Economic Update

Published 06 Sep 2018

Dubai is stepping up efforts to promote the development of its small and medium-sized enterprise (SME) community, creating a new incubator to further strengthen the sector.

In late July Dubai SME – the agency charged with building capacity in the SME sector – launched the Co-working Popup, an incubator that provides business development programmes and a space for entrepreneurs to establish their own creative enterprises and for start-ups to incubate their businesses.

The Co-working Popup also offers training, advisory and mentoring services, which Abdul Baset Al Janahi, Dubai SME’s CEO, told press was part of a wider strategy to provide an innovative entrepreneurship support platform and “contribute towards sustainable development and achieving a knowledge economy based on the concepts of creativity and innovation”.

The incubator is one of the first to be rolled out under new regulations governing the licensing of business accelerators and incubators that came into force in March. The rules mandate that incubators be licensed through Dubai SME following an assessment and feasibility study, and added detail to the terms of operation for accelerators and incubators.

These include providing workspace for entrepreneurs that are in keeping with the main activity for which the incubator is licensed; offering consultancy and guidance on project development; and making support available to implement innovations and apply the latest technology in product development.

Small businesses have an increasingly large economic impact

The new incubator regulations reflect the growing importance of SME and start-ups to the emirate’s economy.     

Small-scale businesses account for 47% of the emirate’s GDP and provide employment for 52.4% of its active workforce, according to a report released by the Dubai Statistics Centre in mid-July. This marks a significant increase from 2009, when the sector accounted for 40% of GDP and 42% of jobs, the report said.

While SMEs’ contribution to the Dubai economy is increasing, the sector is not yet as prominent in the emirate as in the national economy overall, with smaller businesses representing 86% of the private workforce in the UAE, and contributing 60% to national GDP.

In terms of size, SMEs account for around 95% of all businesses operating in Dubai, with up to 70% of these considered micro-businesses.

The latter – defined as having under 10 staff members and a turnover of no more than Dh9m ($2.5m) if in the trading sector, and a workforce of no more than 20 and turnover of less than Dh10m ($2.7m) if in services – though numerous, still only represent some 10% of total employment in Dubai, a little more than half that of SMEs.

Facilitating the growth of these firms by offering incubation and other services is seen as key to making the most of their economic potential. To this end, the new regulations for incubators represent a first step towards the creation of an incubator network to further develop best practices in investment and innovation support.

Efforts to grow agricultural SMEs take root

While much of the focus of SME incubation is on tech start-ups, agencies are also looking to support other areas of economic activity, including agriculture.

On July 25, Dubai SME, the UAE Ministry of Climate Change and Environment, and the Mohammed Bin Rashid Establishment for SME Development signed a memorandum of understanding setting out plans to cooperate to support small-scale agricultural enterprises.

The programme will target SMEs operating or entering the agricultural, livestock breeding, fisheries and beekeeping segments, with a mix of technical, educational and funding support on offer.

Under the agreement, Dubai SME will provide counselling and guidance to local entrepreneurs to introduce them to the legal requirements and dynamics of the labour market, while those small businesses buying into the scheme will also benefit from assistance with administrative services and be eligible for low-cost lending support and exemption from licensing requirements.

Meanwhile, the ministry is to offer technical support services to entrepreneurs working with Dubai SME through the programme, including running awareness and capacity-building courses, hands-on presentations and workshops.

Moves like these are in line with broader targets for the sector as the UAE looks to boost agricultural production, with one of the goals of the national Industry 4.0 strategy being to ensure water and food security through the deployment of bioengineering sciences and advanced renewable energy technologies.