I don’t know what to make of this, only 10 days ago was Kuwait banned from Fifa, this has just reached the point of embarrassment. Since Kuwait did not resolve government interference in the Olympic movement in the country, and the deadline of today passing by with no mutual agreement, Kuwait got banned.
So who’s banning Kuwait next? We already lost the biggest two.
I know many that complain about dealing with government paperwork when starting a business. So this comes in a handy, Sirdab Lab are giving a seminar about how to handle getting paperwork done, licensing and everything else that normally comes with a headache. This is the kind of things that you won’t find in papers, I would recommend any startup or anyone planning to start a business to attend.
The speakers are Ahmad Al Abdulmohsen & Ahmad Al Ibrahim, owners of China Garden
The seminar is taking place at Sirdab Lab today at 7pm, since it’s for members only you’ll have to pay 5 KD for you’re a non-memeber.
Guest post written by Sayed Abbas Al Mohri
Let me begin by saying real estate is not my favorite asset class, but the urge of virtually every Middle Eastern person to acquire some sort of property makes me immensely interested in knowing the details of this sector.
Not long ago I tweeted about the difference between buying one square meter of land in Kuwait City, and New York City – the financial hub of the world. And surprisingly, the financial hub of the world was cheaper than Kuwait! Let’s dig a little deeper in what constitutes the problem in real estate in Kuwait:
1. Land inaccessibility
Most of us heard about ‘freeing government lands’ in the news by politicians and some economists. But what does that mean? Simply put, KOC (the gigantic oil company) owns almost all the unused land in Kuwait, for the very reason that there is ‘potential’ oil underneath these lands, and therefore people shouldn’t live here. But wouldn’t that be absurd since KOC has shut down so many of its fields on lands because the oil ran out in that particular field. You can ask oil officials about that and let me know the answer if you could get one!
The other meaning of freeing lands is the list of less than 5 people who own vast lands in residential and commercial places and are not willing to develop, nor sell these lands. From one perspective people would hate that very list of 5, but I would say from a capitalistic point of view, why would he/she sell or develop the land if no law requires restricts him? Now you’d think yes, the government should be proactive in setting laws to prevent such things. Again, if you could find any answer from the government, let me know and I’ll buy you a Kitco chips.
2. Economic feasibility in a time of crisis
The other reason we have a real estate problem in Kuwait is because there is virtually no way for people to invest their money. And here I mean the general public of people, and not a list of 5 or 20 or 100. It’s me and you, when you get a raise, when you get a bonus, when you sell something and buy a cheaper alternative and you have some excess cash, and so on… In most cases, an average person likes to invest his money somewhere to ensure a brighter future for himself, and his family. The way you do this in western countries is by investing your money in retirement plans that include stocks, bonds, government treasuries, and other financial products.
We do have a stock market, right? Yes, it’s that dark brown building on Boodai Square in Downtown. But how has the stock market performed from the day it operated? First, the Souk Al-Manakh crisis, then the 2008 Credit Crisis. For sure there were crises in other parts of the world, but the problem here is that the public sector did not deal intelligently with the aftermath of crises. That is why you see people still owing money from Al-Manakh crisis, or people selling their Aston Martins and riding a used Nissan Maxima after 2008. And it’s the reason you see bread bakers riot and shut down their shops, or parking lots increase their charge from 100 fils to 150 or 200 and literally the dramatic increase in consumer goods prices, hence Inflation!
Back to investments, so stocks are out, bonds? We do not have a bond market in Kuwait. Government treasuries? There is no vehicle that allows individuals to directly purchase government treasuries, it’s rather reserved for financial institutions that are run by the very elite part of the society.
Basically, the average citizen is left with only real estate to invest in. Of course, the older segment invested before 2000’s so they benefited from the low prices, and now the current generation is left with skyrocket prices because of what we discussed before, and the pure supply and demand economic issue.
The mentality of living inside Al-Soor, and being near to Diwaniya, or Avenues, or my friend’s uncle’s house should be changed to embracing the very fact that Kuwait is a big country with over 3.5 million population and it’s not realistic to assume everybody is literally a block away from their parents or families’ residences. Also, the fact that every newly wed with two kids requires an entire 500 sq. m block of land to build 3 stories, and a garage, and 4 ballrooms. We are way past this stage and we should embrace the reality that if we keep building 500m houses for every family, we’ll need 10 more planet earths to accommodate Kuwaiti families in year 2250 (Yes, I have made some estimations and that’s what Excel came up with!).
Ways to recover?
- Long term: Create more economic opportunities for people to invest in, and reduce the pressure on real estate as an asset class.
- Long term: Introduce new laws imposing taxes on multiple land owners to put pressure on land behemoths and strict the use of the taxation money to only government institutions dealing with providing housing to citizens.
- Long term: Kuwaiti families embrace living in apartment buildings and try to shrink family sizes by not having too much kids.
- Long term: Government sets infrastructure rules for building high rises in residential places and accommodating needs (parking, grocery stores, health, etc…)
- Short term: Have fun and eat a snickers bar. If you can afford, have a Diet Coke as well.
About Guest Writer:
Sayed Abbas is an investment professional currently helping developing technology financing programs with Kuwait National Fund for SMEs Development. He had previously co-founded a mobile payments company, and worked in investment management field. He graduated magna cum laude with a degree in industrial and systems engineering from Virginia Tech.
I had to finish some work that involved getting an approval from a government sector, I’m not even going to mention what a huge and confusing headache it is just to get a simple task done and how many government sectors I had to pass by, that’s not including the ones that redirected me somewhere else.
What ticked me off the most was when I was almost done and had to pay KD 50, they told me I have to pay it in the old currency so the machine would accept it. The new currency was released 3 months ago, why wasn’t the machine updated at the same time? Why do I have to go through such a hard time because of someone else’s negligence?
I didn’t have any money from the old currency and here’s what I had to do:
- Passed by a close by kitchen store: They had KD 0 of the old currency
- Passed by a close by electronics store: They had KD 0 of the old currency
- Passed by NBK: Even though they were understanding of my situation, they told me they can’t give me the old currency
- Passed by Landmark/Centerpoint: They had KD 10 of the old currency so we exchanged
- Passed by a Baqala: He had two KD 5‘s fortunately, so we exchanged
- Passed by a private supermarket: They had exactly KD 30 of the old currency, we exchanged
All of this just to get through the simple task of inserting money into a machine and getting a receipt. If you want to update a currency of an entire country then for the love of God make sure all government sectors are ready to accept the new currency either before or during the launch, not have people suffer 3 months later.
To my pleasant surprise after complaining about some speed bumps in Qurtoba are almost undetectable they actually got properly painted. I don’t know if it was because of my blog post but I’m just happy I don’t have to suddenly halt every time I pass by this road anymore. I wish they’d just remove it altogether, that’d be even better.
According to Gulf News the average Kuwaiti family spends KD 3,723 every month, 14% of that budget is spend on food, nothing new there. Families also spent less than 4% on health care and education, mostly because the government pays for both. I wonder what’s the average of the other GCC countries.[Source]
I guess the government will be using that money to install even more cameras on the streets. The estimate is almost double the revenue earned from traffic fines in previous years which was around KD 25 – 30 millon. Hope they use some of that money on improving the infrastructure of roads.[Source]