India Development Solutions

Today’s economic process has three features (1) too many people in the job market (2) scarce and fast exhausting natural resources and (3) planet threatening pace at which development process is taking place.  The spirit that leads one and all is “we’ll build the big” and that too “no matter where it takes”!

But challenge ahead for those at the helm of the policy matters is to take us to a growth trajectory with a focus on inclusive employment generating and green oriented development, as we cannot just ignore signals like rising sea water level, something that matters for all GCC states. Here comes the role of Small and Micro Enterprises (SMEs). Of course small and green has its beauty!

World has now come to realize the importance SMEs. GCC states too are in the lead to promote SMEs in a big way. But we need to seriously introspect, how far our SMEs growing? How many of the startups have survived after 7, 5, or 3 years? How many of those startups grown up in the enterprise ladder from a startup to a large scale enterprise (LSE)? In UAE there are 230, 000 registered SMEs and 132,000 in Oman. These are good numbers but how many of them are really in the business, if not why? There are other GCC states also have similar large numbers.

SMEs, together with home based businesses and informal sector enterprises, are the largest employment provider in the world, absorbing 90 percent or more of the working population. One would find an SME in everywhere, a key maker to an IT service provider or motor service stations. Further, there are insurance advisors, tourism enterprises, tour operators or a web master of a portal to enterprises that offer thousands of services and products.

It is to be noted that in several countries of the world, regulatory mechanism, played a hindering role in SMEs becoming a formidable force in the economy, with public enterprises getting priority treatment from the State. But with the winds of economic reforms and liberal thinking in policy arena that swept across in the post- socialist 1991 era, after Soviet demise, private sector specially SMEs started getting increased attention, as the policy orientation then shifted to building a robust private sector based economy. However, GCC with its huge hydro carbon reserves, need was not being felt in those days. But today with challenges that mentioned in the beginning of this article, along with the hard reality of diminishing hydrocarbon reserves, SMEs is receiving policy focus and encouragement.

However, there are a number of roadblocks that SMEs face in their struggle to survive in GCC. They range from regulatory hurdles to unrealistically high commercial rentals, fast growing labor cost and delay in receiving payments. When SMEs do not receive payments on time and their bills are not settled they get in to trouble. Bankruptcies and closures follows. Particularly in times of recession this could have serious macro economic implications.  When you make delay in settling bills to your contractor, it has its effect at every level. It means delayed wages and salaries and lower consumer demand with an effect on aggregate demand. Similarly, when rental rates go-up it has its implications on SMEs.  When the rent of a single bed room apartment in Ruwi, Muscat or in Dubai or Doha increase from $ 100 to $500-700 at one shot,  it is the SME workers who feel the heat and in turn SMEs themselves. To retain the workforce SMEs have to pay increased salaries to match with the cost of living. Together with that there would be a rise in rentals of commercial spaces, altogether making life difficult for SMEs.

Yet another issue that matters is affordable and dependable public transportation system, crucial for sustainability of SMEs. It is important for labor movement and transportation of goods. SMEs need cheap and affordable transportation.   We need to put in place a public transport system keeping in mind the need of growing number of SMEs and their future role in the economy.

There are reports about rail project. A GCC railway can connect all the States in the region with each other. It would not only just facilitate cheap movement of people but also economic growth and SMEs. Public transport system connecting every corner of GCC means economic development and industrialization. Remote corners and villages in GCC would become new industrial hubs. Connectivity attained with public transport system would facilitate SMEs to garner skilled human resources from cities at ease.

Yet another problem that a startup entity faces is unusual delays in getting clearances from different ministries and departments and municipal authorities. A one window clearance mechanism may be a probable solution. Expertise in all fields should be attracted to work in GCC to promote SMEs.

SMEs are green and sustainable alternative to manifold challenges that we face in our development trajectory. But SMEs to thrive we need to have an affordable housing, a public transport system, right kind of policy interventions at right times to address the issues such as delayed payment, just for instance, and above all availability of skilled labor force, if not, from beyond GCC.

(This article was first published in Oman Observer and published here with the permission of the author.)

Mr Abdullah Al Suleimany

Mr. Abdullah has over 34 years of experience in the Petroleum sector, with Petroleum Development Oman (PDO) in managing Projects, Construction, Maintenance, Operation Integrity, Staff Planning & Resourcing, and Administering of Local Design Service Consultants.

He is also a management expert, consultant and writer. He occasionally delivers lectures on contemporary management topics in management schools at post-graduate level.

He is B.Sc, (Hons), University of London; MBA, University of Strathclyde & CEO of East Horizon LLC and based in Muscat, Sultanate of Oman.