x Abu Dhabi, UAEThursday 18 January 2018

Lowering the cost of doing business

Small and medium enterprises in the UAE continue to struggle from a lack of expertise and access to capital.

Yousef is an Emirati anomaly. A middle-aged national from Sharjah, he has a good government job in a powerful UAE ministry. But it is his side business as an importer that is his retirement plan, he says. When he leaves public service, it is this small, lucrative enterprise that will put his children through college.

Many UAE nationals may aspire to Yousef's business acumen. Sadly, few have found a way to follow through. As we have frequently reported on these pages, small and medium enterprises in the UAE continue to struggle from a lack of expertise and access to capital.

The Government understands the need to churn out national-owned enterprises worthy of international acclaim. Organisations like the Mohammed bin Rashid Establishment for Young Business Leaders in Dubai, and the Khalifa Fund in Abu Dhabi, are encouraging innovators and entrepreneurs with seed money, loans and strategic marketing help.

These efforts are laudable, and vital. But for small business start-ups in the UAE, the obstacles that remain are enormous. According to the World Bank, the UAE ranks 134th in the world for "enforcing contracts" and 120th for "protecting investors". Should a venture fail, it is also among the costliest in which to close shop. Economic officials concede it can take up to five years to shutter a bankrupt company.

These inglorious attributes conspire in the form of fewer opportunities for Emiratis to earn a living. Roughly 13 per cent of the country's nationals are jobless, while nearly a quarter of all Emiratis under the age of 24 are out of work.

A successful Emiratisation strategy will require young entrepreneurs be given an environment to flourish. Handing out jobs in the public sector, as is common, is only a short-term fix. A better approach would be to lower the bar to small business creation in the first place.

At present, the cost of failure for a good idea is too high. Investors who don't turn a profit are often left with little recourse but to default on loans, and face possible legal trouble. This is no way to encourage innovation.

As Ahmed al Mutawa, chief executive of the Khalifa Fund, argued last month, pushing banks to fund "small and medium enterprises" is a strategy that "will reflect positively on the national economy". Emiratis like Yousef couldn't agree more.