Saudi Arabia is one of the most competitive G20 countries to start a business: EY
- In 2010, it took just four procedures and an average of five days to start a business in the Kingdom
- Large majority of Saudi entrepreneurs surveyed highlight improvements in business regulations and ease of starting a business
Riyadh, 15 January 2012: Saudi Arabia is one of the most competitive countries* among the G20 group of nations in the average time it takes to start a business, according to an EY report on entrepreneurship in the world’s top 20 economies, Entrepreneurs speak out.
To foster Saudi Arabia’s new business creation rate, King Abdullah launched an ambitious group of initiatives in 2005 to reduce the impact of the regulatory burden on start-up companies. One of the results of this ongoing policy is that it now takes nine fewer procedures to start a business than it did in 2005, taking the number to just four procedures – lower than any other rapid-growth market in the G20. Saudi Arabia is also among the most competitive in the number of days it takes to start a business, at an average of just five days in 2010, representing a fall of 59 days since 2005.
Easy access to funding for Saudi start-ups
Almost three quarters of Saudi entrepreneurs interviewed for the survey said that access to funding is not a constraint and that they have easy access to capital. This is partly because of special programs that exist to facilitate bank lending to entrepreneurs. Public aid was viewed as one of the funding instruments that saw particularly strong improvement, with 72% of respondents saying it had improved over the last five years. The government’s Kafalah Program, a US$200 million fund to counter loan defaults, encourages local banks to lend to SMEs. In addition, the AlAhli Small Business Program, designed to provide Saudi youth with the knowledge and skills necessary to establish their own businesses, helps SMEs obtain loans from sources that cooperate with the National Commercial Bank (NCB). It also helps potentially viable SMEs by providing guarantees required by lenders.
Jim Turley, Chairman & CEO, EY, who is a panelist on the ‘Art of Failure’ session at the 6th Annual Global Competitiveness Forum to be held on January 21-24, 2012 in Riyadh, said: “The entrepreneurial flair of Saudis has been given a major boost by these initiatives, which have been warmly welcomed by entrepreneurs in the Kingdom. The government has recognized the important role that entrepreneurship will play in generating the millions of new jobs required to sustain the economy over the coming decade. This provides an excellent model for the rest of the region.”
Increased government support
Regulation and taxation in Saudi Arabia were viewed positively by the entrepreneurs in terms of starting up a business. Business regulations were reported to have improved by 80% of respondents and the ease of starting a business improved by 76%. The cost of starting a business is also quite low, at 7% of income per capita.
Turley added: “In uncertain economic times, governments around the world should be encouraging entrepreneurs to build businesses that create permanent jobs. The Kingdom is creating the right conditions for entrepreneurial activity to flourish while, at the same time, crucially avoiding penalizing failure.”
Dedicated training and education key to entrepreneurial success
Abdulaziz Al Sowailim, Chairman and CEO of EY Middle East and North Africa said: “Today we meet entrepreneurs who are at the leading edge of their industries, who are innovating and growing due to the quality of their training and education. Government initiatives, such as the AlAhli Small Business Program, that provide Saudi youth with the knowledge and skills necessary to establish their own business are examples of the Kingdom’s commitment to fostering entrepreneurship.”
Education and human resource development is the second largest budgetary item for the Saudi government and spending is likely to be increased substantially given the rising youth population. The report noted widespread improvements in entrepreneurship-related areas of Saudi education and training with 80% of respondents reporting an improvement in entrepreneurship conferences and seminars. Specific programs at universities or business schools were thought to have improved by 72% and the majority of Saudi entrepreneurs are satisfied with the quality of dedicated education.
Al Sowailim added: “The Saudi culture is also a key driver - 86% of Saudi entrepreneurs believe their culture encourages entrepreneurship. A large majority also said that promoting the role of entrepreneurship in creating new jobs could have a high impact on further strengthening that culture over the next three years.”
EY’s report, ‘Entrepreneurs speak out,’ a survey of 1,000 entrepreneurs, focuses on the entrepreneurship environment of G20 countries through the lens of five fundamental enablers. These are entrepreneurship culture, education and training, access to funding, regulation and taxation, and coordinated support.