Call to ‘rationalize’ subsidy programs

Updated 22 April 2014

Call to ‘rationalize’ subsidy programs

KUWAIT CITY: Kuwait’s rising public spending and dependence on oil revenues are preventing sustainable economic development, the Gulf state’s central bank governor said.
Mohammad Al-Hashel, who rarely comments on policy issues, said Kuwait needed to reduce wasteful spending in the state budget and “rationalize” subsidy programs, state news agency KUNA quoted him as saying.
One of the world’s richest countries per capita, Kuwait provides heavily subsidized petrol and utilities to its 3.8 million residents and does not charge income tax.
The IMF says the major oil producer’s spending could exceed revenues as early as 2017 under a worst-case scenario. Kuwait’s government predicts this could happen by around 2021.
Al-Hashel’s predecessor Sheikh Salem Abdulaziz Al-Sabah, who is also a former finance minister, resigned as central bank chief in February 2012 after 25 years in protest against the state’s wasteful spending.
Structural imbalances in the budget “hinder the process of promoting growth and development of the national economy on a sustainable basis,” Al-Hashel said in a briefing to local media, according to KUNA.
He said the government needed to “diversify the sources of national income” and make sure that it was able to collect all payments for services such as electricity and water. He also called for an “increasingly sophisticated tax system,” KUNA said without giving details.
The government started a review of the subsidies’ system last year saying that cheap services should go to those who need them. The finance minister has said the review should be completed this year.
Subsidies are expected to cost 5.1 billion dinars ($18.2 billion) in the current fiscal year, which began this month.
Kuwait’s progress with the review is relevant to other Gulf states which do not charge income tax and rely on a patronage-style system of handouts that has helped to shield them from regional unrest.
Local newspapers have reported that Kuwait, which pegs its dinar to an undisclosed currency basket believed to be dominated by the US dollar, may start charging foreigners more for products such as petrol and continue to subsidize petrol for Kuwaitis.
Foreigners make up around two thirds of the country’s population, with large numbers from India, Bangladesh and the Philippines working in the construction and services sectors.
Kuwait plans to raise its budget spending by 3.2 percent this fiscal year, a cabinet statement said in January, a much slower rise than the past decade’s double-digit average. The plan suggests the government is following other Gulf states in adopting a more cautious fiscal policy.
Al-Hashel also called for Kuwait to put forward legislation to allow the government to issue sukuks, or Islamic bonds, KUNA said without giving details.
At the moment, the central bank issues three- and six-month bills as well as mostly one-year local currency Treasury bonds on a regular basis.


Sweden bans Huawei, ZTE from upcoming 5G networks

Updated 20 October 2020

Sweden bans Huawei, ZTE from upcoming 5G networks

  • European governments have been reviewing the role of Chinese companies in building their networks
  • Sweden’s security service called China ‘one of the biggest threats against Sweden’

STOCKHOLM: Swedish regulators on Tuesday banned the use of telecom equipment from China’s Huawei and ZTE in its 5G network ahead of the spectrum auction scheduled for next month.
The Swedish Post and Telecom Authority (PTS) said auctions the setting of the license conditions followed assessments by the Swedish Armed Forces and security service.
European governments have been reviewing the role of Chinese companies in building their networks following pressure from the United States, which says they pose a security threat because, among other concerns, Chinese companies and citizens must by law aid the state in intelligence gathering.
Sweden’s security service called China “one of the biggest threats against Sweden.”
The United Kingdom in July ordered Huawei equipment to be purged completely from Britain’s 5G network by 2027, becoming one of the first European countries to do so.
Huawei and ZTE did not immediately respond to requests for comment on the decision by Sweden, home to Ericsson, one of Europe’s leading telecoms equipment suppliers.
“The ban leaves network operators with less options and risks slowing the rollout of 5G in markets where competition is reduced,” said Ben Wood, chief of research at CCS Insight.
The ban is likely to benefit rival telecom equipment makers Ericsson and Finland’s Nokia.
PTS said companies taking part in the auction must remove Huawei and ZTE gear from existing central functions by Jan. 1, 2025.
The regulator defined central functions as equipment used to build the radio access network, the transmission network, the core network and the service and maintenance of the network.
PTS said the license conditions were decided to address the assessments made by the armed forces and security service.
It has approved the participation of Hi3G Access, Net4Mobility, Telia Sverige and Teracom in the planned spectrum auction of 3.5 GHz and 2.3 GHz, key bands crucial for the rollout of 5G.
Tele2 and Telenor will participate together as Net4Mobility to secure spectrum for a joint nationwide 5G network.
Tele2, which uses Huawei equipment in its network, which had earlier called Huawei an important vendor, said the PTS decision “does not change our plans substantially.”
“We may have to phase different costs differently between years to meet security conditions on time,” a spokesman told Reuters.
The 5G spectrum auction was originally planned for early 2020, but last year PTS said it would delay the auction due to a security review. PTS announced in April this year that the auction would begin in November.