Small and Medium-Sized Businesses in Saudi Arabia - Essay Example

This paper suggests that much headway has been made in Saudi Arabia in terms of providing regulatory systems which aid the funding of SMEs which is highlighted as the greatest challenge these firms face. It is argued that other areas such as regulatory burden and legislating against corruption can be focused on and improved in order to enhance the developmental environment for SMEs. Small and medium-sized enterprises (SMEs) are extremely important for any economy, often being the source of innovation as well as providing a high percentage of employment both directly and indirectly.

As firms, they are defined as small if they have between 10 and 50 employees and have total assets and total annual sales of $100,000 to $3,000,000. By contrast, medium-sized enterprises are those with 50- 300 employees and have total assets and total annual sales of between $3,000,000 and $15,000,000.1 In developed economies, SMEs account for over 90% of employment and therefore represent a vital part of the economy which much be appropriately supported both in terms of their inception and ongoing growth and development.

The benefits of supporting this sector are numerous and include creating a flexible economy, enhancing competition, and being a major driver in poverty reduction. This paper looks at the policies and legislation that support the growth of such firms and asks whether the legislation being developed in Saudi Arabia is appropriate and will be effective in developing this crucial area for an economy that has for many years relied heavily on large firms linked to one industry, oil. To develop an environment conducive to the support of SME development a number of areas have to be targeted including finance availability, property rights, and stability and accessibility of the legal framework to small firms with limited resources.

This paper will examine the relevance of these areas after providing an insight into the current situation relating to SMEs in Saudi Arabia. It will then go on to assess the current legislative environment within the Kingdom and ask whether it really is conducive to SME development and if not, what is lacking.