For some time now, the small and medium sized businesses in the Kuwait economy have been experiencing significant declines in their level of growth. Fundamentally, this can be attributed to the rapid increase in the number of multinational corporations in the country. Apart from a consistent collapse in the number of SMEs in the country, the level of imports in the country has risen substantially. More so, the rate of unemployment among the country’s locals has grown significantly in the last few years. Additionally, it has been noted that the tenure of MNCs in the country has been reducing gradually. In this regard, it is imperative that the Kuwait government puts in place policies and measures that would address these issues.
Measures to Address the Collapse of SMEs
Over the past few years, the small and medium sized enterprises in the country have been suffering from stiff competition from large multinational corporations. As a result, most local enterprises have resulted to closing down their operations following subsequent seasons of losses (World Bank, n.d.). It is imperative to point out that the government plays a critical role in the creation of a suitable business environment. Thus, it should put in place various measures to provide a favorable business environment for local enterprises and encourage healthy competition. Largely, these measures may be in the form of regulation reforms, increasing access to finance, and improving business skills and enterprises.
Regulation Reforms
Firstly, the Kuwait government should initiate reforms relating to entry regulations. At the moment, the rules and regulations are lenient, thereby allowing many MNCs to set up and operate in the country (World Bank, n.d.). Therefore, reforms should focus on creating strict regulations for the establishment of MNCs in the nation. Consequently, it would reduce the number of foreign businesses that are set up in the country. In addition, the government should enact a strict tax regime for foreign enterprises (Bazzarol, 2014). Fundamentally, a higher tax for MNCs would significantly raise their operational costs and, thus, allow for healthy competition between foreign firms and domestic businesses.
Access to Finance and Investment Allowances
Ordinarily, the access to finance plays a major role in the success of a business. Primarily, abundance of business finance allows for the accumulation of business capital, which is a vital component of business growth. In this regard, the government should provide a systematic credit infrastructure. Profoundly, the credit facilities may comprise of credit bureaus and collateral registries from which domestic entrepreneurs can access funds to expand their operations and grow their business (Harrison, 2012). Subsequently, it would allow for the expansion of operations and, thus, permit them to compete with MNCs.
Enhance Business Skills and Practices
Entrepreneurial skills are essential to the success of any business. Thus, the Kuwait government should initiate programs that enhance business skills of local business owners, thereby allowing them to develop their businesses (Bhattacharya & Michael 2008). Basically, this can be done through organizing workshops and training to equip entrepreneurs with required business skills. What is more, the government should offer finance consulting services that offer SME managers financial advice, thereby allowing for their growth and development. Indeed, this measure would facilitate the competitiveness of local enterprises and, hence, prevent their collapse.
Measures to Address Low Net Exports
In the past few years, the Kuwait economy has experienced a significant increase in the level of imports. Unfortunately, these figures have not been accompanied by subsequent increases in the level of exports from the country. As a result, the nation’s net exports have reduced substantially. To address the situation, the federal government may adopt the following measures.
Expenditure Reducing Policies
Firstly, the government should initiate expenditure-reducing policies that are intended to control the demand for imports. Consequently, this would reduce the level of demand for foreign goods and services (Belloc & Maiao, 2013). Besides that, limiting the spending on foreign trade would encourage the rise of local firms.
Expenditure Switching Policies
Secondly, the regime should develop expenditure switching policies. Normally, such policies are designed to change the relative prices of exports and imports in the economy. In turn, it would change the pattern of spending away from imports. Instead, it would direct the spending towards domestic production, which may eventually result in increase in export production from domestic companies.
Raise Productivity of SMEs
The government should also initiate measures to encourage innovation and offer incentives that raise the level of investment in industries with export potential. Profoundly, these measures comprise of supply-side policies designed to boost export performance. Subsequently, it would lead to an increase in the level of net exports in the country.
Measures to Raise the Level of Employment
The past few years has seen a consistent increase in the rate of unemployment among the Kuwait populace. In order to address this issue, the government may adopt the following policies:
Fiscal Policy
It is worth noting that expansionary fiscal policy can decrease the rate of unemployment in Kuwait by raising the nation’s aggregate demand. Mainly, this can be done through increasing taxes or increasing the level of government expenditure. Markedly, an increase in aggregate demand would encourage firms and businesses to expand their operations, thereby demand for more labor. An increase in demand for labor would significantly raise the level of employment in the economy.
Monetary Policy
In the same way, the government may utilize expansionary monetary policy such as reductions in interest rate level. Normally, a low interest rate regime decreases the cost of borrowing in the economy, thereby encouraging individuals to borrow more. In turn, they raise their spending levels and, thus, it increases the aggregate demand. Consequently, this reduces demand deficient unemployment in Kuwait.
Addressing the Decreasing Tenure of MNCs in Kuwait
It has been noted that the tenure of international corporations in the Kuwait economy has been decreasing gradually over the past few years. More precisely, the number of MNCs being set up in the nation has been reducing, following major declines in the degree of foreign direct investments. In order to correct this, the government should provide a suitable business environment for foreign companies (Tembe & Xu, 2012). Mainly, this can be achieved through creating an investment climate that is favorable for foreign direct investments.
A Comparison and Contrast of the Structure and Strategies Adopted by Deloitte-Kuwait and the Gulf Bank
By and large, the Kuwait economy comprises of numerous foreign and domestic corporations. More specifically, the nation is endowed with a series of multinational corporations and corporate parent organizations. For purposes of this assignment, Deloite-Kuwait shall be compared and contrasted alongside the Gulf Bank. Primarily, their structures and strategies will be compared and contrasted to align the various similarities and differences that exist.
Today, Deloitte in Kuwait offers a broad range of services among them insurance, banking and financial services, and investment services. The company also has a strong tax practice and an innovative management consulting group. Furthermore, it possesses a broad understanding in numerous industries among them real estate, manufacturing and petrochemicals (Deloitte, n.d.). On the other hand, Gulf bank is a Kuwait based financial institution that provides investment and financial services to the country’s residents.
Just like Deloitte, Gulf Bank offers a wide range of services across industries in the country. More precisely, the company spreads its services across sectors such as consumer banking, product performance, human resource, and marketing. Currently, the bank is structured into four main units, among them priority banking, business banking, corporate and institutional banking. This way, the companies are able to offer client tailored services, thereby meeting their expectations. In addition to the services offered, the two firms are similar with regards to their structure of service delivery. More specifically, both corporations cater for the needs of small business as well as multinational corporations. Deloitte, for instance, offers both small and large enterprises investment services. In the same manner, Gulf Bank provides its clients, both large and small banking, financial and investment services.
Regardless of the similarities, the two banks differ on various aspects. Firstly, Deloitte is a multinational corporation with its parent organization based in the United States while Gulf bank is a corporate parent organization. Secondly, while Deloitte recognizes that the special needs of small businesses differ from those of MNCs, Gulf bank has no policy to differentiate the needs of firms, and offer similar services across the board. In addition to this, Deloitte recognizes the need to offer professional services on enterprise risk management, tax practice and innovative management, and auditing. Markedly, Gulf bank does not offer these professional services.
Regardless of the likeness and disparities, both companies contribute greatly to the Kuwait economy. Fundamentally, both firms have contributed towards the nation’s growth and development through their provision of banking, investment and financial services. Largely, an increase in such services raises the productivity of firms through profitable enterprise investments. Consequently, this brings about an increase in the country’s GDP, which in turn enhances economic growth and development. Moreover, the two firms offer employment opportunities for the residents of Kuwait. An increase in employment raises the country’s aggregate expenditure which then contributes to economic growth (Tirimba & Macharia, 2014). They are also a significant source of tax revenue essential for the growth and development of the economy.
Reference List
Deloitte. (n.d.). More about Deloitte in Kuwait [Online] Deloitte. Available at: https://www2.deloitte.com/kw/en/pages/about-deloitte/articles/about-deloitte-kuwait.html [Accessed 10 August 2017].
Harrison, J. D. (2012). How big business policies can promote small business interests. [Online] The Washington Post. Available at: https://www.washingtonpost.com/business/on-small-business/how-big-business-policies-can-promote-small-business-interests/2012/03/29/gIQAIOVAjS_story.html?utm_term=.4846a0613626 [Accessed 10 August 2017].
Macro Polis. (n.d.). Kuwait Report [Online] Macro Polis. Available at: https://www.marcopolis.net/top-10-companies-in-kuwait-companies-in-kuwait.htm [Accessed 10 August 2017].
Tembe, P & Xu, K. (2012). Attracting Foreign Direct Investment in Developing Countries: Determinants and Policies-A Comparative Study between Mozambique and China. International Journal of Financial Research, vol. 3, no.4 pp. 1-13 [Accessed 10 August 2017].
Tirimba, O. I & Macharia, G. M. (2014). Economic Impact of MNCs on Development of Developing Nations. International Journal of Scientific and Research Publications, vol. 4, no.9 pp. 1-6 [Accessed 10 August 2017].
World Bank. (n.d.). Attracting FDI. [Online] World Bank. Available at: https://siteresources.worldbank.org/FINANCIALSECTOR/Resources/327-Attracting-FDI.pdf [Accessed 10 August 2017].
World Bank. Policies for SME Growth: What Works, What Doesn’t? [Online] World Bank. Available at: https://pubdocs.worldbank.org/en/269861478801095302/Policies-for-SME-Growth.pdf [Accessed 10 August 2017].
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