Why the UAE government is so keen on investing in SMEs

15/11/2022 by Ali Sajwani

When I take a look at some of the world’s largest economic powerhouses, it’s perhaps no surprise that they all have one thing in common–thousands of small-to-medium enterprises (SMEs).

These SMEs are the backbone of most developed societies, and even in emerging economies, we see the value that smaller, more local companies bring to the table.

As we usher into a new era of automation, I believe we will still require human-driven SMEs to perform the “last mile” of tasks. For example, deliveries and visual checks.

In the UAE, there is a plethora of opportunities for SMEs. The government has created a myriad of opportunities for entrepreneurs, investors, and ordinary people to create meaningful businesses quickly and easily.

In the government’s own words: “Small and Medium Enterprises (SMEs) get special focus from the UAE government as they are considered vital for promoting economic diversification and growth and because they help in building national human resources.”

SMEs in Dubai alone make up of 95% of all businesses, produce 42% of the emirate’s employment opportunities, and contribute an enormous 40% of the emirate’s gross domestic product (GDP).

In many developed economies, SMEs are recognised as the backbone of economic growth, employment, and innovation, and act as a bulwark against economic shocks.

With this in mind, 2021 saw Ahmad Al Falasi, UAE Minister of State for Entrepreneurship and SMEs, launch Entrepreneurial Nation, a programme designed to support the rise of no less than 20 ‘unicorns’ – start-ups valued at over US$1 billion – by 2031. It’s exciting to see the creation of the scheme, which involves a series of public-private partnerships designed to help entrepreneurs set up in the UAE, expand, export products, and take full advantage of online sales.

The minister also revealed an AED 1bn ($272 million) private equity fund to lend to SMEs in strategic sectors. The overarching aim of the scheme is to ensure that the UAE turns into a global entrepreneurship hub, backed by changes in the visa system, more liberalised company ownership rules and a raft of refreshed laws.

Since the UAE redoubled efforts to move away from reliance on finite fossil fuels, I’ve seen the government and the Central Bank work tirelessly to assist SMEs in setting up their businesses.

As another example, the UAE Ministry of Economy has established a National Programme for Small and Medium Enterprises (NPSE)–which provides frameworks, guidelines, advice, training, and technical and managerial support to nascent SMEs.

Today, SMEs are an integral part of the government’s drive to empower the

private sector as it diversifies the economy.

Recently, the federal government issued a ministerial resolution to support Emirati-owned businesses and run SMEs with new incentives. Under this resolution, qualifying Emirati SME owners can now register up to five enterprises under the Tier 1 category, rather than the two allowed previously.

Businesses will also receive a longer five-year classification rather than the previous three years from the date of the licence issuance.

The categorisation of companies into three tiers, based on Cabinet decision No. 18 of 2022, brought incentives to SMEs to comply with corporate laws, encourage Emiratisation, employ 500 people per year and conduct regular training.

Compliance with the rules at different tier levels leads to rewards such as a reduction in employee visa costs.

In my opinion, such bold and rapid moves serve to underline the UAE’s strong commitment to helping and encouraging smaller businesses to thrive.

Don’t you agree that shoring up the economy with hundreds of thousands of small and medium enterprises has to make sense? Especially when the government is keen to back innovative companies via several specialised free zones–from biotech to humanitarian concepts to the media.

To me, it seems a vibrant, diversified, and innovative economy needs a vibrant, diversified, and innovative SME sector–and the UAE can proudly boast such an environment.

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