National Definition of Small and Medium Enterprises in State of Qatar

Transcription

1 National Definition of Small and Medium s in State of Qatar First Edition (November 2015)

2 About Qatar Development Bank Qatar Development Bank (QDB) was established by the Amiri Decree no. (14) for the year (1997), as the Qatar Industrial Development Bank (QIDB), to strengthen and promote economic and industrial development in Qatar. shortly afterwards, the bank s success leaded to change in its mandate and was renamed to Qatar Development Bank instead of (QIDB). This change has coupled with broadening its activates and mandates to contribute to development efforts directed to manufacturing, tourism, education, health care, agriculture, livestock and fishing, as well as other economic activities. By end of (2014), Small and Medium s Development Company (called Qatar, EQ) was merged in QDB. Accordingly, QDB is now being the primary government entity, responsible for the development of SMEs in Qatar, in collaboration with all related stakeholders. Now on, QDB s vision is to accelerate the development of the Qatari private sector in order to diversify Qatar s economy, with focus on promoting entrepreneurship, SMEs and improving competitiveness of the private sector. Beside the financial and advisory services provided by QDB, it is working to promote SMEs ecosystem development, through creating transparency on challenges, identifying required interventions and coordinating with stakeholders in charge of implementing the required interventions. Doha - Qatar P.O. Box: Tel.: )974( Fax: )974( advisory@qdb.qa Website: About The National Definition of SMEs in State of Qatar QDB executed the research project to develop the National Definition of SMEs in the State of Qatar, and conducted consultations with the following entities: Qatar Central Bank Ministry of Economy and Commerce Ministry of Development Planning and Statistics Ministry of Energy and Industry Qatar Chamber of Commerce and Industry Social Development Centre Ministry of Youth and Sport Supreme Council of Health Public Works Authority (Ashghal) Qatar Financial Markets Authority Gulf Organization for Industrial Consulting Tourism Authority Qatar National Bank Qatar Islamic Bank Standard Chartered Bank Commercial Bank Doha Bank Mashreq Bank Al Ahli Bank AlKhaliji Bank Qatar Petroleum Hamad Bin Khalifa University Silatech Badaya Center McKinsey Consulting Firm First Edition: November 2015 All rights reserved for Qatar Development Bank. Booklet content can be used, under condition to mention of Qatar development Bank as the reference who owns the copyrights. I.P.A.: 1110/ H M F

3 National Definition of Small and Medium s in State of Qatar

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5 Table of Content 1. Introduction 4 2. Importance of the National Definition of SMEs 6 3. Work Methodology 8 4. Phases to Design the National Definition National General Definition of SMEs Sectorial Definitions of SMEs Principles of the National Definition of SMEs Exceptions of Adopting the National Definition 23 Appendix (A): Distribution of International Standard Industrial Classification according to the Sectorial Definition of SMEs 25 Appendix (B): Illustrative Examples to Calculate an s Criteria, in order to assess its Eligibility to Join SMEs Sector 34

6 National Definition of SMEs in Qatar 4 1. Introduction Qatar National Vision (2030) builds a bridge from the present to the future. It aspires to transform Qatar into an advanced country, sustaining its development and providing a high standard of living for all of its people for generations to come. QNV foresees a vibrant and prosperous Qatar with economic and social justice for all. It aims to achieve a competitive and diversified economy capable of meeting the needs, and securing a high standard of living for all its people for the present and for the future. Accordingly, National Development Strategy ( ) stated the comprehensive development pillars, among of them is to sustain economic prosperity. This pillar focuses on key perspectives, including economic diversification, aiming to build a diversified economy that gradually reduces its dependence on hydrocarbon industries, enhances the role of the private sector and maintain its competitiveness. In the meantime, the Sectorial Strategy on Economic Diversification and Private Sector Development ( ) confirmed the importance of promoting entrepreneurship and private sector development especially Small and Medium s (SMEs) which constitute the majority of business establishments. The sectorial strategy also explains the importance to adopt a comprehensive and integrated framework to strengthen SMEs development. All desired efforts require a constant collaboration among all related stakeholders, including government, private sector (with all categories: micro, small, medium and large establishments), civil organizations, banking sector, as well as academic and research institutions. However, one vital question is urgently need to be tackled: which enterprises could join the SMEs sector? Figure (1): National Directions to Develop Small and Medium s in State of Qatar Qatar A Goal to Sustain Economic National Prosperity Vision (2030) National Development Strategy An Objective to Build a diversified economy, to increase the importance of private sector and maintain its competitiveness Sectorial Strategy on Economic Diversification and Private Sector Development An Objective to Promote s and Develop Private Sector

7 Lands, Sites and Infrastructure Consultation and Mentoring Learning and Training Logistics Services Access to Markets Access to Finance National Definition of SMEs in Qatar 5 The current situation in Qatar refers that there are more than (12) different definitions of SMEs, adopted by various entities in the country. Hence, there is an important need to adopt a unified definition of SMEs at the national level, to formulate the base of all related efforts that aspire their development. Consequently, Qatar Development Bank (QDB) has executed a national project to formulate the National Definition of SMEs, which resulted in this first edition of the definition. Articulating the National Definition is based on exploring international good experiences, analyzing the national current status and future development directions. It intensively relayed on consultations with (25) entities, including: government, banking sector, private sector, civil society, as well as research centers and universities. In addition, the international Consultancy Firm Mckinsey assessed the National Definition, and recommended to start adopting it. While launching the First Edition of the National Definition of SMEs in Qatar, QDB and all engaged entities believe that it is the first step on its improving path in the future, to ensure its sustainability and compatibility with development needs. Figure (2): Framework of Promoting SMEs in Qatar National Definition of SMEs in Qatar National Strategy for SMEs Development Public Policies Supporting the Development of SMEs Governance of Development Efforts Legislative, Institutional and Procedural Environment Social and Institutional Culture promoting Entrepreneurship Statistical, Information and Knowledge infrastructure, which is high- quality and credible as well as easy to access

8 National Definition of SMEs in Qatar 6 2. The Importance of the National Definition of SMEs Adopting the National Definition of SMEs in Qatar is extremely important, being the cornerstone for all contributions directed to develop this vital sector of establishments, executing by various entities in Qatar. On one hand, the National Definition supports SMEs, where it: o Ensures equal treatment for all SMEs on the national level, no matter the entities they are dealing with. o Improves quality of public policies and SMEs development interventions, based on a clear understanding of their characteristics and needs, and using a unified standards to identify them on the national level. o Strengthens micro enterprises, which constitute the majority of current and foreseen business establishments. According to the National Definition, it becomes a separate category, allowing related entities to pay special attentions to their nature and requirements. o Promotes formal Home-based Businesses, as they constitutes a segment of SMEs sector, whenever the definition s criteria are exist. o Eases access to capital, through providing a preferable treatment to investment entities, such as investment funds and venture capital companies. SMEs are able to be partially financed by these entities, without losing their eligibility to join SMEs Sector. o Increases SMEs competitiveness, through discovering enterprises ownership structure to ensure their eligibility to join SME Sector, and excluding both government and semigovernment enterprises from being SMEs. Figure (3): Importance of the National Definition for SMEs Pay more attention to micro enterprises Promote Homebased Businesses development Improve quality of policies and interventions Ease access to capital Ensure equal treatment SMEs Increase competitiveness

9 National Definition of SMEs in Qatar 7 On the other hand, and in addition to benefits of having a unified National Definition on SMEs level. It also supports concerned stakeholders to increase the effectiveness and efficiency of their efforts directed to SMEs development, where it: o Establishes a unified framework to determine the eligibility of both current and foreseen enterprises to join SMEs sector, and benefit from available programs and initiatives dedicated to them. o Drawing a clear map for business establishment structures currently operating in the State, and their categories (micro, small, medium and large business establishments). This contributes to analyze the current status of economic activities, and formulate future scenarios for the structure of the economy based on different development policies. o Formulates consolidated framework and guiding rules necessary for collecting, processing, and publishing data and information related to small and medium enterprises, whether it is in qualitative or quantitative format. This contributes to the production of high-quality and consistent statistics. o Facilitates processes tend to measure and analyze the status of SMEs, supporting efforts related to monitor and evaluate results of public policies as well as other government and non-government interventions. Increasingly this contribute to enhance efficiency and effectiveness of related development interventions. o Designs effective targeting programs, to serve specific categories of SMEs, based on their size and/or economic activity, and/or any other criteria, depending on the national development perspectives. o Monitors SMEs evolution through time, in terms of their growth and capability to sustain and progression from category to another. This contributes to understanding SMEs dynamics among the definition s categories (stagnant in the same category/ upgrade to higher category/ decline to lower category). Figure (4): Importance of the National Definition for Concerned Entities Formulate consolidated guidelines for data & statistics Facilitate performance measurement, analysis and evaluation Draw clear map of business structures Design effective targeting programs Establish unified framework Entities concerned with SMEs Monitor SMEs evolution through time

10 National Definition of SMEs in Qatar 8 3. Work Methodology Articulating the Qatari National Definition of SMEs takes into account a number of factors, including: the government desire to promote SMEs and strengthen their contribution to the national economy, level of economic development and technology advancement. Also it considers its capabilities and economic and social conditions, especially: the availability of factors of productions, population size, and the accessibility of qualified labor force. In the meantime, the methodology of designing the National Definition of SMEs in Qatar governed by number of characteristics toward ending with a professional definition, to deliver a consensus among related stakeholders, and keep pace with good international experiences. Work methodology aims to be visionary, through: o Forward Looking: takes into account national future perspectives, reflecting Qatar National Vision (2030) and its strategic and sectorial goals and objectives. o Outward Looking: benefits from good experiences and practices, and explores development perspectives on both regional and international level, especially in business arena. o Innovative and creative: designs an outstanding definition that contribute to create an innovative working environment, and provide incentives for both SMEs and entities working to develop them. Figure (5): Key Characteristics of the Adopted Methodology to Design the National Definition of SMEs in Qatar Outward looking Forward looking Reviews Innovative and creative Using Evidence Key Characteristics Learns lessons Evaluates Inclusive Joined up Visionary Effective Learning

11 National Definition of SMEs in Qatar 9 Additionally, the work methodology aspired to be Effective, by taking into account the following characteristics: o Using Evidence: using best available evidence from a wide range of sources, based on a scientific approach. o Inclusive: takes account all economic activities, which currently exist as a business for SMEs or might be in the future. o Joined up: engages all key related stakeholders during the establishment of the National Definition, starting from the early stages. This aims at ensuring a high consensus on it, in light of available evidences. Meanwhile, the work methodology is keen to learn, and move forward after issuing the first edition of the National Definition. In this regard, a set of actions will be adopted in collaboration with all related stakeholders in order to: o Evaluate: builds systematic evaluation of early outcomes related to the adaptation of the National Definition, including opportunities/ perspectives, obstacles and challenges, as well as its relevant to current and future developmental paths. o Learn Lessons: learns from experience of what works and what does not, based on the evaluation results. o Review: continuously modify and enhance the National Definition, once it is required, to ensure its sustainability and success to realize its goals.

12 National Definition of SMEs in Qatar Phases to Design the National Definition The roadmap to articulate the National Definition of SMEs consists of six phases. Phase One discovered the outward looking, with focus on international development directions, SMEs definitions adopted by foreign and Arab countries as well as some international organizations. In this regards, (22) experiences have been reviewed. Table (1): List of Experiences have been discovered during the design of the National Definition European Commission Singapore South Africa Saudi Arabia Asia-Pacific Economic Cooperation South Korea Thailand Jordon International Finance Corporation Malaysia Brazil Egypt United Kingdom China Oman Dubai Canada Japan Kuwait Russia India Bahrain Phase Two exposed the national development context, by analyzing the current status of Qatari Economy and future developmental directions, in light of both Qatar National Vision (2030), National Development Strategy ( ) and its Sectorial Strategy on Economic Diversification and Private Sector Development. Figure (6): Phases to Design the National Definition of SMEs in Qatar First Edition of the National Definition Analyze Development Trends Discover International Experiences Investigate Status of National SMEs Develop the First Initial Version Develop the Second initial Version Intensive Engagement/ Participation of key Related Stakeholders December 2012 November 2015

13 National Definition of SMEs in Qatar 11 Phase Three focused on the national status of Micro, Small and Medium s in Qatar, through analyzing its current situation and discovering their different definitions adopted by various entities in the State. In this regards, (12) definitions were developed and adopted by (12) entities that have been surveyed. The Fourth Phase aimed at developing the first initial version of the proposed National Definition of SMEs in Qatar, based on inputs of all previous phases. Phase Five tended to share the initial version with all related stakeholders, where: o The initial version was communicated to key related stakeholders to give their reflections on it and provide their sights to improve. Significantly, (14) entities shared their feedback. o Specialized workshop was conducted with Economic Statistics Team, in Ministry of Development Planning and Statistics to thoroughly discuss the initial definition s criteria and their thresholds, in light of Establishment Census 2010 findings and results of periodic economic surveys conducted by the ministry. Based on received inputs, the Second Initial version of the National Definition of SMEs was developed. Finally, the Sixth Phase surveyed McKinsey Consulting Firm s feedback on the latest version of the definition. They confirmed its compliance with the international standards of designing SMEs Definitions, ending with a recommendation to release it. Moreover, number on specialized workshops and one-to-one meetings to engage more related entities, including: o Specialized workshop was conducted in collaboration with Qatar Central Bank (QCB), to get all banks feedback. Representatives from (18) Banks were engaged. o Specialized workshop was conducted in collaboration with Qatar Chamber of Commerce and Industry (QCCI). Twenty key entities participated, including government entities, banks, academic entities, civil society and the private sector. Taking all gathered feedback and reflections into account, the First Edition of the National Definition of SMEs was Launched. Table (2): List of Entities have been engaged in Developing the National Definition of SMEs in Qatar Qatar Central Bank Ministry of Economy and Commerce Ministry of Development Planning and Statistics Ministry of Energy and Industry Qatar Chamber of Commerce and Industry Social Development Centre Ministry of Youth and Sport Supreme Council of Health Public Works Authority (Ashghal) Qatar Financial Markets Authority Gulf Organization for Industrial Consulting Tourism Authority Qatar National Bank Qatar Islamic Bank Standard Chartered Bank Commercial Bank Doha Bank Mashreq Bank Al Ahli Bank AlKhaliji Bank Qatar Petroleum Hamad Bin Khalifa University Silatech Badaya Center

14 National Definition of SMEs in Qatar National General Definition of SMEs Small and Medium s shall mean: the companies registered in accordance with the laws of the State of Qatar, which number of employees does not exceed two hundred and fifty (250) employees (with exception of companies operating in the creative industries sector and which number of labor force shall not exceed one hundred (100) employees), and which annual turnover does not exceed one hundred (100) million Qatari Riyals, where: (Employees are measured by work unit and annual turnover is measured in million Qatari Riyals) Sector Criteria Micro Small Medium Agriculture Manufacturing Creative Industries Construction Trade Other Services No. of Employees Annual Turnover Less than 1 1 Less than No. of Employees Annual Turnover Less than 3 3 Less than No. of Employees Annual Turnover Less than 1 1 Less than No. of Employees Annual Turnover Less than 3 3 Less than No. of Employees Annual Turnover Less than 3 3 Less than No. of Employees Annual Turnover Less than 3 3 Less than o Staff Headcount: it covers full-time, part-time and seasonal staff. The definition covers all the employees and individuals working for the benefit of the enterprise, and who are subject to the Qatari Labour Law, in addition to owners who are managing the enterprise and partners engaged in periodic activities for the enterprise and who receive financial benefits in consideration of such activities. It should be noted that a full-time employee within a year is considered as one-unit while part-time and seasonal employees are considered as a part of a unit, as the case may be. o Annual Turnover: means the return/incomes generated by the enterprise during a year as a result of its sales from goods and services provided, following deduction of any rebates and taxes paid by the enterprise. It does not include Other Income such as income from interest, dividends or royalties paid to the enterprise by other entities, or gained by selling its assets.

15 National Definition of SMEs in Qatar Sectorial Definitions of SMEs * * Appendix (A) presents related economic activities in details. o SMEs in the Agriculture Sector: companies established in accordance with the laws of the State of Qatar which number of labor force does not exceed two hundred and fifty (250) employees, which annual turnover does not exceed one hundred (100) million Qatari Riyals, and the economic activities of which fall under Agriculture, Forestry and Fishing sections [groups (1-3) within the international Standard Industrial Classification (Rev. 4) ]. o SMEs in the Manufacturing Sector: companies established in accordance with the laws of the State of Qatar, which number of labor force does not exceed two hundred and fifty (250) employees, which annual turnover does not exceed one hundred (100) million Qatari Riyals, and the economic activities of which fall under [Manufacturing] section [groups (10-33) within the international Standard Industrial Classification (Rev. 4) ]. o Small and Medium s in the Creative Industries Sector: companies established in accordance with the laws of the State of Qatar which number of labor force does not exceed one hundred (100) employees, which annual turnover does not exceed one hundred (100) million Qatari Riyals, and the economic activities of which fall under Information and Communication, Professional, Scientific and Technical Activities, and Arts, Entertainment and Recreation sections [groups (58-63), and (69-75), and ( ) within the international Standard Industrial Classification (Rev. 4)]. It is worth mentioning that according to the United Nations definition of creative industries, craft industries fall within this category. o Small and Medium s in the Construction Sector: companies established in accordance with the laws of the State of Qatar, which number of labor force does not exceed two hundred and fifty (250) employees, which annual turnover does not exceed one hundred (100) million Qatari Riyals, and the economic activities of which fall under Construction of Buildings section [groups (41-43) within the international Standard Industrial Classification (Rev. 4 )].

16 National Definition of SMEs in Qatar 14 o SMEs in the Trade Sector: companies established in accordance with the laws of the State of Qatar, which number of labor force does not exceed two hundred and fifty (250) employees, which annual turnover does not exceed one hundred (100) million Qatari Riyals, and the economic activities of which fall under Wholesale and Retail Trade, Repair of Motor Vehicles and Motorcycles sections [groups (45-47) within the international Standard Industrial Classification (Rev. 4)]. o Small and Medium s in the Other Services Sector: companies established in accordance with the laws of the State of Qatar, which number of labor force does not exceed two hundred and fifty (250) employees, which annual turnover does not exceed one hundred (100) million Qatari Riyals. It covers the economic activities of which fall under other sections of commercial services within the international Standard Industrial Classification (Rev. 4) namely, the Mining and quarrying, Electricity, Gas, Steam and Air Conditioning Supply, Water Supply, Sewerage and Waste Collection and Treatment, Transportation and Storage, Accommodation and Food Services Activities, Financial Services Activities and Insurance Activities, Real Estate Activities, Administrative and Support Services Activities, Education, Human Health and Social Work Activities, and the activities of Other Services with the exception of membership organizations [groups (5-9), (35), (36-39), (49-53), (55-56), (64-66), (68), (77-82), (85), (86-88) and (95-96) within the International Standard Industrial Classification (Rev. 4) ].

17 National Definition of SMEs in Qatar Key Principles behind the Design of the National Definition Principle One: The Official Status of the by being established according to Qatari Laws. This is a vital and mandatory feature for any enterprise to be eligible for joining the SMEs Sector. Among economic activities, we can differentiate between the following: o Formal s: companies established in accordance with the laws of the State of Qatar, and registered based of the formal mechanisms adopted by the government. This group includes official Home-based Businesses (HbBs), registered with the official records, whether it is separate or part of the normal commercial registry. HbB is defined as a project, craft or activity that occupies a residence often the home of its owner and involves the performance of a frequent work for the purpose of making a profit, whatever its size or the nature of its activity Figure (7): Eligibility of an to Join SMEs Sector according to its formality (Illustrative Examples) Registered Home-business Business Registered traditional Informal Homebased business o Informal s: they are conducting economic activities without official registration in State s records, where they do not have a commercial registration. Accordingly, the Principle reflects the equal treatment of all registered enterprises, no matter the nationality of owner(s), where: o s established according to Qatari Laws, and working in Qatar, are eligible to join SMEs Sector (Qatari s). o Qatari s are eligible to join SMEs Sector, even if it is owned totally or partially by Nationals (Qataris). o s established by Qataris abroad are excluded from joining SMEs Sector. Figure (8): Eligibility of an to Join SMEs Sector according to the Nationality (Illustrative Examples) An enterprise established according to Qatari Law and totally owned by Qataris An enterprise established according to Qatari Laws and totally or partially owned by non- Qataris An enterprise established abroad and totally owned by Qataris

18 National Definition of SMEs in Qatar 16 Principle Two: Autonomous. In order to strengthen fair competition among enterprises, the National Definition of SMEs depends on the revised version of the International Accounting Standard 28 Investments in Associates, IAS 28, developed by International Accounting Standard Board, IASB, and issued in May According to IAS 28, an Associate is an entity, including unincorporated entity such as a partnership, over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture. Hence, enterprises can be classified into three types: o Autonomous : if an investor holds, directly or indirectly (e.g. through subsidiaries), less than or equal 20% of the equity/ voting power of the investee, it is presumed that the investor does not have significant influence on the investee enterprise. o Joint Venture : if an investor holds, directly or indirectly (e.g. through subsidiaries), more than 20% to 50% of the equity/ voting power of the investee, it is presumed that the investor has a significant influence on the investee enterprise. o Linked : if an investor holds, directly or indirectly (e.g. through subsidiaries), more than 50% of the equity/ voting power of the investee, it is presumed that the investor has full influence on the investee enterprise. The National Definition of SMEs adopts this principle (up to the first level of associates) to identify data that should be taken into accounts when questioning the eligibility of an enterprises under evaluation for joining SMEs Sector, where: Table (3): Calculating Methodology of the National Definition Criteria, according to the status of under Assessment Investor share of equity/ voting power Type of Degree of Investor Influence Data included to calculate Applicant s Criteria Less than or equal 20% Autonomous No/ Minimal Influence Only the enterprise s number of Staff Headcount and Annual Turnover More than 20% and less than or equal to 50% Partner Significant Influence/ Control s number of Staff Headcount and Annual Turnover + percentage of Investor enterprise Staff Headcount and Annual Turnover equal to its equity/ voting power More than 50% Linked Full Influence/ Control s number of Staff Headcount and Annual Turnover + Total Staff Headcount and Annual Turnover of Investor enterprise equal to its equity/ voting power

19 National Definition of SMEs in Qatar 17 In case of Autonomous, has small share of other enterprise/ enterprises. The calculations to evaluate its eligibility to join SMEs Sector depends on its data only (number of workers and annual turnover). This rule will be applied if the enterprise under evaluation: o Has partner owning (20%) or less. o Has partner or more, each owning (20%) or less. o Has share in another enterprise(s), through holding (20%) or less of each. In case of Partner, where other enterprise(s) each have a stake more than (20%) to (50%) of its equity. The evaluation of its eligibility to join SMEs Sector takes into account the following: o If there is one investor enterprise: calculations depends on total number of the enterprise under evaluation, in addition to the percentage of partnership owned by the other enterprise. o If there is more investors: calculations depends on total number of the enterprise under evaluation, in addition to the percentage of partnerships owned by each enterprise. In case of Linked, where an investor holds more than (50%) of the equity of the under evaluation. Calculations to evaluate its eligibility to join SMEs Sector depends on total number of the enterprise under evaluation, in addition to total number of the invested enterprise. Figure (9): Calculating the National Definition s Criteria based on the degree of the Autonomous of the First: Autonomous (B) (B) (B) (C) 20 Second: Partner (B) 20% or Less More than 20% to 50% (A) under evaluation (A) Staff Headcount = (100%) of (A) + (40%) of (B) (A) Annual Turnover = (100%) of (A) + (40%) of (B). Third: Linked (B) 20% or Less More than 50% (A) (A) Staff Headcount = (100%) of (A) (A) Annual Turnover = (100%) of (A) (A) under evaluation (A) under evaluation Appendix (B) presents number of illustrative examples on how to calculate criteria of the National Definition s (A) Staff Headcount = (100%) of (A) + (100%) of (B) (A) Annual Turnover = (100%) of (A) + (100%) of (B).

20 National Definition of SMEs in Qatar 18 Principle Three: Exclusion of One-Size-Fits-All Model. In the past few decades, literatures have moved beyond a strategy of Market Aggregation, which treats a marketplace as homogeneous, to a highly targeted approach that recognizes and focuses on heterogeneous needs. Significantly, the National Definition of SMEs in Qatar promotes the segmentation of business enterprises, to guarantee focusing on their various needs. Accordingly, the National Definition classifies eligible enterprises into EIGHTEN subcategories, depending on their size and key economic activity, where the Definition: o Depends on the two criteria (Staff Headcount and Annual Turnover) to classify enterprises into three categories based on their size: Micro, Small and Medium. o Differentiates among enterprises based on their economic activity, and groups them into six key sectors: Agriculture, Manufacturing, Creative Industries, Construction, Trade, Other Services. The National Definition adopts the International Standard Industrial Classification of All Economic Activities (ISIC), Revision (4), developed by Statistics Division, the Department of Economic and Social Affairs, United Nations. ISIC is the international reference classification of productive activities. Its main purpose is to provide a set of activity categories that can be utilized for the collection and reporting of statistics according to such activities. The reason behind adopting the ISIC is to develop National Definition of SMEs in Qatar that matching the classification adopted by government bodies, top of them the Ministry of Development Planning and Statistics. Figure (10): Key Sectors adopted by the National Definition of SMEs Agriculture: to support National Food Security Programme Manufacturing: due to its importance to develop booming and technologyintensive economy Creative Industries: constitutes key part of development plans to create knowledge-based economy Construction: contributes a vital role on both economic and social level Trade: plays an important role in the economic activity, representing a large segment of existing enterprises Other Services: to pay attention to other non-government activities Figure (11): International Standard Industrial Classification Sections belong to Services Sector Mining and quarrying Transportation and storage Accommodation and food service activities Financial and insurance activities Administrative and support service activities Education Human health and social work activities Electricity, gas, steam and air conditioning supply Water supply, sewerage, waste management and remediation activities Other service activities

21 National Definition of SMEs in Qatar 19 It is worth mentioning that the International Standard Industrial Classification depends on the top-down method, based on a hierarchical principle, where a unit at the lowest level of the classification must be consistent with the classification of the unit at the higher levels. In this regards: o The individual categories of ISIC have been aggregated into (21) sections (level one). o Each section contains division/ divisions, composing the second level of the classification. Also each division consists of group/ groups of activities (level three). Finally each group includes number of activities, providing the fourth and final level of the classification. The National Definition of SMEs Manual presents the classification of economic activities up to the third level. For more details about the fourth level, easily refer to the official document of ISIC (Rev. 4), published by United Nations. Table (4): Distribution of International Standard Industrial Classification s Sections, according to Sectorial Definitions of SMEs Section Divisions Description SME Definition s Sector A Agriculture, forestry and fishing Agriculture B Mining and quarrying Other Services C Manufacturing Manufacturing D 35 Electricity, gas, steam and air conditioning supply Other Services E Water supply, sewerage, waste management and remediation activities Other Services F Construction Construction G Wholesale and retail trade; repair of motor vehicles and motorcycles Trade H Transportation and storage Other Services I Accommodation and food service activities Other Services J Information and communication Creative Industries K Financial and insurance activities Other Services L 68 Real estate activities Other Services M Professional, scientific and technical activities Creative Industries N Administrative and support service activities Other Services O 84 Public administration and defense; compulsory social security Not Applicable P 85 Education Other Services Q Human health and social work activities Other Services R Arts, entertainment and recreation Creative Industries S Other service activities (excluding activities of membership organizations) Other Services T Activities of households as employers; undifferentiated goods- and services-producing activities of households for own use Not Applicable U 99 Activities of extraterritorial organizations and bodies Not Applicable

22 National Definition of SMEs in Qatar 20 Furthermore, this Principle contributes to promote the Creative Industries. According the United Nations Conference for Trade and Development (UNCTAD), Creative Industries: o are the cycles of creation, production and distribution of goods and services that use creativity and intellectual capital as primary inputs; o Constitute a set of knowledge-based activities, comprise tangible products and intangible intellectual or artistic services with creative content, economic value and market objectives; o stand at the crossroads of the artisan, services and industrial sectors; and constitute a new dynamic sector in world trade. The National Definition of SMEs adopts the UNCTAD classification of creative economic activities, which includes the following: o Media: reflects media that produces creative content with the purpose of communicating with large audience, to include publishing and printed media, as well as audiovisuals. o Heritage: cultural heritage divided into two subgroups: traditional cultural expressions(e.g. art crafts, festivals and celebrations) and cultural sites (e.g. exhibitions and libraries). o Arts: This group includes creative industries based purely on art and culture, even visual or performing arts. o Functional Creations: This group comprises more demand-driven and services-oriented industries creating goods and services with functional purposes, such as Design, Information Technology, and New Media and Creative Services (e.g. Research & Development). Figure (12): Economic Creative Industries according to UNCTAD Classification New Media Creative Services Design Audiovisuals Creative Industries Publishing and printed media Performing arts Cultural sites Traditional cultural expressions Visual arts Media Heritage Arts Functional creations Source: United Nations, Creative Economy: A Feasible Development Option, in collaboration with UNCTAD, 2010.

23 Publishing of books, periodicals and other publishing activities National Definition of SMEs in Qatar 21 The Principle of One-size does not fit all also promote the targeting processes. Although the National General Definition of SMEs determines the population of small an medium enterprises at large. Each concerned can target category/ sub-categories of small and medium enterprises, as the target of its public policies, programs and initiatives, based on its development goals and mandates. Accordingly, the eligibility of an enterprise to join SMEs Sector constitutes the minimum requirements to benefit from any policy/program/ initiative directed to SMEs, based on the definition criteria. In the meantime, the concerned entity sets the complementary criteria that should be in place for the targeted group to benefit from its interventions. For example: o Targeting one economic sector (i.e. creative industries), or economic activity (i.e. human health activities), and/ or targeting group of them according to size (i.e. micro). The ISIC should be used. o Targeting all micro and small enterprises, or targeting enterprises that export their products to the international market (or to specific markets). o Targeting all enterprises that join SMEs Sector, or targeting group(s) based on the social characteristics of the owners, such as gender (male/female), and/or educational level, and/or income level, and/ or the nationality. o Targeting all small and medium enterprises, or targeting enterprises that exist in selected geographic area(s). o Targeting start ups, where the enterprise age is less than specific period (i.e. three years). Figure (13): Models for targeting specific categories of Small and Medium s Targeting Micro s, owned by entrepreneurs with law income Small and Medium s Targeting Micro s Targeting Micro s owned by Entrepreneurs with Law Income Targeting s who are publishing of Books, Periodicals and other publishing activities Publishing books Publishing manuals, and addresses lists Publishing Newspaper, journals and periodicals

24 National Definition of SMEs in Qatar 22 Principle Four: Work Mechanism of National Definition s Criteria, based on the two used criteria: number of employees and annual turnover, where: o In the first year of an enterprise lifetime, and due to the absence of real annual turnover. The eligibility of the enterprise to join SMEs sector will depends on number of employees criterion, and the turnover projections according to its business plan (if available). o In the successive years of an enterprise life-time, the eligibility of the enterprise to join SMEs Sector depends on both number of employees and annual turnover. o The annual turnover is the weighted criterion to classify an enterprise according to its size. For example, if the number of employees may classify the enterprise as a micro enterprise, and the annual turnover may classify it as a small enterprise. The enterprise will be classifies as a small enterprise. o Excluding any enterprise to join SMEs Sector if it exceeds the determined threshold of one criterion. For example, if the number of employees criterion is applicable, and the annual turnover is not matching the National Definition s threshold, the enterprise will not join the SMEs Sector. In the meantime, in case that an enterprise is conducting different economic activities, it should be classified according to its major activity. For example, if an enterprise is basically working in manufacturing, and conducts some marginal trading activities. It will be classified in manufacturing category. Figure (14): Illustrative Examples to show how the National Definition s Criteria work together Number of employees is inline with micro category Annual turnover is in-line with the small category 60% of the s activity in manufacturing 40% of the s activity in service and trade Number of Employees is inline with the National Definition The will not join the SMEs Sector The enterprise is eligible to join the small category The enterprise is eligible to join the manufacturing sector Annual Turnover des not march the National Definition

25 National Definition of SMEs in Qatar Exceptions of Applying the National Definition of SMEs Exception One: Only the Private- Profit-seeking- s are eligible To ensure fair competition among enterprises that constitute the SMEs Sector, and to guarantee the effectiveness of efforts aiming at the development of SMEs. Only the Private- and profit seeking- enterprises are eligible to join the SMEs Sector. Accordingly, following establishments are excluded: o Government departments and diplomatic/ international entities o Government Establishments/Companies. o Mixed establishments/ companies, which totally or partially owned by any government department/ establishment/ company. o Non- profit establishments Exception Two: Exceptions related to the Autonomous of an In order to promote interventions related to provide seed capital to small and medium enterprises, a commercial enterprise still be ranked as autonomous, and thus as not having any partner enterprises, even if this 20% threshold is exceeded to (50%) by any of the following investors: Figure (15): An can still be evaluated as Autonomous if any of the following types of investor holds less or equal 50% of equity/ voting rights Venture Capital Company % 50 Individual(s) o Public investment corporations, venture capital companies and business angels. o Universities and non-profit research centers. University %50 Individual(s) o Institutional investors, including regional development funds. They are usually known as investors, which trade large volumes of securities on behalf of a great number of individual small investors and which have no direct involvement in the management of the enterprises they invest in. mutual funds and pension funds are examples for institutional investors. Financing Fund belongs to semigovernment entity Investment Fund belongs to government entity %50 %50 Individual(s) Individual(s)

26 National Definition of SMEs in Qatar 24 Exception Three: Excluding Qatar Exchange Venture Market to Apply the National Definition: Launching QE Venture Market was aiming to meet SMEs financing needs. Over time, Qatar is aspiring to promoting companies listed in this market, to be part of the Stock Exchange. This can be realized after their development and the proper performance. Due to the nature of QE Venture Market, being a Capital Market with a mandate to enable companies that issue securities for trading in the market (constituting the demand side) by getting their financial needs. Therefore, the market commodity is the Capital. QE Venture Market is excluded to apply the National Definition of SMEs. The reason behind is that the requirements for companies to be listed in a capital market is significantly different. However, QE Venture Markey may decide to use it as a guiding definition. This exception is aligned with related international experiences.

27 National Definition of SMEs in Qatar 25 Appendix (A): Distribution of International Standard Industrial Classification of Economic Activities According to the Sectorial Definitions of SMEs Division Group Description Agriculture Sector (A) Agriculture, forestry and fishing 01 Crop and animal production, hunting and related service activities 011 Growing of non-perennial crops 012 Growing of perennial crops 013 Plant propagation 014 Animal production 015 Mixed farming 016 Support activities to agriculture and post-harvest crop activities 017 Hunting, trapping and related service activities 02 Forestry and logging 021 Silviculture and other forestry activities 022 Logging 023 Gathering of non-wood forest products 024 Support services to forestry 03 Fishing and aquaculture 031 Fishing 032 Aquaculture Manufacturing Sector (C) Manufacturing Manufacture of food products Processing and preserving of meat Processing and preserving of fish, crustaceans and molluscs Processing and preserving of fruit and vegetables Manufacture of vegetable and animal oils and fats Manufacture of dairy products Manufacture of grain mill products, starches and starch products Manufacture of other food products Manufacture of prepared animal feeds Manufacture of beverages Manufacture of tobacco products Manufacture of tobacco products Manufacture of textiles Spinning, weaving and finishing of textiles Manufacture of other textiles Manufacture of wearing apparel

28 National Definition of SMEs in Qatar 26 Division Group Description Manufacture of wearing apparel, except fur apparel Manufacture of articles of fur Manufacture of knitted and crocheted apparel Manufacture of leather and related products Tanning and dressing of leather; manufacture of luggage, handbags, saddlery and harness; dressing and dyeing of fur Manufacture of footwear Manufacture of wood and of products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials Sawmilling and planing of wood Manufacture of products of wood, cork, straw and plaiting materials Manufacture of paper and paper products Printing and reproduction of recorded media Printing and service activities related to printing Reproduction of recorded media Manufacture of coke and refined petroleum products Manufacture of coke oven products Manufacture of refined petroleum products Manufacture of chemicals and chemical products Manufacture of basic chemicals, fertilizers and nitrogen compounds, plastics and synthetic rubber in primary forms Manufacture of other chemical products Manufacture of man-made fibers Manufacture of pharmaceuticals, medicinal chemical and botanical products Manufacture of pharmaceuticals, medicinal chemical and botanical products Manufacture of rubber and plastics products Manufacture of rubber products Manufacture of plastics products Manufacture of other non-metallic mineral products Manufacture of glass and glass products Manufacture of non-metallic mineral products n.e.c. Manufacture of basic metals Manufacture of basic iron and steel Manufacture of basic precious and other non-ferrous metals Casting of metals Manufacture of fabricated metal products, except machinery and equipment Manufacture of structural metal products, tanks, reservoirs and steam generators Manufacture of weapons and ammunition Manufacture of other fabricated metal products; metalworking service activities Manufacture of computer, electronic and optical products Manufacture of electronic components and boards

29 National Definition of SMEs in Qatar 27 Division Group Description Manufacture of computers and peripheral equipment Manufacture of communication equipment Manufacture of consumer electronics Manufacture of measuring, testing, navigating and control equipment; watches and clocks Manufacture of irradiation, electro-medical and electrotherapeutic equipment Manufacture of optical instruments and photographic equipment Manufacture of magnetic and optical media Manufacture of electrical equipment Manufacture of electric motors, generators, transformers and electricity distribution and control apparatus Manufacture of batteries and accumulators Manufacture of wiring and wiring devices Manufacture of electric lighting equipment Manufacture of domestic appliances Manufacture of other electrical equipment Manufacture of machinery and equipment n.e.c. Manufacture of general-purpose machinery Manufacture of special-purpose machinery Manufacture of motor vehicles, trailers and semi-trailers Manufacture of motor vehicles Manufacture of bodies (coachwork) for motor vehicles; manufacture of trailers and semitrailers Manufacture of parts and accessories for motor vehicles Manufacture of other transport equipment Building of ships and boats Manufacture of railway locomotives and rolling stock Manufacture of air and spacecraft and related machinery Manufacture of military fighting vehicles Manufacture of transport equipment n.e.c. Manufacture of furniture Manufacture of furniture Other manufacturing Manufacture of jewelry, bijouterie and related articles Manufacture of musical instruments Manufacture of sports goods Manufacture of games and toys Manufacture of medical and dental instruments and supplies Other manufacturing n.e.c. Repair and installation of machinery and equipment Repair of fabricated metal products, machinery and equipment Installation of industrial machinery and equipment