A few months ago, predictions on the gravity of the post-pandemic global economic outlook were largely left to speculation. Now, with unemployment dramatically on the rise, businesses shutting down and the coronavirus disease (COVID-19) still taking its toll on everyday life, there is little room to doubt that the economic consequences of the pandemic will be severe. With Saudi Arabia heading toward a potential economic recession, the Kingdom will need to use all its resources to bolster its economy in preparation for the worst — and this will mean supporting entrepreneurs and the development and growth of small and medium-sized enterprises (SMEs).
The notion that SMEs and entrepreneurs will lead the way in Saudi Arabia’s economic recovery may at first seem counterintuitive, as SMEs have proven to be the most vulnerable to the financial impact of the pandemic. In the coming months, SMEs will need continued governmental support in the form of stimulus packages and funding initiatives. However, economic recovery in Saudi Arabia should be perceived more broadly. It will rely on long-term growth, innovation and adaptability to the changed economic and social landscape, ultimately creating an economic framework that is more resilient to future crises.
It is within this long-term vision that the role of SMEs and entrepreneurs is crucial to the Kingdom’s economic recovery from the pandemic. SMEs and entrepreneurs are better equipped to be agile and innovative and are capable of creating a large, diverse job market and adapting to the new digital environment generated by the pandemic. It is precisely these qualities that will streamline Saudi Arabia’s economic recovery and future prosperity.
The pandemic has made it glaringly apparent that Saudi Arabia can no longer depend so heavily on its dominant oil market. The slump in oil prices over the past month highlights the market’s volatility — certainly not a first for the country. The government has already acknowledged the need to diversify the economy, placing SMEs at the forefront of its strategy to create new markets. Diversifying the economy is not just a matter of moving away from a dependency on oil. It is crucial to combating the surge in unemployment over the past few months. Entrepreneurs and SMEs will be key to creating more jobs and developing a skilled local workforce with diversified expertise.
The Middle East has one of the highest tech-savvy youth populations in the world. Booming SME sectors in Saudi Arabia, such as fintech, real estate and e-commerce companies, will thrive in being able to cater to a digitally adept society, while drawing on a huge talent pool for job opportunities. The Saudi government has already taken initiatives to drive entrepreneurial activity, offering a wealth of programs and educational services to aspiring entrepreneurs. Institutions such as the Entrepreneurial Institute in the Dhahran Techno Valley or the Prince Mohammed bin Salman College for Business and Entrepreneurship will be key to developing digital entrepreneurialism in local talent.
With Saudi Arabia’s heavy reliance on digital innovation and creativity as a result of the pandemic, it can be expected that the Kingdom’s entrepreneurial ecosystem will from here on thrive more organically alongside government funding. With companies developing a greater awareness of how business can largely be conducted online, SMEs in Saudi Arabia will more readily have access to international talent through the online job market. As the diversity of human capital shapes the region’s entrepreneurial ecosystem in years to come, SMEs will be able to continue drawing in foreign investment by further opening up their market to the global entrepreneurial scene.
The key to long-term economic recovery in Saudi Arabia does not simply lie in returning to the economic situation prior to the pandemic, but rather in adapting to the new digital environment.
In this respect, SMEs and entrepreneurs are key in spearheading the Kingdom’s economic recovery. Backed by government support, they will allow Saudi Arabia to play a more prominent role on the global stage of digital innovation, where economic recovery will transform into growth and long-term prosperity.
Abdullah Faisal Al-Othman is a Saudi businessman and serial entrepreneur working in the fields of financial technology and real estate. He is founder and co-chairman of Geidea Financial Tech and AO Holdings and co-founder of United Lemar Company Ltd.