Study: Broadness of the Fund Law Leads to Economic Misalignment
29 Sep. 2019
A critical study of Kuwait’s SME Fund Law, its broad interpretation, economic impact, and reforms needed to refocus it on productive growth.
You can download the study in PDF format through this link.
Overview
In April 2013, Law No. 98 was issued to establish the National Fund for the Care and Development of Small and Medium Enterprises, with capital equivalent to 2 billion Kuwaiti dinars. Rather than playing a tangible and effective role in improving the business and financial environment, the relevant indicators suggest otherwise, as they depend on sub-indicators outside the scope of both the Fund and the Ministry of Commerce, despite the reflection of those two entities’ efforts on the indicator directly related to them. Since its launch and to this day, the Fund has continued to implement the law through strained interpretations, in an attempt to avoid government bureaucracy affecting that indicator. The result has been little more than financing contributions to consumer-oriented or distressed projects, many of which fail to add value to the national economy, or even lead their owners to prison.
1. The Fund Law
Article 3 of the law states that the purpose of the Fund is to support and develop such projects, enhance the capacities of their owners to accomplish them, plan, coordinate, and promote their spread, and work toward achieving several objectives. Foremost among them is the most important objective: “developing the national economy through policies that create job opportunities and diversify sources of income in order to ease the financial burdens on the state’s general budget.” Article 11 then provides guidance for the Fund in evaluating applications and selecting projects submitted to it, stipulating that it should consider: “(1) those most capable of creating added value, developing the national economy, diversifying sources of income, and providing employment opportunities for Kuwaitis. (2) Unleashing citizens’ creative capacities and investing in patents submitted by them. (3) Encouraging self-employment and contributing to the development of the labor force. (4) Selecting projects that make the greatest use of local products and technology in a way that increases their added value. (5) Those most protective of the environment.”
2. The Fund’s Track Record
The Fund has gone through three administrative eras. The first began with the appointment of Dr. “Mohammad Al-Zuhair” as Director General. Due to the low total number of applications and accepted applications, the Fund had no notable administrative impact on the business and financial environment. However, that administration focused on creating employment opportunities for Kuwaitis within funded projects and gave this criterion greater weight than it deserved, turning it into an objective rather than an outcome. Given the need during that era to attract competencies to manage the Fund, the absence of a role for oversight bodies resulted in practices that reflected negatively on the Fund.
As a result, and because of other administrative dilemmas, the Fund entered a new era beginning in May 2018, when Mr. “Abdullah Al-Jouan” was appointed Director General. This period was marked by legislative activity that introduced the role of oversight bodies through amendments to the law and regulations. This contributed to raising the rate of applications for funded projects to 100%. At the same time, collateral damage emerged from confronting oversight bodies administratively, financially, and entrepreneurially, which ultimately compelled the Director General to submit his resignation.
In December 2018, a decree announced the beginning of the current era with the appointment of Mr. “Ibrahim Al-Kandari” as Director General. He argued that employing Kuwaiti citizens should come as a result, not as an objective, in the criteria for selecting projects submitted for financing, while the principal objective should be rebuilding the economic direction. Accordingly, the efforts of this administration have been intensely directed toward integrating small and medium enterprises into the government tendering system, facilitating their exports through the Arab Investment and Export Credit Guarantee Corporation, sending them to international exhibitions, and addressing the Gulf Cooperation Council to reduce customs duties on raw materials used in local products by small and medium enterprise owners.
3. The Effects of Oversight Bodies
The oversight bodies concerned with the salaries of Fund employees and the mechanisms for managing funded projects were a cause of administrative turbulence between the Fund and state institutions. As a result, the Fund was compelled to reduce the job grades of those who had been appointed above their grades under the justification of competence, necessity, or otherwise, while preserving the salary difference in the form of a monthly allowance that gradually declines with periodic promotion, out of consideration for the employees’ social standing. Accordingly, the salary of an employee within this segment remains fixed until the salary of the new grade becomes equal to the salary of the previous grade before the reduction.
As for the mechanisms for managing funded projects, since the Fund financed entrepreneurs’ projects through a lending mechanism with symbolic interest, the oversight bodies responsible for preserving public funds urged the Fund to take legal action against all projects that defaulted on repaying their loans. There is no doubt that such a step would negatively affect society, especially in light of the Fund’s clear shortcomings in meeting entrepreneurs’ needs in research, studies, and investigation, or in facilitating dealings with state institutions. This resulted from the conflict between the Fund’s capabilities and oversight bodies, particularly in attracting competencies to manage its operations.
Here, the Fund introduced a new administrative maneuver through two working mechanisms. The first aimed to resolve the dilemma of distressed projects, while the second aimed to ensure that the same dilemma would not recur with oversight bodies — not necessarily with future distressed projects. The first mechanism, concerning distressed projects, rests on presenting each case separately to an internal committee of external experts to assess the integrity of the reasons for distress and whether the distress can be contained or remedied. Accordingly, legal action becomes the path only for those projects whose reasons for distress lack integrity. As for the second mechanism, it lies in the Fund’s transformation from a financier of small and medium enterprises into an initial financier and then a principal partner through its investment portfolios. This step relies on the fundamentals of business incubators, which invest in numerous projects with the aim of achieving worthwhile returns from more than 20% of them, provided that those returns are capable of covering the failure of fewer than 80% of projects. To reduce the risk of future misuse by benefiting certain parties at the cost of the 80%, the first mechanism would apply to new distressed projects as well, with each case presented separately to an external body under the authority of the Council of Ministers to assess the integrity of the reasons for distress.
4. The Reality of the Kuwaiti Economy
Before addressing our conclusion regarding the Fund and the competent ministry, it is necessary to clarify the reality of the Kuwaiti economy. The state’s economy rests on revenues generated from exports abroad, which flow into commercial poles within the country. The first pole “1,” representing the government sector, is managed through a centralized methodology by the state’s administrative hierarchy. The second pole “2,” represented by the private sector, is managed through a separate methodology by different parties, each making decisions based on the data of the state’s macroeconomy and its own specific circumstances.
In light of the dynamics of the macroeconomy and the policies in force within the Kuwaiti economy, three additional “sub-poles” have formed under the second pole “2,” which represents the private sector. We detail them as follows: the first branch “A,” the largest in size, is the private sector that depends on revenues generated from the consumption of employees of the first pole “1” — the government sector — and the second pole “2” — the private sector. The second branch “B,” smaller than the pole above it, represents the private sector dependent on revenues from tenders and practices that meet the needs of the first pole “1” — the government sector. Finally, the third branch “C,” the smallest among them, is the private sector that depends on revenues from external export operations.
Based on the foregoing, we reach a conclusion indicating that the Kuwaiti economy rests exclusively on: first, the export revenues of the first pole “1” — the government sector; and second, the export revenues of the third branch “C” belonging to the second pole “2” — the private sector — and nothing else. Accordingly, since “C” is the smallest branch within the second pole “2” — the private sector — and since “A” and “B” depend for their revenues on both “1” and “2,” this clearly indicates that the weight of the Kuwaiti economy’s dependence on “1” — the government sector — far exceeds the weight of its dependence on “2” — the private sector. And since the oil export revenues of the first pole “1” constitute slightly above or below 90% of total revenues, this provides another indication that the Kuwaiti economy, across all its poles, is almost entirely based on the rent generated by those oil exports.
The challenge lies in reversing the balance of this equation: moving this economy into a new economy, changing its concepts, and reshaping its meaning. This would be a transformation in which the weight of dependence on “C” becomes greater than the weight of dependence on “1” — that is, an economy based on private-sector export revenues, or productivity, rather than an economy based on government-sector revenues generated by exporting oil — or any other natural resource — abroad.
This cannot be achieved except in the presence of an investment environment with fertile soil and healthy productivity, capable of creating a sector whose exports rival the weight of current oil exports. This stands in contrast to our present environment. What we aspire to is the creation of an environment that generates non-oil revenues for the state treasury, such as service revenues, taxes, customs duties, and others. Such an environment would itself become the primary cause and contributor to resolving the state’s greatest dilemmas, reducing the burden on the state in providing employment opportunities for citizens.
At present, the salaries item constitutes the largest part of state expenditures, accumulated because of legislative shortcomings that require the government to employ citizens regardless of its need for their productivity. Instead of using this legislation to create a viable investment environment capable of generating employment opportunities for citizens, the government’s path bent toward an undesirable direction, ending with the problem of employment bloat.
5. Conclusion
We return to Article 3 of Law No. 98 and focus in particular on the law’s central objective, which states: “developing the national economy through policies that create job opportunities and diversify sources of income in order to ease the financial burdens on the state’s general budget.” Where, then, is the role of the Fund — across all its working mechanisms — in achieving a transformation in the Kuwaiti economy whereby the weight of dependence on “C” becomes greater than the weight of dependence on “1”? In other words, where is its role in moving the economy toward one based on private-sector export revenues — productivity — rather than one based on government-sector revenues generated from exporting oil — or any other natural resource — abroad? Based on the statement of the Fund’s Director General, there is no official mechanism to distinguish project applications submitted for financing when they have a fundamental role in increasing total exports.
Although the Fund and the competent ministry have made efforts to include small and medium enterprises in government tenders in support of their local products — which increases the weight of “B” in the equation and results in a rise in export output through lower imports — this does not constitute a significant achievement for a two-billion-dinar institution such as the National Fund for the Care and Development of Small and Medium Enterprises. Nor has it contributed directly to diversifying sources of income.
It is fair to commend the administrative and legislative role of the National Fund for the Care and Development of Small and Medium Enterprises and the competent ministry, “Commerce,” in confronting negative outcomes and placing solutions aimed at achieving the required return from the Fund Law. However, at a time when Law No. 98 intended the National Fund to lead that qualitative transformation in improving the business environment and achieving the principal objective, the Fund and the competent ministry became immersed in the swamp of government bureaucracy. This reinforced the administrative staff’s ideological tendency to continue repairing the aforementioned issues without taking the initiative in intellectual leadership beyond the Fund’s existing boundaries. Consequently, administrative and entrepreneurial competencies distanced themselves as a result of the Fund’s conflict with oversight bodies. The selection of funded projects and the extent of their contribution to the Kuwaiti economy therefore came to be based on strained criteria shaped by the preferences of fluctuating and changing competencies in each era, each interpreting the law differently. The dilemmas accumulate, and the efforts to address them accumulate as well, while the Fund forgets the central objective of its law. The administrative movements of the Fund and the competent ministry turn into reactions seeking to treat accumulated negatives, hoping to reduce the damage, while becoming distracted from pursuing exceptional leadership in improving the business environment — leadership capable of devouring this accumulated deterioration in the future.
6. Recommendations
The core of the dilemma lies in the mechanism for interpreting the law’s wording, which is open to distortion. Its wording also contains a degree of comprehensiveness that allows internal regulations to be amended with greater flexibility in ways that may serve the Fund’s work or political directions. At the same time, that comprehensiveness has produced undesirable consequences, leaving negative effects greater than the benefit hoped for from it. We therefore present the following recommendations, whose key is empowerment, with the aim of improving the direction of the National Fund and the competent ministry in serving the Fund’s central objective.
First, empowering detailed economic elaboration within the text of the law in a way that prevents benefit from interpreting it in multiple directions. This should include what sound and effective regulations ought to contain in order to close loopholes. Such elaboration must address in detail the mechanisms for achieving the intended objectives in a manner that does not allow internal or external maneuvering. For example, though not exclusively, the law should specify in detail those mechanisms that determine a project’s added value according to its role in increasing exports, reducing imports, or both. Based on that added value, the law should detail the mechanisms that determine the appropriate financing value and the value of other incentives.
Second, empowering detailed administrative and organizational elaboration within the text of the law in a way that prevents benefit from interpreting it in multiple directions, while serving the economic elaboration in the law. This elaboration should define the organizational and administrative mechanisms for realizing the economic text in a manner that leaves no room for internal or external maneuvering. Since the Fund is one of the government bodies that are difficult to manage properly if they lack administrative and entrepreneurial competencies in finance and business, detail and elaboration within the text of the law constitute a sound mechanism that does not change color according to preferences or flaws in implementation, and that attracts competencies in this field through worthwhile incentives. Such incentives need not be financial as much as administrative, such as part-time work or secondment systems for participation in research and evaluation committees. It is unrealistic to expect experienced owners of successful businesses to leave their ventures, which generate high returns, for medium-salary jobs in support of small and medium enterprises. In addition, the law should define detailed mechanisms that contribute to incentive systems, such as using relevant economic indicators, on the basis of which incentives rise or fall annually.
Third, empowering detailed supervisory and institutional elaboration within the text of the law in a way that prevents benefit from interpreting it in multiple directions, while serving the economic, administrative, and organizational elaborations. This elaboration should define all details related to the Fund’s working mechanisms and obligations toward oversight bodies and state institutions. It should also specify the role of state institutions in serving the Fund’s mechanisms materially, morally, and within defined timeframes, in a way that does not allow internal or external maneuvering.
When reconsidering the order of these recommendations, we see that the third recommendation serves the first and second. The second, in turn, serves the first. This confirms that all mechanisms should, first and last, serve economic elaboration, which is precisely what the correct interpretation of the current law intended before its interpretations became twisted by differing convictions in each era.
This study came as an expression of an economic perspective from outside the viewpoints of both the government apparatus and the broader body of entrepreneurs, and as part of social responsibility toward my homeland, Kuwait, its people, and its leadership. Allah is the ultimate guide of intent.
The End.
Overview
In April 2013, Law No. 98 was issued to establish the National Fund for the Care and Development of Small and Medium Enterprises, with capital equivalent to 2 billion Kuwaiti dinars. Rather than playing a tangible and effective role in improving the business and financial environment, the relevant indicators suggest otherwise, as they depend on sub-indicators outside the scope of both the Fund and the Ministry of Commerce, despite the reflection of those two entities’ efforts on the indicator directly related to them. Since its launch and to this day, the Fund has continued to implement the law through strained interpretations, in an attempt to avoid government bureaucracy affecting that indicator. The result has been little more than financing contributions to consumer-oriented or distressed projects, many of which fail to add value to the national economy, or even lead their owners to prison.
1. The Fund Law
Article 3 of the law states that the purpose of the Fund is to support and develop such projects, enhance the capacities of their owners to accomplish them, plan, coordinate, and promote their spread, and work toward achieving several objectives. Foremost among them is the most important objective: “developing the national economy through policies that create job opportunities and diversify sources of income in order to ease the financial burdens on the state’s general budget.” Article 11 then provides guidance for the Fund in evaluating applications and selecting projects submitted to it, stipulating that it should consider: “(1) those most capable of creating added value, developing the national economy, diversifying sources of income, and providing employment opportunities for Kuwaitis. (2) Unleashing citizens’ creative capacities and investing in patents submitted by them. (3) Encouraging self-employment and contributing to the development of the labor force. (4) Selecting projects that make the greatest use of local products and technology in a way that increases their added value. (5) Those most protective of the environment.”
2. The Fund’s Track Record
The Fund has gone through three administrative eras. The first began with the appointment of Dr. “Mohammad Al-Zuhair” as Director General. Due to the low total number of applications and accepted applications, the Fund had no notable administrative impact on the business and financial environment. However, that administration focused on creating employment opportunities for Kuwaitis within funded projects and gave this criterion greater weight than it deserved, turning it into an objective rather than an outcome. Given the need during that era to attract competencies to manage the Fund, the absence of a role for oversight bodies resulted in practices that reflected negatively on the Fund.
As a result, and because of other administrative dilemmas, the Fund entered a new era beginning in May 2018, when Mr. “Abdullah Al-Jouan” was appointed Director General. This period was marked by legislative activity that introduced the role of oversight bodies through amendments to the law and regulations. This contributed to raising the rate of applications for funded projects to 100%. At the same time, collateral damage emerged from confronting oversight bodies administratively, financially, and entrepreneurially, which ultimately compelled the Director General to submit his resignation.
In December 2018, a decree announced the beginning of the current era with the appointment of Mr. “Ibrahim Al-Kandari” as Director General. He argued that employing Kuwaiti citizens should come as a result, not as an objective, in the criteria for selecting projects submitted for financing, while the principal objective should be rebuilding the economic direction. Accordingly, the efforts of this administration have been intensely directed toward integrating small and medium enterprises into the government tendering system, facilitating their exports through the Arab Investment and Export Credit Guarantee Corporation, sending them to international exhibitions, and addressing the Gulf Cooperation Council to reduce customs duties on raw materials used in local products by small and medium enterprise owners.
3. The Effects of Oversight Bodies
The oversight bodies concerned with the salaries of Fund employees and the mechanisms for managing funded projects were a cause of administrative turbulence between the Fund and state institutions. As a result, the Fund was compelled to reduce the job grades of those who had been appointed above their grades under the justification of competence, necessity, or otherwise, while preserving the salary difference in the form of a monthly allowance that gradually declines with periodic promotion, out of consideration for the employees’ social standing. Accordingly, the salary of an employee within this segment remains fixed until the salary of the new grade becomes equal to the salary of the previous grade before the reduction.
As for the mechanisms for managing funded projects, since the Fund financed entrepreneurs’ projects through a lending mechanism with symbolic interest, the oversight bodies responsible for preserving public funds urged the Fund to take legal action against all projects that defaulted on repaying their loans. There is no doubt that such a step would negatively affect society, especially in light of the Fund’s clear shortcomings in meeting entrepreneurs’ needs in research, studies, and investigation, or in facilitating dealings with state institutions. This resulted from the conflict between the Fund’s capabilities and oversight bodies, particularly in attracting competencies to manage its operations.
Here, the Fund introduced a new administrative maneuver through two working mechanisms. The first aimed to resolve the dilemma of distressed projects, while the second aimed to ensure that the same dilemma would not recur with oversight bodies — not necessarily with future distressed projects. The first mechanism, concerning distressed projects, rests on presenting each case separately to an internal committee of external experts to assess the integrity of the reasons for distress and whether the distress can be contained or remedied. Accordingly, legal action becomes the path only for those projects whose reasons for distress lack integrity. As for the second mechanism, it lies in the Fund’s transformation from a financier of small and medium enterprises into an initial financier and then a principal partner through its investment portfolios. This step relies on the fundamentals of business incubators, which invest in numerous projects with the aim of achieving worthwhile returns from more than 20% of them, provided that those returns are capable of covering the failure of fewer than 80% of projects. To reduce the risk of future misuse by benefiting certain parties at the cost of the 80%, the first mechanism would apply to new distressed projects as well, with each case presented separately to an external body under the authority of the Council of Ministers to assess the integrity of the reasons for distress.
4. The Reality of the Kuwaiti Economy
Before addressing our conclusion regarding the Fund and the competent ministry, it is necessary to clarify the reality of the Kuwaiti economy. The state’s economy rests on revenues generated from exports abroad, which flow into commercial poles within the country. The first pole “1,” representing the government sector, is managed through a centralized methodology by the state’s administrative hierarchy. The second pole “2,” represented by the private sector, is managed through a separate methodology by different parties, each making decisions based on the data of the state’s macroeconomy and its own specific circumstances.
In light of the dynamics of the macroeconomy and the policies in force within the Kuwaiti economy, three additional “sub-poles” have formed under the second pole “2,” which represents the private sector. We detail them as follows: the first branch “A,” the largest in size, is the private sector that depends on revenues generated from the consumption of employees of the first pole “1” — the government sector — and the second pole “2” — the private sector. The second branch “B,” smaller than the pole above it, represents the private sector dependent on revenues from tenders and practices that meet the needs of the first pole “1” — the government sector. Finally, the third branch “C,” the smallest among them, is the private sector that depends on revenues from external export operations.
Based on the foregoing, we reach a conclusion indicating that the Kuwaiti economy rests exclusively on: first, the export revenues of the first pole “1” — the government sector; and second, the export revenues of the third branch “C” belonging to the second pole “2” — the private sector — and nothing else. Accordingly, since “C” is the smallest branch within the second pole “2” — the private sector — and since “A” and “B” depend for their revenues on both “1” and “2,” this clearly indicates that the weight of the Kuwaiti economy’s dependence on “1” — the government sector — far exceeds the weight of its dependence on “2” — the private sector. And since the oil export revenues of the first pole “1” constitute slightly above or below 90% of total revenues, this provides another indication that the Kuwaiti economy, across all its poles, is almost entirely based on the rent generated by those oil exports.
The challenge lies in reversing the balance of this equation: moving this economy into a new economy, changing its concepts, and reshaping its meaning. This would be a transformation in which the weight of dependence on “C” becomes greater than the weight of dependence on “1” — that is, an economy based on private-sector export revenues, or productivity, rather than an economy based on government-sector revenues generated by exporting oil — or any other natural resource — abroad.
This cannot be achieved except in the presence of an investment environment with fertile soil and healthy productivity, capable of creating a sector whose exports rival the weight of current oil exports. This stands in contrast to our present environment. What we aspire to is the creation of an environment that generates non-oil revenues for the state treasury, such as service revenues, taxes, customs duties, and others. Such an environment would itself become the primary cause and contributor to resolving the state’s greatest dilemmas, reducing the burden on the state in providing employment opportunities for citizens.
At present, the salaries item constitutes the largest part of state expenditures, accumulated because of legislative shortcomings that require the government to employ citizens regardless of its need for their productivity. Instead of using this legislation to create a viable investment environment capable of generating employment opportunities for citizens, the government’s path bent toward an undesirable direction, ending with the problem of employment bloat.
5. Conclusion
We return to Article 3 of Law No. 98 and focus in particular on the law’s central objective, which states: “developing the national economy through policies that create job opportunities and diversify sources of income in order to ease the financial burdens on the state’s general budget.” Where, then, is the role of the Fund — across all its working mechanisms — in achieving a transformation in the Kuwaiti economy whereby the weight of dependence on “C” becomes greater than the weight of dependence on “1”? In other words, where is its role in moving the economy toward one based on private-sector export revenues — productivity — rather than one based on government-sector revenues generated from exporting oil — or any other natural resource — abroad? Based on the statement of the Fund’s Director General, there is no official mechanism to distinguish project applications submitted for financing when they have a fundamental role in increasing total exports.
Although the Fund and the competent ministry have made efforts to include small and medium enterprises in government tenders in support of their local products — which increases the weight of “B” in the equation and results in a rise in export output through lower imports — this does not constitute a significant achievement for a two-billion-dinar institution such as the National Fund for the Care and Development of Small and Medium Enterprises. Nor has it contributed directly to diversifying sources of income.
It is fair to commend the administrative and legislative role of the National Fund for the Care and Development of Small and Medium Enterprises and the competent ministry, “Commerce,” in confronting negative outcomes and placing solutions aimed at achieving the required return from the Fund Law. However, at a time when Law No. 98 intended the National Fund to lead that qualitative transformation in improving the business environment and achieving the principal objective, the Fund and the competent ministry became immersed in the swamp of government bureaucracy. This reinforced the administrative staff’s ideological tendency to continue repairing the aforementioned issues without taking the initiative in intellectual leadership beyond the Fund’s existing boundaries. Consequently, administrative and entrepreneurial competencies distanced themselves as a result of the Fund’s conflict with oversight bodies. The selection of funded projects and the extent of their contribution to the Kuwaiti economy therefore came to be based on strained criteria shaped by the preferences of fluctuating and changing competencies in each era, each interpreting the law differently. The dilemmas accumulate, and the efforts to address them accumulate as well, while the Fund forgets the central objective of its law. The administrative movements of the Fund and the competent ministry turn into reactions seeking to treat accumulated negatives, hoping to reduce the damage, while becoming distracted from pursuing exceptional leadership in improving the business environment — leadership capable of devouring this accumulated deterioration in the future.
6. Recommendations
The core of the dilemma lies in the mechanism for interpreting the law’s wording, which is open to distortion. Its wording also contains a degree of comprehensiveness that allows internal regulations to be amended with greater flexibility in ways that may serve the Fund’s work or political directions. At the same time, that comprehensiveness has produced undesirable consequences, leaving negative effects greater than the benefit hoped for from it. We therefore present the following recommendations, whose key is empowerment, with the aim of improving the direction of the National Fund and the competent ministry in serving the Fund’s central objective.
First, empowering detailed economic elaboration within the text of the law in a way that prevents benefit from interpreting it in multiple directions. This should include what sound and effective regulations ought to contain in order to close loopholes. Such elaboration must address in detail the mechanisms for achieving the intended objectives in a manner that does not allow internal or external maneuvering. For example, though not exclusively, the law should specify in detail those mechanisms that determine a project’s added value according to its role in increasing exports, reducing imports, or both. Based on that added value, the law should detail the mechanisms that determine the appropriate financing value and the value of other incentives.
Second, empowering detailed administrative and organizational elaboration within the text of the law in a way that prevents benefit from interpreting it in multiple directions, while serving the economic elaboration in the law. This elaboration should define the organizational and administrative mechanisms for realizing the economic text in a manner that leaves no room for internal or external maneuvering. Since the Fund is one of the government bodies that are difficult to manage properly if they lack administrative and entrepreneurial competencies in finance and business, detail and elaboration within the text of the law constitute a sound mechanism that does not change color according to preferences or flaws in implementation, and that attracts competencies in this field through worthwhile incentives. Such incentives need not be financial as much as administrative, such as part-time work or secondment systems for participation in research and evaluation committees. It is unrealistic to expect experienced owners of successful businesses to leave their ventures, which generate high returns, for medium-salary jobs in support of small and medium enterprises. In addition, the law should define detailed mechanisms that contribute to incentive systems, such as using relevant economic indicators, on the basis of which incentives rise or fall annually.
Third, empowering detailed supervisory and institutional elaboration within the text of the law in a way that prevents benefit from interpreting it in multiple directions, while serving the economic, administrative, and organizational elaborations. This elaboration should define all details related to the Fund’s working mechanisms and obligations toward oversight bodies and state institutions. It should also specify the role of state institutions in serving the Fund’s mechanisms materially, morally, and within defined timeframes, in a way that does not allow internal or external maneuvering.
When reconsidering the order of these recommendations, we see that the third recommendation serves the first and second. The second, in turn, serves the first. This confirms that all mechanisms should, first and last, serve economic elaboration, which is precisely what the correct interpretation of the current law intended before its interpretations became twisted by differing convictions in each era.
This study came as an expression of an economic perspective from outside the viewpoints of both the government apparatus and the broader body of entrepreneurs, and as part of social responsibility toward my homeland, Kuwait, its people, and its leadership. Allah is the ultimate guide of intent.
The End.
Abdullah Al-Salloum
Thoughtful messages and inquiries are always welcome. Send a message
Answers
Why can governance and reform not be separated from the factor of incentives?
Governance makes reform executable because it defines responsibilities, closes loopholes, and links decisions to accountability. From the angle of incentives, the issue is not measured by its label alone, but by the measurable effect it leaves behind.
Why can legal loopholes not be separated from the factor of incentives?
Legal loopholes give corruption a safe path within the text of rules, so reform needs precise drafting and institutional oversight. From the angle of incentives, the issue is not measured by its label alone, but by the measurable effect it leaves behind.
How does SME fund law and productive growth affect Kuwait?
Its effect appears in how costs, incentives, and resources are managed, and in Kuwait's ability to turn decisions into sustainable value. The direct context is a critical study of Kuwait’s SME Fund Law, its broad interpretation, economic impact, and reforms needed to refocus it on productive growth.
Why can institutional reform not be separated from the factor of incentives?
Institutional reform becomes difficult when interests, administrative habits, and weak accountability accumulate; it needs lasting rules, not scattered decisions. From the angle of incentives, the issue is not measured by its label alone, but by the measurable effect it leaves behind.
Related articles
Our Youth and Sovereign Wealth Funds
30 May. 2017
30 May. 2017