The Government plans an overhaul of rules covering small businesses to encourage entrepreneurs, and Dubai makes the first move.
UAE streamlines laws for start-ups
The Government is planning an overhaul of codes governing small businesses in an effort to aid entrepreneurs in setting up shop, with Dubai the first emirate to reform laws for the sector.
The aim is to streamline the process of setting up a small business in the UAE by cutting back on red tape and reducing start-up costs for entrepreneurs, said Sultan Al Mansouri, the Minister of Economy.
"We see the potential of the UAE being a magnet for all of these businesses, because of the infrastructure we have provided," he said a forum in Dubai.
"The target is … to encourage citizens to be active within this small and medium-enterprise sector, and there'll be incentives to attract people to be active in businesses."
The ministry hopes to reduce the costs of establishing businesses and speed up the time it takes for them to obtain licences.
Plans were being discussed to use the "purchasing budgets of certain local governments and private-sector companies, to make sure that we sustain these businesses over a period of time," Mr Al Mansouri added. "The large-cap private sector has a big role to play also."
More than 90 per cent of companies in the UAE can be classified as small or medium enterprises, with almost half of the jobs in Dubai provided by this sector.
However, the difficulty of attracting new entrepreneurs into the sector has limited the development of home-grown businesses, viewed as crucial to diversifying the UAE economy away from oil and gas.
In an effort to persuade more Emiratis to take the risk of starting businesses, the Ministry of Economy has partnered with international banks to establish funds focused on small and medium enterprises. But difficulties in receiving funding for small businesses persist, said Mohammed Ali bin Zayed, the Deputy Governor of the Central Bank.
"Although the banking sector is giving some loans to this sector, the contribution in financing is still limited," he said.
Part of the problem is that no unified definition of a small business yet exists for the UAE. In an effort to correct this, the Dubai Government announced a law this month establishing criteria an organisation must meet to be considered a "small and medium enterprise" so that lending can be targeted directly.
Yesterday, the emirate's Government also released a set of corporate governance guidelines for small businesses intended to convince would-be investors that their boardrooms are well-governed.
The measures include nine voluntary steps that businesses can adopt to make themselves more attractive to banks, which are lending less in a tight credit environment.
The new corporate governance code is meant to help to make these businesses formalise certain processes, such as the creation of a succession plan and board of directors.
Another key area of concern is assisting smaller firms in maintaining credible accounts that are audited each year by professionals outside the companies.
"When you have corporate governance, the banking system sees proper accounts," said Alexandar Williams, the director of strategy and policy at Dubai SME, an agency under the Government of Dubai that issued the new guidelines.
"They see books are done properly. Once you have good books it leads to banks being confident, [lending] you the money, and there's a flow of liquidity. Therefore, the economy grows," he said.