10% government contracts for UAE SMEs

UAE President His Highness Sheikh Khalifa bin Zayed Al Nahyan has issued Federal Law No.2 of 2014 for small and medium enterprises in which 10 per cent of the contracts by the government entities will be awarded to them, exempted them from certain customs taxes and also offered other incentives, according to a press statement issued by the Ministry of Economy.

Sultan bin Saeed Al Mansouri, UAE’s Minister of Economy, said classification of enterprises and businesses will be made by the Small and Medium Enterprises Council on the basis of the number of employees, annual returns and capital.

He said the SME law is in line with the vision of the leadership to create an appropriate business environment for UAE nationals to increase their presence in the business sector and enhance their role in supporting the sustainable development of the country.

The statement further said companies in which the Federal Government owns more than 25 per cent will award at least 5 per cent of their contracts to local SMEs.

The law states that products made by local SMEs should be given adequate space in exhibition abroad where UAE participates and also exempts them from customs tax for equipment, raw materials and intermediate goods for production purposes.

According to the statement, the law exempts them from bank guarantees that companies must pay per new worker. The Small and Medium Enterprises Council will coordinate with the Ministry of Labour to implement the regulations and conditions required in this regard.

Sultan bin Saeed Al Mansouri said the new law issued by the Sheikh Khalifa will play a significant role in promoting sustainable economic development in the UAE and strengthen its competitiveness regionally and globally. It will also support economic diversification and accelerate the country’s transformation to a knowledge-based economy that fosters creativity and innovation.

He added: "The law comes in line with the vision of the wise leadership of His Highness Sheikh Khalifa bin Zayed Al Nahyan, and His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, and their Highnesses Supreme Council members and Rulers of the Emirates, to create a conducive business environment for UAE nationals that enables them to establish their enterprises and contribute effectively towards promoting the sustainable development of the UAE and building on its many achievements.”

“In line with the objectives of the UAE Vision 2021, this is a modern law that will advance economic development based on the conviction that successful enterprises will increase the ability of the economy to achieve optimal performance, and in turn contribute to the social stability of the UAE’s nationals and residents.”

He added that entrepreneurs can benefit from the facilities offered by the Council including finance, marketing and promotion. The law will help simplify the procedures related to these services, in addition to reducing licensing costs, and enabling them to benefit from land granted to them for industrial or agricultural purposes.

Other benefits offered by the Small and Medium Enterprises Council include the allocation of adequate space in the exhibitions that the UAE participates in abroad to showcase the national products made by local small and medium enterprises. The law also contains additional privileges and facilities for small and medium enterprises that focus on research and development and innovation, in addition to supporting patent holders in the country.

The success, Al Mansouri said, of any country’s economy greatly depends on small and medium enterprises, and in the UAE, this sector contributed more than 60 per cent to the country’s GDP in 2011. Today, however, it represents almost 92 per centof the total number of companies operating in the country. As many as 300,000 UAE-based SMEs are currently providing over 86 per cent of employment opportunities in the private sector alone.

Under the new law, an SME Council will be established and SMEs will be categorised; the Cabinet will issue the executive regulations that will determine the frameworks and mechanisms regarding the facilities and the incentives offered to owners of SMEs. In addition, a national programme for SME’s will be announced later this year.

Emirati entrepreneurs falling under the ‘small and medium’ classification will benefit from a number of incentives offered by the Council including credit and funding facilitation, financing, marketing, and reduced licensing costs.

Furthermore, they will benefit from land grants for industrial or agricultural purposes, as well as suitable locations in international exhibitions to display their national products.

The law also includes additional facilities granted to SMEs that have special departments for R&D and innovation, as well as to inventors and patent owners in the country.
 

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