Markaz launches special report on "impact of Covid-19 on mobility in Kuwait"

Kuwait: As part of its ongoing interest to constantly evaluate the performance of various economic sectors to help achieve sustainable growth, Kuwait Financial Centre “Markaz” launched a special report highlighting the impacts of the Covid-19 outbreak on mobility in Kuwait. The report includes a set of recommendations that can be implemented by different sectors to address the challenges caused by disruptions to mobility as a result of the measures taken to curb the spread of the pandemic. It comes as a continuation of Markaz’s efforts to monitor the latest market developments in line with the national initiatives aimed at gradually reviving the economy and returning life to normal.

Measures taken to contain the spread of Covid-19

Following the outbreak of the pandemic, restrictions on movement were announced in most countries around the world, including Kuwait. The wide-ranging preventive measures taken by various governments included strict lockdowns and curfews that curtailed travel and movement within and outside their countries. The State of Kuwait has taken several measures to curb the spread of the Covid-19 virus, including a total lockdown from 10 to 30 May. This was followed by the latest ‘Five Stage’ announcement for the gradual come back, starting with a partial lockdown from 31 May (from 6 pm until 6 am) and full lockdown for specific areas, namely Farwaniya, Khaitan, Hawalli and Maidan Hawalli.These measures have had significant ramifications on various vital sectors in these countries.

Lifting mobility restrictions is key to revitalizing economy

The report focuses on the importance of restoring mobility to overcome the effects of the measures taken to contain the spread of the virus, on the national economy, and the increase in levels of demand for essential goods, services and supply chains. Traffic to supermarkets and pharmacies had heavily increased, prior to the announcement of the full lockdown, whereas a decline in activity was witnessed across all areas except for residential areas, and was also seen across the food supplies sector, pharmacies, parks, retail and entertainment, transportation stations and offices declined. Markaz’s report indicates that mobility acts as an interlink between various stakeholders for goods and services, and creates a chain of linkages that touches every aspect of life. Therefore, it was necessary to reduce restrictions on mobility and allow various sectors to return to work under specific conditions and by following precautionary measures.

The impact of mobility restrictions on different sectors

Several sectors were impacted by the restrictions on mobility and the full lockdown. Among those deeply impacted was the transportation sector, in which taxis and public transportation were negatively affected by the halt on business, in addition to the challenges faced by those without private cars to reach authorized convenient stores and supermarkets. All retail outlets, with the exception to cooperative-societies and supermarkets, have been closed, causing residents to panic-buy. There is also a heavy burden on the supply chain, as retailers face many challenges with stocks that will soon become perished, in addition to the lack of revenue in return for the occuring expenses. The medical sector was also impacted by the restrictions on mobility, where patients postponing treatments will increase pressure on the waiting list, and in return, hospitals may lose revenues due to this approach. In addition, hospital visits require the issuance of permits, and although pharmacies are open 24 hours, home delivery is also restricted by permits.

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Impact of mobility restrictions on financial sector

The financial sector witnessed a severe state of distress, being directly linked to other vital sectors. The nation’s stock exchange continued its operatios, however, relevant stakeholders, such as asset managers and brokers, are denied access to visit their offices, limiting their service capabilities. We also witnessed a halt on the operations of investment companies due to the total lockdown, as it restricts the critical employees from being present at their work place, creating pressure on the business activities and liquidity of these companies. The restrictions on mobility also impacted companies that rely on the collection of cheques as a settlement method, and have been unable to deposit cheques in banks over the past weeks. The inability to obtain account statements and remittance receipts from banks contributed to creating discrpencies between companies and bank statements. The full lockdown put pressure on treasury departments in investment companies in terms of working remotely with regard to transferring funds via SWIFT. In addition, investment companies may be exposed to some risks that affect their business in light of mobility restrictions, such as the inability to access the data center and servers in the event of any electrical failure or in the programs used, which will make it difficult for employees to access computers remotely.

As for banks, Banking services stopped due to the total lockdown, with the exception to online services. Although many companies quickly shifted to electronic services, this also exposes them to the risk of cyber attacks, bearing in mind that many marginal labours cannot benefit from online services since they lack access. In terms of banks, and since they operate within strict protocols and restrictions related to confidentiality, majority of bank employees have not been able to carry out their duties from home, resulting in a halt of many banking activities related to credit, cheque deposits, and transfers that require client presence. However, with more restrictions eased, markets are expected to rebound and rebalance.

In accordance with the 5 phase comeback plan, investment companies will be allowed to operate in the second phase, which will limit the role of the financial sector in supporting national economic activities. The activation of the second phase is dependent on the success of the first phase, which means that the current halt can be extended to this sector, and it will represent a crisis for business continuity in the country. There is also a challenge facing the financial sector as a whole in relation to information technology, due to the fact that if for any reason, access to the database servers is lost, working remotely iss no longer an option.

Key takeaways… A proactive and integrated framework

The need to activate an integrated mechanism to reduce the effects on the Kuwaiti market is a necessity. The many recommendations set out in the report include the formation of multiple teams to cater to the increasing needs of residents, and leveraging the potential use of technology,  in addition to correctly assessing areas of high demand, the number of delivery personnel in each area and their movement, along with the number of suppliers, among others. Furthermore, the report calls for activating delivery services during full lockdown, and granting volunteers more permits to help, in the case of shortage in manpower. With regard to the challenges faced by the various stakeholders, collective consultations can be held with the parties from different sectors, to reach integrated solutions and better coordination to ensure that all segments of society are served as well as possible. As for the medical sector, special teams can be formed to address the requirements of patients and treat their needs as a priority, to relieve some of the current pressure on this sector.

Markaz’s report also suggests formulating a comprehensive national disaster recovery plan, one which facilitates the work of the financial services sector as an imperative necessity in times of crisis, while forming an administrative governance structure, with the aim of coordinating and supporting national resources, and developing a community-led approach to policy framework. This would also include formulating a plan to monitor the supply chain by developing a modern information-sharing system.

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Impact of mobility restrictions on financial sector

The financial sector witnessed a severe state of distress, being directly linked to other vital sectors. The nation’s stock exchange continued its operatios, however, relevant stakeholders, such as asset managers and brokers, are denied access to visit their offices, limiting their service capabilities. We also witnessed a halt on the operations of investment companies due to the total lockdown, as it restricts the critical employees from being present at their work place, creating pressure on the business activities and liquidity of these companies. The restrictions on mobility also impacted companies that rely on the collection of cheques as a settlement method, and have been unable to deposit cheques in banks over the past weeks. The inability to obtain account statements and remittance receipts from banks contributed to creating discrpencies between companies and bank statements. The full lockdown put pressure on treasury departments in investment companies in terms of working remotely with regard to transferring funds via SWIFT. In addition, investment companies may be exposed to some risks that affect their business in light of mobility restrictions, such as the inability to access the data center and servers in the event of any electrical failure or in the programs used, which will make it difficult for employees to access computers remotely.

As for banks, Banking services stopped due to the total lockdown, with the exception to online services. Although many companies quickly shifted to electronic services, this also exposes them to the risk of cyber attacks, bearing in mind that many marginal labours cannot benefit from online services since they lack access. In terms of banks, and since they operate within strict protocols and restrictions related to confidentiality, majority of bank employees have not been able to carry out their duties from home, resulting in a halt of many banking activities related to credit, cheque deposits, and transfers that require client presence. However, with more restrictions eased, markets are expected to rebound and rebalance.

In accordance with the 5 phase comeback plan, investment companies will be allowed to operate in the second phase, which will limit the role of the financial sector in supporting national economic activities. The activation of the second phase is dependent on the success of the first phase, which means that the current halt can be extended to this sector, and it will represent a crisis for business continuity in the country. There is also a challenge facing the financial sector as a whole in relation to information technology, due to the fact that if for any reason, access to the database servers is lost, working remotely iss no longer an option.

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© Press Release 2020