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You are reading Entrepreneur Middle East, the international franchise publication of Entrepreneur Media.
this Financial Times An entrepreneur is described as an individual who is “attracted to opportunity, innovation and the creation of new value.” Around the world, entrepreneurs are the people behind businesses that become market leaders. Steve Jobs started Apple in his garage. Elon Musk transformed Tesla from an engineering project into a global giant. Uber co-founders Travis Kalanick and Garrett Camp conquered the world one city at a time.
In the four years to 2016, a total of 234 private investment transactions were completed in the digital and technology sector in the UAE, with a total value of more than US$1.1 billion. In 2016, the UAE ranked first in terms of investment volume and volume in the Middle East and North Africa (MENA). Technology trading. More generally, Dubai’s small businesses are a force to be reckoned with, accounting for 95% of the region’s businesses and 42% of the workforce.
An entrepreneurial mindset sees opportunity where others see competition or even saturation. But starting a business is hard work. An environment designed to make your ideas successful will help tremendously, and Dubai and the UAE fit the bill. So let’s explore how to get the best bang for your buck when doing business in the area.
Are small businesses really thriving in Dubai?
Despite some discouraging headlines over the past few years, Dubai’s economy looks healthy. The Economic Development Council expects the economy to grow by 3.1% this year, a figure further supported by independent research firm Emirates NBD; however, the International Monetary Fund believes that the UAE’s overall growth rate this year will be close to 2%.
In this environment, small businesses in Dubai and the UAE continue to grow. Back in 2012, nearly 17,000 new licenses were issued, but by 2015, that number had edged up to 23,000. More than 40% of new Middle East and North African startups have entered the UAE, and Emirates NBD said that by 2020, nearly 200,000 new companies may be established in Dubai, 95% of which are small and medium-sized enterprises.
There’s also Expo 2020, just three years away, which is expected to have 25 million visitors from around the world. Last year, more than 1,200 Expo contracts worth Dh2 billion were signed, of which nearly half have been awarded to SMEs to date. If Expo 2020 is the UAE’s big opportunity to showcase itself to the world, then data suggesting the country’s support for new businesses will be an important showcase.
How to set it?
Therefore, with the economy on the rise and multiple contracts vying for it, there is a lot of scope for small businesses in Dubai to grow. But what about practicality? In recent years, the government and the private sector have increasingly aligned on the practical aspects of supporting the establishment of new enterprises, which has helped the UAE rise eight places to 34th in the World Bank’s latest overall “ease of doing business” ranking.
There are many different ways to set up a new business in Dubai. You can choose a sole proprietorship, which means you own 100% of the business, control all operations and retain 100% of the profits. Or you can choose a limited liability company (LLC), which is a legal entity in itself and requires between 2 and 50 shareholders, each of whom is responsible for their share of the company. Then there are partnerships, where two or more people share ownership of the business.
There are other routes, and while it’s up to you to decide which structure is best for your business, it’s worth hiring a regional expert to help navigate the options and find the structure that’s best for you. You need to consider the future growth of your business and its current position, so it’s important to take professional advice.
In addition to the “mainland” option, the region’s free zones are a major attraction, with 45 free zones in the UAE and more than 20 in Dubai. These industry-specific centers offer a range of incentives, including exemptions from import, export and corporate taxes. In the first half of 2015, the total trade volume of the UAE free zones reached AED 297 billion. But it’s not just financial incentives. Setting up a base in a free zone that suits your industry gives you access to localized expertise and networking with like-minded people. Business and countless networking opportunities are on your doorstep.
What is the government doing to assist?
In recent years, the government has been paying great attention to small and medium-sized enterprises, aiming to increase the industry’s contribution to GDP to about 45% by 2021. The plan calls for creating 370,000 jobs, helping approximately 40,000 businesses and adding Dh65 billion to the economy. The Khalifa Fund, a fund set up specifically to promote and support entrepreneurs, has invested over AED 2 billion to help local businesses. The new ventures are firmly integrated into Dubai Vision 2021, and looking ahead, the UAE’s Centenary Plan 2071 aims to build an economy based on innovation, leadership and advanced industries.
然後是杜拜中小企業部門,它是經濟發展部(DED) 的一個部門,自2002 年成立以來,已支持了4,000 多個項目,並為杜拜的小型企業贏得了近33 億迪拉姆的contract. The Dubai SME News page reveals a series of recent events, all aimed at helping entrepreneurs get back on their feet. In recent months, the institution’s financial arm, Mohammed Bin Rashid Fund (MBRF), has partnered with Emirati peer-to-peer finance platform Beehive to facilitate SME financing and improve SME performance.
Then in March, Dubai SME announced START – a new competition set up as part of the UAE Careers Expo – offering future Emirati entrepreneurs a total prize money of Dh1 million. Finally, Dubai Development Authority and the Singapore Intellectual Property Institute signed a memorandum of understanding in April to establish the Dubai Intellectual Property Center to help entrepreneurs protect their intellectual property rights.
How private enterprise can help drive growth
In May this year, the 2013-2016 report released by Dubai Small and Medium Enterprises showed that in the Middle East and North Africa, the UAE dominates investment in small and medium-sized enterprises. While this can partly be attributed to recent blockbuster deals with Careem and Souq.com, the UAE still ranks high even without them. Taking these factors into account, the value of technology investment in the MENA region as a whole grew by 70% last year.
Accelerators, incubators and private equity also contributed. The government-backed Dubai Future Accelerator program brings together entrepreneurs, top companies and government partners for a nine-week program designed to promote collaboration and investment. In addition, there are a number of private companies such as In5, Turn8, Impact Hub and Astrolabs that help startups and their founders grow their businesses within a community of like-minded individuals. While these initiatives are primarily about securing investment, they are also designed to help new startups establish, grow and become revenue-generating businesses as quickly as possible.
Venture capital firms also play an important role, and alongside newer, smaller players such as Venture Souq and Envestors, more established firms such as Dubai-based Wamda Capital and Beco Capital remain highly sought after. In 2015, Wamda Capital announced a new regional growth-stage investment fund to pursue new business initiatives worth $75 million, the largest such investment fund to date in the region.
Improving Financing—A Traditional Barrier
Traditionally, setting up a company in the UAE has not been without its problems. Despite the big push for new companies, getting financing isn’t always easy, and troubled businesses are sometimes treated harshly under the country’s legal system. But a recent review of the insolvency framework has put less emphasis on finger-pointing and more on opportunities to restructure troubled companies in a positive way. Earlier this year, Dubai SME launched a new rating system for companies with a turnover between Dh1 million and Dh200 million. Although voluntary, this is a useful initiative that provides investors with a mechanism to assess the prospects of businesses in which they are interested.
The view from the ground
Investment in small businesses continues to grow rapidly in Dubai. The private sector is behind this, and the government is relentless in its support of new ventures. At the same time, long-standing financing and other difficulties are improving, but investment levels still dwarf those of other Middle East and North African countries.
But how does all this translate in reality? According to the latest Business Confidence Index (BCI) survey of Dubai SMEs, the mood of new start-ups this year is optimistic, with small businesses showing higher confidence than large enterprises. In the first quarter of this year, 78% of new businesses said their business operations were not affected by any obstacles, a steady increase from the previous quarter.
Not all of this is down to entrepreneurial optimism. But what is certain is that while enthusiasm and drive are important in growing your business, an environment designed to help such a business succeed is also crucial. Of course, no one cares about your company as much as you do. But as it stands, you’re unlikely to find another country whose government and economy are so actively aligned with your success.
Related: Building an entrepreneurial hub: Dubai committed to new businesses
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