The number of Small-to-Medium enterprises (SMEs) in Kuwait is high, particularly in retail and non-financial services, but their overall contribution to the economy is marginal—just 3% of GDP. This paradox is especially troubling when compared to high income and emerging economies, where SMEs comprise most of the economic activity in the private sector and contribute to 50% and 40% of GDP (respectively).
Kuwaiti SMEs only employ around 23% of the country’s total workforce, which is less than half of SME employment figures for both high income and emerging economies.
To understand key barriers to SME business growth in Kuwait, in 2014 the World Bank surveyed 502 SMEs there. More than 35% of respondents saw business licensing and permits as the main things blocking their growth. Answers concerning labor regulations, regulatory uncertainty, and administrative corruption also featured highly.
The lack of an adequately educated workforce was also cited by 24% of the survey’s respondents as a barrier to growth. Obtaining an operating license takes, on average, 41 days in Kuwait, they said. And dealing with other government regulations consumes anywhere from 14%-20% of a manager’s time.
Building a vibrant ecosystem for SME development is seen as critical to promoting long-term economic diversification in Kuwait. In the next 20 years or so, the private sector is expected to play a leading role in creating jobs for the next generation of Kuwaitis.
Its success will hinge largely on whether Kuwait creates an enabling environment in the form of an ecosystem for entrepreneurship.
The Government of Kuwait established a National Fund for SME Development in April 2013. An independent public corporation with a total of 2 billion Kuwaiti Dinars (US$7 billion) in capital, it aims to help create productive jobs for Kuwaiti professionals, increasing private participation in the economy and the amount of income diversification.
The National Fund prides itself on being the first single entity for SMEs in the Gulf. “The equivalent of the National Fund in other countries involves four or five different government entities, one for financing, one for business support, etc.” said Mohammad Al-Zuhair, Chairman of the Fund.