What are the Initiatives taken by the UAE for SMEs?
What are the initiatives taken by the UAE for SMEs?
Small and medium businesses (SMEs) make up the backbone of the UAE economy, accounting for 95 percent of all businesses in Dubai. These small and medium-sized firms employ 42 percent of Dubai’s workers and create roughly 40 percent of the economy’s overall value add. The government is putting a lot of effort into improving the contribution and performance of small and medium-sized enterprises so that they can compete with their counterparts in other developed and high-income countries.
Role of SME in the economy of the UAE
According to the Ministry of Economy, the UAE SMEs sector employs more than 86 percent of the private sector’s workforce and accounts for more than 94 percent of all enterprises functioning in the nation.
Why would the government want more SMEs to start in the UAE
One of the most important reasons is that they promote growth, innovation, and job development. The UAE’s economy is built on small and medium businesses. They’ve shown to be significant drivers of sectors all around the country, and they’re likely to play an even bigger role in the coming years.
These SMEs, in essence, contribute to economic development, innovation, and job development. As a result, it’s critical to make sure they have the tools and support they need to continue on their path.
How is the government helping the UAE SMEs?
1. Cabinet Support Package for the Economy
On March 22, 2020, the UAE Cabinet stated that it will provide the economy with AED 126 billion in financial assistance. This assistance package has now been increased, totaling roughly AED 257 billion. The assistance is said to have three goals: (i) lowering the cost of doing business in the UAE, (ii) assisting small firms, and (iii) to hasten the construction of key infrastructure projects by the government
In addition, the Cabinet announced that special teams will be formed to guarantee that remote working is both sustainable and beneficial to the economy. The teams are responsible for reporting to the Cabinet on a daily basis on the financial effects of COVID-19 on the economy and what actions may be taken to mitigate the negative effects.
2. Central Bank’s Initiatives and Targeted Economic Support Scheme
The UAE Central Bank cut the interest rates on Certificates of Deposits by 75 basis points in mid-March in order to boost economic expenditure. The REPO Rates for borrowing short-term liquidity have been reduced by 50 basis points in tandem with the fall in interest rates. The Central Bank also reduced the rates applicable to the Interim Margin Lending Facility and the Collateralized Murabaha Facility by 50 basis points in March as part of its budget measures.
The UAE Central Bank has launched the Targeted Economic Support Scheme (TESS), which aims to provide temporary relief from principal, interest, and profit payments on outstanding loans for all affected private sector corporates, SMEs, and individuals. However, the waiver will not apply to loans made by the government or by foreign corporations.
TESS reduces current capital buffers to help banks in the UAE expand their lending capacity, as well as providing assistance to all financial institutions in the country.
TESS’s impacts result in the provision of AED 50 billion in collateralized loans and AED 50 billion in capital buffers being released.
3. Dubai Free Zone Initiatives
The Dubai Free Zone Council’s package will benefit free zones operating within the Emirate of Dubai, including a six-month rent delay, improved installment payment facilitation, refunds of security deposits and guarantees, cancellation of free zone applied fines, and permission for temporary contracts that allow free movement of labour between free zone companies.
Waiving any transfer fees between jobs will benefit both businesses and employees in the event of unpaid absence or redundancies, and will allow for a more fluid and dynamic workforce to deal with the changing economic situation.
Many of the UAE’s free zones have launched their own projects and packages, and we can give further details on individual jurisdictions upon request.
4. Establishment of Dubai’s Startup Hub and Remote Access
Dubai Startup Hub, the entrepreneurship programme of the Dubai Chamber of Commerce and Industry, has hosted its first entirely online event for its members. 40 new members joined, and they will receive online mentoring to help them with their new endeavors at this challenging time.
5. Small Businesses Initiatives in Abu Dhabi
The Abu Dhabi Department of Economic Development and the Abu Dhabi Department of Finance, in collaboration with Abu Dhabi-based banks, have launched a number of projects aimed at both people and small businesses. These measures have been developed to help both people immediately impacted by COVID-19 and the broader SME community who are suffering from the outbreak’s indirect repercussions.
The Abu Dhabi initiatives also help UAE SMEs affected by COVID-19 by allowing them to defer payments on current loans and credit cards for up to three months.
- Fees for bank merchant services are reduced;
- Fees and costs associated with banking are reduced; and
- Minimum average balance requirements are reduced.
SMEs that are not immediately touched by COVID-19, can take advantage of the following benefits:
- Installments on new borrowing can be deferred for up to three months;
- Interest rates on new borrowing will be reduced; and
- Bank costs will be reduced by 50%.
On request, more information and guidance on how small firms might benefit from Abu Dhabi initiatives may be offered.
6. Stabilisation Initiatives of Market Values
The Securities and Commodities Authority of the United Arab Emirates (“SCA”) has announced a ruling imposing a 5% restriction on stock price declines in the UAE. The limit was implemented on March 18, 2020, and will remain in effect until further notice.
A limit down cap determines the maximum amount of a stock’s price that can fall in a single trading day. The ceiling is presently fixed at 5% across all sectors, but the SCA decision empowers markets to possibly raise the ceiling to 7% for particular equities chosen by the markets. Any such judgment must be based on precise criteria that the SCA must approve. Nasdaq Dubai, Dubai Financial Market (DFM), and Abu Dhabi Stocks Exchange (ADX) all issued press statements announcing the implementation of a 5% limit down on all securities listed on their respective exchanges.
Any decreases will be stabilised by the implementation of the new limit down limitation.
7. Support and Prioritisation for Government Suppliers
The Federal Cabinet has ordered federal ministries and agencies to expedite payments to government vendors, requiring payments to be made within fifteen days.
Suppliers who have been delayed in completing federal government contracts may benefit from a congressional resolution that says there will be no penalty for delays for the next three months.
8. Unified Digital Platform
The Ministry of Finance has announced the creation of a single digital platform that will allow fees for common federal and local government services to be settled. The platform’s goal is to create an interconnected platform that allows users to access shared government services without having to go through manual procedures. The stated goal of this platform is to improve efficiency and financial flow sustainability for both municipal and federal income.
9. Reduction in Utility Bills
The UAE Cabinet has made a decree imposing a 20% reduction on water and energy rates for three months beginning in April 2020. Fee reductions will be applied to industrial plants, shopping malls, commercial stores, hotels, and hotel flats at this time.
A six-month delay in water and electricity connection installations, as well as a freeze on reconnection fines and the elimination of administrative costs for energy connection, will assist the aforementioned industries/entities.
10. Dubai Customs Initiatives
Dubai Customs Department has presented a stimulus package for imports and declared a delay of their auditing processes in an effort to guarantee that the UAE’s international commerce and imports are protected against the volatility of the supply of products. In particular, Dubai Customs would reimburse 1% of the customs charge normally charged on imported products (usually 5%) that are sold in the UAE market.
This reimbursement will be available for products imported between March 15th and June 30th, 2020.
The AED 50,000 bank or cash guarantee will be cancelled for individuals who provide customs brokerage services, and the sum will be reimbursed to individuals who have already placed the guarantee.
11. Smart Attestations
Initiatives include not just financial packages, but also efficiency improvements and remote operations. The evolution of attestations is one example of this.
The UAE relies significantly on document attestation to confirm the integrity and authenticity of important business papers. A face-to-face interaction is usually required for the attestation of the essential document. In the Emirate of Sharjah, the Sharjah Chamber of Commerce has indicated that they will accept attestation for all transactions via their website and dedicated Smart App in an effort to keep the payment process as quick as possible at this time.
Investors will be able to complete transactions remotely while receiving a ratification of signature, individual sponsorship, minors permission, a certified true copy, guardian approval, and external transactions, as well as the option of making online payments via credit card or prepaid from the registered company’s account.
12. Foreign Direct Investment Positive List
The UAE Cabinet has established a “positive list” of industries in which foreign citizens (i.e., non-UAE and non-GCC nationalities) can own 100% of an onshore company’s stock. The first Foreign Direct Investment Law (FDI Law) was passed in 2018 (Federal Law No. 19 of 2018), which included a negative list of activities in which foreign people are prohibited from investing.
Each positive-list activity will have certain (not minor) financial requirements, which investors must consider. It’s also worth noting that each Emirate will be able to decide which of the activities on the positive list can be carried out with 100 percent ownership in their respective Emirates. We anticipate that each Emirate will concentrate on recruiting investment in specific sectors.
13. Umm Al Quwain Financial Support Packages
Umm Al Quwain’s ruler has issued a Decree (No. 2 of 2020) that offers a range of financial assistance packages. The Umm Al Quwain Economic Development Department is offering a 50% reduction on costs for new business licenses and license renewals (these relate to renewals of commercial, industrial and professional licenses). Any fines associated with these expired licenses have been waived.
Finally, the Decree reduces all fees related to the Umm Al Quwain chamber of trade and industry by 50%.
14. Fujairah Licensing and Tax Fee Waivers
The ruler of Fujairah has issued a Decree (No. 4 of 2020) exempting firms engaged in specified economic activities from paying licensing fees and taxes for the rest of the year.
The fitness, food, and leisure industries are among those affected by the exempted licence costs. Hotels and hotel units, on the other hand, will be free from all local taxes.
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SMEs are an important part of the economy of the UAE and the government has introduced many initiatives especially during the pandemic to help them flourish.