The Small and Medium Sized Enterprises (SMEs) may be defined as those enterprises with small number of employees and a low balance sheet. Many countries consider SMEs as those enterprises with less than 250 employees. However, the great majority of SMEs employ 10 employees or less. The number of SMEs has increased in recent years as many countries become more aware of their importance. SMEs account for more than 90 percent of all enterprises and over half of the working population relies on SMEs for employment and income. In the OECD economies, the SMEs account for over 95 per cent of the number of enterprises. In the low and middle income countries, the World Bank estimated that the SMEs account for between 60-70 per cent of GDP and about the same share in employment. In other developing countries, the share of the SMEs in employment reached 65 in India and 84 per cent in South Africa. In the ESCWA member countries, these enterprises account for 60 per cent of employment in Jordan, 76 per cent in Egypt and 62 per cent in the United Arab Emirates. Their share in the production varied from 50 per cent in Jordan to 80 per cent in Egypt.
SMEs sector plays an important role in sustaining economic growth, increasing trade, generating employment and creating new entrepreneurship. The role of these enterprises has expanded in the last two decades to include many sectors such as retail trade, information technology, and tourism as well as the manufacturing sector. SMEs are particularly important in developing countries where they can play a critical role in poverty reduction, mainly through provision of employment opportunities. Easy entry and exit of SMEs make economies more flexible and competitive, while large numbers of SMEs create competitive market pressure. SMEs need less capital and investment, easier to manage, more dynamic and do not need a complex administrative structure and hence suits the need of developing countries. These enterprises enjoy several unique characteristics including their high mobility, management efficiency and therefore, are becoming essential to economic development particularly in developing countries. Their role in innovation became more evident in recent years particularly in the major developed countries.
However, many of the traditional problems facing SMEs — lack of financing, difficulties in exploiting technology, constrained managerial capabilities, low productivity and regulatory burdens — become more acute in a globalised environment. Getting a business enterprise off the ground or expanding it requires funding, and finding the right kind of finance is often a major difficulty for SMEs worldwide.
Recent studies showed that SMEs play an important role in providing long-term investment for Arab countries and beyond, and hence, contributing to economic development, export promotion, employment creation and growth. Several countries in the ESCWA region have put emphasis on the role of these enterprises as means for employment and production in various fields, particularly in rural areas. They have expanded the role of these enterprises in agriculture, manufacturing and services. The role of SMEs in the Arab region is expected to expand in the future as a result of the expected high demand for investment to promote growth and development and to meet the millennium development goals set up by the United Nations. Several countries in the region have engaged in training exercises on establishing and running SMEs enterprises, where individuals undertook training on how to start and run small businesses under the supervision of government and/or private sector.
League of Arab States, Cairo, Egypt
