Kuwait is punching below its weight in business due to its weak regulatory framework and needs to improve its insolvency laws so that distressed companies can restructure properly, a World Bank official said on Tuesday. Major oil producer Kuwait is one of the most financially stable economies in the world thanks to high demand for its natural resources, World Bank Senior Counsel Riz Mokal said.
But its laws are hampering progress and the Gulf state needs to look at improvements to help commerce and industry weather the uncertain global economic environment, he said. "We think that there is room for improvement at each of the stages of the credit life cycle," Mokal told a forum in Kuwait held by the Ministry of Commerce and Industry.
"The regulatory and institutional framework causes Kuwait to punch below its weight given the immense wealth and human resources which are available to the country," he said. The global financial crisis hit Kuwait's companies hard and its investment companies suffered in particular.
The stock exchange has suspended trade in around 30 companies for failing to report earnings on time or for accumulating large losses. Some of them have been delisted and others warned they could face the same fate. Investment Dar secured a 1 billion dinar ($3.6 billion) debt deal with creditors in February 2011 as part of a restructuring under Kuwait's Financial Stability Law. Global Investment House is undergoing its second voluntary debt restructuring in three years.
Mokal said his team had reviewed Kuwait's insolvency and creditor/debtor regimes at the request of the government. He said Kuwait's legislation for insolvencies needed improvement because it is based on an Egyptian code dating to the 1940s which was in turn derived "from one of the classic versions of the Napoleonic code."