How are SMEs driving economic growth in Saudi Arabia?

The Covid-19 pandemic disrupted global economies, bringing a host of challenges to one of the most important drivers of Saudi Arabia’s economic diversification.

Small and medium-size enterprises have remained steadfast in their growth, positively contributing to job creation across the kingdom. Under the visionary leadership of King Salman bin Abdulaziz and Crown Prince Mohammad Bin Salman, Saudi Arabia’s Vision 2030 continues to support the SME sector through a variety of reform programmes aimed at diversifying the economy with a key focus on local capabilities, ultimately aimed at increasing SMEs’ contribution to GDP from 20 per cent to 35 per cent.

SMEs and Vision 2030
At the height of the pandemic, government support to the private sector has been instrumental in mitigating the negative impact of the global crisis, extending support packages to the tune of $61bn, $13.3bn of which is aimed at alleviating the burden of decreased cash flows for SMEs. A central pillar of Saudi Arabia’s ambitious Vision 2030 is to transform the SME sector into an engine for economic growth. The government has taken great interest in small and medium enterprises, enabling their growth and supporting entrepreneurship through enhanced regulations and financing support. In doing so, we have seen the creation of a more accommodating environment for SMEs, providing a fertile ground for growth and competition.

Aligning with government support for the private sector
As Vision 2030 steers the private sector through the Covid-19 recovery roadmap, businesses that have been able to get back on track have been those that have capitalised on Saudi Arabia’s accommodating business environment. In the same way SMEs have taken advantage of the opportunities laid out by the kingdom’s reform programme.

Digitisation as a means for globalisation
SMEs are paramount to establishing sustainable economies. Their roots are local; however, increased digitisation provides an opportunity for globalisation. The Covid-19 pandemic has demonstrated how digital innovation enhances business resilience, with Saudi Arabia having seen a considerable digital transformation. SMEs that capitalise on Saudi Arabia’s digital revolution have been able to access to new markets and reduce operational costs.

Promoting development
SMEs are an important source for generating employment, creating economic opportunity in communities across the kingdom. SMEs provide significant employment opportunities at comparatively lower capital cost while creating country-wide wealth and making room for an equitable distribution of income in Saudi Arabia – effectively contributing to the development of a sustainable economy.

The SME sector plays an important role in propelling the kingdom’s economy forward; it provides employment opportunities, boosts local capabilities, enhances competitiveness of the business environment and contributes to diversifying the economy, further driving the growth of non-oil exports.

Looking to the future, SMEs must align more closely with government initiatives to guarantee sustained growth. Small and medium enterprises are already key players in driving the economic growth of Saudi Arabia, but more must be done to take advantage of the opportunities created by Vision 2030, including establishing meaningful partnerships and building on local capabilities – rather than relying on international relationships, manpower or expertise. This is about taking ownership of the future of the private sector, and it is very promising to see so many SMEs starting to do just that.

Mohammed Ibrahim Abunayyan is the CEO of Al Hassan Ghazi Ibrahim Shaker Company and a board member of Abunayyan Holding