The UAE aims to become home to 20 unicorns, or start-ups valued at more than $1 billion, by 2031 as part of a programme it launched on Wednesday to attract and expand small-and-medium enterprises.
The Entrepreneurial Nation initiative aims to offer support through a series of public-private partnerships that help entrepreneurs set up in the UAE, expand their businesses, export their products and tap into online sales, Ahmad Al Falasi, Minister of State for Entrepreneurship and SMEs, said during a conference in Dubai.
The UAE will also set up a Dh1bn ($272 million) private equity fund for lending to SMEs based in the country and operating in strategic sectors, which will be released from the first quarter of 2022 and over the next five years, he said.
“Our aim today is to transform from a regional to a global entrepreneurship hub,” the minister said.
SMEs are the backbone of the UAE economy, with the government introducing economic support packages to help business owners weather the Covid-19 pandemic. It has also taken measures to create a more attractive environment for foreign investment by easing visa rules, liberating company ownership rules and updating laws.
“The UAE, federally and locally, is amending laws because this is the most important factor in attracting capital and also talent,” the minister told reporters on the sidelines of the conference.
The programmes under the UAE's Entrepreneurial Nation initiative will start this month, according to the ministry’s presentation.
The Entrepreneurial Nation, a unified destination for start-ups from inception to growth, encompasses three stages or tracks.
The Skill-Up Academy is intended to equip participants with entrepreneurial skills and to be suited to a variety of participants, including students, recent graduates, employees, retirees, homemakers and jobseekers.
Its Start-Up track will target entrepreneurs who are seeking to establish a business and will offer incentives, products and services to support start-ups and innovative companies in the country. This includes a partnership with Emirates Development Bank to open bank accounts as quickly as within 48 hours.
The Scale-Up programme will back fast-growing, revenue-earning companies that are more than three years old to expand and eventually become unicorns.
The various tracks will offer services from facilitating access to funding, offering a network of experts for mentorship, exporting to international markets, digitalisation and sourcing talent, according to the presentation.
Entrepreneurial Nation has partnerships with global companies such as Google, Facebook, LinkedIn, Cisco, Huawei and UPS, as well as local entities such as Etihad Credit Insurance and Khalifa Fund For Enterprise Development to support entrepreneurs.
“The Entrepreneurial Nation is a partnership and scalable platform with the private sector,” Mr Al Falasi told The National.
The ministry is still considering whether the new Dh1bn fund for start-ups and SMEs will be for early stage or late-stage businesses, he said.
“We will only intervene when there is a gap,” Mr Al Falasi said.
“So when we release the fund, we size it in a way without overwhelming the market … at the same time, I don’t want to cannibalise and overstep on VCs. So we’re taking our time in understanding what's the best way in complementing the sector.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
