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S.M.E.'s in a Time of Crisis
By Mete Bakircioglu and Anushka Bansal, 4/9/2020

​Economic Stability in Switzerland
Categorizing a company as ‘small’ or ‘medium-sized’ is based on the number of employees, which varies with country. In Switzerland, every market economy enterprise is considered to be an SME regardless of its legal status and activity, provided that it employs fewer than 250 persons. Small and Medium-Sized enterprises (SMEs), play a decisive role in the Swiss economy, contributing to entrepreneurial creativity, economic growth, and national prosperity. The businesses act as the “backbone of socio-economic progress” while achieving the fundamental goals of any economy by being a “catalyst [for] economic development”. In Switzerland, SMEs are constantly adjusting to the reality on the ground while concurrently addressing the actual needs of the consumer by providing a large share of the day-to-day sustenance for low-income households.

One of the focal points of Swiss SME policy is the State Secretariat for Economic Affairs (SECO), which works with numerous partners in favor of SMEs such as with Switzerland Global Enterprise. The State Secretariat for Education, Research and Innovation (SERI) offers an excellent framework in international comparison, ranking second - after the United States - as per the GEDI report of 2017. The growth policy approved by the Federal Council in 2016 provides measures for SMEs geared towards the local market. It aims to prevent inequality between enterprises, promote maintenance and development of the bilateral route with the European Union, which in turn, allows the enterprises access to a qualified labour force. 

The larger corporations usually tend to focus on enhancing old products - even though they have strong research departments - to produce large quantities and consequently obtain advantages of the dimensional economy. The small and medium-sized enterprises are thus able to concentrate on new products and technological advancements - building their foundation on innovation, creativity, and flexibility. As a result, the SMEs are able to provide employment, promote modernization, and enhance overall prosperity of an enterprise. 

According to the Federal Statistics Office (FSO), Swiss SMEs represent more than 99% of companies and create two-thirds of the jobs in the country. From basic confectionaries to complex startups, SMEs constitute a significant portion of enterprises in Switzerland, contributing to national creativity, prosperity, and economic growth. By strengthening competition, conducting research on impact assessment, developing bilateral agreements with the European Union, and making efforts to increase the coherence and effectiveness of foreign policies, SMEs contribute significantly to the Swiss economy. ​

SME's in Covid-19
Small and Medium Enterprises (SMEs) are an overlooked yet imperative piece to international economic development. Amazon and Apple are discussed daily on mainstream media, yet Atlassian and Amobee are virtually unheard-of corporations. The reason SME’s play such a crucial role in the world’s economy is because of the market size. Whereas there is only one Amazon, there are hundreds of Amobees which remain largely local and provide helping hands to their communities. According to the World Bank, SMEs “represent about 90% of businesses and more than 50% of employment worldwide. Formal SMEs contribute up to 40% of national income (GDP) in emerging economies.” With the surging spread of COVID-19, businesses -- small and large -- are shutting down. Each country is scrambling to soften the impact on SME’s with Saudi Arabia’s approach of federally funding a single store, Sary, is of particular interest. 

Sary is a wholesale grocery business that facilitates partnerships between small food companies and wholesalers. Since its founding, the company has promised that customers can get “same day delivery.” On March 31, Sary received a generous aid package of $6.6 million from the Saudi Arabian government. This was at the end of the company’s most successful month, when chief executive Mohammed Aldossary announced to Reuters that March sales were "equal to 50% of what [Sary] did in 2019.” Due to the closure of most public spaces, delivery enterprises such as Sary have prospered, due to the inelasticity of the demand for essential goods and their demand.

This Saudi Arabian case study exemplifies the impact of SME’s on national economies. They hold vital ties to employment and GDP, which must be protected during the global pandemic to minimize economic impact. The necessity of Sary and other online businesses is eye-opening for Saudi Arabia, a nation which has been striving to diversify its economy beyond oil. The recent aid package is congruent with Crown Prince Mohammed bin Salman’s goal to invest in SMEs so that they contribute to 35% of the country’s GDP by 2030, a significant leap from their 20% contribution today.

SMEs are spearheading international movements to innovate, which can be accelerated through federal funding. SMEs hold the potential to provide ample jobs, increase consumerism, and foster positive feedback loops within the economy. The primary issue is that in times of severe instability, smaller businesses often do not have the infrastructure to survive. Their profit margins remain smaller than those of larger corporations. However, this highlights the disparity between aid provided to small businesses versus large businesses. Large corporations typically receive substantial federal benefits as they are in limited quantities and each create great numbers of new jobs. Conversely, each SME generally receives disproportionately less support because of the amount of stores present. Unfortunately, it has taken a global pandemic for nations to truly understand the additional economic value of SMEs.

However, this economic change is not yet another byproduct of COVID-19, yet how one country is learning to adapt to an unprecedented economic environment. For the Saudi Arabian government to provide $6.6 million to a small business such as Sary would have been a distant dream reserved only for larger corporations until recently. Now, SMEs can begin to trust governments to recognize their potential and treat them accordingly.
International Youth Politics Forum, Est. 2019

All arguments made and viewpoints expressed within this website and its nominal entities do not necessarily reflect the views of the writers or the International Youth Politics Forum as a whole.

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