The Dubai government recently introduced five new initiatives that are designed to support small and medium sized companies and public-private partnerships in the UAE. The schemes have been praised by the local business community who believe it will allow them to sustain their growth over the coming years.
By introducing these new initiatives, it is believed liquidity in the SME sector could increase by billions of dirhams. This is due to the reduced cost associated with business transactions, faster payment for government supplies, lower insurance costs and smaller businesses being allocated government-based projects.
Local business leaders believe SMEs will now be able to flourish as a result of these new economic packages introduced by the Department of Finance. The hope is it will have a multiplier effect across a number of sectors of the economy, allowing it to continue building on the fantastic financial results achieved over the past few years.
At present, SME’s make up approximately 95% of businesses in Dubai. Their combined contributions to UAE GDP total almost 40%, with the workforce accounting for 43-45% of all those in employment.
The government realise the fundamentally important role the SME sector plays in the ongoing growth of the UAE economy, and particularly in Dubai. The introduction of these five new initiatives illustrate their commitment to supporting long-term growth and expansion.
New government initiatives explained
In 2020, the largest ever event staged in the Arab world will welcome over 190 participating countries and millions of visitors from around the globe. Expo 2020 will reveal the exciting investment possibilities that are available in UAE and the second of the new financial initiatives will provide key support in the lead up to the event.
This involves government capital projects worth up to Dh400 million being offered to SMEs, further increasing confidence across the business community. Improved payment terms will reduce the financial burden and boost liquidity while also stimulating growth.
The first phase of the new initiatives included freezing school fees, striking off fines and certain government related fees to reduce business costs. The second phase saw a big change in the way SMEs who supply goods and services to the government are paid. Instead of having to wait 90 days, this has been cut down to 30 days, potentially adding Dh1.6 billion more in liquidity to these firms.
Phase two also saw SME primary insurance cut from 2-5% to 1-3%. This resulted in minimum primary insurance being lowered from Dh40 million to Dh20million, and maximum primary insurance fell from Dh100m to Dh60m.
The third phase ensured performance insurance cut from 10% to 5% across the board. Phase four saw the government allocate 5% of capital projects to small to medium sized businesses. And finally, phase five covers the allocation of public-private partnership projects worth Dh1 billion in order to bring in private sector investment.
Not only are these initiatives good news for existing businesses but also for anyone else thinking of starting a company. It not only adds to the continued growth of the SME sector, but also that of the country and its flourishing economy.