SME role in Gulf economy, jobs growth 'woefully low' |
Gulf Times - 29 May, 2012
Small and medium enterprises' (SMEs) contribution to the overall Gulf economy and employment sector is woefully low and need a big push for the region to enhance its economic diversification, the 2nd Middle East SME conference was told yesterday.
Addressing the conference, al khaliji bank chairman Sheikh Hamad bin Faisal Thani al-Thani said that in North Africa and the Levant, SMEs have played a prominent role in economic contribution with Egypt and Lebanon having almost 90% of their GDP from SMEs.
“Sadly, in the GCC, this only ranges from 13 to 30%, so much must be done to support this sector,” he said at the conference which concludes today.
Highlighting that a recent World Economic Forum had made the case that the Arab region must create 75mn jobs in the next eight years to accommodate the growing population, he said this is bound to be a difficult task.
However, with the right support in place from public and private sectors, “I believe we will be able to even beat the 75mn mark”, Sheikh Hamad said.
Apparently referring to the Arab Spring, he said youth unemployment is now at the forefront, and governments must create a climate whereby entrepreneurs and SMEs are allowed to thrive.
“That will involve strengthening capabilities, updating infrastructures, and creating mechanisms – which in turn will involve partnering with the private sector – in support of SMEs.
“However, one major line of support that seems to have vanished from the limelight is that which should be given to entrepreneurs themselves,” he said.
He pointed out to a recent study that showed an upgrade of a country’s telecommunication infrastructure – including the introduction of broadband speed Internet networks – could increase the country’s GDP by up to 4%, not only because it becomes more cost-effective to communicate internationally, but also because it spurs the growth and launching of SMEs.
As a result, governments have already invested greatly in infrastructure improvement, realising that these upgrades are needed to support and encourage growth, especially for SMEs, which are the engines of job creation, innovation and economic growth, according to him.
He said Qatar, like many other nations, in the region, has noted the importance of running a state-of-the-art broadband network to encourage economic growth.
Drawing many parallels in the Mena (Middle East and North Africa) region with Europe, al khaliji chief executive officer Robin McCall said family owned businesses, handed down from one generation to another, has been extremely successful.
“However the difference in concentration, levels of employment and contribution to GDP is stark reminder when one compares to Mena region to more developed (Europe and the US) or fast developing economies like China.
Globally 90% of businesses are SMEs, generating nearly 80% of job opportunities, in Europe SMEs account for 60% of GDP and generate 85% of all new jobs and in Germany almost all of the 1.8mn jobs created in the last five years came from SME’s, he said, adding “the overall share of SMEs in the Mena region is estimated to account for only 28% of GDP and 71% of employment.
“In the Gulf area the SME sector represents much more minor contribution with both workforce and GDP.”
To prosper, SMEs need a conducive business environment and regulations, adequate basic infrastructure services, access to short and long term funding at reasonable rates, equity and venture capital, advisory assistance and knowledge about market opportunities, he said.