DUBAI
The value of small and medium enterprises (SMEs) in the Gulf Cooperation Council (GCC) states is likely to skyrocket over the next five years, a new study claims.
The study, by Mena Research Partners, suggests the value of SMEs in the GCC could grow by 156 per cent, from its current value of $360 billion (around 26 per cent of GDP) to $920 billion by 2022.
Anthony Hobeika, Chief Executive Officer at Mena Research Partners (MRP), said: “Most of this growth is expected to come from key geographies such as the Kingdom of Saudi Arabia and the UAE, which are giving high priority to SMEs across many new regulations, policies and initiatives with the aim of boosting their share in the national economy.”
Hobeika cited Saudi Arabia’s Vision 2030, which calls for SME’s contribution to national wealth to increase from 20 per cent of GDP to 35 per cent, and the UAE’s Vision 2021, which seeks to increase the contribution of SMEs from 60 per cent of non-oil GDP to 70 per cent.
“SMEs are the main engine for job creation in the GCC region. Current SME employment is estimated at around 17 million people with a potential to reach 22 million in five years, a rise of around 30 per cent, or the equivalent of 55 per cent of the total active population,” he added.
The report, presented at Sharjah Entrepreneurship Festival last week, indicated that young people would occupy many of these new jobs.
Hobeika added, “Such a positive outlook for SMEs and entrepreneurship in the GCC is clearly reflected by the enthusiasm of private and institutional investors gearing up their funding into the sector. Venture capital firms have invested around $1 billion into SMEs and start-ups in the past five years. Although such numbers remain low, they have been on a fast growth trajectory, driven by many success stories in sectors like technology.
“These initiatives are filling the large gap created by regional banks and capital markets, in failing to provide adequate funding to SMEs.”
The report said banks currently allocated 2 per cent of their loans to GCC SMEs, compared to 13 per cent in the rest of the Middle East and North Africa (Mena) region, and said capital markets, in particular IPOs, remain closed for SMEs as no substantial funding has been raised from regional stock markets during the past years.
However, governments in the region had adopted initiatives design to create and promote the SME business ecosystem.
“Looking forward, governments acknowledge the role that entrepreneurs and SMEs can play in leading economic transformation, where special focus is given to high growth sectors like technology,” Hobeika said. “We have already seen many success stories in the regional tech start-ups, which are key to promoting competitiveness, innovation, productivity and unlocking economic growth.”
