 The “Bahrain Model” for entrepreneurship development and enterprise creation
INSME: Your position within ARCEIT represents a privileged observatory on Arab SMEs' capability to face growth and competitiveness. Based on your experience, what do Arab SMEs need to perform well in this respect within a globalised economy?
Mr. Barhoumi: The problems that Arab SMEs have to face in the globalised economy are common to any SME in the world, but their relative importance changes. Financing could be a problem wherever you go. In the Arab world it’s not that severe.
SMEs require capacity building, maybe a little bit more than what others need. In the Arab countries maybe technology transfer, know how, linkages and counselling are needed a little bit more, because the number of supporting institutions that you have in the Arab world is not to the extent that you have in Europe or in other countries.
Moreover, the kind of support services offered is not up to the standard you have in Europe. So, for instance, when it comes to incubation or implementation you have several incubators or technology points in Europe and in some parts of Latin America that are not really available in the Arab region.
You have business incubators in the Arab region, but they are not really functioning as what real business incubators should be giving. It’s mainly an infrastructure but it doesn’t give the technical support.
INSME: Do you mean that in the Arab region incubators are only buildings for simply hosting small businesses?
Mr. Barhoumi: Yes, beautiful buildings, but with no extra services. That’s why ARCEIT [Arab Regional Center for Entrepreneurship and Investment Training], which is a UNIDO set up, came in to shed some light in these areas. We give capacity building, we give counselling in technology through the UNIDO network. We give the financial linkages (which means not only loans, but also venture capital).
We are also developing business incubators and technology parks. We are developing growth programmes, because an entrepreneur, let’s say after 2 years of operation, has different requirements. His accounting system should be changed. His expectations are modified. He comes to you and says: I want to export to Europe. You say there are different standards, different ways of dealing. ISO has become a must. If you sell in the Arab world is not really a must now. If you work in the agro-industry, HCCP has become a priority or else you cannot export.
INSME: How do you see ARCEIT activities assisting SMEs of the region in tackling these issues?
Mr. Barhoumi: As ARCEIT we have developed the Bahrain Model. This really covers these areas, on the collective front and then on the personal front of the entrepreneur one to one business counselling. What we have done through ARCEIT in Bahrain is to develop the Bahrain Young Entrepreneurs Association. If you notice in the world there are chambers of commerce and private sector associations. These usually target the big and wealthy companies. They do not come to the small and medium ones, they do not go to the entrepreneur level.
We have helped establish the Bahrain Young Entrepreneurs Association in order for small entrepreneurs to lobby, in order for them to say: these are our needs, this is what we want, this is what we need the government to provide us with. One of the success story we faced concerns the financial issue. We have the Bahrain Development Bank [BDB] which give loans. We have the Kuwait Finance House [KFH] which manages venture capital funds. We have linked both of them together and now they are developing a venture capital fund. BDB will rely on the KFH’s experience in how to do it. What we have done as UNIDO is going to the Bahrain Development Bank and doing the restructuring in order for them to be able to better suit the needs and requirements of SMEs.
INSME: Do you think small entrepreneurs are conscious enough of the demands posed by globalisation and the way to cope with these demands?
Mr. Barhoumi: No, in general they are not fully aware of the demands of globalisation. Governments tend to work alone, away from the private sector. There is not much public-private partnership. A country can sign a free trade agreement but the private sector won’t really benefit. There must be more listening towards what the private sector needs. Bahrain and Jordan have signed a free trade agreement with the United States. In the case of Jordan I remember that the businessmen were not really aware of what this agreement will entail. They knew they were accessing the American market but they forgot to realize that the American products will be coming to Jordan. And that they will compete in the same small market they were working in.
In the European Union it is the same thing. The kind of awareness is not there. People are not well educated. At the same time, nobody explains to them: “We are in the process of signing an agreement with a certain country. This is what will happen. Do you want it or don’t you want it? What are your requirements?” This is a problem we face in the Arab world and in developing countries.
INSME: Can you describe in short the peculiarity of the Bahrain Model? How can it help would-be entrepreneurs and small entrepreneurs in enterprise creation and development?
Mr. Barhoumi: The Bahrain Model is one of the programmes given by ARCEIT. At ARCEIT we aim at covering 2 points: supporting institutions and supporting entrepreneurship.
On the first point, we take people from the ministry of industry, commerce, chambers, associations, whoever the entrepreneur will have to deal with to set up his company. We take these intermediaries and we train them how to deal with entrepreneurs and SMEs. And how to provide them with services, because at the end of the day entrepreneurs and SMEs will generate investment, domestic and foreign investment. This is why we concentrate on institutions.
A tendency in the Arab world and developing countries is that institutions know how to deal with big companies because it is facilitated automatically. When you have Bill Gates or Shell or a big company coming, everybody knows them and the services will move very quickly. But when it comes to the small and medium sized enterprises, you are not one of the big 5 families of the country, you are not very well known, so they have to deal with you in certain way. If what you are requesting cannot be done, they should be able to tell you how to reach that. How can we help you? How can we help you develop? Entrepreneurs of SMEs have a high motivation when they have a business idea, they eat they drink they sleep the same idea. So you should not destroy this motivation. What you should do is to nurture and give them the advice that this is the wrong way of doing if you do it this way, but not to destroy the motivation.
INSME: You defined the Bahrain Model as a programme. Isn’t it a network?
Mr. Barhoumi: The Bahrain Model in Bahrain is a network. We do not as UNIDO say: we are developing this programme. We, the ministries, the chambers, the supporting institutions, the universities, the financial institutions, everybody is part of this network.
INSME: But is it a formal network? Or is it just a way for these institutions to relate to each others and face entrepreneurship related issues?
Mr. Barhoumi: It’s a way of developing entrepreneurship. The entrepreneur is at the centre of a network of institutions and actors, each of them with a specific role in supporting and fostering entrepreneurship.
It is a formal, a very, very structured network, implemented or in the process of being implemented in Jordan, Kuwait and Saudi Arabia. The Bahrain model is currently being exported to South America, namely in Uruguay.
INSME: How is the relationship between these organisations? Is it smooth of troublesome?
Mr. Barhoumi: Sometimes there are problems.
For example, the Gulf region in general adopts the British system and in this system if you are employed you cannot get commercial registration, which means you cannot set up your own company. We had to discuss this with the ministry. If you want to create entrepreneurs, you have to have a certain lenience for this entrepreneur to start. If I am employed for instance and get a fixed salary and I’m in the process of getting married, you can in no way expect me in one day to resign from my job and say I want to follow up on my dream. This will be done by 1-2%. But the majority will not do. So we discuss this with the ministry and he was very cooperative. He said: no problem. We will issue them a commercial registration for 2 years. We as UNIDO and other parties will follow up each 2 years. In 2 years time, if he is going with the business plan set for him, he should resign. If for any reason he is not able to meet the business plan set for him, he will get an extra 1 or 2 years as grace period for resigning. In many cases we have these people that resign way before the 2 years. In some cases we advice them not to resign. But, you know, when you are an entrepreneur and your feet are moving and you go with the flow, then you move. You are like a bird: you set it free and you cannot stop it.
INSME: What's the geographical coverage of this network? How extended is it in the Arab Region? What are its relationships with other international networks?
Mr. Barhoumi: When it comes to ARCEIT, we are covering the Middle East and Northern Africa. We are also working in other countries with the OECD: they have the MENA investment project. The OECD has requested us to join hands with them to develop the same Bahrain model in these countries.
We are working with the Islamic Development Bank. We have been requested to set up the Bahrain model in the 55 members countries of this Bank. So now we look at it more as an Arab model. The Bahrain model is a methodology that can be exported. We are exporting it also to Uruguay. We have an agreement with China. By the end of this year we will settle in Shanghai. We are starting off in Tunisia and Northern Africa. We will start in Tunisia, then we are moving to Morocco and then Algeria.
So again, the Bahrain model is a methodology, and then you establish it in other countries. The model is done in such a way that for instance we take a group of Uruguayans having certain qualifications, we train them on the model, on the methodology of this programme and they set it up, they apply it to their reality. Perhaps they have to modify or evolve the model to suit their requirements. The model is very flexible.
We are also working with the Arab Gulf program for United Nations Development Organization (AGFUND), the fund which is headed by Saudi Prince Talal. They have certain countries that they would like to target because now they are developing what it’s called the Bank of the Poor and they have recently established one in Jordan with our support. So the Bahrain model will utilize the Bank of the Poor on the financial linkages. We will also be giving specialized training programme on microfinance, because you cannot just give out money to these people. You need to train and counsel them.
INSME: Will the "Bahrain Model" evolve in the future?
Mr. Barhoumi: Yes, absolutely. One year ago we started to work on the concept of franchising and we introduced issues concerning negotiation because we realized that our entrepreneurs were in need of negotiation skills. What we do is not discussing the whole issue, but we shed some lights on some aspects and then each entrepreneur decides: do I need this? In this case he has a follow up. During the counselling, they come to us and they say we need more on franchising and we inject more information on it.
Counselling is a tailor-made support. Training is a collective action (20-25 people).
We are also trying to reach the school level. If you ask a teenager what you would like to do for a living, it’s mainly a job : engineer, fire-fighter, financial officer, etc. Nobody says I want to be an entrepreneur, I want to have my own business. Even if his father is a big businessman. He does not have this embedded in him. It’s usually employment. This initiative will be implemented in September in private and public school in Bahrain. We are not saying: leave your school and go and structure your own business. We say: when you graduate you have 2 options, either employment or start your own business. And if you want to start your business, we are there, we have a network that can help you.
INSME: As a participant at the INSME International Conference 2006, what's the contribution of this conference to inspiring your future action-taking within your organisation? What have you learned from this experience with INSME?
Mr. Barhoumi: First, it gave us an exposure to Latin America which we don’t have. We now know what it is happening in Latin America in a much clearer sense, in a more tangible way. We see prospects of developing in other parts of Latin America. We have heard a lot of facts that can help us develop this programme in other parts of Latin America. The networking that took place was excellent. We do not often have this opportunity to come to Latin America and meet all these people coming from different parts (Chile, Peru, Argentina, Brazil). We have also had clients. So it’s been a very good opportunity for us.
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