Kuwait – MENA Herald: 90% of all companies in Kuwait are SMEs. Together, they contribute 20% of the country’s GDP, and employ 23% of the country’s working population. The figures come from BLOOVO.COM’s latest research on the beneficial role SMEs play in catalysing economic diversification and employment regionwide.

SMEs operate extensively throughout the rest of the GCC too. 90% of all companies in Oman and KSA are SMEs, versus 94% in the UAE and 99% in Bahrain while the Qatari business ecosystem is 75% composed of SMEs. They employ 60% of Saudi Arabia’s workforce, 43% of Oman’s, 57% of Bahrain’s, 72% of the UAE’s, and 20% of Qatar’s.

Collectively, these SMEs and the people they employ are crucial to economic growth in GCC countries. BLOOVO.COM research shows that SME activity accounts for 30% of the UAE’s GDP, 28% of Bahrain’s and 22% of KSA’s. Kuwait’s GDP is 20% composed of SME activity, with Oman’s GDP relying on SMEs for 17% of its total.

“We’ve always known SMEs to be powerful drivers of economy but our new research shows just how crucial they are to economic and prospects throughout the GCC. Not only do they contribute very significantly to GDP but also generate high job numbers. Yet they still don’t have the same significance, or play the same role, as their counterparts in the EU, for instance. So there’s certainly room to evolve and grow, and this should be a region-wide priority, says BLOOVO.COM CEO and co-founder Ahmad Khamis.

All told, these SMEs currently employ around 17 million people in the GCC. BLOOVO.COM research predicts this number rising to 22 million by 2020 in a positive scenario. Even a more neutral scenario shows that 20 million people across the region will be employed by SMEs by 2020 – still a job growth rate of 2.5%.

SMEs’ capability to generate jobs is crucial not just for economic progress but also social stability. With GCC population growth rates ranging between 0.5% (UAE) and 8.1% (Oman), and around 40% of the population being under the age of 25, thousands of young GCC nationals are expected to be looking for gainful employment every year. With government sector employment reaching saturation, SMEs will play a crucial role in generating job opportunities for this new generation.

“Historically, we’ve seen governments absorb young nationals into rewarding jobs. But the public sector is reaching saturation. And in this new era of cost-cutting and streamlining, SMEs are going to have to take centre-stage in generating viable employment opportunities that attract young national talent throughout the GCC. And to do so, they’re going to have to overcome key challenges, where they’ll need the support of governments, regulators and the financial sector to reach an adequate stage of maturity,” says Iyad Abu Hweij, BLOOVO.COM’s other co-founder.

GCC countries are aware of creating effective support systems for SMEs to thrive. For instance, the UAE established Federal Law No 2 of 2014 to categorise SMEs, establish a dedicated council and determine incentives to be offered to small business owners. Bahrain set up its Tamkeen body to support SMEs in 2006. In 2013, Kuwait established a USD 7 billion National Fund for Small and Medium Enterprise Development from government coffers. More recently, Saudi Arabia has formed its Public Authority for Small and Medium Enterprises (PASME) in 2015.

While SMEs are largely associated with service provision, BLOOVO.COM’s research shows them also playing a very important role in boosting GCC manufacturing capabilities. 2014 data from the Gulf Organisation for Industrial Consulting (GOIC) shows 13,480 small and medium sized factories in operation – of which 10,809 were small and 2,671 were medium-sized. Collectively that year, they accounted for a staggering 82.7% of the total number of factories in the GCC, and also employed 44.1% of the total industrial sector workforce despite the small the investment size.