A lot more than subsidies to help SMEs

The Omani SME strategy appears to be taking a more pragmatic approach, covering a range of factors deemed important for their success.

The potential positive impacts Small and Medium Enterprises (SMEs) can have on both society and economy in Oman have not been overlooked by the government. As part of its strategy to create jobs, increase wealth, diversify the economy, optimise domestic resources and foster an entrepreneurial spirit amongst young people, numerous initiatives are being put in place to both increase the number of SMEs, and further aid the expansion and development of those already up and running.

Endeavours to achieve these goals began in 2007, when a strategy was developed by approaching several embassies in Muscat to see what incentives and help, both technical and financial, were being given to SMEs elsewhere, and by engaging consulting firm Booz Allen Hamilton to investigate different strategies for supporting SMEs throughout Oman. Out of this process came a diverse strategy that incorporated best practice from other countries, while ensuring that the government’s various strategic goals for Oman were met and optimal benefits for the economy were achieved.

Rather than simply helping SMEs by providing cheap credit, the Omani strategy appears to be taking a more pragmatic approach, covering a range of factors deemed important for their success. From regulatory changes, extra training of bureaucrats, to national training seminars and the creation of several organisations and bodies, in addition to assistance with credit, it seeks to address both practical and financial issues facing SMEs.

On the regulatory front, the government has recognised the need for public-private cooperation in promoting entrepreneurship, and has looked to ease the registration process through the establishment in 2009 of a ‘one-stop-shop’, that reduced the number of set-up procedures by 3, and the number of days needed to establish a business from 33 to 12 – a number that has now been further reduced to just eight days. Such reforms include easing regulations for doing business at home, allowing new businesses to cut costs of water, electricity, rent and so on. Registration of home businesses can take as little as 15 minutes, and allows staff already employed in the home to work for the business. Further to this, certain labour laws that were causing difficulties for SMEs have also been overhauled. For example, regulations regarding the employment of family members have also been altered. Family members employed in a business now count towards the work force nationality ratios required by Omanisation laws, where they did not in the past, further reducing potential overheads and bureaucratic barriers for would be entrepreneurs.

As of January 2013, at the behest of His Majesty the Sultan, the Al Rafd Fund was established. The Self-Employment and National Autonomous Development (SANAD) programme, as well as the other schemes to help Omanis set up their enterprises will be combined under this new fund for the SMEs.

Further to regulatory change, the Public Authority for the Development of Small and Medium Enterprises in Oman has given practical training to more than 13,400 entrepreneurs, to help them establish and run their business successfully and overcome barriers such as complying with tax regulations and payment procedures that may be prohibitive for some SMEs. This organisation, along with running courses online and from the National Business Centre, has established programmes such as a scoring card system that enable businesses to be easily rated and make them more accessible to investors. Other schemes set up by the Directorate include psychometric testing to try to guide entrepreneurs towards the areas that best suit them, and programmes to train government employees in how to deal with SMEs specifically.

This body has also worked closely with the Bureau International des Expositions (BIE), running annual exhibitions and conferences to create awareness of SMEs and provide workshops for entrepreneurs. The SME Exhibition and Conference of 2013 was the fifth of its kind, and was a three-day event focussed on self-employment and training in order to enable a greater number of young Omanis to venture into start-ups. Similarly, private initiatives such as Intilaaqah Entrepreneurial Development Programme (IEDP) established by Shell Oman, and launched in early July, are also playing an important role in supporting SMEs. This programmefocuses on connecting entrepreneurs with potential business opportunities and providing access to strategic business partners. This is a move aimed at avoiding situations where SMEs do not have sufficient know-how or strategy to provide for market demands. In a similar way, Knowledge Oasis Muscat (KOM) seeks to attract knowledge and technology-driven SMEs and start-ups, by offering them short leases with flexible terms, and providing an ‘incubator’ environment that allows and encourages increased interaction between SMEs.

Across the globe, a number of factors ranging from broader issues in the business environment of a country, to the availability of a suitably educated and well trained labour force, impact on the growth opportunities of SMEs. However, a lack of access to finance consistently ranks as the most important obstacle to SMEs across the globe, and it is no different in the Sultanate. To address this, further to practical assistance for SMEs, the government has also taken steps to ensure that SMEs have access to funding when they most need it. The bank loan guarantee scheme, which has been in place since 2011, allows business owners to borrow money with no collateral, as the government guarantees 50 per cent of the loan, up to RO250,000, with interest rates of only three per cent, while banks charge around six per cent interest on the remaining 50 per cent. More recently, the Central Bank of Oman (CBO) has mandated all banks operating in the sultanate to allocate five per cent of their total credit portfolio to small and medium enterprises, by the end of December 2014. They have further articulated that bank lending policies should encourage the growth of SMEs in the country through liberal lending policy for the SME bearing in mind the government’s vision and other regulatory initiatives to this end.

The value of SMEs to the sustainability of any nation’s economy is clear to see. World Bank estimates indicate that SMEs have contributed more than 55 per cent of GDP in OECD countries and between 60 to 70 per cent of GDP in middle income and low income countries, while accounting for as much as 70 per cent of employment. According to the most recent surveys and estimates in Oman, 13.8 per cent of Oman’s GDP is accounted for by small- and medium-sized enterprises (SMEs). With this statistic in mind, it is clear that there is already an established sector, but with the support being given to such businesses by government bodies, banks and private institutions, it is equally clear that this contribution could well increase significantly in the years to come.

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