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An allocation of AED5 billion in contracts to small and medium enterprises (SMEs) announced by Dubai Expo 2020 manifests the importance that the UAE gives to the sector. The recent federal bankruptcy law is also aimed at boosting investment by SMEs to vitalize the country’s business landscape.
Today, the segment is contributing 60% to the GDP of the UAE and this is set to rise to 70% by 2021. Around 94% of the companies that operate in the country are SMEs — which totals to 400,000. The sector is helping the country to bolster its economic diversification efforts. A lot of entrepreneurs are jumping on the SME bandwagon. They need to be empowered and offered an ideal ambience to flourish. While the insolvency law is a good step to let them thrive, the role of free zones in the country in enhancing the strength of the SMEs is paramount. With flexible rules that make business easy and an environment where innovation takes roots, these zones could be the ideal trading hubs.
The free zones can catapult the economy, while working in tandem with the SMEs — right from the start. They have to provide a proper direction to the entrepreneurs regarding the specific economic activity they wish to undertake, help them meet the bureaucratic requirements, work out the logistics and then finally ensure comprehensive business infrastructure keeping the economics in mind. Most entrepreneurs are attracted towards the free zones as there they have full ownership of their business and assets. Also, they don’t have to pay any corporate, income or other government-levied taxes. The tax-free status of the free zones is a big catch for the investors.
There are over 30 free zones across the UAE. In Abu Dhabi, there is a lot of variety to choose from while selecting a free zone. The type of economic activity would decide where an SME should launch operation. Abu Dhabi Airport Free Zone caters to aviation, cargo and freight sectors. Khalifa Industrial Zone Abu Dhabi (Kizad) and ZonesCorp pay stress on industrial manufacturing. Twofour54 is a media free zone that encourages creative ventures. Masdar City’s Free Zone focuses on clean environmental technologies and renewable energy that can bring about sustainable development. Abu Dhabi Global Market is also an emerging free zone. More free zones that target unconventional sectors should come up. It is imperative that multi-purpose free zones allow easy investment options and their operation targets diversification to maximize returns.
The free zones have to invest in developing a climate where business becomes a breeze. They don’t just have to extend financial support but also provide professional assistance to those keen to start their ventures. Innovation should be the byword of every start-up.
With the bankruptcy law set to become effective soon, the SMEs can now restructure their functioning. The free zones could further assist in streamlining the working of the sector. These zones can help in the learning, collaboration and networking of the SMEs. The SME World 2016 summit discussed ways to
exchange the experience of SME entrepreneurs. More such platforms should be organized to connect these players. The free zones can build up on the potential of SMEs and both can benefit from each other in pushing ahead the sustainable economic diversification goal.