A symbiotic relationship

While the global economic canvas currently looks faded and jaded, reeling under the severe impact of US slowdown (even the Asian tigers like China and India are feeling the heat), the UAE economy is merrily marching along.

It's not just the oil prices that deserve the credit for UAE's economic resilience - strong contribution from the country's mid-tier companies and SMEs across diverse sectors is playing an important role in keeping the UAE economy well-oiled.

Significant non-oil sectors such as construction and real estate, trading and retailing have emerged as the key building blocks for the country's strong economic state, and SMEs have had a critical role to play in all these sectors. SME development in the UAE has been boosted by the following factors:

• Fundamental monetary and economic solidity; historically lent by significant oil reserves

• Strategic geographical advantage of the UAE for international trade

• Vision, planning and execution capabilities of the country's leadership

• Positive regulatory guidelines

• Favourable economic and monetary policies such as no taxation, relative ease of money flow, capital account convertibility, etc

• Infrastructure development in the form of ports, roads, airports, rail, telecoms, and other utilities

• Establishment of numerous free zones and sector-specific special economic zones

• Constructive real estate initiatives and the resultant sectoral boom

• Low entry and exit barriers for businesses

• Skilled expatriate workforce from multifarious ethnic and geo-political backgrounds across diverse sectors.

• Significant broad-based international investment in the region

• Heightened consumerism (demand as well as supply) as a consequence of the above directly boosting the retail sector.

Thus, over the last decade, the above factors have attracted expatriate businesses and businessmen to set up new operations or divert existing ones out of the UAE.

In fact, the UAE top leadership and the government has been taking active steps in bolstering the Emirati entrepreneur participation in the self-employed segment through initiatives like the UAE entrepreneurship forum.

UAE's self-employed SME segment has in turn lent a ‘stable vibrancy' to the country's economy in the form of:

• Alleviating oil-related dependence of the economy

• Attracting foreign investment directly and indirectly across the breadth and depth of the economy

• Enhancing intermediation across diversity of economic activities which result in growing the money flow in the economy

• Diversification of the nation's workforce thus creating a multi-ethnic social fabric and cosmopolitan culture

• Introduction of best practices in the way business and business banking is done

• Creating a valuable section of ‘middle-class' businesses; therefore strengthening the economy.

Today, the SME market in the UAE comprises of about 250,000 entities involved in wholesale trading, retailing, manufacturing/processing and services with a total revenue pool of approximately US$1.5bn and growing at an annual rate of 25%.

It is thus a beautiful symbiosis - a coexistence and dependence that has lent a solid framework for the country's progress in the medium to long-term.

Mayank Upadhyaya is the head of products and Business Development, SME, Mashreq.

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