Dangerous Decline In Construction Licenses Threatening Dozens Of Sectors With Closure And Bankruptcy

Only recently in February, the government was celebrating the progress of Kuwait’s ranking in the World Bank’s report for ease of doing business, especially the building permits index, which is now issued within two days, but official figures reveal that the number of building permits issued during this year is more than 50 percent less than 2019 in various sectors.
The statistic shows that the number of building permits in private housing decreased by 46%, for investment housing by 65%, and the commercial sector by 61%, and the decline reached 57% for building permits for industrial use.

Economists warned that the continued weakness of urban business recorded in 2020 will increase the financial pressures faced by companies in various sectors, stressing that this shows the true situation of economic activity, as the decline in new licenses reveals the extent of the deterioration in economic activities of all kinds.

The construction sector is the head of the operational chain that pushes dozens of other economic sectors, which has come under the weight of stifling pressures following the coronavirus preventative measures including the curfew and limited working hours leading to a reduction in business and threatens them with bankruptcy because of the stagnation of the construction sector.

They stressed that the government’s continuing attention to the reality of the crisis without providing any support will deepen its effects and increase the cost of absorbing the shocks resulting from this decline.

The analysis of the financial tables shows the strength of the construction sector’s link with many of the main operational sectors, led by the wholesale and retail trade works that show largely the changes in the construction projects and factory building, the financial activities and insurance sector, as it concerns a wide range of entrepreneurs. Particularly those involved in small and medium enterprises in the sector, and finally the manufacturing sector.

The number of building permits issued for private housing since the beginning of the year reached 4821, compared to 8,863 in 2019, while investment housing permits recorded 222 licenses in the past months of this year, compared to 652 licenses issued in the corresponding period of 2019, while the commercial sector issued 170.

Finally, the industrial use sector witnessed the issuance of only 96 licenses, compared to 224 licenses issued last year, which shows the widespread deterioration in the local construction enterprises.

The officials explained that the construction sector is the backbone of the local economy, as it not only enhances economic performance, but also increases the effects of its spending on various sectors and the market movement in general. Consequently, this slowdown is expected to represent heavy economic losses for the private and government sectors at the same time, in terms of the cost of the stimulus package that may arise due to the delay in instituting the return to normal life plan.

Economically, the severe negative repercussions of the slowdown in issuing construction permits do not stop at a specific sector, as company officials told Al-Rai that the construction sector is a window of business for all other economic sectors, and any narrowing of this window would create operational challenges that negatively affect the economic cycle.

As a whole, the building and construction sector are closely related to all sectors of business operations, and the many industries that depend on these projects. They said that the deep recession that the local construction sector suffers from may undermine many economic endeavors, which increases the economic vulnerabilities, and the treatment plans required by the government will be exacerbated. Moreover, this issues is likely to cause employment disturbances, making it difficult nationals to gain employment in this sector.

 

SOURCE: TIMESKUWAIT

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