Pakiza Abdulrahman is the manager of Startup Business Development, Bahrain Economic Development Board
Across the Gulf Cooperation Council (GCC), governments are tentatively beginning to reopen their economies. Restaurants are once again accepting bookings for socially-distanced, outdoor dining; offices are getting busier and even border restrictions are gradually loosening. The King Fahad causeway – one of the busiest crossings in the Middle East, which connects Saudi Arabia to Bahrain – is now allowing the passage of passengers with precautionary measures. Throughout the GCC, governments are surveying the economic impact of robust, regionwide lockdown and quarantine measures. Now they are turning their attention to the future, to the question of recovery and driving sustainable economic growth.
Even before the paradigm shifting effects of the Covid-19 pandemic were felt, the GCC was undergoing a major upheaval. Near unprecedented economic diversification efforts were already underway as governments across the region raced to realign their economies away from hydrocarbons and towards the fast-evolving needs of the digital era. Forward looking regulations which encourage innovation, like “Cloud First” policy implemented in Bahrain, are being introduced along with the localisation of emerging digital trends in order to match our unique needs in the GCC. Increasingly, the focus has shifted to small business, with the growth and attraction of startups, scaleups and SMEs coming to the foreground of regionwide strategies to build tech and startup ecosystems from scratch.
Look to Saudi Arabia where now SMEs constitute a staggering 99 per cent of businesses and provide 64 per cent of total employment in the Kingdom. Under Saudi Vision 2030, the Kingdom plans to raise the contribution of SMEs from the current 20 per cent of GDP to 35 per cent by facilitating their access to funding and encouraging financial institutions to allocate up to 20 per cent of overall loans to them. And look to the UAE, where last year the Ministry of Economy estimated that the SME sector represents more than 98 per cent of the total number of companies operating in the UAE and contributes some 52 per cent of non-oil gross domestic product (GDP) – a figure the ministry wants to increase to 60 per cent by 2021. In Bahrain too, SMEs have proven to be a key pillar in the economic diversification strategy, as well as playing a major role in job creation and emerging as an increasingly significant contributor to national GDP. This prompted a recent Cabinet decision to boost public spending in the sector.
Small wonder then that SMEs have come front and centre of regionwide unprecedented support packages to mitigate the effects of Covid-19. For example, the Bahrain government recently announced plans to subsidise electricity bills for SMEs to the tune of BHD24 million ($63.7 million) to help bolster national economic growth. This was followed by an announcement from the Bahrain Tender Board in August that in the first half of the year it had awarded a record 47 public tenders worth a combined $21.8 million to SMEs in the Kingdom.
This comes against a backdrop of a regionwide surge in commercial registrations, which have seen triple-digit increases in recent months with tender boards across the region awarding tens of millions of dollars in contracts to these enterprises. In Bahrain, the number of commercial registrations soared by 109 per cent in June alone. In other words, governments are doubling down on their support for what was already a priority segment for most major GCC economies and we are now seeing the results: an SME and startup “boom” driven by a new wave of entrepreneurs and business people emboldened by clear government support for small business in these uncertain times.
Governments must not let up in their support. They have correctly identified startups and SMEs as key drivers of sustainable economic diversification. Now, small business will be the engine of the Gulf’s post-lockdown recovery too.