become a burden on small and medium enterprises, in light of governmental frustration and absence of viable and practical solutions.

The Governor of the Central Bank of Kuwait
Dr Mohamed Al-Hashel

The COVID-19 pandemic cast a heavy shadow over the business sector in Kuwait. The business owners have found themselves facing a heavy storm that they could not overcome without government support and a clearly defined rescue plan that would help them to restart their business.

Today, with the government leaving the private sector to suffer alone in the crisis, the country is faced with a bitter and painful reality represented by the announcement made by dozens of SMEs that they are unable to resume operations , reports Al-Qabas daily. According to informed sources from the Ministry of Commerce and Industry, the ministry has started receiving requests to cancel the contracts of companies, as well as many inquiries about how to cancel the main commercial licenses or about the possibility of reducing the number of their branches.

Majority of the requests for cancellation were submitted by Kuwaiti owners of small and medium enterprises as they have been crushed by the economic crisis that followed the outbreak of the COVID-19 pandemic.

The sources said they are expecting the volume of requests for cancellation of licenses and contracts to increase in the coming period, due to the depth of the economic and financial crisis experienced by the markets in various sectors in Kuwait and the suspension of commercial activities for a period of five months, which resulted in the accumulation of obligations in the absence of government support for the owners of these businesses.

They said, “Cancellation of commercial licenses means cancellation of the residencies of all workers registered under its files. These workers must either search for another sponsor, if their visas are transferable, or deported from the country permanently, especially those registered under the licenses of small and medium enterprises that form the majority. Note that the majority of these projects are new and were established not more than two years ago.

Therefore, the workers registered under this section are not legally entitled to transfer their residencies to other sponsors, except after three years have passed”. In this regard, one of the applicants requesting cancellation of commercial licenses and who is enrolled in chapter five of the social security, said, “The experience of doing business in Kuwait was very bitter; something I will never repeat. This is because everyone gives up on you at the first problem. The government has left us to suffer alone, and some members of the parliament do not have electoral interests with the entrepreneurs, so they did not stand with us.

Government work is safer and more comfortable, as salaries are guaranteed at the end of every month. There are no monthly obligations on the government employees, unlike business owners who work to secure salaries of their employees and rents in addition to the obligations towards suppliers and banks”.

An entrepreneur supported by the National Fund for Small and Medium Enterprises Development said, “More than a month ago, a number of entrepreneurs such as myself had filed for financial support from a local bank to take advantage of the economic stimulus plan and low interest to save our projects.

However, the funding request is pending on a certificate issued by the national fund which is delaying in granting me the certificate for unknown reasons and impeding the completion of the financing procedures. This is happening to many of the entrepreneurs registered under the fund. None of them have yet received additional support from the banks due to the delay in the fund to grant us the certificates, which is one of the conditions for receiving additional funding.”

He clarified that the executive regulations of the national fund allow an entrepreneur it has financed the right to obtain financing not exceeding 50 percent of the total previous support he received from the fund. Meanwhile, informed sources said a large number of those registered in chapter five wish to return to government work in pursuit of job security.

They explained that a large number of business owners opted to cancel their licenses due to several reasons such as the depth of the crisis, the length of closure of activities, and the need for business owners to continue paying their workers’ salaries.

There is no clarity in the process of financing small and medium projects, and with the slowdown in some government agencies for implementing the economic stimulus plans proposed by the Governor of the Central Bank of Kuwait Dr Mohamed Al-Hashel, who resigned due to the slow stimulus.

The fate of the entitlement to pay the rents of shops and offices of the companies is still vague, as there is no government decision to structure and postpone the payment mechanism, and no parliamentary legislation reduces the scale of the problem.

Also there is a lack of prompt and prudent government handling, both in terms of financial support to companies or stimulating the economy. A number of companies were fundamentally lost before the crisis extended deeply to its operations. Furthermore, legal sources said, “Some business owners may deliberately seek liquidation and bankruptcy of their companies, especially those with large debts in the interest of banks or large financial obligations with suppliers, due to several reasons such as inability to pay.

There is the option to go to the courts to grant the bankruptcy requester more time to resolve their affairs within some years, without waiting for the new “alleged” bankruptcy law, which the government is seeking to pass soon”.

In addition, a real estate source said many vocational areas such as Qurain and Ardiya markets have started witnessing migration of small and medium enterprises in order to get out with the least losses from this severe crisis that has affected them due to the suspension of business following the total and partial lockdown imposed by the government during the past four months. He revealed that a number of shop owners, who previously paid tens of thousands of dinars to obtain shops in privileged locations, are now looking for those who will pay their late rents to give up

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