How the SME environment in the UAE can become a world leader

In the UAE the SME ecosystem has a long way to come until it fosters entrepreneur success stories like the US and Singapore, writes Paris Norriss.

Singapore is taking an SME emphasis and running with it. Reuters

The first scientific experiment I can remember was a simple bacteria growth test, where we took two Petri dishes and in one we put nutrient rich agar jelly with some moisture and kept it at a temperature of 35 degrees Celsius, the other we left at room temperature with less moisture. A week later we found that in one dish we could visibly see that bacteria had grown and in the other there was little trace. This was my first appreciation of how creating the right environment allows organisms to sprout, prosper and build their own societal colonies.

When tackling the tough question of how to create a world class SME sector in the UAE, I think of it much like a Petri dish – the answer is the environment.

Two countries that have impressed me when visiting and doing business are the United States and Singapore. Their business environment are different but equally admirable, and as a result their entrepreneurial success stories are plentiful. What has always struck me is how multidimensional a good entrepreneurial environment is, as it’s not simply a case of having good access to funding, but everything from the risk-taking culture of the people to how they celebrate success and reward entrepreneurship.

In the UAE, the SME ecosystem has a long way to come until it fosters entrepreneur success stories like the countries I mentioned. Though the importance of the SME sector is clearly recognised since it employs 42 per cent of the Dubai workforce and contributes 40 per cent of the GDP, the performance of the SME sector is far behind other countries. According to a report by Dubai SME, the productivity of SMEs in Dubai is only one-quarter that of Singapore and half of that of South Korea. In Dubai, only 23 per cent of SMEs have accessed bank finance in the past 5 years, compared to 25 per cent in the Mena region as a whole, 45 per cent in South Asia and 57 per cent in Eastern Europe.

This clearly outlines that the environment is hindering the performance of the SME sector and progressive measure need to be taken to become world class in this space. There are numerous quick-fix measures that the Government could apply to make things easier for SMEs such as pushing for shorter incorporation times, dedicating larger provisions for government procurement to go to SMEs and promoting more funding mechanisms such as crowdfunding and venture capital. However, the overarching question is: What steps can the Government take to design and engineer the best ecosystem for SMEs to prosper?

Dubai in particular has demonstrated visionary style leadership and has been successful at achieving many of these. For the SME sector in the UAE to compare with world leaders there must first be a vision specific for the SME sector that is countrywide rather than segmented into economic clusters and departments. A vision should be measurable and with a deadline, and is a starting point for any successful movement.

Here’s a thought – what about a connection point between policymakers and small business owners to periodically voice the challenges facing their business – a feedback forum to speak directly to government? A chance for the real-life difficulties to be exposed and voiced, since a problem can’t be fixed until it is recognised.

Recognising the problem is one part. Creating solutions is a whole other ball game, and while entrepreneurs are smart, capable people, for solutions to be well formed the expertise of people from other areas is needed. You can’t create financing solutions for SMEs without understanding the troubles banks face. Similarly you can’t change Government processes without understanding the challenges of government. So a think tank that includes small business owners as well as policymakers, thought leaders, financiers, academics and senior government leaders to ensure change takes place could be a key engine to foster the SME environment that would allow small businesses to become big businesses.

For the SME environment in the UAE to become a world leader, the relationship between small business owners and the Government needs to be close. The success of any good relationship always lies in great communication.

As Bill Gates has said, “I’m a great believer that any tool that enhances communication has profound effects in terms of how people can learn from each other, and how they can achieve the kind of freedoms that they’re interested in.”

Paris Norriss is an entrepreneur and partner in Coba Education, which provides educators to schools and institutes