Small business bank proposed

Yemen Observer: http://www.yobserver.com

Small business bank proposed

Posted in: Business & Economy
Written By: Faisal Darem & Mohammed al-Quiri
Article Date: Dec 2, 2007 - 12:36:59 AM
The fourth Arab Meeting for Small and Medium Industries recommends encouraging small and medium enterprises as a route to creating jobs and ending poverty

Dr. Yahya al-Mutawakel the Minister of the Industry and Trading, Dr. Ali Mujawar, the prime Minister, and Mohammed bin Yousif, Director of the Arab Industries Development and Mining Organization launch the meeting.

The fourth Arab Meeting for Small and Medium Industries, which was held in Sana’a from 25-26 November, has recommended establishing an Arab Investment Bank to finance small and medium industries, to be approved at the next pan-Arab summit. The meeting called on Arab countries to set up a legal framework to organize small and medium industries and to unify government efforts to assist this sector.

It was recommended that Arab countries should create financial mechanisms which cover the operational needs of small and medium industries through setting up co-operative banks, on the lines of those found in European countries.

The conference also called upon Arab countries to allocate money to encourage creative and inventive people and fund their inventions.    The final statement said that the Arab Organization for Industrial Development and Mining should organize a meeting to discuses supporting technical innovation in small and medium industries as well as establishing an information network among Arab countries. Additionally, it should work on encouraging the inventiveness of the young.

They also called on the organization to prepare training programs for people in rural areas to enable them to set up small businesses which give them opportunities to lift themselves out of poverty.

The participants agreed on the need to benefit from the experiences of successful countries in the fields of planning and developing small and medium enterprises and industries. Arab countries were urged to benefit from Asian experiences in the field of small industries and to allocate funds annually to encourage creative types, particularly young graduates. The conference welcomed a proposal presented by the Algerian Minister of Small and Medium-Sized Enterprises and Handicrafts, Mustafa Benbada, for an agreement for developing small and medium industries and joint Arab cooperation in this field.

The participants asked Algeria to prepare a draft convention and circulate it to the Arab states.

The participants recommended holding the next meeting on small and medium industries in Sudan.

At the end of the meeting, Dr. Yahya al-Mutawakel, the Yemeni Minister of Industry and Trade, said the meeting had come up with several interesting proposals to contribute to improving small and medium industries.

“We must work together and combine our efforts to create a suitable climate for applying these recommendations which will lead to realising the goals of this sector. These goals are creating job opportunities and combating poverty.”

About 96 percent of industrial enterprises in Yemen are small business.

Ali Ahmed Othman, the Sudanese Industry Minster, said, “We have achieved many benefits in this meeting, such as, sharing experiences in this sector to avoid mistakes. We are keen to attract Gulf investors to improve the investment climate in Sudan.”

Small and medium industries have important role in terms of economic and social development, he added. They create job opportunities and contribute to GDP.

No’man al-Zeeat, Managing Editor of the al-Ahram business paper, said, “There are more than 20 million unemployed in the Arab states, therefore this meeting constitutes a turning point for Arab small and medium industries due to its important recommendations. If those recommendations are applied, this sector will develop immediately. Small industries form the basis of large industries. So we must work together to support this sector by applying these recommendations quickly.”

Thoria Yagoob, a businesswoman, said, “We need to improve these industries, we must find an Arab strategy to facilitate financing these projects. Governments should issue a legal framework to make it easier to get loans from commercial banks.”

Mabrook Zaed, manager of the Algerian Chamber of Industry and Commerce, said that Yemen has good legislation concerning small business. A positive step that Yemen has taken is to allocate around thirty percent of industrial zone space to small and medium industries. This will help improve the situation for small businesses.

“Developing small and medium industry is the best way to reduce unemployment, poverty and improve the economy,” al-Mutawakel said. “This meeting has identified both the obstacles to this and the solutions, as well as offering a chance to sell products to local and regional markets.”

The participants called upon Arab countries to set up legal framework to organize small and medium industries

He said that the meeting had focused on enhancing the role of the public and private sectors to improve the performance of small and medium industries, as well as founding a central financial system to fund these industries and stimulate development.

Mohammed bin Yousif, Director of the Arab Industrial Development and Mining Organization, said that the main reasons for the weaknesses of small industry in Yemen are a lack of technology, trained workers, decent infrastructure and difficulties in accessing funding.

“The organization issued certain recommendations, if Yemen applies them, it will get financial support and training from regional and international organization,” he said.” We have agreed to cooperate with Yemen to market its products under the banner Made in Yemen. We will consider the obstacles which Yemeni products face in foreign markets.”

“Small and medium industries still only contribute some 10 percent of GDP in Arab countries, while they form 35 percent of GDP in developed countries, he added. “This figure demonstrates that Arab industry is in dire need of small and medium businesses to reduce poverty and improve living standards, leading to economic and social stability,”

The industrial sector and processing industries contribute over 10 percent of Yemen’s annual Gross Domestic Product, and employs 5.4 percent of the labor force. The industrial sector in Yemen is set to witness a 6.6 percent growth during the next years of the third five-year plan 2006-2010, according to an official report issued by the Ministry of industry and Trade.

About 96 percent of industrial enterprises in Yemen are small business. Around 42 percent of workers in the industrial sector work in small industries projects. Female workers form 2.5 percent of small business employees, working mainly in sewing and weaving.

Oil and gas currently account for more than 90 percent of industrial production. Private sector industries form an important sector of any national economy. They create vital income, increase employment and reduce poverty. They also provide required commodities through effective manufacturing.
Abdullah Shiban, Assistant Deputy Minister of industry and Trade, said that the government is paying great attention to the industrial sector within its overall economic and social development plans.

“The number of industrial projects around the country has increased from 37,971 projects in 2005 to 38,160 projects in 2006,” Shiban said.” But owners of small industrial enterprises face many difficulties in the form of red tape and harsh conditions for loans, which have lead to many bankruptcies.”

Financial bodies’ fear of lending has lead to a decrease the trust between both sides, which has placed further constraints on loans, seriously damaging the potential for success of many projects, he said.
He cited the small domestic market and low economic resources in the country as obstacles to small investors. Many submitted projects are unfeasible and there is a high rate of failure. Additional obstacles are a lack of management expertise and insufficient human resources. These result in low quality projects and an uncompetitive market, lower revenues, and inefficient markets.