‘Consequences of SMEs going out of business will be felt by everyone’

KUWAIT CITY, March 23: As the coronavirus crisis upends economies internationally, most Kuwaitis feel insulated from the fall-out. The 90 percent of workers employed by the state continue to receive their wages as they would in ordinary times.

For the country’s small and medium-sized enterprises (SMEs), however, the outlook is far grimmer. Unless the global pandemic miraculously subsides, many of these businesses will declare bankruptcy. Plummeting revenues accompanying the worldwide depression will force Kuwaiti SMEs to shutter their doors.

Because the consequences of their closure will be catastrophic, the government must step in quickly to save them. Doing so will require assisting not only those under the umbrella of the National Fund for SME Development (the “SME Fund”) but also every firm employing at least one Kuwaiti.

SMEs help drive this country’s economic vitality. Should they go under, workers will be unable to support their families and lead dignified lives. To prevent such a disaster, it’s important that the government extend its financial assistance to all of these small businesses until the global pandemic ends.

Reconnaissance Research recently distributed a questionnaire to gauge public attitudes toward supporting SMEs. Though some were in favor of doing so, many others who opposed the proposal raised two main concerns.

The first: This is business. Business is about risks and dealing with the effects of those risks. Just as many earn profits and succeed, others lose money and fail. SMEs, they argue, should be accountable to the free market like everything else. They must sustain losses as the economy dictates. The second: SMEs profited in years past in the absence of state taxes. Since the government received no revenue from them previously, it has no obligation to help them now.

These reasons are not compelling. We can all agree that Kuwait is not simply buildings, gardens, and bridges. Kuwait is its people, not inanimate objects. Talking exclusively of goods and services dehumanizes these people and their value to our nation. Saving Kuwait at this time of crisis requires us to come together and prevent unemployment, and economic ruin. The consequences of SMEs going out of business will be felt by everyone in the country. The global economy is depending more and more on them every day and in practically every country.

According to the World Bank, SMEs account for approximately 90 percent of businesses globally as well as 50 percent of employment. This shows us the importance of that sector and why it must not collapse. Everyone in Kuwait therefore has an economic interest in SMEs. Though they need little capital to get started, they can generate considerable job opportunities for skilled and unskilled workers alike.

Furthermore, the risk in this sector is relatively small compared to the large investments needed to sustain big businesses. SMEs additionally serve as a remarkable outlet for young people dynamically pursuing alternative sources of income that can replace the long-standing dependency on oil. Yet if this sector disintegrate, then many Kuwaitis will suffer.

Unemployment and crime go hand in hand, as we have seen elsewhere. Kuwait is certainly not immune to what is occurring around the world. Helping SMEs through this rough patch will prevent Kuwait from facing social disorder. As for the argument that the government is not responsible for saving SMEs, it may seem convincing at first glance. But the coronavirus and its economic consequences present an exceptional emergency. Capitalist countries in Europe and North America are turning to government-run solutions to save their market economies.

Reconnaissance Research believes Kuwait should do the same. This will result not in permanent dependency on state funds but temporary assistance to prevent economic collapse.

The consumer also has an interest in seeing SMEs succeed. Should they disappear from the market, monopolies on major commercial entities will emerge. This means higher prices for inferior goods and services across many industries, including automobile repairs, interior design, restaurants, and advertising. Kuwait can either help SMEs weather this economic storm, or its economic and social prospects will worsen.

The pocketbook of the Kuwaiti citizen will be a casualty of their bankruptcy. Kuwait would be following the lead of other countries in helping its small businesses. French President Emmanuel Macron has announced a national recovery plan that sets aside desperately needed funds to keep SMEs afl oat and to pay the salaries of employees whose businesses have shuttered their activities. In the United Kingdom, Prime Minister Boris Johnson has put together a one billion-pound financial package to help businesses and homeowners.

Some may say that Paris and London are not Kuwait City. Fair enough. But surely the United Arab Emirates, Saudi Arabia, Morocco, and Qatar are comparable countries. The Saudi Arabian Monetary Authority has devoted 50 billion riyals for SME relief, while Mubarak Rashed Al-Mansoori, governor of the Emirati Central Bank, has engineered a 100-billion-dirham plan to support banks, financial institutions, and SMEs in the short and medium term. Morocco and Qatar have enacted similar measures.

No one criticizes the great efforts made by the Kuwaiti government to mitigate the coronavirus epidemic. Its performance has met with domestic and international acclaim. In light of the urgency of the moment, the government would also do well to take into account this critical issue. Every Kuwaiti depends on SMEs and all will suffer if they are not helped at this difficult time. Though some people do not realize its importance now, this is a vital sector that everyone needs.

By Reconnaissance Research