GRM 2010 GRM 2011

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What’s the role of SME’s and how did it contribute to economic development of Dubai? Also, what lessons could be learned by the development model of South Korea
Paper Proposal Text :
Nowadays, most of the Gulf Cooperation Council (GCC) countries are trying to find a way to diversify their economy. The main reason is that GCC country’s GDP is very much concentrated on hydrocarbon exports and they want to find another way to produce income which would be fundamental decision for their future generations. Moreover, current low oil prices also affecting GCC country’s economic decisions which would be trying to move away from hydrocarbon export. Therefore government support local business entrepreneurs in order to generate revenue from other methods as well as to create more jobs through private business sectors. Small and Medium Enterprises (SMEs) are one of the solutions to many GCC countries to diversify their economy. Both in the Gulf region and European Union (EU), small and medium enterprises (SMEs) are main drivers for economic diversification and job creation (Hertog, 2010). Hertog (2010) believes that without the successful role of SMEs, it is difficult for Gulf countries to achieve economic diversification as well as solving the unemployment issues.
However, there are also a lot of obstacles for SMEs to grow in the Gulf countries. There are many economic regulations which prevent small businesses to grow. Moreover, due to the availability of the public sector jobs, many people less tend to open a small business (to be an entrepreneur) or to work in private sectors. Complexity to get a local block visa is another problem which many of the small entrepreneurs face every day. High cost of the rent is another challenges which had to be faced by the small entrepreneurs. Also some scholars argue that, oil producing countries tend to impose larger barriers to domestic firms and entrepreneurs in order to help the elites (royal family) to have less competition and more profits. Hence, high regulatory among SMEs create problems like obtaining permits, resolving contracts, paying taxes, and uneasy access to credit facilities through the local banks. It also disturb SMEs in Gulf states to grow.
Dubai was one of the first country to focus on the SME’s in order to diversify their economy (“Dubai SME”, 2014). Currently SME’s accounts 95 percent of established firms in the Emirates. 42 percent of Dubai’s population works in SMEs and 40 percent of the total value are generated through SMEs in Dubai (“Dubai SME”, 2014). Moreover, Dubai’s GDP has grown more than 10 percent rate during 2000 to 2012. During this time Dubai government really tried to diversify their economy and many of the improvement has been made to increase the job opportunist not only for the locals but to the foreign workers as well. Dubai also registered their highest foreign trade earnings in 2011 which recorded as AED 600 billion.
In contrast, many data shows that, SMEs in the Gulf states are not performing well enough even though they have strong entrepreneurial traditions as well as the large size of the SME sectors. Therefore to look at the case South Korea could be a good example to compare. South Korea and Dubai’s cases could be explained by the “development state” by Chalmers Johnson (1982). South Korea had gone through rapid economic development after the Korean War in 1953. Like other late industrialized countries like Taiwan or Singapore, economy of South Korea was controlled by bureaucratic governmental state which manipulated the market system. The only benefit that Koreans had at the time was cheap labor. Therefore government pursued the export oriented policy using these labors to create light industry such as cottons and wigs, to heavy and chemical industries in 1970s to 1980s. Later moved on to the steel and shipbuilding industries. Among these time, the government played a major role to control the market. They did not believe the concept of the invisible hands. I think this concept could be extended on the case of Dubai where the needs are there to boost the SMEs within the country.
Nowadays in South Korea, 99 percent of the whole enterprises are SMEs. SMEs accounts nearly 60% of the South Korean’s GDP ($ 780 billion in 2013). Also, 87 percent of the employees works in SMEs. This is a considerable amount of number and there are many policies and lessons which could be learned by the case of South Korea