Successful countries are enterprise countries, such as Samsung in South Korea, Mercedes in Germany, Nestle in Switzerland and Unilever in the Netherlands. The US is now full of brands that took over the world, more so than the armies of any empire throughout history did.
My topic is on a controversial affair. Is it better for us to build small and medium-sized enterprises (SMEs) or large ones? Relatively, our markets are large and our consumption is huge. Despite that, our market has stayed under the mercy of small-sized enterprises that are incapable of advancing.
Why do we want to build giant companies? It’s because large companies are more capable of organizing the market and of researching and developing. They carry out training and work according to plans for years, and they can build strategic local and international partnerships that can lower costs on the consumer.
These companies are more capable of automatization and robotization, and they’re easier to obligate to hire women and people with special needs and to localize jobs. They are the state’s best support on the domestic level and its best arm on the foreign levelAbdulrahman al-Rashed
They can invest, build trademarks and strengthen the sense of belonging. The government can monitor them and control their logbooks. Through these companies, the government can accurately collect information in the market’s favor and enrich millions of shareholders.
These companies are more capable of automatization and robotization, and they’re easier to obligate to hire women and people with special needs and to localize jobs. They are the state’s best support on the domestic level and its best arm on the foreign level, while the open market usually assumes the task of reforming or getting rid of failed companies.
Large enterprises in Saudi Arabia
If SABIC hadn’t been established, the country would have continued to be an importer of iron, fertilizers and plastic. If there hadn’t been Almarai food company, the government would have had to hire thousands of health inspectors to monitor thousands of small cow farms. Almarai produces dairy and yields profits for 70,000 shareholders.
The Jarir Library succeeded in the most difficult investment: books and school supplies. Even when counting cement companies and banks, our market is still one that’s dominated by small shops at a time where there can be stores like Panda with 400 branches and 30,000 employees.
The market would be much better with similar enterprises if companies and shops expand, even if via the franchise system, and if the retail market that’s fragmented due to regulations is shrunk and the million small shops and companies are left fighting until the most worthy remains standing.
Therefore, I think what’s best for a country like Saudi Arabia is to stimulate and push towards establishing giant companies in all sectors while making use of the techniques of modern management and new successful ideas. Vision 2030 is built on change, making the free market the hub while giving up on rentier economy.
The danger of too many small enterprises
In terms of why I prefer the concept of a state with large enterprises despite advice to strengthen the market of small and medium-sized enterprises, is because the latter do not suit countries like Saudi Arabia. There are highly populated states with limited investment capabilities and the best for them is to secure the largest number of jobs with the least costs. Egypt and Pakistan are two examples. We must note that the number of institutions in proportion to the population is larger in Saudi Arabia than in Egypt!
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Saudi Arabia suffers from the large number of foreign laborers, the spread of cover-up businesses, lack of training and scarcity of information in the retail market as well as in other sectors like services.
Thousands of Saudi technicians will not find jobs in dozens of jobs like electricity, plumbing and others and which they were trained on unless large companies rise at the expense of workshops, small shops and small contractors in order to control the market thus modernize it, organize it and guarantee insurance, training and funding in favor of consumers and affiliates.
The role of the state is important here in terms of founding the company and listing it in the market if investors loiter. Large enterprises do not cancel small ones but the latter are rather former’s tributaries, and they develop the market and organize it instead of keeping the current chaos.
This is regarding the market. As for the state, there’s no doubt that giant companies are its best option. And as Charles Wilson said about his company in the 1950s: “What is good for our country is good for General Motors, and vice versa.” Of course this does not underestimate the possible challenges due to amending legislations and rules, and the losses of those who live off the old economic system as well as the difficulty of getting local and foreign leaderships to handle the management of these aspired for entities.
This article is also available in Arabic.
Abdulrahman al-Rashed is the former General Manager of Al Arabiya News Channel. A veteran and internationally acclaimed journalist, he is a former editor-in-chief of the London-based leading Arab daily Asharq al-Awsat, where he still regularly writes a political column. He has also served as the editor of Asharq al-Awsat’s sister publication, al-Majalla. Throughout his career, Rashed has interviewed several world leaders, with his articles garnering worldwide recognition, and he has successfully led Al Arabiya to the highly regarded, thriving and influential position it is in today. He tweets @aalrashed.