Big potential for SME partnerships between India and Gulf region

The region also offers Indian MSMEs compelling business opportunities in sectors like agriculture

Traditionally, India enjoys cordial relations and cooperation with the Gulf Cooperation Council (GCC) that includes Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates, Oman and Yemen. The GCC-India bilateral trade has increased from $145 billion in 2011-12 to $158 billion in 2012-13, reflecting a growth of nine per cent.

While the region's substantial oil and gas reserves are vital for India's energy needs, it also offers Indian MSMEs compelling business opportunities in sectors like agriculture and food processing, real estate development, energy, petrochemicals and infrastructure - particularly ports, airports, railways, road transport and highways - according to an article in a recent issue of the CII publication MSME Business.

Increasing bilateral trade can give opportunities for Indian MSMEs to explore GCC markets, according to the article. The SME sector is one of the fastest growing segments in GCC. It contributes over 60 per cent of the UAE's GDP and provides around 86 per cent of their employment in the private sector.

Fast moving consumer goods are a segment where Indian MSMEs can explor opportunities. Apart from this, various other sectors include petrochemicals, infrastructure sector and agricultural and food processing, the article says.

Although the trade between India and GCC is growing steadily, the current export basket of India includes items like jewellery, machinery and instruments, metals, electronic goods, transport equipment, basmati rice, RMG cotton, primary and semi-finished iron and steel and man-made yarn and fabrics.

Among the various steps taken by the two sides to forge SME ties, a trade promotion delegation of Ras Al Khaimah Free Trade Zone Authority visited South India some time ago to identify potential investors from among the MSME sector for setting up business at the Free Trade Zone in the UAE.

Also, in 2010, Oman and India had agreed to pursue cooperation in field of human resource development, especially skill development in the fields of technology, management and information technology, including cooperation in MSME sector.

In December 2012, the UAE Cabinet endorsed a federal law that aims to support and develop SMEs. Sharjah has more than 45,000 strong small and medium-sized businesses, while MSMEs in Saudi Arabia represent almost 93% of the total enterprises and account for about 24.7% of total employment in the country.

In March 2013, the Kuwaiti parliament approved a new law to establish the National Fund for the Welfare of Small and Medium-Sized Enterprises and Development. The purpose of the fund is to provide financing for small businesses, which represent 85 per cent of total private institutions in Kuwait.

Qatar's SMEs constitute about 15 per cent of its economy, with most firms focused on the domestic economy. Qatar lays emphasis on SMEs that utilise raw materials and finished products and those which rely on oil and gas. In January 2013, Enterprise Qatar announced the first Government Procurement and Contracting Programme, giving SMEs the opportunity to improve their ability to win business through tenders.

On December 12, 2013, India and the UAE signed a Bilateral Investment Promotion and Protection Agreement (BIPPA). India now has such agreements with all GCC countries, which also opens up possibilities of pursuing an India-GCC Free Trade Agreement, which has been on the backburner so far.

The FTA will remove restrictive duties and push down tariffs on goods being traded. This will provide Indian pharma and chemical industry the opportunity to export their products to the Gulf region.

Some of the other efforts taken by the two regions for developing an institutional mechanism to push bilateral trade include the India-GCC SME Development Council and India-GCC Industrial Conference.