Empowering SMEs role is key for growth

Moehammad Amar Ma’ruf

Published — Sunday 10 November 2013

Last update 9 November 2013 11:39 pm

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The commitment of Custodian of the Two Holy Mosques King Abdullah to empower small and medium enterprises (SMEs) by incorporating the concept of knowledge-based economy seems to have come at a time when Saudi Arabia is showing its readiness to facilitate all national and foreign stakeholders interested in trade and investment.
Meanwhile, the Kingdom’s commitment to the role of SMEs is quite significant in the context of what some international observers speculate that the Kingdom within the next 30 years will receive lesser oil income than ever.
So, the empowerment of SMEs is the best strategy to avoid the worst.
Almost for a century, Saudi Arabia has been enjoying abundant income from oil and gas exports and so the development of skilled SMEs is urgently needed to be incorporated. The Kingdom’s policy toward the empowerment of SMEs in Saudi Arabia is in line with its national program, which has been done since the nonoil products generate income which is gradually increasing every year.
In order to anticipate the worst situation, the role of SMEs must be fully guarded to maintain the growth of the Saudi economy.
The participation of SMEs, it is believed, will make Saudi Arabia more prosperous.
Meanwhile the political will of the Kingdom is clear; the implementation of this will be facilitated by establishing more sources that are crucial to support this concept. One of the most crucial sources is the establishment of more economic centers within the nations facilitating their connectivity and hence distribution of products and services among regions and even among the continents.
For Saudi Arabia, the availability of sources of connectivity seems well-designed and prepared. Projects such as the economic cities seem to be good models to sustain the concept of knowledge-based economy, which will accommodate SMEs develop their business.
The implementation of projects will be a success if they are guided by reliable and professional agencies. The Kingdom also has formed the Economic Cities Agencies (ECA) to encourage the sustainable economic activities, which are expected to generate the welfare around the regions.
The challenges are still there when the available skilled human resources lack technical knowledge. It may be an obstacle, which in fact can easily found in the Saudi society. In this context, Saudi needs a lesson learned from other countries. This preparation is very crucial to learn how not to depend on oil products. Saudi Arabia has never faced any economic crisis, but it is a fact that for both the citizens and expatriates the cost of living in the Kingdom is increasing, especially for the basic needs such as food and housing.
In the case of Indonesia, the role of SMEs is positively acknowledged by Indonesian economic observers.
The Indonesian economy continues to grow, which is why it enjoys the status as a member of Group 20 (G20) like Saudi Arabia. Indonesia is seen as a country that can generate income for all its people, giving them a chance to establish business activities in every sector. With the 5 percent to 6 percent growth during the last five years, Indonesia seems to be stronger than ever, especially when the crisis struck Indonesia in 1998-1999. More surprisingly, the reason why the Indonesian economy moves on even after the crisis is due to the vital role of SMEs.
The Bank of Indonesia as the central bank noted that about 99 percent of Indonesia’s national economy is by the SMEs.
This sector has contributed 56 percent to the Brutto National Product/GDP and the SME sector has accounted for at least 97 percent jobs.
Learning from the situation, the Indonesian government has strengthened its policy to support the SMEs by giving them a chance to participate in bids for government projects. The government has also legislated to legalize the role of the SMEs.
Under this legislation, the Indonesian government has formed a special cell to handle the tasks related to the “Ekonomi Kerakyatan” under the Ministry of Cooperation and SMEs.
In this context, Indonesia is optimistic to protect the main sectors, which in fact play the role of a main contributor of the SMEs in fields like agriculture, fishing, plantation and forestry. These sectors have given abundance of resources to related stakeholders in developing their business. The role of SMEs in various regions is supported by establishing the regional or central economies or markets.
Though Indonesia is known as an agricultural country, its forests surrounded by water are full of resources; however, there seems to be an obstacle that may hinder the development of these sectors, namely the connectivity between the point of production to the point of user or consumer.
Realizing how important this sector is, Indonesia has a sustainable program to eliminate or at least reduce the dependence on imports that undermine the innovative measures of our business communities.
As the Indonesian vice president stated in his opening remarks of Jakarta International Exhibition Centre (JIEC) on Oct. 16, 2013, the government encourages building the connectivity infrastructure of harbors, airports, roads, and railways for easing the transportation from one region to another.
The government also has emphasized its commitment to curb corrupt practices that may push up the cost of doing business.
For Saudi Arabia, Indonesia is a country that its people have made a big contribution to the Kingdom’s economy as much for the economy of their home country.
Thus, the Kingdom could take additional measures to adopt the kind of strategy Indonesia has adopted to develop its SMEs.
Meanwhile, both countries could learn from the experience of each other about the role of SMEs in furthering their respective national economies.
In this context, both countries which, in fact, have a Joint Commission on Economic and Technical Matters can study and benefit from each other, especially in boosting their SMEs.
This year, the Kingdom is scheduled to host the 10th Joint Commission, following the previous (9th JC) held in Bali, Indonesia.
Both countries, who are members of G20, can strengthen bilateral cooperation, especially in the economic and technical sectors. Such a move will not only benefit both countries but also their respective regions.
For this step, both countries are encouraged to study the issues related to the development of SMEs, and the construction and management of connectivity and become the model of cooperation.

- Moehammad Amar Ma’ruf is counselor for economic affairs at the Consulate General of the Republic of Indonesia, Jeddah. These are his personal views.

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