Economic Update

Published 23 Aug 2016

With low oil prices continuing to take their toll on the Kuwaiti economy, the government is hoping investment in the small and medium-sized enterprise (SME) sector begins to pay dividends.

There is significant room for growth in Kuwait’s SME sector: it contributes just 3% to GDP, compared to an average of 50% in high-income economies, according to the latest World Bank figures. Furthermore, SMEs account for roughly 23% of Kuwait’s workforce, about half of the average in high-income and emerging economies.

National fund

In a bid to foster growth in the sector, the KD2bn ($6.6bn) National Fund for SME Development was founded in 2013 as the first single entity for SMEs in the Gulf region. The fund assumes responsibility for everything from business licensing to financing up to 80% of capital for feasible projects.

Since November 2013 the fund has been overseen by the World Bank’s two-year technical assistance project, which includes creating a “one-stop shop” to ease the process of acquiring an operating license, as well as promoting business development.

In June the fund launched the 136 Call Centre to address regulatory uncertainty and excessive time spent dealing with government regulations, which have been identified as among the most significant barriers to SME growth, according to a 2014 World Bank survey. The purpose of the centre is to provide callers with information on establishing a new business in Kuwait.

More recently, in early August the fund signed a memorandum of understanding with the Kuwait Foundation for the Advancement of Sciences (KFAS) to address a backlog of 250 patent applications at KFAS, which would be either partially or fully financed by the fund.

Boosting entrepreneurship

One of the largest challenges to increasing the number of SMEs and their contribution to the workforce has been the fostering of an entrepreneurial culture in Kuwait, according to Mohammad Al Zuhair, executive chairman of the National Fund for SME Development.

“The government, the private sector and the youth share an unwillingness to take risks,” he told OBG last year. “To develop the proper ecosystem in Kuwait, the start-up scene has to be fuelled. This means taking risks and celebrating unsuccessful initiatives as learning opportunities.”

In an attempt to address this issue, the fund has established a relationship with Wamda, a Dubai-based company that works to develop entrepreneurial ecosystems across the MENA region. The partnership with Wamda has led to the creation of Nuwait, an online platform that encourages innovative thinking in Kuwait by highlighting specific SME success stories and supplementing this content with tips and advice from entrepreneurship experts.

Additionally, the fund hosted the country’s first national SME Forum and the “Exploring Entrepreneurship” programme, which helps young entrepreneurs develop their ideas into business ventures.

Regulatory changes

Meanwhile, recent changes to legislation are expected to bring about a more formalised SME sector through protection of intellectual property.

Last December, Kuwait became the first country to implement the GCC Trademark Law, a piece of intellectual property legislation long discussed in the region.

With the passing of Ministerial Decision No. 500 of 2015, the official fees for trademark applications in Kuwait from filing to registration increased from roughly $80 to around $1035. The fees are roughly three times those of the US, where the cost of applying to register a trademark stands at between $293 and $325, regional media sources reported in mid-July.

While the new regulations, soon to be implemented throughout the GCC, will create a more efficient, internationally recognised and better-regulated trademarking system, some stakeholders have raised concerns that the cost increase might discourage smaller businesses from legally taking ownership of their ideas, according to press reports.

However, the prices are likely to be offset by shorter waiting times. The new regulation mandates that the Kuwait Trademark Office must issue an initial examination report within 90 days of the filing date, an improvement of a process that previously took between six and eight months.

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