With the Coronavirus hurling the world towards a potential global economic recession, countries around the world are having to bolster their economies in preparation for the worst. In Saudi Arabia, SMEs hold the most promise for economic recovery – they constitute 99% of the private sector and have vast growth potential, with the Saudi Vision 2030 aiming to boost SME contribution to the GDP from 20% to 35%. SMEs are also in a unique position to drive entrepreneurial innovation and adapt to the changing digital landscape generated by the pandemic, ensuring Saudi Arabia stays ahead in the coming years. Here are four features that distinguish SMEs in Saudi Arabia:
Diversified sector
If the volatility of the oil market was not clear before the pandemic, the recent slump in oil prices stresses the importance for Saudi Arabia to diversify its economy away from a dependency on oil. To achieve this, the kingdom has recognised the need to redirect its focus from the public to the private sector. SMEs hold the greatest opportunity for growing new, diverse markets that are more agile and resistant to change than the more vulnerable dominant oil market.
Entrepreneurial innovation
Saudi Arabia and more broadly the Middle East has recently been experiencing a budding start-up culture, attracting foreign investment particularly from South East Asia. Sectors that are particularly thriving are fintech, real estate, transport and e-commerce services. To support and maintain the growing entrepreneurial ecosystem, Saudi Arabia offers a wealth of programmes and educational services to aspiring entrepreneurs, including the Entrepreneurial Institute in Dhahran Techno Valley or The Prince Mohammed Bin Salman College for Business and Entrepreneurship.
Booming talent pool
SMEs account for around 70% of the country’s workforce, meaning SMEs have a huge talent pool at their disposal to thrive and take a leading role in the Saudi economy. Moreover, Saudi Arabia benefits from one of the youngest youth populations in the world who are more tech-savvy than their elders. The pandemic has intimated that digital-adeptness will be a key skill in years to come, and Saudi youths working for SMEs are at a particular advantage to embrace this skill head-on.
Government support
The Saudi government has long recognised that SMEs are agents of economic growth in the kingdom. The government’s funding support now needs to be fully harnessed to ensure SMEs are not disproportionately affected by the pandemic. SMEs often struggle to get easy access to funding, however fintech innovation in the region aims to ensure this soon changes for SMEs, allowing them to get the immediate financial support they need from the government and central banks.
The changes the pandemic has brought about for the Saudi economy and society highlights the extent to which SMEs are perfectly suited to help Saudi Arabia weather the economic storm of the crisis and come out stronger and more prosperous than before. With continued government support, their digital resourcefulness, diversity and agility is set to shape the future of the Saudi economy.
