SMEs to become more competitive

14 April 2014

Several planned initiatives should improve conditions for SMEs

With the overwhelming majority of the region’s economies dominated by large companies, it can prove challenging for small to medium-sized enterprises (SMEs) to keep up.

But new government regulation is set to help SMEs increase their competitiveness, the UAE being the latest to unveil a law that will improve smaller firms’ access to federal contracts.

The law, which requires that federal government entities award at least 10 per cent of purchasing, service and consultancy contracts to SMEs, will guarantee more work for the sector and help keep costs down by exempting them from a range of taxes and fees.

That is set to strengthen an existing government procurement program in Dubai, which since 2002 has provided SMEs with AED1.5bn ($409m) worth of contracts.

Aside from putting SMEs in a better position to compete with larger companies, which have a cost advantage through economies of scale, there is a push to improve financing for SMEs.

In addition to local banks’ lending programmes for SMEs specifically, governments are planning to put measures in place that will further increase their ability to meet their capital needs.

In Oman, the central bank plans to mandate all banks to lend a minimum 5 per cent of their credit portfolios to SMEs by the end of 2014.

And in Qatar, authorities are preparing local SMEs for stock market debuts by funding the advisory fees associated with listing in addition to planning to lower the capital requirements to form a new company from QR200,000 ($54,050) to a mere QR100.

Combined, these initiatives are poised to help diversify the business landscape across the GCC and, as SMEs mainly operate in areas such as manufacturing, services and trading, further develop their non-oil economies.

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