Distinguished ministers, excellencies,
ladies and gentlemen, good morning. I am very pleased to be here.
I am honored to share the stage with such a distinguished group of speakers, and to talk to such a notable audience in my first official visit to Kuwait.
I would like to start by commending the National Fund for SME Development, chaired by Dr. Mohammad Al-Zuhair, for organizing this inaugural SME forum. It is an excellent opportunity for government, the private sector, and international organizations to network, share information, and collaborate in developing the private sector in Kuwait.
My remarks today will focus on three topics:
- The importance of SMEs in economic development;
- World Bank Group support to the National Fund; and
- Key priorities going forward
The importance of SMEs in economic development
There is an increasing recognition of the importance of SMEs in supporting overall economic growth. According to a recent survey of nearly 50,000 firms in 104 countries, SMEs provide as much as two-thirds of all employment, with small firms contributing more to employment in low-income countries than high-income countries.
Ourcross-country research also suggests that small and young SMEs are the net job creators in many countries.
At the same time, research shows that growth and productivity among SMEs varies widely from country to country.
While over a life cycle of 40 years, an average firm in the U.S. grows by 7 times its initial size, it grows only 2 times its initial size in India. Such a difference in growth and productivity translates into missed opportunities in increasing the GDP per capita in countries where SMEs face growth constraints.
Both business environment (the regulatory environment that governs the cost of doing business) and firm-specific factors (entrepreneurship, skills, access to credit and markets) tend to affect the life-cycle growth profiles of firms in different countries.
In Kuwait, having a healthy, vibrant, barrier-free SME ecosystem is critical to economic development. In fact, the private sector is anticipated to provide employment opportunities for a rapidly growing Kuwaiti labor force and to lead economic activities in various sectors to reduce the country’s heavy reliance on oil resources.
I believe this aligns closely with Kuwait’s vision 2035 which envisages a revival of the entrepreneurial spirit of its people. This revival will allow the private sector to take a leading role in the economy, creating ample jobs for nationals, with the government playing only a supporting role.
Through vision 2035, Kuwait is expected to have a business climate that encourages local investment, competition, diversification, and growth.
Within The World Bank Group’s team analyzed Kuwait’s economic activities, with an aim to assessing SME’s contribution to GDP, value added employment, and productivity. The analysis reveals that the value added by SMEs in Kuwait trails far behind peer economies.
In Kuwait, despite 94 percent of Kuwaiti firms being categorized as SMEs, the share of SMEs in total value added is only 3.1 percent This share is concentrated in the real estate and retail sub-sectors.
SMEs employ 23 percent of the total workforce in Kuwait. However, SMEs’ contribution to the economy is marginal at 3 percent of GDP.
What are the main challenges faced by SMEs? As a result of in-depth discussions with entrepreneurs and stakeholders from different segments of small businesses (nearly 70 entrepreneurs), the National Fund and World Bank Group have identified these challenges:
Among them:
- Excessive regulations that hinder business activities from start up through growth to exiting;
- Lack of access to developed land and to commercial and industrial premises;
- Challenges recruiting and retaining skilled Kuwaitis in the private sector as remuneration and benefits offered in the public sector are often more generous;
- A small domestic market dominated by government and large corporations;
- Lack of access to finance for SMEs;
- Limited capacity of programs meant to support SMEs -- incubation services, matching grant schemes, management training etc.; and
- Perception and culture. SMEs said a majority of workers prefer government jobs because of the lower risk and the perceived low social status of entrepreneurs.
World Bank Group support of the National Fund:
The World Bank Group has been closely following the Government of Kuwait’s efforts to address some of these constraints by supporting the diversification of the local economy and promoting the growth of an SME ecosystem.
These efforts have led to the establishment of the National Fund for SME Development, which aims to help the country make great strides in its efforts to support youth, combat unemployment, and enable the private sector to drive economic growth.
The Bank Group is privileged to work with the National Fund in supporting its vision.
Our current engagement with the Fund focuses on supporting its institutional establishment through a two-year technical assistance project, which supports implementation of the National Fund Strategy and takes a holistic approach to the development of an SME Ecosystem.
In particular, we are supporting the National Fund in the following thematic areas:
- SME business environment
- SME business development
- Entrepreneurship culture development
- Data collection, monitoring and evaluation
- Organizational set up and IT architecture
Key priorities going forward
Going forward, more work will be needed to advance the specialization and internationalization of SMEs. This will entail improving the efficiency of SMEs in order to link them with local, regional and international value chains.
The National Fund will take on this specialized role, while continuing to serve the wider community of SMEs in Kuwait, and improving the business environment to facilitate entry, retention, and exit of enterprises.
I would encourage entrepreneurs to take full advantage of the opportunities offered by the National Fund to help achieve their dream ideas.
I also encourage the National Fund to provide more venues for interaction where public and private sector representatives can address common challenges, discuss opportunities for SME growth, and ensure that the voices of entrepreneurs are well-heard.
When governments and the private sector work together, they can have a major impact on diversifying economies and promoting inclusive growth.
In Kuwait, I look forward to working with all of you to put the World Bank Group’s global knowledge at your service so that the dividends of trade and investment can be shared by as many inhabitants of GCC as possible.
I am excited about our collaboration going forward, particularly in this region, which carries such tremendous potential!
Thank you.
Anabel Gonzalez is the World Bank Group’s Senior Director for Trade & Competitiveness
