Bahrain Introduces 10% Quota to Support SMEs

by Zaara 14, Jan 2020

Small and medium-sized companies in Bahrain add to a massive chunk of the country’s GDP. Naturally, the governments will most likely support these businesses as they are the dominant drivers of industry, economy, and employment throughout the GCC, and the MENA region. Their economic contribution is becoming essential through a convergence of three factors – broad, young, national population looking for gainful employment, a drop in oil prices hurting government revenues, and the onset of the fourth industrial revolution, where nation-states are gaining competitive benefits through investment in technology, IT, innovation as conservative relationships between citizen, state, and economy are negotiated.

In a new initiative taken by Bahrain’s cabinet, 10% of all its public contracts will be awarded to the SMEs. Earlier, a 10 percent quota existed for service facility auctions. The new mandate expands this in all the public tenders, which naturally means that more Small and Medium Enterprises from multiple spheres will gain access to government deals.

Although the quotas supporting SMEs and encompassing their growth is nothing new to the area, providing 10 percent of significant contracts is an exceptional and relatively game-changer. In the United Arab Emirates, for the Expo 2020 happening in March, it is listed that over half of all deal related to the event has been awarded to SMEs and is bang on the objective for meeting its aim by being awarded the fifth time the budget allocated to this sector in past five years. Moreover, as far as the statistics are concerned, the Expo 2020 Dubai has recorded data that over 26,000 registered suppliers from 150 countries want to do business with them. Surprisingly, the significant chunk of these companies is SMEs.

Why SMEs Matter Today?

More than 96% of the business setup in the United Arab Emirates are SMEs. Overall, they underwrite 30% of the country’s GDP and employ 72% of the country’s working population. SMEs operate broadly throughout the rest of the GCC too. 90% of all companies in Oman, Kuwait, and KSA are SMEs. In the future, the part of SMEs as leaders in job-creation could become even more crucial. There is already an indication that the corporations of the digital age generate significantly fewer jobs than those of the industrial age.

The reduction of oil prices in the past few years has reduced the pace of economic growth in an interconnected GCC region, resulting in challenges for most enterprises, especially so for the SMEs. Despite the slowdown, many analysts point out the firm resolve and resilience of the people of the Kingdom, its Leadership and the SME sector, to continue the journey of improving the economy resulting in the increased well-being of all those who live and work in the Kingdom.

End Note

SMEs are a crucial driver of economic activity and the most significant sponsor to global employment. Progressive economies such as Germany have also proven that an active performing SME segment can provide attractive job opportunities for a skilled workforce. After a decade-long road to recover pre-crisis levels of employment, it is no wonder that governments all over the world are looking to boost their SME sectors to drive the development of their labor markets and achieve sustainable economies.

With mainstream millennials and youth power joining the SME sector and craving to be entrepreneurs, there is no doubt that this move would profit the overall SME sector development across the region and make Bahrain touted as a global hub for SME. Consequently, company formation in Bahrain will go from strength to strength.

We at Commitbiz help entrepreneurs start a business in the UAE and its Emirates. If you are interested in business setup, do contact us – we’d be glad to help you out!