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Fri 6 Jan 2017 01:49 AM

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Forget post-oil, Saudi Arabia needs a pre-oil economy

Kingdom’s historical culture of entrepreneurship is the way forward, says Fahd Al Rasheed, group CEO of King Abdullah Economic City

Forget post-oil, Saudi Arabia needs a pre-oil economy
Growth forecast The Saudi economy is expected to expand by 1.6 percent this year, according to the World Bank.

Saudi Arabia is a historically entrepreneurial country. Jeddah has been a mercantile centre for centuries. Even Riyadh and the Holy Cities of Makkah and Madinah began as trading stations on the spice and silk trails.

What has changed since the rise of the oil industry? Not the entrepreneurial spirit of the country but the institutional environment for entrepreneurship to flourish. As we contemplate the country’s future as a non-oil economy we should be inspired by its past.

I am reading the initial results of the Saudi Arabia Global Entrepreneurship Monitor 2016. The full report, developed by the Babson Center for Entrepreneurial Leadership at King Abdullah Economic City, will be released in early 2017. The findings are both inspiring and disturbing.

Saudi Arabia ranks highly in entrepreneurship potential and skills of the population. But in entrepreneurship education the country ranks 60th out of 66 countries surveyed. We also perform poorly in financing, regulation and research and development transfer to support entrepreneurial activity.

This must change. Saudi Arabia cannot sustain a competitive economy based on a labour-intensive, subsidised industrial sector.

To compete in industry we must increase automation, and automation does not create jobs. It creates unemployment.

A rounded, sustainable economy needs a high quality of entrepreneurial activity. This means making it easy for new companies to enter the market and for non-viable companies to exit. It means improving capital financing and market access for small and medium-sized industries. And it means enhancing the ability of people entering the job market to compete in an entrepreneurial environment, just as they did for centuries before oil.

The government has recognised this imperative in Vision 2030 and addressed it in the National Transformation Plan. The Ministry of Commerce and Industry and the Small and Medium Enterprises (SME) authority have set specific targets to enhance the ease of doing business and the participation of SMEs in the kingdom’s economy.

The result will be greater demand in 2107 and beyond for vocational education and an increase in entrepreneurial activity, especially among young people who are hungry for such opportunity.

Many people, inside and outside Saudi Arabia, don’t want to believe that we can make this change. Often it’s because they are not Millennials — indeed, neither am I. Yet the young men and women of Saudi Arabia are more connected, more tech savvy, more innovative and more entrepreneurial than we give them credit for.

As Arabian Business reported in April 2016, about 20 percent of entries to the 2016 MIT Enterprise Forum Arab Startup competition were from Saudi Arabia. Saudi entrepreneurs, on average, start their businesses at the age of 26. We don’t have to tell young people to be entrepreneurial: it’s in their DNA.

We need to empower them, give them the tools, get out of the way, and let them do it.

The government is taking concrete steps to improve the environment for entrepreneurship. At KAEC we are contributing to the educational side of the equation.

We have launched the Prince Mohammad Bin Salman College of Business and Entrepreneurship (MBSC), to develop entrepreneurship as a core skill for government, businesses and civil society.

We have also launched the Babson Center for Entrepreneurial Leadership at MBSC, the first Babson Entrepreneurship Center outside the US. It is already promoting a sustainable entrepreneurial culture in Saudi and the surrounding region.

We have built a K-12 curriculum at the World Academy that incorporates design thinking and entrepreneurship from day one, encouraging students to explore the world around them and apply what they learn at school to real-world situations.

And we are opening new vocational training facilities, including a start-up incubator and a culinary academy.

There is enormous potential in Saudi youth; potential that has, in the past, been overlooked. If they can be inspired, as I am inspired, by our heritage, then 2017 will be the first step back to the future of entrepreneurship in Saudi Arabia.

Fahd Al Rasheed, group CEO of King Abdullah Economic City