The Mohammed Bin Rashid School of Government (MBRSG), in collaboration with the Ministry of Economy and with support from Google, has launched a major report titled ‘The Future of SMEs in the UAE - Drafting a Future Roadmap and Lessons for the Post-Pandemic Phase’ at a policy workshop on 26 January 2023 at the UAE Government Accelerators, held in presence of numerous government entities and SMEs from across the UAE.
The report is based on a multi-year fieldwork study by the Policy Research Department at the MBRSG, identifying challenges that face small and medium-sized enterprises (SMEs) in the UAE, and proposing future policy directions to strengthen the sector. The report is based on a series of policy workshops and a country-wide survey involving around 500 startups and SMEs over the past two years, in addition to a series of interviews with stakeholders across the UAE. The findings of the fieldwork that was carried out during and after the height of the pandemic were also contrasted with earlier policy research by the School that explored the ecosystem just prior to the COVID-19 pandemic, providing a rare view on the emerging challenges and transformations in the sector.
Key findings:
- Two thirds of surveyed SMEs and start-ups cited "negative financial impact" due to the pandemic
- 60% of companies reported lower net profit than pre-pandemic time, while 10% reported profit growth due to the pandemic, and 30% reported no impact on profit from the pandemic.
- 66% of surveyed SMEs said they sought financing during the past two years
- Only 12% of medium-sized enterprises reported cutting training expenses, and 15% cut staff benefits because of the pandemic
- Impact on products and services: 38% of responding SMEs reported shifting their production towards new products and services due to COVID-19 impact
- Impact of COVID-19 relief measures: a third of the surveyed SMEs reported that the government relief measures decreased financial pressures, 9% said they “rescued the company from bankruptcy” and 16% said they helped them retain talent and prevent layoffs.
- Digital transformation: Prior to the pandemic, UAE-based SMEs reported wide challenges implementing online payment systems, but 56% claimed it became "easy" or "very easy" since COVID-19.
H.E. Abdullah Bin Ahmed Al Saleh, Undersecretary of the Ministry of Economy said: “The small and medium-sized enterprises sector forms the veritable backbone of the national economy here in the UAE. Indeed, no less than 94% of all companies in the UAE fall under the SMEs category, and with that in mind, empowering this key sector is a priority for the UAE leadership and government, and paves the way for further economic and social development. The findings of the study shed light on the current state of the sector contributing to shaping better policies to support the sector in the future”
Commenting on the study, Anthony Nakache, Managing Director, Google MENA, "Small and medium-sized businesses play a vital role in the UAE economy, and to thrive they need the right environment and policies. In the UAE, we have ongoing partnerships and collaboration with the public sector such as the Ministry of Economy and MBRSG to share knowledge and best practices to enable the path to growth Comment end of small businesses in the digital world.”
The UAE is firmly at the forefront of regional innovation and is home to 251 scale-ups or 42.8% of the total documented in MENA. The report highlights how government policies and initiatives allowed the country to soften the burden of COVID-19 on the SMEs sector. Meanwhile, new agile responses in terms of policies, legislation, and interventions helped retain existing talent and attract more during the crisis, particularly in the digital sector. This responsiveness ultimately allowed the country’s SMEs sector not only to survive the pandemic but in the case of some sectors, like the digital economy, to thrive and grow.
Dr. Fadi Salem, Director of Policy Research at MBRSG and co-author of the report added: “While the data shows positive outcomes on agility of the sector and digital transformation in the UAE, the overall picture is a mixed one according to our findings. Several challenges persist, primarily related to banking, licensing, IP management and difficulties when procuring with public agencies, such as payment restrictions and delays.” Based on the MBRSG Policy Research Team’s findings, the report sheds light on future policy advancements in six categories: Ease of doing business and centralised licensing; role of SMEs in ‘research and development governance policy’; finance mechanisms for SMEs; building an export economy; government payments and tendering, and accelerated digital economy transformation.
The Mohammed Bin Rashid School of Government is the first research and teaching institution focusing on governance and public policy in the Arab world, offering academic and training programmes that aim to train future leaders and prepare them to meet public administration and policy challenges across the region. Courses are developed and delivered by a diverse group of scholars, academics, and researchers. The Policy Research Department at the MBRSG is a regional policy think tank producing impactful research on seven multidisciplinary policy areas, including Future Government and Innovation, Economic, Sustainability, Social, Educational, Health and public leadership policies.
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