SMEs play a crucial role in Kingdom’s economic growth

20/10/2016 04:58 AST

Small and medium enterprises (SMEs) would have to play a key role in spurring the Kingdom’s robust growth, according to Ghassan Al-Sulaiman, governor of the General Authority for SMEs. “At present, the contribution of SMEs to the Kingdom’s gross domestic product (GDP) is less than 20 percent with a value of SR600 billion. This amount is to be quadrupled to SR2,400 billion, making up 35 percent of GDP,” he said on Wednesday while inaugurating the Forum of SMEs, organized by the Chamber of Commerce and Industry in the Eastern Province (Alsharqiyah).

Al-Sulaiman said an increased role for SMEs, as a real engine of growth, is one of the major goals of the Kingdom’s Vision 2030 so that the Kingdom can find a place among the top 15 economies in the world. He also announced that his authority is working hard to increase the volume of participation of Kafala Program in financing SMEs from the current trivial two percent to 20 percent in line with the target set by the Vision. The program is a collaboration between the Ministry of Finance, represented by the Saudi Industrial Development Fund and Saudi banks, to promote financing SMEs.

Under the program, the bank will offer credit facilities to SMEs and simultaneously Kafala Progam will issue a guarantee to the bank, covering up to sR1.6 million. Al-Sulaiman noted that volume of banking financing to SMEs in developing countries reached up to 30 percent. He also welcomed the move to institute an award to the firm with excellent record in financing SMEs.

He hoped that there is a bright future for the growth of SMEs in the Kingdom. “SMEs play a remarkable role in the development of almost all developing countries, with contributing a major chunk of GDP. The contribution of SMEs to GDP in the European Union accounts for 58 percent while it is 36 percent in the United Arab Emirates,” he said. Al-Sulaiman noted that the SMEs make up 67 percent of the workforce in EU states while they make up 88 percent of the workforce in South Korea and Chile.

He said almost all the developing countries are successful in tapping the immense potential of SMEs several decades ago. For instance, Japan has established its SME authority 68 years ago in 1948 while such a body is in a nascent stage in the Kingdom. According to the governor, small enterprises make up 99 percent of the total firms operating in the Kingdom. “The global figures showed that only 10 percent of small enterprises registered success in the first two years after their inception while the remaining 90 percent are encountered with setbacks,” he said while underscoring the need to launch intensive awareness campaign to transform the failures to success. “The SMEs Authority is striving hard to make the percentage of failure from 90 percent to at least 67 percent in future,” he said.

Khaled Al-Battal, undersecretary at the governorate of the Eastern Province, and Abdul Rahman Al-Otaishan, president of Al-Sharqiyah chamber, were also among the speakers at the opening session of the forum.

Saudi Gazette