BLOOVO.COM identifies key areas of regulatory focus to help SMEs take on job creation and national economic expansion role
Dubai December 20th, 2016
With the oil price slump creating a USD 275 billion export shortfall for GCC countries, regional governments are prioritising economic diversification. Accelerating SME sector growth is an integral element of this economic strategy, says a new report by WWW.BLOOVO.COM .
www.BLOOVO.COM’s research shows that SMEs provide economic impetus across two axes. First, they add directly to national GDP through business activity. SMEs account for 30% of the UAE’s GDP, 28% of Bahrain’s and 22% of KSA’s. Kuwait’s GDP is 20% composed of SMEs activity, with 17% of Oman’s GDP generated by the sector. Second, SMEs are essential engines for job creation to keep pace with a growing – and increasingly young – 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 WWW.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,” says WWW.BLOOVO.COM CEO and Co-founder Ahmad Khamis.
Creating an effective SME ecosystem requires time, investment, and regulatory optimization. Fortunately, GCC countries have been cognizant of the importance of SMEs for a while and are accelerating programmes already in place. For instance, the UAE established Federal Law No. 2 of 2014 to categorise SMEs, establish a dedicated council and determine incentives to be offered to small business owners. Bahrain set up its Tamkeen body to support SMEs in 2006. In 2013, Kuwait established a USD 7 billion National Fund for Small and Medium Enterprise Development from government coffers. More recently, Saudi Arabia has 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 been very active in supporting SME creation. It has to date assisted around 11,000 entrepreneurs through its Development Advisory Services, has helped over 1,100 SMEs with licensing 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.
However, more remains to be done. WWW.BLOOVO.COM report identifies four crucial regulatory arcs for facilitating SME growth. First, there is an argument for the creation of funds dedicated to getting SMEs off the ground and making up the shortfall presented by conventional bank financing. Apart from subsidised financing, funds and incubators could also deliver mentoring and support to increase chances of business success.
Second, company formation laws should be tweaked to offer greater flexibility, and allow 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.
And finally, proactive action is required to make SMEs an essential part of critical supply chains. SMEs can be made first-preference suppliers for government contracts, for instance. For example, the UAE’s Federal Law No. 2 also mandates that federal bodies must procure at least 10% of their servicing and consulting requirements from the UAE’s SMEs.
WWW.BLOOVO.COM also advocates for an increase in R&D expenditure to bring it up to international levels – to create a technological ecosystem where SMEs can thrive. Germany allocates 2.85% of its GDP to R&D, while the USA earmarks 2.81%. In comparison, the UAE leads the GCC by investing 0.49% of its GDP in R&D, followed by Qatar, which sets aside 0.47%.
“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. 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,” says Iyad Abu Hweij, WWW.BLOOVO.COM’s President & Co-founder.
About WWW.BLOOVO.COM is an innovative online recruitment platform, which aims at revolutionizing the recruitment processes across the MENA region. The platform functions through the use of Data Science & Advanced Algorithms to offers exclusive never-seen-before innovative features.
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