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Friday , September 25 2020

‘Corona pandemic’ reveals major weaknesses of industry in Kuwait

Industrialists facing challenges

KUWAIT CITY, Aug 11: The corona pandemic revealed major weaknesses in the joints of industry in Kuwait. The supply chains of the major manufacturing raw materials have stopped due to difficulties in importing and shipping, as the airports and seaports remain closed in several industrial countries of the suppliers, especially China, India, and Europe, reports Al-Qabas daily. Industrial sources were quoted as saying if Kuwait did not have distinguished diplomatic relations with the countries of the world that enabled her import from abroad, repercussions of the pandemic would have been more serious in the months of March, April and May, especially in fulfilling the country’s need for necessary consumer goods, especially food commodities and simple protective items such as masks and sterilizers, because Kuwait does not have any of these basic materials that go into its manufacture, while all of them are imported.

The same sources stated the challenges facing industrialists in Kuwait, as they have been for half a century and more, citing the lack of workable industrial lands. They noted the business environment in the industrial sector is still repulsive and discouraging.

Kuwaitis and expatriates shopping at Souq Mubarakiya recently during the evening time

Transfer
They explained that many industrialists for years have endeavored to transfer their work to Saudi Arabia, the United Arab Emirates and the Sultanate of Oman due to the ease of business environment in those countries, and the availability of developed industrial lands in vast areas. They indicated the establishment of any industrial project in Kuwait is very expensive, and the largest part of the cost is in the land on which the project will be built, as there are no suitable lands in the possession of the Public Authority for Industry for that purpose.

The prices of industrial plots are very expensive in terms of rental price per meter or the price of the usufruct right, which is sold for millions of dinars. With regard to small and medium industrial enterprises, the sources saw that they die even before they are born, as the issuance of industrial license is subject to a lease contract for the location of the project, and the value of one rental meter is no less than 5 or 6 dinars. They indicated the investor provides a place to establish his project and pays his fee up to 4 months before the start of the operation process until the arrival of the manufacturing equipment imported from abroad.

Import
They pointed out that small industrial enterprises known as “craft” do not have any advantage at all, in terms of providing lands or exemptions from customs duties from any raw materials that they import from outside the GCC countries, in addition to the fact that the investor must pay 5 per cent of the total value of the imported invoice.

They added that investors of small crafts in Kuwait are treated in government transactions as if they are investors of large industrial establishments, and they are the ones that are supposed to receive special treatment and care from concerned authorities in order to grow and expand their business in the market.

A Kuwaiti entrepreneur informed that the dream of young industrialists in Kuwait to obtain lands to settle their existing projects has become like “tracking the mirage,” especially those supported by the National Fund for Small and Medium Enterprises Development, as 10 percent of Shadadiyah plots were allocated on paper for their benefit almost two years ago. He explained that the most affected by the delay in the completion of the Shadadiyah project are the industrial entrepreneurs supported by the National Fund, as they pay thousands of dinars per month in rent for the headquarters of their factories, while they have large financial obligations toward suppliers and workers’ salaries.

Projects
This is in addition to the fact that the special grace period given for a number of them to pay the fund financing installments has ended or it is nearing completion.

This means they will face a new financial commitment that will compound the problems and may lead a number of the owners of these projects to default in payment, and thus enter into legal confrontation with the National Fund, and end up in prison. He added the distribution of land to industrial entrepreneurs means dropping a large obligation such as rent, while it is treated as a facility transaction.

Therefore, the entrepreneur will be exempted from customs duties while importing raw materials from abroad, and be freed from large financial obligations transferred to support production quality, and to increase its capacity. Industrial sources say that the Public Authority for Industry has had a legacy of persistent problems since it began its work in early 1997 while its specializations overlap with a number of state ministries such as Kuwait Municipality and Ministry of Public Works. It has been charged with burdens that do not belong to the main objectives for which it was established.

They pointed out that a number of activities entrusted to the authority have become a burden, including cutting and transporting milling tires, lands for storing slabs, lands for sand quarries (drakes), areas of general scrapes or car scrapes … all of which are non-industrial activities, and are not within the authority’s jurisdiction.

An industrial source says: The industrial city of Shadadiyah included in the projects of the new Kuwait Vision 2035 has become like “quail egg” the people hear about but do not see it. He quoted officials in the industry as stating that more than 1,000 industrial plots were to be delivered in this city before the end of 2019, then confirmed that it would open during the first quarter of 2020, and they finally announced that the handover would be the end of June of the current year, with the end of all appointments, but this city is still unseen.

He noted the construction, completion, operation and maintenance of the infrastructure of the Shadadiya Industrial Zone”, with an area of 5.89 million square meters, is scheduled to contain more than 1,036 industrial plots, in addition to many services. Its objectives are divided into three main sectors: chemical, food, and multipurpose industries. Industrialists said the corona pandemic has revealed that it is possible to complete some industrial facility transactions in the Public Authority for Industry within hours, despite the suspension of government work and the absence of 95 percent of the employees, while it used to take weeks before work was completed and employees were on the job in full number!

This is evidence that bureaucracy experienced by the local industry can be eliminated, as it is man-made. Sources said the Public Authority for Industry is still managed with traditional mentality, as dozens of industrial activities are suspended under the pretext that their number is large in the market, while no industrial country in the world closes its activities and refuses to issue licenses to practice, preserving it for some companies and suppliers. He stressed at the same time the need to reopen all closed activities and the market, and allow the industrialists to compete with each other for the benefit of consumers and the Kuwaiti market.

The Industry Authority created an account on the social networking site (Twitter) in February 2018 to report the most important developments in the establishment of Shadadiyah Industrial City, but the account stopped running one year after the news related to the project was reported. The last tweet on the account was in February 2019. Does this mean that there is no new thing in the project for about a year and a half?

Obstacles
A number of industrialists in Kuwait who were contacted summarized the problems and obstacles to the industry in Kuwait into 12 obstacles:

1- Lack of developed industrial lands for establishing new projects or expansions to increase production.

2- Bureaucracy in completing some industrialists’ transactions in the Industry Authority and related state bodies.

3- Non reliance on national products in government projects and preference for foreign goods.

4- No significant encouragement or facilities for the procedures of exporting Kuwaiti products abroad.

5- Lack of logistical support, such as the presence of warehouses to accommodate the production of some factories.

6- Environmental law is imported and suffocating and does not fit the nature of the industry in Kuwait.

7- Industrial craftsmen pay very high rents for not providing them with lands from the state.

8- Industrial crafts are not exempted from customs duties, and those in charge of them pay 5 percent fees for raw materials they import from abroad.

9- The abundance of imports from abroad and dumping of Chinese, Indian and Turkish goods caused a number of local factories to suffer huge losses and to exit from the market.

10- There are no advanced government laboratories for examining products and conducting tests for the purpose of developing and promoting them.

11- Some of the decisions taken in Gulf countries have repercussions on the work of industrialists in Kuwait, indicating poor communication and coordination with government agencies responsible for the industrial sector with neighboring countries.

12 – Lack of workers’ cities and adequate housing for a large number of industrial facilities and crafts workers.

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