Other BriefingsSaudi Arabia and Jordan Ink Memorandum of Cooperation to Support SMEs
Saudi Arabia and Jordan have recently signed a Memorandum of Cooperation aimed at bolstering the development of small and medium enterprises (SMEs) while deepening economic cooperation between the two nations. Central to the agreement are initiatives geared towards enhancing skills, strengthening trade relations, and promoting innovation within the SME sector.
By Lucia Brancaccio
On February 6, 2024, Jordan Enterprise Development Cooperation (JEDCO) and Saudi Arabia, represented by the Small and Medium Enterprises (SMEs) General Authority “Monsha’at”, signed a Memorandum of Cooperation (MoC). The signing of this agreement took place during the Public Investment Fund (PIF) Private Sector Forum in Riyadh in the presence of Monsha’at’s governor, Sami Alhussaini, and JEDCO CEO Abdel Fattah Al-Kayed.
The MoC aims to boost SME development in both countries by enhancing economic, commercial, and investment cooperation within the sector. It strengthens economic ties between Jordan and Saudi Arabia, and marks a significant advancement in their bilateral cooperation for mutual economic growth.
Key points
The formalization of the MoC between JEDCO and Monsha’at underscores a strong commitment across several key areas:
- Capacity building and skills enhancement: The MoC seeks to increase the exchange of expertise between the two agencies, thereby strengthening the institutional infrastructure and providing vital support to SMEs in both Jordan and Saudi Arabia.
- Strengthening trade relations: In addition to fostering collaboration on capacity building, the MoC facilitates the exchange of promotional activities aimed at highlighting available opportunities for both nation’s SMEs. Moreover, the agreement also sets out the arranging of business visits, thus facilitating direct engagement and fostering stronger trade ties between Saudi Arabia and Jordan.
Promote innovation: Innovation emerges as a core focus within the MoC, with the primary objective being fostering technological advancement and innovative collaboration within the SMEs sector. The agreement also aims to formulate models, policies, and strategies that will enhance entrepreneurship between the two countries.
Why SMEs?
The emphasis on SMEs within the recently signed MoC underscores the pivotal role these enterprises play in driving economic development and fostering job creation in most economies worldwide.
In the case of Jordan, this is especially evident where SMEs dominate the business landscape, constituting 99.5 percent of the total economic establishments operating in the country, and employing approximately 60 percent of the total workforce.
Despite their prevalence, their contribution to Jordan’s GDP remains modest, accounting for 30 percent, while their share of national exports does not exceed 10 percent.
This underperformance can be attributed to various challenges, including limited access to new markets, a scarcity of skilled labor, difficulties in accessing financing, and low deployment of new technologies – all issues that the newly signed MoC aims to tackle.
On the other hand, in Saudi Arabia, the value of SMEs lies in their contribution to the realization of Saudi Vision 2030. By the third quarter of 2023, the kingdom boasted nearly 1.2 million SMEs, which contributed to a 3.6 percent growth in the non-oil sector. This growth underscores the indispensable role of SMEs in Saudi Arabia’s economic diversification agenda.
Building on this data, the economic collaboration with Jordan represents a significant opportunity for Saudi Arabia to enhance SMEs’ efficiency and bolster economic diversification efforts. Monsha’at, in particular, is actively pursuing extensive cooperation across various sectors to empower entrepreneurs and SMEs owners in realizing Saudi Vision 2030’s targets.
Saudi Arabia-Jordan economic relations
Saudi Arabia and Jordan share a deep historical relationship founded on cultural similarities and shared values, setting a prominent example for regional and pan-Arab cooperation. Evolving into a strategic partnership, their longstanding bond is characterized by cooperation across political and economic sectors.
Economically, the two countries have witnessed a growing trend in trade and investment cooperation in recent years. As of 2022, Saudi Arabia has emerged as Jordan’s largest economic partner, with over US$12 billion worth of investments in Jordan, as reported by Reuters. This substantial financial commitment highlights the depth of economic cooperation between the two nations. Furthermore, the recent completion of a US$250 million support package from Saudi Arabia aimed at bolstering Jordan’s economy, further indicates the strength of their economic ties.
The recently signed MoC, while building on previous agreements aimed at fostering innovation and entrepreneurship, is expected to feed into this growing cooperation by leveraging SMEs to stimulate development opportunities in both countries. The potential impact of this agreement, however, expands beyond Saudi Arabia and Jordan. By setting an example of successful cooperation for other countries in the Middle East and North Africa (MENA) region, it could hold the potential to inspire greater stability, prosperity, and interconnectedness throughout the Arab world.
