Support for SMEs is vital for country
While big enterprises tend to get the lion’s share of attention, a healthy national economy also relies on having a broad range of profitable small and medium-sized businesses. SMEs are big employers, and they are often engine rooms for innovation, being nimble and flexible enough to get ahead of the curve and exploit new and niche opportunities. To succeed, they require a regulatory framework that encourages and supports them.
The UAE already ticks many of the right boxes, with reasonable start-up costs, on-tap expertise and a tax-free regime. And last year, federal authorities and ministries were directed to spend a minimum of 10 per cent of their procurement budgets on Emirati-owned SMEs. But more can be done to support businesses and the entrepreneurs behind them. That is why we welcome moves by the Dubai Economic Council to create a fund to help start-ups and SMEs as part of the emirate’s Dubai Plan 2021.
According to government figures, 95 per cent of enterprises in Dubai are SMEs, they contribute 40 per cent of GDP and employ 42 per cent of the workforce. However, bank lending to this sector accounts for just 4 per cent of total loans.
Proper funding is critical to SMEs, but it must be forthcoming with an acknowledgement that many start-ups will fail and money will be lost. This is a global story. The trick, as the Irish playwright Samuel Beckett once observed, is to try, fail, try again and then “fail better”. Entrepreneurs as diverse as Sony founder Akio Morita, Walt Disney, Oprah Winfrey and Bill Gates all failed in their first ventures, but learnt from their mistakes to build successful business empires. Although reforms, including the Al Etihad Credit Bureau, are being introduced in the UAE, business failure can still lead to prison – a significant disincentive for any budding entrepreneur.
Economic diversification is essential to the UAE and SMEs are uniquely placed to drive further economic growth. Support for fledgling businesses now will pay off in the future.
Published: March 19, 2015 04:00 AM