Government moves to help SMEs with new legislation

DUBAI // The Federal Government has increased plans to support small businesses after the financial crisis with new legislation expected to be submitted for Cabinet approval in six months. The Ministry of Economy is close to sending out draft legislation, aimed at fostering small and medium-sized enterprises (SMEs), for consultation among other government departments and the business community.
"The ministry has prepared a comprehensive proposal to develop the role of SMEs in the UAE that will be shared with concerned parties," said Sultan al Mansouri, the Minister of Economy. The proposal includes an analysis of the current status of SMEs and the challenges faced by the sector, including how to arrange financing for projects that have come under increasing pressure this year as banks reduced lending.
"There are many challenges facing SMEs in the UAE, including lack of training, financing, high operation cost, labour considerations, the absence of marketing networks to promote national products, and procedural obstacles," Mr al Mansouri said. "The ministry is working on tackling these challenges by developing SME projects all over the UAE. We will also work to facilitate procedures of registrations and financing, and to provide training programmes."
The Government has already started discussions with banks with the aim of creating special facilities to support SME projects. The sector employs about 85 per cent of the UAE workforce and contributes about 46 per cent to the country's GDP of Dh535.6 billion (US$145.82bn), according to the Ministry of Economy. Some 98 per cent of businesses registered in Dubai are classified as SMEs, figures from the Dubai Chamber of Commerce and Industry show.
But many small firms have struggled to stay afloat since the economy started to contract in the fourth quarter of last year, hurting consumer demand and investments. Small businesses rely heavily on bank financing and have complained that banks are reluctant to lend to them especially if they have any exposure to the construction sector, which is beset with payment problems. The ministry is also drawing on support initiatives that have already been used in 28 other countries.
The Mohammed Bin Rashid Establishment for SME Development, an arm of the Dubai Government, last week published official definitions of what constitutes micro, small and medium-sized businesses. The designations are based on staff numbers, annual turnover and industry classification. But the ministry said it also planned to introduce its own definition of SMEs to be used on the federal level. "The new SME definition will be sent to concerned parties in the UAE before January 15 to study it and check its suitability for the needs of each emirate," Mr al Mansouri said.
skhan@thenational.ae