Layoffs hit Kuwait financial sector

KUWAIT: Employees in Kuwait's financial sector are facing an uncertain future, with more layoffs and lower salaries expected as banks and investment firms try to weather the global financial meltdown. "They no longer recruit people anymore in the bank where I work," said a female employee at one of Kuwait's main banks. "Certain departments are being closed, and the employees are being shifted to other departments," she adds, explaining that tardy employees and employees who have received warnings are the ones with the most probability of being laid off. "But you never know," she says, adding that there is extreme fear among the staff nowadays.

The banking sector alone employs approximately 12,000 employees, a majority of which are Kuwaiti citizens. Thousands of expats and citizens work in the investment sector. Expatriates may bear the brunt of layoffs in the banking sector. But both citizens and expats in the investment sector face downsizing as the crisis deepens.

Already Kuwait's leading trade union has slammed private sector firms for layoffs and salary reductions. Reducing employees' salaries is against the private sector law, and shall be severely punished, said Khaled Al-Azmi, president of the Kuwait Trade Union Federation. "The problem stems from the greed of company owners," Azmi alleged in a statement to the press yesterday.

Already investment firms in Kuwait are laying off staff and restructuring salaries. Bonuses, raises and benefits have been canceled or reduced, according to industry insiders. More than half of Kuwait's 46 listed investment firms have seen their share prices halved since the crisis hit Kuwait in October. The bourse has nosedived, dropping from a high of 15.000 points in May to about 6.900 now.

Instead of diversifying their portfolios, investment companies invested all their assets in the Kuwait Stock Exchange. That's why when the market fell, their businesses fell with it," said one financial analyst in an attempt to explain why investment firms in Kuwait have taken such a sit.

Many investment firms will be forced to merge with other companies or face bankruptcy. About 70 percent of them can no longer meet requirements necessary for listing on the bourse, claimed the analyst who asked that his name be withheld. The fourth article in the KSE rules and conditions for listing shareholding companies states: "The company shall have achieved net profit in the last two fiscal years, and the yearly net profit shall not be less than 7.5 percent of the weighted average of the paid-up capit
al at the end of each fiscal year.

It also states that companies need a capital of KD 10 million to be registered. "The majority cannot guarantee to make the net profit of 7.5 percent in the next year in order to meet that requirement," elaborated the financial analyst.
Earlier this week, Parliament member Mohammad Al-Abduljader warned that 27,000 nationals employed in the private sector face termination. He demanded immediate government intervention to solve the problem.

Citizens made redundant can rely on government support but expatriates will be left empty handed, many of them forced to leave Kuwait if they cannot find another job within the 30 grace period after their work visas are cancelled.

The next hearing on the suit will be in early March.