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Saturday , February 22 2020

Qualitative leap in ’18 business environment

KD 330.87mn hike in bourse foreign investment

Kuwait’s Minister of Commerce and Industry Khaled Al-Roudhan

KUWAIT CITY, July 25, (KUNA): Kuwaiti Minister of Commerce and Industry and State Minister for Services Khaled Al-Roudhan said on Thursday that the year 2018 witnessed a quantum leap for the Kuwaiti business environment after the ministry succeeded in overcoming obstacles through a package of decisions and amendments to some laws. In a speech published in the ministry’s annual report for 2018, Al-Roudhan said that the ministry’s decisions and laws package contributed to improving Kuwait’s ranking on the business environment improvement index, generating KD 330.87 million (about $1 billion) hike in foreign investment in the local bourse, up 455 percent from 2017.

He pointed out that the vision of the ministry in the economic reform focused on various dimensions, including a series of economic and social reforms, including the establishment of the individuals company within three working days instead of 62 days and the issuance of special licenses within five days and the reduction of licensing fees by 50 percent.

Al-Roudhan said that among the economic reforms the cancelation of the contract and rent slip during foundation of a company, in addition to consolidation of the classification of statistical data for economic activities in government agencies with the United Nations.

He pointed out that the list of achievements of the ministry during the year 2018 included the issuance of micro-licenses, mobile licenses, in addition to the launch of the national registry of small and medium enterprises and reduction of the number of applications for new projects with the adoption of two private sector incubators in the fields of agro-industries and public industries.

Banks’ profitability is likely to stay healthy on back of better economic conditions, marginally higher interest income, improved credit off-take, lower provisions and a modest increase in nonperforming loans, said Central Bank of Kuwait (CBK) Governor. Mohammad Al-Hashel said in a press release on Wednesday on the occasion of the CBK’s 2018 financial stability report that liquidity levels will also remain comfortable, and resumption in government debt issuance (subject to the passage of public debt law) will offer banks additional opportunities to invest in risk free government paper.\

In view of the foregoing, the domestic banking sector is generally well placed to remain resilient in the near term, he said, noting that the risks emanating from banks’ foreign operations can increase, particularly in countries with challenging security and/or economic conditions. Financial buffers help the government adopt a counter cyclical fiscal policy, increasing public sector wage bill will make the future path less sustainable.

The OPEC agreement of December 2018 and its extension in mid- 2019 for another nine months has supported oil prices and government revenues, providing further breathing space, he said. Yet only comprehensive fiscal and structural reforms will eventually enable Kuwait to wean itself off oil dependence.

Thanks to its enormous financial savings and low public debt, Kuwait can afford the reforms to be smooth and gradual as long as the measures are sustained, Al-Hashel added. Banking system assets, on consolidated basis, grew by 4.3 percent in 2018 on the back of higher private sector credit off-take, he said, adding that lackluster growth in investments amid non-issuance of public debt weighed down on overall asset expansion. Still, domestic credit by Kuwaiti banks was up 4.9 percent, compared to 3.9 percent observed in 2017, the CBK governor pointed out. Credit to the real estate sector, on the other hand, contracted by 0.7 percent after growing by 4.4 percent in 2017, notwithstanding the strong recovery in real estate market which picked up pace as the year drew to a close, he said. Growth in banks’ investments plateaued amid non-issuance of domestic sovereign bonds after the expiry of public debt law in late 2017.

Reflecting a bid to search for alternatives, lending to other banks increased sharply, making it the third key recipient of fresh lending in 2018. Likewise, banks’ investments in other fixed income securities as well as to the GCC increased. While the growth in banks’ consolidated deposits moderated to 2.4 percent as deposits from abroad contracted by 1.9 percent, the banking system continued to enjoy a stable funding base with time deposits accounting for 66 percent of the total deposits, Al- Hashel said.

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