The UAE needs more small and medium-sized enterprises (SMEs) focused on products and services in the run-up to the World Expo 2020, regional experts say.

While there are massive plans in construction and tourism, the UAE will also need to develop other industries, according to Dave Harris, sales and marketing director at Dubai-based RSA Insurance.

“With the event expected to attract over 20 million visitors in the next six years, a 10 per cent increase, there is a need for the development in sectors such as food and beverage, waste disposal management, transportation and goods supply,” he says.

Currently, the UAE hosts about 230,000 SMEs based in the UAE, mainly operating in food and beverage, travel and tourism, and construction and oil field services.

In Dubai, the trading sector accounts for 57 per cent of SMEs, followed by the services sector with 35 per cent. The manufacturing sector accounts for only 7 per cent of SMEs in the Emirate and is another area of where start-up businesses can thrive, according to Harris.

A study from Abu Dhabi’s Khalifa Fund for Enterprise Development, which supports and provides financing for local businesses in Abu Dhabi, also shows that the emirate has a need to develop the engineering and construction, tourism, information communications technology, retail, food and beverage, petrochemical and metals sectors.

“The Expo 2020 theme is Dubai Smart City and this is the differentiation that Dubai is working on; hence I believe start-up ideas in the ICT sector could benefit and largely contribute to the Expo 2020,” says Saer Imad, Khalifa Fund.

Hari Kesavan, chairman and founder of entrepreneurship and private equity consultancy Unipropitia, says there are opportunities to develop more specialised services for tourists.

“I believe the a start-up could benefit from the expo for instance by offering the ability to provide a mobile number in Dubai even before the tourists land in Dubai by bundling it as an enhanced service along with ticket booking or visa approval,” says Kesavan. “If this mobile application bundled with the concept if ‘soft sim’ technology is made available, it will help several Dubai retailers and other service providers to target deals to the tourists. Additionally, it will help the government to keep track of every tourist in the UAE.”

However, experts warn that the price of starting up a business has increased compared to previous years.

Inflation in the UAE is expected to average about 2 per cent in 2014, compared with 1.1 per cent last year, which will mainly affect wage costs and rental prices.

In Dubai, the cost of office space rentals has increased by about 50 per cent over the past two to three years, according to data from Dubai SME.

“Based on the number of start-up projects funded by us, we can easily notice an increase in cost particularly over the past two years. The main increases are rent, fittings and decoration, fees associated with new government regulation and a slight increase in wages,” says the Khalifa Fund’s Imad.

Government-supported initiatives such as the Khalifa Fund and Dubai SME and local banks are helping local entrepreneurs meet some of their financing needs, though there is a need for more funding, which could come from private equity or angel investors.

In addition, the new SME Law, which is expected to be approved in the coming months, will help SMEs by exempting them from a range of costs and fees.

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