RIYADH, 14 September 2006 — The establishment of an independent authority to assist small and medium enterprises (SMEs), which make up more than 90 percent of the Kingdom’s private-sector business, is being discussed in the Shoura Council. This was announced by Saleh M.S. Shoaib, legal and external trade adviser at the Ministry of Commerce and Industry, on Tuesday night at a presentation, “SMEs True Gains in the World Trade Organization — Their Positioning on the Map of the Multilateral Trading System.”
SMEs contribute an average of 28 percent to the Kingdom’s GDP and employ over 82 percent of the work force. Nonetheless, they face obstacles in getting bank loans and business orders as their products and services do not meet international standards.
Referring to the proposed higher authority, Shoaib said it would help fine-tune the law and put in place a new funding mechanism for SMEs. The authority for SMEs will consist of representatives from both the government and the private sector.
By acting as an underwriter for these establishments, it will instill confidence in banks and other financial institutions to provide them with loans. Currently, the major beneficiaries of bank loans are large-scale petrochemical and construction companies which constitute only 10 percent of companies in the Kingdom.
Shoaib said that while the government has done its part, much needs to be done by the SMEs. They suffer from a lack of professionalism and of marketing skills; they do not conduct feasibility studies, maintain financial records or prepare annual budgets.
These problems could be resolved through the new partnership with the government under Shoura Council initiative.
Asked about the challenges from globalization, the official said it presents both challenges and opportunities. In order to seize the opportunities, the SMEs would have to reinvent themselves through technological upgrades and professionalism.
