Friday 29 March 2024
 
»
 
»
Story

SMEs ‘key to Saudi Arabia’s growth’

Jeddah, April 12, 2011

Saudi Arabia has the largest number of SME support programmes in the region but reforms have to go further to unlock the kingdom’s potential, said an expert ahead of an upcoming economic summit in Riyadh.

“The Shura Council recently approved the formation of an SME authority. Its role as a driving force in developing regulatory frameworks, which lower barriers to SME development and growth, will be under scrutiny at this year’s Euromoney Saudi Arabia Conference,” added Richard Banks, director of the conference.

The sixth edition of Euromoney Saudi Arabia Conference will be held on May 17 and 18 at Al Faisaliah Hotel in partnership with the Saudi Ministry of Finance.

“Prominent figures from the governmental, financial and commercial sectors will discuss the role of SMEs as new engine of growth at the summit,” Banks said.

“The significance of this year’s overarching theme ‘Diversifying sources of finance’ is highlighted by the fact that only two per cent of banks' total lending is dedicated to SMEs and that the Saudi government took action by raising the guarantee for SME loans to 80 per cent and to the maximum of SR1.6 million ($426,600) for a single enterprise.”

“Further, the maximum limit of total guarantees for sole proprietorships has increased to SR5 million and for companies to SR10 million,” Banks said.

A report recently published by the World Bank states that the small- and medium-enterprise (SME) sector currently forms 90 per cent of all Saudi companies, yet the sector only contributes a quarter of total employment and about a third of the country's gross domestic product.

With the Ministry of Labor estimating unemployment around 10 per cent among Saudis and youth unemployment being four times higher than any other age bracket, drastic reforms are necessary for the private sector to shoulder the burden of future job creation, according to the report.

Saudi Arabia's Ninth Economic Plan (2010-2014) recognizes the importance of SMEs in the development of the Kingdom’s economy and articulates many objectives, such as encouraging the private sector to increase spending on research and development, providing soft loans to the private sector, reduce dependence on expatriate labor, supporting investment in new economic cities, and increasing female participation in the workforce, a statement said.

State-financed megaprojects are most often awarded to big contractors and developers, which has tended to restrict the trickle-down benefit to SMEs, thus constraining their ability to generate new jobs. The development of feasible policies is crucial to stimulate growth of the SME sector in order to remedy the job situation in Saudi Arabia, it added.

“By defining SMEs as companies whose annual sales do not exceed SR30 million the Saudi Ministry of Finance has provided a common starting point from which stakeholders and those concerned can develop programmes and services for SMEs,” Banks concluded. – TradeArabia News Service




Tags: Saudi Arabia | SME | Conference | Riyadh | Euromoney |

More Economy Stories

calendarCalendar of Events

Ads