Wednesday 21, December 2016 by Jessica Combes

GCC governments accelerating SME development

Regional governments are prioritising economic diversification in light of the $275 billion export shortfall for GCC countries created by the oil price slump. Integral to this economic strategy is accelerating SME sector growth, according to a new report by online recruitment platform, BLOOVO.COM. 

SMEs contribute directly to national GDP through business activity, accounting for 30 per cent of the UAE’s GDP, 28 per cent of Bahrain’s and 22 per cent of KSA’s. Kuwait’s GDP is 20 per cent composed of SMEs activity, with 17 per cent of Oman’s GDP generated by the sector.  

SMEs are also essential engines for job creation to keep pace with a growing national population. With the public sector operating at capacity, new jobs will need to become the preserve of the private sector. SMEs currently employ around 17 million people in the GCC, but this figure could rise to 22 million under a best-case scenario modelled by BLOOVO.COM.

“Supporting the creation and growth of SMEs is very much in the spotlight as GCC countries evolve economies less reliant on energy prices. And while regional governments have been active in creating an SME ecosystem, our report identifies key areas that still need support. Moving to an SME-oriented knowledge economy is the best way for GCC countries to maintain progress towards social and economic goals,” said Ahmad Khamis, CEO and Co-founder, BLOOVO.COM. 

Fortunately, GCC countries have long been cognisant of the importance of SMEs and are accelerating programmes already in place. The UAE’s Federal Law No. 2 of 2014 categorises SMEs, established a dedicated council, and determines incentives to be offered to small business owners.

In 2006, Bahrain set up its Tamkeen body to support SMEs and similarly in 2013, Kuwait established a $7 billion National Fund for Small and Medium Enterprise development. More recently, Saudi Arabia formed its Public Authority for Small and Medium Enterprises (PASME) in 2015. 

Dubai SME, the agency set up by the Department of Economic Development (DED) has, to date, assisted around 11,000 entrepreneurs through its Development Advisory Services, advised over 1,100 SMEs with licencing and registration services, and has brought over AED 1 billion in government contracts to the sector. Dubai SME has also incubated 300 startups, and engaged with 4,000 students through its Young Entrepreneur Competition to launch 1,200 projects.

The BLOOVO.COM report suggested four regulatory arcs for facilitating SME growth further. First, aside from subsidised financing, funds and incubators could deliver mentoring and support to increase chances of business success, making up the shortfall presented by conventional bank financing. Second, tweaking company formation laws could offer greater flexibility by allowing greater foreign ownership, to attract FDIs and international innovators. Third, a focus on commercialising intellectual property would help companies turn ideas into revenue streams–with the public sector playing a facilitative role in helping SMEs file international patents.

Finally, greater focus could be placed on making SMEs an essential part of critical supply chains, such as making them first-preference suppliers for government contracts, for instance. The UAE’s Federal Law No. 2 also mandates that federal bodies must procure at least 10 per cent of their servicing and consulting requirements from the UAE’s SMEs is a good start to facilitating this.

“The development of the SME sector has become a crucial and strategically relevant concern for GCC governments. Speeding up SME growth is the only way to deal with incipient challenges such as rising unemployment among GCC youth, lower oil prices and their impact on government revenues, and threats to standards of living and national prosperity. We’ve seen the public sector in many GCC countries reach saturation point in terms of job creation for nationals,” said Iyad Abu Hweij, President & Co-Founder, BLOOVO.COM.

He added that in this era of belt tightening, many of the economic responsibilities once the preserve of the government will need to be taken over by SMEs, and these SMEs must be empowered to effectively play their role.

  

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