Kuwait Finance House (KFH)Kuwait Finance House (KFH)

National Bank of Kuwait (NBK)National Bank of Kuwait (NBK)

Emphasizing the need to form a 'rescue' committee to address the KSE crisis under the leadership of economic experts like Deputy Premier and Minister of Foreign Affairs Sheikh Dr Mohammad Sabah Al-Salem Al-Sabah, Al-Duwailah opined the whole world is currently experiencing an unprecedented economic crisis which, he stressed, is beyond what the experts and those working in the financial sector like the ministers of finance, commerce and industry as well as the KSE have expected. He believes the crisis is not within the bourse but the whole economic system. This, he said, only proves that the so-called managers of the Kuwaiti economy know nothing about the economic, credit or liquidity problems in the international market.

Confirming that the necessary measures are being taken to address the crisis, Al-Duwailah asserted the bourse fell drastically due to administrative flaws, negligence of KSE officials, lack of transparency, and irregularities in trading procedures. Al-Duwailah pointed out the value of the whole world's assets has plummeted and it now stands at not more that 10 percent of the original value while that of the real estate is not more than 25 percent. He said he believed Kuwait's surplus was valued around $200 billion, but this has gone down to about 25 to $75 billion due to the crisis. He did not clarify how he had come to this conclusion.

On another development, Al-Duwailah confirmed the committee has approved a draft law banning local banks from offering any loans or credit facilities or doing any banking business -- under whatever name -- based on variable interest rates. The law was then referred to the Parliament Secretariat. Al-Duwailah said the committee discussed seven draft laws on the amendment of law number 32/68, particularly stipulations on foreign exchange, Central Bank of Kuwait (CBK)Central Bank of Kuwait (CBK) and banking professionals. He said the committee has unanimously approved a proposal to add two clauses to Article 97 and amend Article 87 of law number 32/68.

The committee postponed discussions on draft laws related to financial responsibility and protection of public funds while waiting for the government to come up with a unified vision in this regard. The committee rejected a draft law obliging firms and corporations to have equitable deposits in Kuwaiti banks. It also turned down a suggestion to add an article to the law on prohibiting banks from issuing credit cards or offering credit facilities to individuals below 21 years. Al-Duwailah explained these proposals are not appropriate under the current economic situation and it will harm the interests of Kuwaitis studying abroad.

Meanwhile, some members of the Financial and Economic Affairs Committee on Sunday criticized Central Bank of Kuwait (CBK)Central Bank of Kuwait (CBK) Governor Sheikh Salem Al-Sabah for reaffirming that Kuwait is not affected by the international financial crisis despite the fact that the whole world is suffering the brunt of the problem. After the committee meeting with Sheikh Salem and ministers of finance, commerce and industry and representatives from the KSE Committee, MP Hassan Jowhar said the government officials confirmed reports that Kuwait Investment Authority (KIA)Kuwait Investment Authority (KIA) has pumped money into the market by increasing some portfolios and its shares from 55 to 76 percent while another parliamentary source disclosed the amount is estimated at KD 8 billion.

The government considered the current financial crisis a 'financial tremor or storm'. CBKCBK took measures to secure its monetary policy -- an unprecedented move in Kuwait, regulate procedures to pump more liquidity into banks, implement supervisory policies to strengthen the banking sector, and increase capital level to 12 percent, Jowhar affirmed.

On the other hand, MP Mohammad Abduljader underscored the need to form a government crisis management team to deal with the current economic situation in the country. He added the MPs have asked the government to encourage government authorities with investments in Kuwait like Kuwait Petroleum Corporation (KPC), Public Authority for Social Security (PASS) and Public Awqaf Foundation to invest in the stock market. He disclosed many economic experts had earlier advised the government to invest in the market to benefit from the falling prices of shares.

In the meantime, Finance Minister Mustafa Al-Shamali said the effect of the global financial crisis on KSE is very minimal compared to other stock markets in the world, adding the Cabinet will continue taking the necessary steps to stabilize the market.

Admitting there were no new resolutions presented in the meeting, Al-Shamali clarified the committee discussed measures taken by the Cabinet since the start of the global financial crisis.

Minister of Commerce and Industry Ahmed Baqer, meanwhile, affirmed the crisis has affected stock markets in the whole world and economic experts are satisfied with the measures taken by the Cabinet to avert the crisis.

Agreeing with Al-Shamali that the effect of the global crisis on KSE is minimal, Committee Chairman Dr Nasser Al-Sane said Kuwait still needs to take the necessary steps to avert the crisis. He also expressed his satisfaction over the measures taken by the Cabinet, including the decision of CBKCBK to reduce the discount rate by 1.25 percent -- from 5.75 to 4.50 percent.

Moreover, Chairman of Kuwait Economic Committee Dr Rola Dashti disclosed the society has presented a number of proposals to lessen the impact of the global financial crisis on KSE. She said the society proposed the formation of an emergency economic team, establishment of an investment protection fund to purchase selected shares in the bourse, and require loan companies to buy 10 percent of the treasury's shares.

The society also suggested the allocation of a fixed amount to Kuwaiti investment companies, regular inspection of investment companies, establishment of a constant risk management unit, proper implementation of monitoring mechanisms, imposing harsh punishment on those found to have violated KSE regulations, proper dissemination of stock market information, minimizing fluctuation of rates in trading, passage of vital laws like the KSE authority law, regulate usage of internal information, amend real estate law 9/2008 and law on public-private sector partnership. Committee member MP Marzouq Al-Ghanim affirmed the authorities will soon take a number of new resolutions to end the crisis. He recommended pumping more liquidity into the bourse through the establishment of a large fund, instead of forming separate funds, to avoid conflicts later.

By Dahlia Kholaif & Abubakar A. Ibrahim

© Arab Times 2008

 

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