Developing SMEs must be core of UAE economy

The recent move to exempt small and medium-sized enterprises (SMEs) from bank guarantees has been taken to facilitate smooth functioning of this sector. It will help SMEs to do their business without any uncertainty and apprehension.
The UAE’s growing SME sector has been playing a vital role in shaping its economy. Today, there are over 3,50,000 SMEs in the country which provide around 86% of the jobs in the private sector. Their share in the non-oil GDP is 60%. By 2021, it is expected to increase to 70%. Therefore, as UAE gives impetus to sustainable economic diversification, it is imperative that SMEs are offered the right environment to flourish. In the years to come, it is this segment which would form the backbone of the country’s economy.
While providing exemption from bank guarantees, there is a crying need that the long-pending bankruptcy law is also implemented soon. This will make working of the SMEs far easier than it is now. The law will ease access to finance and help SMEs to get on with business without encountering bottlenecks. In case an SME is in trouble, the law would assist it in settling the financial issues and back it to tide over the crisis. Recently, the UAE Banks Federation (UBF) rolled out an initiative that would support SMEs in economic stress to ensure the defaults are reduced. This mechanism by UBF will go a long way in giving a safety cover to the SMEs, which will translate into better productivity.
Economic diversification plan has to be inclusive. It must increase productivity and bolster competitiveness. The International Monetary Fund (IMF) in a meeting held a few weeks back underlined that SMEs and start-ups will have a major impact on the economic landscape of the UAE. Hence, the policymakers have to devise strategies that can take off their financial burden. It is time that the policies are made in a way that SMEs don’t feel restricted by the financial constraints. They have to be given a room to evolve and excel.
Being the major contributor to fiscal growth, job creation and economic activity, SMEs will buoy UAE’s economic development. However, they have to move away from the trading-dominated model as they focus on sustainability and innovation. It is crucial that they take up value-added projects, which will be beneficial for the knowledge-based as well as innovative economy.
Adequate and timely financing for SMEs is a must. It would be prudent that a fund is created that supports the young entrepreneurs to finance their innovative projects. There should be a body which monitors the funding and work of the start-ups. The banks have to make lending to small businesses a breeze.
SME development is going to sustain the diversification of UAE’s economy. The UAE has free-zone business hubs with business-friendly processes and huge infrastructure which are an ideal place for the SMEs to display their potential. Those in the sector must network and exchange their ideas and experience. This will enhance their knowledge and acumen. It will make them understand and face the challenges in a more effective way.
The policymakers, on the other hand, must offer necessary assistance to this segment and take steps that give them more power to break the limits.