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Agents of change

July 2012

A recent forum in Bahrain highlighted a growing demand for entrepreneurial freedom, and an increased willingness among policy makers to support private sector expansion

In April 2011, as protests raged in the Arab World, a timely report was published which sought the views of young Arabs aged between 15 and 29 about a range of issues that most affected them.

The study, compiled by Silatech – a Qatar-based initiative established to promote, among other things, large-scale job creation and entrepreneurship in the region – in partnership with well-known pollsters Gallup, revealed that entrepreneurship was an increasingly important topic in the Gulf, and that women were becoming as determined to climb the entrepreneurial ladder as men.

Among the many findings of the survey, conducted in 2009 and 2010 - before the so-called Arab Spring - some stood out in particular. Among the ‘high-income’ GCC countries, for example, young people were less likely to view their communities as providing a hospitable environment for entrepreneurs, even though the survey noted that young Arabs in those countries had the potential for substantial new business creation.

“Further, they are less likely to believe entrepreneurs can trust the government to allow their businesses to make a lot of money. Taken together, these changes suggest that young Arabs in high-income countries view government business regulations as an obstacle to business creation,” the report continued, urging policymakers to create an environment which helps young people perceive the business climate differently.

Among the policy recommendations made in the document were for the government and private sectors to “take actions that catalyse the creation and ‘scaling-up’ of small and medium-sized enterprises (SMEs)”.

“Increasing young Arabs’ access to financing for entrepreneurial pursuits and enterprise development is critical to SME development in the region,” it said. It went on to say that financial projects targeted towards 18- to 29-year-olds had the potential to spur low-risk transactions that pay high dividends financially and create deep impact in local communities.

“The private sector should also partner with government in the creation of “business development” knowledge that helps entrepreneurs grow their businesses. Such efforts will require expert institutions to help deliver skills and knowledge to young entrepreneurs.

Fifteen months on from the report’s publication, passions on the street may have cooled slightly, and regional states have attempted to respond to demands for change by pushing through a range of social packages, including initiatives to stimulate job creation. In Saudi Arabia about $130 billion has been allocated, some of which, the government hopes, will help get more Saudis into a private sector which currently employs only 10 per cent of the workforce.

As the ambitions of Arab entrepreneurs intensify, regional governments are clearly well aware of the strategic importance of growing their SME sectors in particular.

In an interview last month with the UAE’s The National newspaper, the Middle East managing partner of global accounting firm PriceWaterhouse Coopers’ (PwC), Fouad Alaeddin, said a recent region-wide PwC study of employment showed that some 31 per cent of employees said they’d like to work for themselves, rather than a boss.

At the end of May, entrepreneurs from around the Gulf shared the stage with policy makers and financial institutions at the first GCC Future Entrepreneurs Forum in Manama. On the agenda were a range of issues relating to entrepreneurship and an SME sector Mahmood Kooheji, chairman of Bahrain government holding company Mumtalakat, called “the backbone of any economy.”

Nedhal Saleh Al Aujan, chief executive of Bahrain Development Bank, whose mandate is to specifically support SME growth in its home market, told delegates that efforts by Gulf states to develop a unified strategy to promote entrepreneurship needed to address a range of issues.

“This requires them [GCC countries] to address issues such as finance, training, organisational procedures, exchange of information, increasing investments and joint ventures between entrepreneurs, as well as incubation and business excellence,” he said.

According to the Silatech Index, Bahrain displayed “relatively negative attitudes toward the difficulties of launching and operating a business”, which presented “significant obstacles to successful entrepreneurship.” On the other hand, 60 per cent those surveyed in Bahrain reckoned it was easy to get a loan to start a business.

Social unrest in the kingdom last year, which hurt economic growth rates, apparently made the authorities even more determined to step up support for the SMEs sector, articulated via a range of initiatives and schemes, including targeted financing.

As of December last year Tamkeen, the semi-government labour fund, had pumped more than BD166 million ($440 million) into the local private sector since it was established in 2006. This was done through various programmes targeting 100,000 Bahraini nationals, as well as enterprises. Tamkeen also says it has made a further BD166 million available through its financing portfolio to enable SMEs to market themselves at local, regional and international trade fairs and exhibitions.

This year Tamkeen, whose funds are sourced from fees collected by Bahrain’s Labour Market Regulatory Authority (LMRA), says it plans to launch a further 20 initiatives, which will reportedly include enterprise financing.

One of the key themes of the Forum was the growing profile of female entrepreneurs in the Gulf. Although a separate Gallup survey in 2011 showed that the percentage of women in GCC countries who own or plan to start a business in the next 12 months was “generally low” across all countries surveyed except Qatar, it pointed to greater parity between the sexes in the years ahead.

“Interestingly, the gender gaps are larger among men and women who own businesses than among those who plan to start businesses,” it noted.

Citing the Gallup poll, Gulf Co-operation Council (GCC) secretary general Dr Abdul Latif al Zayani told delegates at the Forum that Gulf governments were making it easier for women to participate in the private workforce by increasing the availability of business advisers and making it easier for aspiring entrepreneurs to access training and money, though he admitted challenges remained.

Some observers think GCC efforts to boost entrepreneurial activity could yet be hindered by the reality that, for many individuals, the public sector remains a more comfortable, risk-free and less demanding option than private sector employment. It is not hard to see why - estimates suggest that in Saudi Arabia, for instance, the average private sector wage is just one third of those in the public sector.

Weaning populations off the ‘cradle-to-gave’ mentality could take time, but if the GCC Future Entrepreneurs Forum proved anything, it is that there are plenty of motivated individuals willing, and able, to take a calculated risk.

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