We are seeing realty firms shift to other activities

Mohammed Shael Al Saadi CEO, Licencing and Registration, Dubai Economic Development Council. (DENNIS B MALLARI)

Dubai's real estate and realty-related businesses have not only found ways to survive the downturn that hit the sector – but they have also started to make inroads into other sectors that offer better opportunities, said Mohammed Shael Al Saadi, CEO, Licencing and Registration at Dubai Economic Development Council (EDC). He denies that Dubai has seen massive cancellations of licences in 2009. "We haven't seen a big rise in cancellation and we haven't seen large establishments cancel their licences," he told Emirates Business.

"In fact, we are witnessing an increase because people are still testing the market. We are also seeing real estate companies shift to other activities they think are more profitable, such as foodstuff and beverages." The department expects to record further growth this year as it moves to remove remaining obstacles in doing business in Dubai. By the end of the first quarter of 2010, for example, incorporating a company in Dubai will be as easy as clicking a mouse.

"The removal of capital requirement led to the removal of three obstacles… 'Is this the only thing we've done to help the investors'? 'No'. We're doing more," Saadi said.


The number of new registrations in Abu Dhabi has doubled since the abolition of the rule requiring a start-up capital. Are we seeing the same thing happening in Dubai?

The aim to remove the requirement of initial capital is not just to have an increase in the number of companies. Our purpose was also to facilitate genuine investments in Dubai. After conducting studies we found that one of the obstacles facing investors planning to set up business was how to raise initial capital of Dh300,000. If a micro-, small- or medium-sized business would like to establish a company, it is not necessary they have Dh300,000. They can start with less than that and slowly grow. There was no other way to help these investors but to remove the initial capital requirement and make it as easy as the investors wanted. By eliminating that clause, we eliminated three related conditions. One was the letter required from the bank confirming that the investor did have Dh300,000; a document from the auditor and the last one was the smart chip, which is part of authenticating the licence. That one step led to the removal of three obstacles and now more people are opening their businesses with genuine information instead of making up the information. This in turn has helped us boost confidence in the market and that reflected in the World Bank report. Is this the only thing we've done to help investors? No. People are now no longer required to go to the EDC to register their company name. If the company is existing, that company is no longer required to go to the EDC office to renew his license – he can do that online. By the end of first quarter in 2010, any person can incorporate his company through the online system.

Do you see an increase in applications in 2009?

Keeping in mind that all economies in the world are going through a recession, if you compare 2009 to 2008, you would see a difference in company establishment. In 2007-2008 it was booming, now we have good growth but not like 2008 and 2007. We are in positive cycle.

How much growth has been seen?

I have a rough understanding… you can say it is in high single digits.

Casualties are natural in small- and medium-sized enterprise sector, which comprises 98 per cent of UAE firms. Analysts say seven out of 10 SMEs go under in the first three years.

Compounded by the fact that we are living in rough times, how many companies have gone under?

In 2007-2008, starting a businesses was at the upper limit and cancellations were near the low limit. For 2009, starting businesses was at the mean level and closing them was below the lower limit. There is a natural turnover but companies that were established in 2007-2008 were in real estate and real estate-related activities.

These companies were affected by what happened in the economy but if you look at normal activities – not purely real estate related, we did not see any decrease. In fact, we saw an increase because people are still testing the market. There is a move by real estate firms to shift to other activities they think have demand, such as foodstuff and beverages.

There were talks that Dubai saw massive cancellations. Is that true?

We have not seen big rise in cancellations and we have not seen cancellations by large firms. If you compare 2009 and 2005, you can see that there was a good correlation between those two. Year 2009 was similar to 2005.


PROFILE: Mohammed Shael Al Saadi CEO, Licencing and Registration, Dubai Economic Development Council

A former President of University of Dubai Alumni Association (UDAA), Al Saadi spearheads innovation to attract new firms to set up businesses in Dubai and making it easy for existing ones to renew their licences. He manages EDC's new online programmes, which aim to achieve greater effectiveness in performance and reduce cost both for the government and entrepreneurs.

 

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