Dubai’s new incentives package includes five initiatives to support SMEs

Dubai’s new incentives package includes five initiatives to support SMEs

His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai directed the government to focus on simplifying the procedures of conducting business in Dubai and reduce the costs for companies by utilizing all the possible resources, in order to facilitate the economic accomplishments.

Under this directive, emirates department of finance rolled out five initiatives with the objective to support small and medium sized enterprises (SMEs) and public private partnerships (PPP).

According to Abdulrahman Al Saleh, the department’s Director General,

“The five initiatives are aimed at reducing the cost of conducting business, to support the registered companies in the emirate and attract new investments.”

Dubai and the UAE as a whole, has been introducing a range of measures to lower the cost of doing business, facilitate company setup in Dubai, attract foreign investments, create business opportunities in UAE as well as jobs and boost economic growth. Among the reforms implemented in the year 2018 included the waiving of corporate fines in Dubai and Abu Dhabi, granting long-term visas to expatriates and allowing foreign ownership of companies outside free zones.

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  1. The first incentive is to pay the dues to SMEs that supply goods and services to the Dubai government agencies within 30 days instead of 90 days. This initiative is expected to provide SMEs with additional liquidity of AED1.6 billion per year. The government will introduce a special classification for SMEs eligible to receive their dues within 30 days.
  2. The second initiative involves reducing the value of primary insurance for SMEs by one half i.e. to a range of 1-3% instead of 2-5% which will give them an incentive to continue supplying their goods and services to government agencies. Under this measure, the minimum primary insurance was reduced by half i.e. from Dh40 million to Dh20 million, a figure that involves 80% of SMEs. The maximum primary insurance was cut down to Dh60million from Dh100 million, this figure applies to remaining SMEs i.e. 20%.

The government believes that this measure will provide greater liquidity for SMEs and brings bigger opportunities for them to participate in procurement to government agencies.

  1. The third economic incentive includes cutting in half the final insurance rate for SMEs i.e. from 10% to 5% on all supplies. Under this initiative, Dubai government intends to prepare a classification of SMEs entitled to lower performance insurance. This measure is forecasted to raise the value of retrieved final insurance from classified enterprises, that account for 70% of total SMEs, up to Dh100 million, in a short amount of time.
  2. The fourth initiative focuses on allocating 5% of government capital projects to SMEs, a measure that allows them to get projects worth up to Dh400 million. This initiative will encourage SMEs to develop their business, enter into key projects contracts with government agencies and make alliances to compete for government projects.
  3. The fifth initiative includes allocation of projects worth Dh1 billion to public-private projects (PPP) in order to attract private sector investments, enhance government’s quality of service and decrease the burden on the budget. The implementation will ensure the optimal utilization of Public-Private Partnership Law No. 22 of year 2015 along with implementation of projects prepared by Dubai government on time, in accordance with Dubai 2021 Plan.

SMEs are the backbone of UAE economy. In Dubai, only 0.8% businesses are registered as large businesses which mean that the majority of businesses are composed of micro, small and medium-sized enterprises. According to Dubai SME, SMEs in Dubai account for 52.4% of the all workforce employed and contribute 47% to the GDP of Dubai which is why several initiatives are being implemented to ensure growth of SME sector in UAE.

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