Dubai set to reinforce its status as a hub for SME growth
Dubai’s flourishing economy has traditionally provided a fertile environment for small and medium enterprises (SMEs) to establish and grow their business. Its dynamic and diversified economic base, with robust real estate, construction, tourism, hospitality, logistics, finance and technology sectors, have made it a magnet for small and medium business entrepreneurs.
With the emirate’s economy entering a new phase of development, powered by mega projects, and the government launching a spate of initiatives to simplify and reduce the cost of doing business, Dubai is set to become an even more productive base for SMEs.
At the forefront of providing new opportunities for SMEs in Dubai is the Expo 2020 project. SMEs are considered big winners in the opportunities emerging from the first ever World Expo to be held in the Middle East, Africa and South Asia. With a commitment of awarding 20% of the value of all contracts to SMEs, Expo 2020 has so far invested AED 2.4 billion in the SME sector and is set to introduce a new wave of tenders that will depend mainly on SMEs for delivery.
One of the key players in supporting the growth of Dubai’s SMEs is the Dubai SME, the agency of the Department of Economic Development mandated to develop the SME sector in the emirate. Last year, the organisation saw a significant increase in the number of local entrepreneurs seeking its assistance. The agency extended support to 4,227 local entrepreneurs in 2018, an increase of 32% from 2017 while the value of its incentives and facilities increased 63.4% to AED101 million in 2018 from AED61.8 million in 2017. Furthermore, 5,767 entrepreneurs benefitted from Dubai SME’s services, training and development programmes, a 163% increase compared to 2017. In addition, 1,175 national companies were launched in Dubai in 2018, thanks to the support of Dubai SME.
“Since its inception in 2002, Dubai SME has adopted a clear strategy to translate the directives of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, to enable citizens to enhance their participation in economic development,” says Abdulbaset Al Janahi, CEO of Dubai SME. “The UAE and its leadership are committed to supporting entrepreneurs and creating a supportive economic climate for small and medium enterprises,” he added.
“Dubai offers a unique model for creating a vibrant SME sector. HH Sheikh Mohammed has set ambitious development goals in the 50 Year Charter including the establishment of the world’s first virtual trade zone targeting 100,000 companies, as well as the transformation of universities into free zones in order to promote economic growth and innovation. These goals offer exceptional opportunities for promising small and medium enterprises,” he further said.
Dubai SME continues to expand opportunities for its members and promote SME competitiveness by providing consultation and training, as well as facilitating partnerships with both the government and private sector, he added. Over the years, the organisation has expanded its services and facilities to the GCC and regional markets while promoting innovation and talent in the sector.
Financial support has been a key part of Dubai’s offerings for SMEs. The Mohammed Bin Rashid Fund (MBRF), the financial arm of Dubai SME, supported 18 projects with a financial assistance of AED14 million in 2018, an increase of 147% over 2017. As Dubai prepares to host Expo 2020, UAE-based trade finance banks are seeing new opportunities to support more small businesses. Emirates NBD recently rolled out a new banking package for local SMEs and startups involved in Expo 2020 that includes preferential pricing and privileges on transactions, working capital, trade finance, foreign exchange and commercial loans.
Incubating promising ventures has been another key focus for the emirate’s government. Dubai SME’s Hamdan Innovation Incubator (Hi2) served more than 38 start-ups from the UAE and across the GCC in 2018. Launched in 2014, Hi2 guides entrepreneurs through the idea development, business start-up and enterprise growth phases with strategies and support.
The Dubai Plan 2021 aims to increase the SMEs GDP contribution to 45% by 2021. As part of achieving this goal, the government has introduced a slew of initiatives seeking to stimulate the growth of SMEs, which constitute 95 per cent of all establishments in Dubai. A new incentive package launched by Dubai’s Department of Finance (DOF) in May this year introduced five new incentives to support SMEs and boost public-private partnerships.
In the first incentive, SME suppliers to government agencies will be paid within 30 days instead of 90 days. The initiative is expected to provide SMEs with additional liquidity of AED1. 6 billion per annum. Under the second initiative, the value of primary insurance for SMEs has been reduced to 1-3 per cent instead of 2-5 per cent. Furthermore, the minimum primary insurance has been cut from AED 40 million to AED 20 million covering 80 per cent of SMEs, while the maximum primary insurance has been cut from AED100 million to AED60 million.
Under the third initiative, the final insurance rate, known as “performance insurance,” has been cut from 10 per cent to 5 per cent on all supplies. The fourth initiative calls for 5 per cent of government capital projects to be allocated to SMEs, a move that will allow them to receive AED400 million worth of projects. The fifth initiative includes allocating AED1 billion to public-private projects.
In the first set of incentives unveiled last year, Dubai had introduced several measures to reduce costs and boost business confidence. Government fees were frozen for three years and municipality fee on sales at hotels and restaurants were cut to 7 per cent from 10 per cent.
In the last few years, Dubai has emerged as a SME hotspot for new specialised niche sectors. One such sector that has witnessed exciting SME growth stories is fintech. Dubai has become a major hub for fintech startups, thanks largely to government support and initiatives undertaken by the Dubai International Financial Centre (DIFC).
DIFC’s unique experimental licences, market leading pricing and collaborative workspaces have been instrumental in spawning a vibrant fintech ecosystem that is unrivalled in the wider region. The hub, called the Fintech Hive, is playing a crucial role in shaping the future of the region’s financial industry.
Dubai is also setting up new dedicated SME clusters focused on entrepreneurial innovation. Dubai SME along with Meraas and the Department of the Economic Development (DED) recently signed a partnership to launch Al Seef SME District, an innovation hub within Al Seef. The hub, which pays tribute to Dubai’s origins as a commercial trading port, offers a dedicated space for new businesses from the design, fashion, F&B and information technology sectors.
With several new initiatives being rolled out to promote entrepreneurial growth, Dubai is poised to reinforce its profile as the main hub for SME activity in the MENA region. Over the next few years, Dubai could well witness a remarkable new phase in SME growth and innovation.