Vice-President of World Bank for Middle East and North Africa Dr Hafez Ghanem stated Kuwait has recorded significant progress through its economic and financial reform strategy adopted in the last three years to counter the falling oil prices, reports Annahar daily.
In an interview, Al- Ghanim named three main axes upon which Kuwait’s economic reform strategy is based; the first axis entails adjustment and rationalization of subsidy and the second axis covers management of financial deficit and public debt, while the third axis involves reorganization of private sector to improve business environment and develop labor market.
Al-Ghanim is optimistic the legislative and the executive authorities will reach a compromise and take the step toward economic reform, noting the move is essential for achieving the goal of Vision 2035 but it requires full upgrading of economic performance in the next two decades to perfect changes in all fields.
Regarding the three axes needed to fulfill Kuwait’s Vision 2035, he stressed the need to institute strategy for adopting alternative sources of income aside from oil. He also stated the need to focus on developing educational system to raise the potential of students in their various specialties, while preparing them for the labor market. He also touched on developing and empowering Kuwaiti women to occupy different positions, particularly in private sector.
Regarding his view on the measures taken to cut down subsidy, Al-Ghanem said subsidies in all countries are meant for needy citizens and not meant for financing specific commodities. He explained that all citizens, including the rich, benefit from low fuel prices whenever the state subsidizes fuel — even though the state originally targets low-income citizens, and the outcome contradicts the concept of social equality. He is of the view that providing commodities based on their true prices will help citizens to rationalize consumption.
The World Bank has suggested that citizens should be offered cash instead of subsidizing specific commodities to enable the state distribute their share of the national wealth directly. Meanwhile, amid fears that execution of Value Added Tax may be postponed due to consistent friction between the legislative an executive authorities, an international expert affirmed that Kuwait is obliged to implement the system latest by the end of 2018. The source based this affirmation on the framework of the GCC Agreement concerning the unified tax regime, especially as it will be in January since Saudi Arabia and UAE started implementing the VAT system.
In a recent seminar on “Value Added Tax in the Financial Services Sector” organized by the Union of Investment Companies, a partner agent at Ernst and Young Company Waleed Abdul- Fadhel said the agreement framework obligates GCC member states to implement the system not later than 12 months after two of its members have implemented the system and “any of the countries that fail to implement it within the stipulated period is out of the agreement and will bear the consequences”. This means Kuwait is obliged to implement VAT system latest by Dec 2018, he stressed. He reiterated Kuwait will lose the right of getting tax revenues on goods imported from member states if she fails to comply during the stipulated period.