Manama: Subsidy relief must be offered to help small and start-up businesses succeed in the wake of planned government cuts, a prominent business leader has argued.
Plummeting oil prices over the past 12 months have forced Bahrain to rethink its subsidy regime, and under current plans much of the financial aid offered by the government to help keep food and fuel prices low will be stopped – starting with the meat subsidy on September 1.
However, Bahrain Small and Medium Enterprises Society vice-president Abdulrahim Fakhro said it was imperative to maintain support for new businesses so that they have a chance to break into
the market.
“For the start-up period, any small business should be given at least six months to a year of subsidy relief,” he said.
“It shouldn’t be continuous, because otherwise it will stop them from improving.
“But everyday, these start-up businesses have a 10 per cent chance that they will exit the market because they are very vulnerable in that
first year.”
Although Mr Fakhro cautioned that “healthy businesses do not need subsidies” he emphasised the need to offer support for new entries into the market, especially in heavy industry.
“Industrial areas will have to adapt quickly,” he said.
“Small restaurants shouldn’t be affected, because what will happen is prices will increase on menus and affect the consumer.
“However, for those who are dependant on the subsidies and for some reason cannot increase the price of the meal, they will go into
the red. “The market is temperamental and businesses have to adapt to it.”
Mr Fakhro said that while it was understandable that businesses had not factored in the removal of subsidies, they must now account for a new economic reality.
“Everyone has to adapt to the market,” he said.
“All businesses should take into account risk management and adapt to changes in circumstances.
“It doesn’t mean we should surprise everyone and lift subsidies immediately, it should be gradual.”
Despite the predicted impact of subsidy cuts, Mr Fakhro did emphasise that there were other avenues that small and medium enterprises could explore when looking for support.
“For instance, we have Tamkeen’s support, where there is a budget and programmes that are transparent and give entrepreneurs a clear picture of what they can utilise to succeed,” he said.
“There is also financing for small businesses through banks such as the Family Bank and Bahrain Development Bank.
“These all help to lower the overheads on the small business
sector.
“Some are aimed at helping production and some are aimed at projects overall, but they all give small businesses a place to help them
market themselves.”
The GDN reported last month on the fact that expatriates and businesses would be the target of the majority of subsidy cuts – with electricity, petrol, water and meat all in the government’s cross hairs.
Under the plans, Bahrainis will continue to enjoy subsidies on electricity and water in their homes, as well as on essential home goods and food.
However, meat subsidies for everyone are due to be scrapped from next Tuesday – with Bahrainis being compensated by way of direct payments into their bank
accounts.
laala@gdn.com.bh
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