With the US shifting away from Middle East oil dependence and rapid advances in alternative energy, there is a 'limited amount of time to adjust the business model'.
Saxo Bank chief sees urgent need for more SMEs in the Emirates
Denmark’s Saxo Bank says shifts in global energy production make SME growth more urgent in the Emirates.
The US shift away from Middle East oil dependence and rapid advances in alternative energy have made the growth of the private sector in the UAE through small and medium-sized enterprises more urgent, according to Saxo Bank’s chief economist Steen Jakobsen.
“I don’t think energy prices will ever go back to the same levels because of shale gas,” Copenhagen-based Mr Jakobsen said in an interview last week at the investment bank’s office in Dubai, where it has had a presence since 2009.
“We’re on the brink of massive improvement in alternative energy usage. It’s a 10-year-plus worry because you have a fast-growing population and they cannot all work in the public sector, which is already bloated and overpaid. There is a lot of reasons why you want SMEs.
“You have a limited amount of time to adjust the business model for the day when no oil is coming in. It’s becoming more urgent.”
Mr Jakobsen joins a growing chorus of economists highlighting the need for the UAE to expand its private sector through SMEs.
Mr Jakobsen predicts that in the years ahead, the ties between the United States and the GCC countries, holders of some of the largest oil and gas reserves in the world, will remain, but in a weakened form.
As part of the shift in focus away from Saudi Arabia, the UAE and Qatar, he cited the possible re-emergence of Iran, which last month reached an agreement with the US to temporarily curb nuclear production in exchange for a loosening of trade sanctions.
At the same time, the UAE has a ready environment for the growth of SMEs, he said.
With low amounts of red tape and developed infrastructure including airports and roads, the UAE could become a powerhouse of SMEs, although the owners of such businesses often complain about the difficulty of obtaining funding here.
More important than funding, however, for SMEs is attracting entrepreneurs by tweaking laws so that businesses can be 100 per cent owned by their owners, Mr Jakobsen said. SMEs will create more sustainable long-term jobs and reduce the country’s reliance on seasonal workers, he added.
“They must create a handover from the public sector to the private sector and make it the best place to nurture SME business in the world,” Mr Jakobsen said. “You need to create the framework and the impact of the government- related entities on the economy must be reduced. And for you to create real jobs. Construction is a real job but it is short term. It’s like a franchise model, it’s not an investment into the long term.”