Opportunities for SME's in the current global climate
Date: Wed, 01 Aug, 2018
by Adel Al Awadi, Director of Government Relations
What is an SME?
Small and medium-sized enterprises (SMEs) are non-subsidiary, independent firms, which employ fewer than a given number of employees. This number varies across countries. The most frequent upper limit designating an SME is 250 employees, as in the European Union. However, some countries set the limit at 200 employees, while the United States considers SMEs to include firms with fewer than 500 employees.
Financial assets are also used to define SMEs. In the European Union, a definition came into force on 1 January 2005 applying to all Community acts and funding programs as well as in the field of State aid where SMEs can be granted higher intensity of national and regional aid than large companies. This definition provides for an increase in the financial ceilings: the turnover of medium-sized enterprises (50-249 employees) should not exceed EUR 50 million; that of small enterprises (10-49 employees) should not exceed EUR 10 million while that of micro firms (less than 10 employees) should not exceed EUR 2 million. Alternatively, balance sheets for medium, small and micro enterprises should not exceed EUR 43 million, EUR 10 million and EUR 2 million, respectively.
How do SMEs contribute to the economy?
SMEs in many countries account for the majority of the GDP, and in UAE and the Gulf region, they account for a minimum of 60% with the number increasing in some countries. SMEs are growing in this region for many reasons, such as Government spend in new infrastructure in many sectors, and particularly the efforts by local Governments in the Middle East trying to accommodate more jobs for nationals. The Middle East region has a large number of graduates every year and Governments are developing sustainable plan to create jobs for these nationals.
Government support for SMEs
Recently, Governments have realized that public and private partnership and engagement is the most successful model to create sustainable programmes where innovation and technology will be driving many of these projects. Some examples of this include each emirate promoting the services provided to SME sectors like Dubai SME, Khalifa Fund, Ruwad in Sharjah, and many more. The UAE Ministry of Economy is also focusing on supporting the SME level at federal level.
SMEs should benefit and grab the opportunities during a downturn in the economy as there is a need for outsourcing many Government works to other providers. Successful SME community and business will be found in countries that initiate and establish a regulatory body, such as the ‘Entrepreneurs National Council’, to look at developing the SME sector further, review rules and regulations, amend policies, create strategies, monitor progress and report it to higher authorities to improve the sector.
The Government and private sectors are looking to create a support platform amongst entrepreneurs to exchange ideas, challenges, updates, solutions and referrals and so on.
There are a few venture capitals supporting start ups and few other Private Equity firms focusing on SMEs and targeting industries/sectors for them to grow and expand into new markets.
There are many events, online memberships, conferences and meetings held to support the platform in a sustainable model.
SMEs should not focus on a services and franchise model. There are other areas such as trading, industrial and technology, that are much bigger than services alone.
One of the fears for SME success in this region is that the organisations do not focus on their core capability. It is important that SMEs build and deliver their core capability in the first three years, as it is important to have sustainable growth and build reputation and ‘reference-ability’ in the market.
They should also collaborate and partner with other international players and adapt themselves to the market need, where they can provide best solutions, products and customer service for sustainable business.