ABU DHABI // Federal authorities and ministries must set aside at least 10 per cent of their procurement budgets for small businesses under a new law approved yesterday by the FNC.
"We already have SMEs but this is the turning point," said Marwan bin Ghalita (Dubai).
"This is what will help encourage these SMEs. This needs to be in the law. Ten per cent needs to be included."
Emiratis with small businesses will receive greater support under the new law. In a three-hour discussion with Sultan Al Mansouri, the Minister of Economy, the FNC passed a raft of amendments to encourage UAE nationals to start up SMEs.
Problems addressed included the lack of bank financing for Emiratis wanting to start such businesses, and little formal support.
"The main reason for this law is to encourage and convince Emiratis to run SMEs," Mr Al Mansouri said. "This has been going on for a decade.
"There are big efforts for there to be a foundation to enter and start on. This law will support this."
A study presented by the council's finance committee found bank financing covered 2 per cent of start-up costs at most.
And more than half of businesswomen interviewed said they had little support when they launched their businesses.
Public-shareholding companies must set aside a minimum of 2 per cent of their procurement budgets for SMEs, but some members, including Ahmed Al Shamsi (Ajman), were concerned about putting off investors. Mr Al Mansouri agreed.
Others, including Hamad Al Rahoomi (Dubai), insisted on the clause. He said companies were exempted from Emiratisation quotas and other requirements in the Commercial Companies Law passed this year.
Some other members wanted to increase the percentage.
"There are big sensitivities when we go into private companies," Mr Al Mansouri said. "We do not want to pass a law today that could harm us tomorrow."
Mohammed Al Ruqbani (Fujairah) suggested only companies that are at least a quarter Government-owned should have to comply with a minimum 5 per cent of their procurement budgets. Mr Al Mansouri agreed.
"Let's try with these companies," he said. "We will follow it and then look back on this."
Other incentives included lowering licence fees on SMEs.
Emirates Development Bank would have to spend at least 10 per cent of its annual financing on SMEs.
Members had also proposed exempting owners from paying Dh3,000 in insurance for every employee. But others argued against the move.
"This is not in its place, this is the right of a worker," Mr Al Shamsi said. "If the business shuts down, what will happen to the worker then?"
But Mr bin Ghalita said this was one of the challenges many SME owners faced now. He said the clause was needed.
Hamad Al Rahoomi (Dubai) said members should not fear as "the owner, a local, would not flee the country".
Mr Al Mansouri said this should be left for the Ministry of Labour to decide. He said only four people were exempted from such fees, fewer than what the council assumed.
As part of the bill, all SMEs will need to register in a programme governed by a new SME council to gain the benefits.
The council will be required to set out a clear plan for SME development, introduce regulations and gauge the programme's work.
The National Programme for SMEs would be in charge of gathering local and international support for the businesses.
The law will now go to the President for final approval.