Huge inflation wave expected of commodity prices in Kuwait

According to experts, the rate of increase in the prices of commodities in Kuwait amounted to 28 percent. This means every citizen and resident is now required to spend an additional KD 28 on every KD 100 to buy his needs, reports Al-Anba daily. The experts warned that up to 300,000 different commodities, whose prices are fixed by the Union of Consumer Cooperative Societies, may witness an increase in prices with the application of the Competition Protection Law, which prohibits setting a minimum price. They said, “This means that there is a high wave of prices coming … backed by law”. While Kuwait witnessed repeated meetings in the last period regarding the cancellation of the Minister of Commerce and Industry’s decision No. 67/2020 to fix prices during the COVID-19 crisis and the demand for the liberalization of prices, the experts affirmed that there would be price hikes of up to 35 percent if the Ministry of Commerce and Industry canceled its decision. They stressed that this needs to be addressed, and there should be a rational control that takes into account the balance between all parties.

Increase
The experts highlighted that the price increase is due to many factors that are prevalent in the whole world and directly affect the supply chain, including weak production and supply globally, the high cost of transportation by land and sea, partial employment, and lack of employment.

Meanwhile, informed sources revealed that the government is not absent from the scene and is working tirelessly to maintain market stability by qualifying and motivating companies and suppliers. They stressed that periodic followup decisions are being taken to ban export and re-export of goods, and also to provide financial support to some suppliers in the event of a shortage in local production of some goods. Regarding this matter, the Chairman of the Board of Directors of the Consumer Protection Association Mishal Al-Manea revealed that the association, in the year 2021, monitored the increase in the prices of many goods in cooperative societies and markets. He said the price hike occurred at varying rates ranging between 7.5 and 28 percent, such that it is believed that each citizen and resident has to pay an additional KD 28 on every KD 100 spent.

With the passing of law No. 72/2020 for the Protection of Competition and its Executive Regulations, Al-Manea warned of another upcoming wave of infl ation that will pose a danger to consumers directly. He indicated that those on whom the law applies were defined as the individuals or organizations engaged in an economic or commercial activity regardless of its legal form, such as traders and companies as well as cooperative societies, which is very dangerous. Al-Manea explained that the regulation specified in its description of practices harmful to competition that it is prohibited for the dominant person to abuse dominance with the aim of limiting, restricting or preventing competition. This includes directly or indirectly setting or imposing prices for products or setting minimum prices or conditions for reselling them. This means that the cooperative societies do not have the right or the ability to fix the prices of commodities, which indicates that “a rising wave of prices is coming… and by law”. He went on to explain that according to the law, companies can ask cooperative societies to increase their prices without involving the Union of Consumer Cooperative Societies. If the board of directors refuses, they can file a lawsuit according to the text of this article and win them because the law is in force. There are up to 300,000 different commodities, whose prices are fixed by the Union of Consumer Cooperative Societies, that may witness an increase in prices with the application of the Competition Protection Law, which prohibits setting a minimum price or the imposing of prices

Cancels
If the Ministry of Commerce and Industry cancels its previous decision, which was issued during the COVID-19 crisis, to fix prices, there will be price hikes of up to 35 percent. This requires rational control that takes into account the balance between all parties. Al-Manea said, “Kuwait is of a special nature, as it imports most of its needs, which means that it is affected by the supply chain crisis, the rise in the prices of raw materials and the price increases in the country of origin including the cost of shipping, which has doubled. However, the customs taxes in Kuwait are low, which means that the increases we are witnessing are currently unjustified to reach that extent”. In the same context, government sources explained that the rise in prices is a global phenomenon that was prevalent during the period of the COVID-19 pandemic and reflected on the Kuwaiti market by extension. It thus pushed for a rise in the prices of goods and services locally during the pandemic for several reasons, foremost of which is the rise in the prices of all raw materials in the global market, which was followed by a rise in commodity prices in the local market. Another reason was the weak global production, and thus weak supply, as the factories’ raw materials reached a waiting rate of 90 days and eventually decreased to 65. Other reasons include the high cost of land and sea freight, the partial operation, lack of manpower, the scarcity of containers, and the high prices of storage due to scarcity of warehouses.

Exporting
In terms of the increase in meat prices, the sources indicated that the main reason is the spread of diseases and epidemics in the exporting countries, which affect meat prices in the local market due to the lack of imports, adding that a global rise in the fodder prices also directly affected the prices. They revealed that the Ministry of Commerce and Industry is monitoring the situation in all markets around the clock in order to prevent any unjustified price hikes or manipulation of the capabilities of citizens and residents.

The sources affirmed that the ministry has taken several measures to reduce prices, especially the prices of food commodities, and maintain balance in the market through qualifying and motivating companies that supply necessary goods and merchandise. They explained that other measures taken by the ministry include banning the import of some food items and necessary goods and merchandise, providing financial support to some suppliers of food and necessary goods in the event of a shortage in local production, cooperating with government agencies to overcome obstacles facing companies and suppliers, facilitating classification procedures, and extending import licenses. Also, the Minister of Commerce and Industry had issued a decision to fix prices of food items during the pandemic. Furthermore, the Executive Director of the Kuwait Shipping Companies & Agents Association (KSCAA) Ahmed Eid explained that the maritime transport sector witnessed an increase in the cost of transportation by double from the start of the COVID-19 pandemic until the end of the year 2021. He attributed this to several reasons such as
1- Unavailability of ships and shortage of containers due to the increased demand for consumables, which affected the carrying capacity of ships and the lack of sufficient space for transporting cargo containers.
2- The presence of restrictions in international ports, shortage of stations, and shortage of workers, which led to congestion, and long waiting period for ships to unload the goods.

Eid explained that a significant decrease in the rates of 40-foot containers has been observed during the current period, from USD 9 thousand in the last quarter of 2021 to USD 7,500, for goods coming from China, which is the largest exporter of goods around the world. Such an increase and decrease in the rates is global. The rates amounted to USD 20 thousand for containers from China to the United States, and USD 15 thousand for those destined to Europe and north, provided that there is sufficient space on board the ship. The 2021 report issued by the United Nations Conference on Trade and Development (UNCTAD) on the review of maritime transport stated that global import prices may rise by 11 percent and the prices of consumables by 1.5 percent between the current period and the year 2023 if the disruptions in shipping and supply chains are not stopped, and the restrictions imposed in global ports and container terminals are not addressed.

Solutions
The report touched on the need to work on finding new solutions that include development of the infrastructure and technology for shipping, digitization, and trade facilitation measures. It indicated that there will be large-scale transformations in maritime transport in the presence of the pandemic. Regarding the restrictions imposed on receiving ships loaded with goods in Kuwait, Eid said there is a delay in issuing entry permits for regular ships loaded with importers’ goods, in contrast to what was in place before 2019 with regard to regular ships that visit Kuwaiti ports on an ongoing basis, and have a local marine agency registration certificate, contrary to what is applied in ministerial resolution No. 282/1980. He highlighted the high daily rental cost of ship carrying goods. Eid concluded by saying the KSCAA, with the cooperation of the Kuwait Ports Authority, is working hard to harness and overcome all difficulties and problems to facilitate the entry and exit of ships loaded with importers’ goods, and to prevent delays for international ships loaded with goods.