Micro and Small Business Affecting Saudi Arabias Economy

Question: Discuss about theMicro and Small Business Affecting Saudi Arabia's Economy. Answer: Introduction Despite Saudi Arabian economy being one of the fastest growing in the global perspective, the country has presented a relatively small SMEs (Small and Micro Enterprises) sectors contribution regarding the Gross Domestic Product (GDP) as well as the rate of employment. This proposal seeks to investigate a comprehensive finding on the impacts of micro and small business on the economy of Saudi Arabia. Research Objectives To evaluate and examine the effects of micro and small business on the economy of Saudi Arabia To establish the reasons behind the relatively small contribution of SMEs in Saudi Arabia despite the economy being one of the fastest growing globally Significance This study comes at the right time when the contribution of SMEs to global economies is increasing receiving attention globally. With SMEs input taking center stage, it is appropriate to understand how best the potential opportunities presented by SMEs can be harnessed to help boost the economy of Saudi Arabia (Al-Khaldi Wallace, 2009). This study will add to the current literature to discover the reasons for a relatively small contribution to the GDP by Saudi Arabian SMEs despite the economy being one of the fastest growing globally. Research Questions What are the effects of micro and small businesses on the economy of Saudi Arabia? What are the reasons for the small contribution of SMEs to the GDP and employment in the Saudi Arabian economy? Literature Review The SMEs in Saudi Arabia currently account for 90 percent of all the businesses in the country. They provide the country with valuable opportunities to enhance productivity as well as diversify the economy. The contribution of the SMEs to the Growth Domestic Productive (GDP) is 30 percent. This percentage is higher than any other GCC economies. The increasing significance of the SMEs in the Saudi Arabian economy has consequently triggered the government of the Custodian of the Two Holy Mosques, King Salman Bin Abdulaziz to take initiatives to encourage as well as develop the SMEs. The governments financial initiative purposes to regard the mechanisms of supporting the SMEs in the various fiscal as well as social factors which focus towards the imperative role of SMEs in stimulating as well as developing economies throughout the world. The key enablers of the SMEs in Saudi Arabia include strong regulatory environment, political stability as well as solid infrastructure. Saudi Arabia defines micro as those enterprises with between one and two employees with annual revenue of less than $27,000. The small enterprises are defined by Saudi Arabia as those with between 3 and 49 employees with between $27,000 and $1.3 million. Medium enterprises feature those firms with between 50 and 200 employees and $1.3 to $13.3 million. A clear kingdom-wide strategy for SMEs is inevitable with solely one institution and one definition to understand the SMEs in Saudi Arabia (Asad Sadi Henderson, 2011). The SMEs business environment in Saudi Arabia has provided the understanding of the contribution of SMEs in this economy. They have remained the backbone of any successful as well as the sustainable economy, and Saudi is not exempted (Looney, 2004). The roots of SMEs in Saudi Arabia is local but with the growing globalization and trade crossways the globe, SMEs in Saudi Arabia have exploited the global opportunities. They have a firm footing in Saudi Arabia due to the regions overall economic strategy which supports the diversification away from the oil sector. SMEs in Saudi accounts for 1.97 million (90%) of all the countrys businesses registered. They also account for 60% of the total Saudi Arabias employment. Over 85% of the SMEs in Saudi Arabia are single proprietor companies. The SMEs in Saud Arabia have remained the key to unlocking the broad potential of the economy of Saudi Arabia (Tuncalp, 2009). The sectoral distribution of SMEs in the Saudi Arabian economy can help also acknowledge their contribution to the overall GDP growth of the country. The commercial and Hotel sector has the largest SMEs standing at 47% while the construction industry comes in a distance second at 27% of the SMEs. Industrial, social services, and others account for 12%, 8% and 6% in that order (Ghanem, 2013). The SMEs in the Saudi Arabian economy are widely present in the private sector representing one of the fundamental pillars in the field of trade. Seventy-four percent of the SMEs in Saudi Arabia are involved in the trade as well as construction businesses which are followed by twelve percent in the industrial sector (Zamberi Ahmad, 2011). The SMEs contribution to the GDP in Saudi Arabia presently pegs at 33% that is very low relative to the most developed economies as seen by 64.3% and 50% of the Spain and US GDPs respectively. Nevertheless, the contribution of SMEs to the economy of Saudi Arabia has remained relatively higher in the GCC countries whereby Bahrain and Omans contributions to respective GDP are 28% and 14%. The KSAs SMEs, have, however, gained from several initiatives by the government. A greater percentage of such SMEs benefiting have risen by 28% to 1,497 businesses in 2014 against 1,173 businesses in 2013 (Acs, 2006). The SMEs accounts for 4.5 million employees in Saudi Arabia comprising about 25% of the economys labor force. It is surprising that SMEs employ mainly migrant workers since about 74% SMEs are in construction and commercial sectors. The nationals of Saudi Arabia only account for less than ten percent of the total SMEs employed labor (Zamberi Ahmad, 2012). Methodology The systematic review of literature will be used in this study. The study will involve selection of ten scholarly articles relating to the topic and undertake a thorough review to gather the information. Only peer-reviewed articles will be used in this study. The exclusion criteria will be based on the date of publication where only those study that was produced between 2011 and 2016 will be reviewed. Counter referencing will be done to evaluate the credibility of the sources used by comparing the findings of those of the sources listed at the bottom of each article. Data Analysis Thematic analysis will be used in this study to help discover the effects of SMEs on the economy of Saudi Arabia. It will also help explain why the SMEs relatively contribute low to the GDP of the Saudi Arabian economy. Limitations Since the study only involves a systematic review of the literature, it will be limited in the sense that it might carry forward the mistakes or wrong information presented in the articles or previous studies. Bibliography Acs, Z. (2006). How is entrepreneurship good for economic growth?. Innovations, 1(1), 97-107. Al-Khaldi, M. A., Wallace, R. O. (2009). The influence of attitudes on personal computer utilization among knowledge workers: the case of Saudi Arabia. Information Management, 36(4), 185-204. Asad Sadi, M., Henderson, J. C. (2011). Franchising and small medium-sized enterprises (SMEs) in industrializing economies: A Saudi Arabian perspective. Journal of Management Development, 30(4), 402-412. Ghanem, H. (2013). Role of Micro and Small Enterprises in Egypt's Economic Transition. Brookings. Looney, R. (2004). Development strategies for Saudi Arabia: Escaping the rentier state syndrome. Strategic Insights, 3(3), 6-18. Tuncalp, S. (2009). 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