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Saudi- Government financing of SMEs in IT planned  Join our daily free Newsletter

MENAFN - Arab News - 23/12/2012

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(MENAFN - Arab News) The Ministry of Communications and Information Technology has adopted a plan to create and support small and medium enterprises, drawing on the participation of several ministries and government agencies, including the Ministry of Finance, the Public Investment Fund, the General Authority for Investment, the Ministry of Communications and Information Technology, and the Ministry of Trade and Industry.

An official source told Al-Madinah newspaper that the plan, which will be implemented over the next five years, involves the development of mechanisms for government financing of small and medium enterprises (SMEs) in the field of telecommunications and information technology. The project aims to develop innovative government financing mechanisms for small and medium businesses through diversification of funding sources, such as funding directly from the public treasury as well as through the development of a specialized site to support the SMEs in stimulating and gathering innovative ideas.

An official source said the plan also includes a national initiative to support the emerging high tech companies in Saudi Arabia and to help them grow. The project seeks to establish an initiative to support institutions and emerging SMEs to engage in the communications and information technology market, and to be involved in professional competition with products and services, as well as to achieve growth rates that allow them to maximize their profits.

Currently there are several bodies and programs that support institutions and emerging companies in the local technology market, but their impact is still limited in the sector. The initiative aims to coordinate existing efforts and new projects to be adopted by government agencies and the private sector. Also, it aims to open the door to businesses to take advantage of financial services, knowledge and logistical support, as well as removing procedural obstacles that may prevent the expansion of the base of participation.
The plan involves encouraging the establishment of venture capital firms in the areas of telecommunications and information technology.

The project will encourage the establishment of venture capital companies, which will invest in small companies and organizations in the sector. These venture capital companies would not only offer financial funding, as is the case in bank financing, but also adopt the principle of participation without warranty of return, but with revenue that is relatively high in the case of success of the project. In fact, this type of funding leads the national economy to further expansion and stimulation of economic activity, as well as contributing to the creation of jobs at home.

Research has confirmed that most modern industries, such as the communications and information technology industries, flourished spectacularly due to funding capital. These projects, a few years later, became successful medium projects that rose mostly to the rank of major projects with products and services that are now in the world's markets.
Venture capital is usually created by a group of experts in a particular field such as information technology.

The plan includes government involvement in investment in SMEs in the IT field where the project seeks to create a state-owned company to invest in small and medium telecommunications and information technology companies by participating as a partner in the projects, instead of providing funds only.
This company could focus on high-risk projects, which are not attractive to traditional investors or venture capital companies.

Under the plan appropriate mechanisms will be developed to encourage SMEs through the allocation of a percentage of the government projects to these institutions. The government will seek to support SMEs and give them a chance to prove the quality of their work by allocating a percentage of major projects to them. Major companies will also be encouraged to outsource part of their projects to small and medium enterprises.

There is also the provision of supporting the establishment of major companies specializing in the areas of competitive advantage. The project aims to support investment in the establishment of major companies in the appropriate fields in communications and information technology, in which the Kingdom owns competitive advantages, thus enabling it to establish a market able to compete globally with its high quality products and services. The project intends to support the telecommunications sector with competitive industries based on the development of information systems in the sectors which have competitive advantage and can be applied locally, and then exported to the world market as producers of knowledge.

There is a contribution program on national ownership in the global information technology companies. The idea is based on the creation of a national investment portfolio in large, medium and small global technology companies, and to use these investments in the refurbishment of strategic industries.


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