Despite a historic energy bounty, the Gulf Cooperation Council (GCC) countries are making all-out efforts to encourage SME growth, so much so that SMEs are seen as one of the fastest growing sectors in the region, according to Dr. Ali Hamed Al-Mulla, Assistant Secretary General for the Industrial Projects Sector of the Gulf Organization for Industrial Consulting (GOIC), a pan-Gulf industrial consulting body. GOIC was established in 1976, with the United Arab Emirates (UAE), Bahrain, Kingdom of Saudi Arabia (KSA), Oman, Qatar and Kuwait, while Yemen joined in 2009. In support of his belief, Dr. Al-Mulla cites several initiatives across the GCC countries, noting “all the countries have put in place dedicated centers to assist and support SMEs to grow. Each GCC member country has put in place a regulator to encourage growth and development for these entities- the UAE has a dedicated council and determined incentives for SMEs, Bahrain has set up the Tamkeen Fund, Kuwait has a national fund for SME development, the KSA has the Public Authority for Small and Medium Enterprises, and Oman has established Sharakah for the development of SMEs.”
GOIC statistics, according to Dr. Al-Mulla, show that the number of SMEs currently in operation within the GCC is around 16,890 small and medium sized factories– of which 11,288 are small and 2,707 are medium-sized, approximately accounting for 82% of the total number of factories in the GCC, and employing 45% of the total industrial sector manpower. Commenting on the sectors that the GCC SMEs belong to, Dr. Al-Mulla states that although a larger number of SMEs are venturing into industrial manufacturing, they predominantly populate the e-commerce, technology, event management, food and beverages, sports and fitness, healthcare, education, construction, and the fast food sectors.
Dr. Al-Mulla is of the opinion that there are many challenges that SMEs are facing within the GCC, particularly issues relating to infrastructure development, where it lacks appropriate research and development (R&D) centers, testing centers, and well-developed infrastructure facilities for SME businesses to grow and eventually commercialize. “In addition to some other pressing problems that SMEs are struggling with, such as regulations, export support and cost of production or labor, there are also legal and logistical roadblocks that have emerged as impediments for SMEs in the region, such as high registration fees for business and licensing, ownership structures, and complicated legal frameworks. Also, the human capital is not groomed properly causing a lack of strategic planning and decisionmaking skills at the operational level. This is testified by entrepreneurs with limited ability to present their ideas clearly,” states Dr. Al-Mulla, agreeing in part to a premise that massive hydrocarbon revenues have led to a neglect of the SME sector earlier.
It has seen reversal in recent times with the GCC governments’ initiatives, primarily focusing on SME legislation and making it easy for new entrants, although he states there is still room for more improvements. As a case in point, Dr. Al-Mulla cites the case of Qatar, which has enacted the Commercial Companies Law No. 11 of 2015 and eliminated minimum capital requirements for the establishment of limited liability companies which gives partners the freedom to determine their own capital, thus encouraging SMEs. “The relaxation of minimum capital requirement has immensely helped new entrepreneurs with innovative ideas and business models to commence their startups even with small capital which was not the case earlier. Another example would be the Qatar Business Incubation Center, which, since its inception in 2015, has graduated 247 lean startups and 56 incubated companies. Similarly, Qatar Development Bank has financed many greenfield projects initiated by new local entrepreneurs and this relaxation in minimum capital has provided a level playing field to all newcomers in the market,” Dr. Al-Mulla says.
In 2016, GOIC entered into a partnership with Qatar University (QU) to collaborate towards promoting the economic and industrial sector in Qatar and the GCC. Commenting on the reasons behind this partnership, Dr. Al-Mulla states that this partnership has been born out of GOIC’s understanding that innovation and human capacity building are essential for the diversification of the GCC’s industrial sector. He details: “GOIC’s partnership with QU is a step in this direction and GOIC is trying to align the research initiatives and activities in the R&D centers with the strategic interests of the GCC industries. GOIC is also working on commercializing and licensing patents, which were developed in the GCC-based R&D centers and have economic value for the industrial sector.
In the case of QU, GOIC is working on a couple of initiatives: one is an industrial investment opportunities forum to present investment opportunities based on the university’s technical achievements. The second is a partnership with the College of Engineering to design a program that involves university professors, students and GOIC experts to assess a sample of local plants and provide a practical approach to eliminating waste and improving productivity and quality.” GOIC also has a wide network of contacts with several GCC universities, including King Saud University and King Abdulla University for Science and Technology (both in the Kingdom of Saudi Arabia) for propelling SME growth there.
When asked about the policy level recommendations that a body of GOIC’s stature can make for faster development of SMEs in the region, within their capacity of a consulting institution, Dr. Al-Mulla believes that gone are the days when GCC members were only reliant on hydrocarbon revenue and were not nurturing other sectors. He points out: “There has been a consensus among member states that the non-hydrocarbon sector, predominantly led by private sector and SMEs, is the need of the day. There have been many government initiatives advocating the same change in policies of the GCC members states, such as attracting Foreign Direct Investment (FDI), privatization initiatives, incubators and accelerators for new startups, particularly for SME manufacturing, subsidized loans for new entrepreneurs, and enhancing support for an ecosystem that can not only nurture but bring fresh pool of talent into these sectors that could help diversify the economy and the gross domestic product.”
Commenting on GOIC’s position on the regional economies’ diversification efforts, Dr. Al-Mulla says: “GOIC is a strong supporter of a diversified robust economy for the GCC and has been contributing in holding many initiatives to accelerate manufacturing activities in the GCC at very grassroots level. In particular, in Qatar we strongly feel that the country needs a very clear and defined industrial strategy that is in conformity with Qatar National Vision 2030, a strategy that expedites the industrial infrastructure needed to meet the pace of work and supporting legislation to incentivize and attract FDI in the SME sector.”