UAE issues new law to promote SMEs

13 April 2014

Decree improves access to federal government contracts and provides tax breaks

The UAE has issued a new law to promote small-to-medium enterprises (SMEs) by improving access to federal government contracts and customs tax breaks, the country’s economy minister announced in Abu Dhabi on 13 April.

The law requires that federal government entities award at least 10 per cent of purchasing, service and consultancy contracts to SMEs. Companies that are more than 25-per-cent owned by the federal government must commit to awarding 5 per cent of contracts to SMEs.

Under the law, SMEs will be exempt from customs tax for equipment, raw materials and intermediate goods for production purposes. They will also be exempt from bank guarantees that companies must pay for each new worker.

“This will help improve competitiveness of SMEs, create new job opportunities for UAE nationals and encourage them to work in this sector,” said Economy Minister Sultan bin Saeed al-Mansouri.

The decree falls in line with the UAE’s Vision 2021 strategy, which aims to provide more jobs to UAE citizens in the private sector through industrial diversification and decreased economic reliance on oil revenues.

According to the ministry, SMEs contributed more than 60 per cent of the UAE’s GDP in 2011 and today represent almost 92 per cent of the total number of companies operating in the country.

More than 92 per cent of workers in the private sector are employed by up to 300,000 UAE-based SMEs.

The new law is expected to be enacted three months after the executive articles are complete, which Al-Mansouri expects to happen within the next three months.

Al-Mansouri said Emirates Development Bank would use 10 per cent of its annual financing to fund SMEs.

A national programme for SMEs is expected to be announced later this year, under which Emirati entrepreneurs falling under the SME classification will receive several incentives including credit and funding facilitation, financing, marketing and reduced licensing costs.

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