Entrepreneurship in the Kingdom of Saudi Arabia

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Growth of SMEs is essential to create more job opportunities for Saudi youth

Eastern Province Gov. Prince Mohammed bin Fahd speaks at the opening of the SME Economic Forum 2011 in Dammam on Tuesday. (AN photo by Imran Haider)

By MOLOUK Y. BA-ISA | ARAB NEWS

Published: Mar 29, 2011 23:09 Updated: Mar 29, 2011 23:27

DAMMAM: Eastern Province Gov. Prince Mohammed bin Fahd opened the SME Economic Forum 2011 at the Asharqia Chamber headquarters in Dammam on Tuesday.

The two-day forum was promoted as a platform through which leading national and international organizations catering to small and medium sized enterprises (SMEs) could communicate with their target audience.

In his remarks, the governor noted that SMEs make up about 80 to 90 percent of the business establishments in the Kingdom and are a major source of employment for Saudis. Consequently, the government of the Custodian of the Two Holy Mosques, King Abdullah, is keen to develop and enhance this sector.

He pointed out that it is essential to grow this sector to provide more employment opportunities for the Saudi youth. The governor particularly mentioned the kafala program under which the Ministry of Finance will provide a guarantee of up to 80 percent on loans issued to SMEs by local banks and commended the work being done to help SMEs by the Saudi Industrial Development Fund and Bab Rizq Jameel (BRJ), an affiliate of the Abdul Latif Jameel Community Services Programs (ALJCSP).

Ibrahim Badawood, CEO, ALJCSP, said that BRJ’s training programs that lead to employment have created over 15,000 job opportunities for young men and women. The purpose of these educational programs is to provide targeted vocational training so that young people get a good start in their careers.

Badawood advised that while it is important to provide financing for SME projects that lead to employment, there must be appropriate oversight of these programs to prevent cheating by those who would simply take equity without good intentions. Additionally, there must be continuing guidance and follow up so small business ventures thrive. Badawood said that BRJ has found that one of the main obstacles in the success of SMEs is that these young entrepreneurs lack comprehensive marketing plans for their products. There needs to be greater understanding that before creating new products and services, a clear strategy must be in place defining how to bring those goods and services to market, otherwise the effort is futile.

The SME forum was not only about speakers and presentations but there were six workshops on offer. The workshops had very attractive themes and many attendees had come to the forum specifically for these learning opportunities. The 25 women who attended the forum found to their dismay that women were barred from the workshops.

“I found some of the information from the speakers interesting, but we need to gain new skills and understand the business environment in detail in order to compete. I am so disappointed,” said Shaikha Benmahfoudh who has been working for three years at a family owned business. “All the women here came for the workshops and now we have nothing.”

“It is not acceptable that there were no workshops for the women,” agreed Abdulaziz Al-Hazani, GM of Mishari Kitchens. “They have their own market share and should be helped to succeed. This forum was created with good intentions but the event was not well implemented and the information presented by the speakers was already public. I read it in the newspaper yesterday.”

Al-Hazani said that rather than forums what is needed to help SMEs succeed is more transparency in government regulations. Rules should be published online or posted clearly at the government offices. And while there can be some flexibility in the rules, that flexibility should be available to all — not only those with “connections.” Beyond the government, the banks need to bring clarity to the terms and conditions for business financing. Bank employees should be taught that creativity in helping business owners meet their funding goals is to be applauded. Many forum attendees were very critical of the Saudi banking sector. Sami Bin Jumah, GM, Technical Exploration was appreciative of the chance for SMEs to engage in free discussion with individuals in the finance sector, but he believes that the banks are doing very little to help SMEs.

“The banks do what’s good for their interests alone,” he said. “The speakers today weren’t really in touch with the realities of the situation for small businesses. I would never take out a bank loan because the terms are unacceptable. One mistake and my entire company and future could be in jeopardy.”

Jamal Al-Hilal, general manager of Al-Hilal Est., what he laughingly called a “micro, micro-sized company,” was pleased that there is a difference in attitude toward SMEs and he feels that many business owners are optimistic about the new policies and regulations. He did caution though that the idea that handouts are to be expected is not the way to build a strong economy.

“Some Saudis want to be given easy money. I believe there have to be conditions for money to be given out whether it’s from a bank or another source,” he said. “Business financing is not charity. There is an attitude among our young people that they should take a degree and then sit in an office. We need to change that attitude. Our youngsters must be encouraged to work and to struggle. That encouragement and examples of what work means should come from within our families.”

Attending the forum were students from the Institute of Public Administration in Dammam. Faculty member Murtadha Al-Nemer accompanied them. He advised that the instructors are constantly emphasizing to their students how important it is to build their skills and to be serious in investigating market trends and business innovations. “We try to get our students to take part time jobs to learn about business, but most don’t keep those jobs. They say they must concentrate on their studies,” he explained. “Students get a stipend of SR1,000 monthly but few save any of it. It is very difficult to convince students that they must have a well thought out plan for their future after graduation.”

His comments were those of an educator worried about the challenges ahead for these young Saudis. Chatting with the students it was easy to see why. Sami Saeed, Taher Nassir and Hussein Ali all want to open their own companies. While they have lots of ideas and the enthusiasm of youth, not one had considered the details of how to run a business. They couldn’t even say what would differentiate their establishments from other local businesses. Where are they planning to get funding for their ventures? Their fathers and relatives were mentioned as the sources of possible financing. One even believes his father will hand over SR1.5 million to set up a video gaming center.

With graduation just two months away, thousands of young people are about to discover how tough the Saudi business environment really is. That’s something that the hundreds of attendees at the SME Economic Forum already know.

http://arabnews.com/economy/article335054.ece


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