GCC lending to the small and medium enterprises (SMEs) sector stand at 2% against the 8% in the Middle East and North Africa (MENA), according to statistics issued by the Union of Arab Banks.
The least support to SMEs in the region speaks volume of the failure of the region which needs millions of new jobs every year. Globally, SMEs are seen as engine of economic growth and catalyst to creating new jobs.
“Bahraini small and medium enterprises (SMEs) contribute nearly 30 % of nominal Gross Domestic Product of Bahrain and also provide jobs for nearly 73% of private sector employees,” Dr. Hassan Abdulla Fakhro, the Minister of Industry and Commerce in his keynote address during the opening of 4th SME’s Day being held at the Crowne Plaza Hotel, said.
“Kingdom of Bahrain was the first country in Gulf Cooperation Council to notify a formal definition of micro, small and medium enterprises and come out with a Policy Statement for this sector as far back as in December 2006,” he said.
“The Kingdom of Bahrain continues to focus on the development of thriving and competitive local enterprises as part of a strategy aims at helping small and medium enterprises (SMEs) sector,” he said.
“We have a sound entrepreneurial ecosystem and a mature model for entrepreneurship development that has been internationally acclaimed,” he added.
“The Bahrain model of entrepreneurship development is widely regarded as a model programme and has been emulated in several developing countries,” the Minister said.
“An Arab Centre for Entrepreneurship and Investment Training has also been operational in Bahrain since 2001 with the support of Ministry of Industry and Commerce. The Business Incubators at the Salman Industrial City have been very successful in nurturing entrepreneurship and in supporting nascent enterprises. We are also making efforts to include entrepreneurship development in school curricula. Enterprise building, incubation and linking to finance and market are the pillars that support our entrepreneurial ecosystem.
During the opening ceremony Dr. Fakhro delivered a speech stating that entrepreneurship is the life blood of any economy. Bahrain’s Economic Vision 2030, enunciated by our wise leadership, assigns a pivotal role to the private sector as the engine of growth and productivity. Stimulating entrepreneurial activity to develop a dynamic small and medium enterprise sector is a key plank of our national economic strategy.
Entrepreneurship is a long tradition in Bahrain which has been a regional trading hub for centuries. Our human capital is widely recognized as our greatest competitive advantage. Facilitating entrepreneurship is reiterated in National Economic Strategy as an important strategic initiative to be implemented through a subset of initiatives aimed at strengthening the entrepreneurial ecosystem in the Kingdom of Bahrain. These sub-initiatives aim at enhancing co-ordination and integration of support to small and medium enterprises and lay emphasis on expanding small and medium enterprises access to capital and other business development services.
Dr. Fakhro affirmed that we are however not resting on our laurels and are making continuous efforts to further strengthen the entrepreneurial ecosystem through comprehensive policy measures and in tandem with other stake holders in government as well as private sector. Simplification of procedures to set up new businesses, an effective and transparent regulatory mechanism to foster competition, world class industrial infrastructure in industrial parks, availability of industrial land at competitive price, maximizing market access through multilateral and bilateral trade agreements and optimizing use of technology to deliver services are some of the noteworthy measures to spur the growth of entrepreneurial activity in Bahrain. I will take this opportunity to dwell upon some of the important initiatives taken by the Ministry of Industry and Commerce to strengthen the entrepreneurial ecosystem.
The foremost strategy is to improve the ease of business registration. This is being ensured through Bahrain Investors Centers located at places where businesspersons can have easy access. The industrial licensing system, too, has been reviewed and simplified. An effective anti-trust system to foster competition and curb unfair trade practices is being put in place. The Competition Law is at draft stage. The quality and consistency of regulations is being reviewed periodically. Commercial and Industrial Laws have been reviewed and improved. The revised Commercial Companies Law aims to overcome obstacles in establishing businesses, simplifying legal and administrative procedures and laying down principles of corporate governance. The proposed changes would make it considerably easier to set up businesses.
“The Bahrain Subcontracting and Partnership Exchange have been established in the Ministry of Industry and Commerce in close cooperation with the Gulf Organization for Industrial Consulting to match enquiries and offers for subcontracting work and outsourcing. More than two hundred small and medium enterprises are registered with the Exchange and the test cases have demonstrated substantial cost savings to large firms- as much as 100% savings in some cases taken up in a pilot project to promote sub-contracting.
“Another important initiative under implementation is the Export Development Centre to provide export advisory services to small and medium enterprises. In partnership with Bahrain Chamber of Commerce and Industry and the Ministry of Industry and Commerce is also creating an online SME Tool Kit with technical contents sourced from International Finance Corporation on licence basis.
“The Minister confirmed that The Ministry plays an active role in negotiating and implementing various bilateral and multilateral trade agreements and is the responsible authority for governing the Bahrain-USA Free Trade Agreement that provides duty free access in USA to Bahraini goods and services that qualify under the agreement. Bahrain is the first in Gulf Cooperation Council to have a free trade agreement with USA. We also take pride in active participation of private sector in trade policy development to ensure that trade policies are conducive for the healthy growth of domestic enterprises.
“The majority of enterprises in the region remain very small; micro enterprises account for over 90% of all enterprises in the region. This is not a healthy picture and serious thought must be given to create a viable ‘middle’ segment that can contribute to growth of economy in terms of productivity, exports and employment.
“Access to finance is a key determinant of entrepreneurship. Adequate and timely finance is necessary for the growth of enterprises. Commercial Banks in the region adopt a cautious approach toward lending to small and medium enterprises due to associated risks and most of the burden for financing falls on the Development Banks. As per a January 2011 report of World Bank and Union of Arab Banks, the average share of small and medium enterprises lending in Gulf Cooperation Council region is only 2% of total lending as against 8% for Middle East and North Africa region. This indicates the over cautious approach of Commercial Banks in lending to this sector and the scope for considerable improvement even when one takes into account the structure of oil based economies. Indifferent attitude and approach to financial planning and book keeping practices by the business owners also contribute to difficulty in accessing finance. This is something internal to the entrepreneur and there is a need to create greater awareness in this regard.
“Having a large number of start-up companies, by itself, is no indication of development- new enterprises need to scale up and grow in order to survive and contribute to economy. Our entrepreneurial ecosystem should ensure a balanced attention to all stages of the life cycle of an enterprise so as to encourage growth of an innovation and knowledge driven economy.
“The idea of holding this event stems from the belief that the small and medium enterprises play a strategic and pivotal role in economic and social development of the Country. Dedicating this day to small and medium enterprises is a demonstration of the value that the Government places on this sector and its potential value for the national economy. Let me conclude by reiterating my thanks and appreciation to Bahrain Small and Medium Enterprises Society, and to all those involved in organizing and participating in this event.