New Dubai stimulus to provide ample liquidity
It is estimated that liquidity with the SME sector will improve in billions of dirhams through reduced costs of doing business.
Businessmen in the UAE on March 6 lauded the newly-announced five initiatives by Dubai government, to support the small and medium enterprises (SMEs) sector and public-private partnerships which will provide ample liquidity for the smaller firms, and also ensure their sustained growth in coming years.
It is estimated that liquidity with the SME sector will improve in billions of dirhams through reduced costs of doing business, lower insurance charges, quicker payment for government supplies and increased allocation of government projects to the smaller firms.
Krishnan Ramachandran, CEO, Barjeel Geojit Financial Services, said SME's have been given another lifeline by way of an economic package which is focused on providing the much-needed liquidity into their business, lowering their cost for doing business (primary / performance insurance) and above all a preferential allocation of 5 per cent of the project size for SME's in government projects.
"All these measures are expected to vastly improve the business sentiments and growth of the SME's in Dubai. These timely initiatives announced by the Department of Finance is likely to have a positive multiplier effect across of sectors of the economy," said Ramachandran.
SME in Dubai constitute nearly 95 per cent of businesses, contributing to nearly 40 per cent of the GDP with a significant workforce of around 43-45 per cent.
Nimish Makvana, senior partner, Crowe MAK and Past Chairman ICAI - Dubai Chapter, said SMEs sector plays a significant role for growth of UAE economy and in particular the Dubai economy.
"The second economic package will lift the business sentiments of SME enterpreneurs. As we are progressing closer to Expo 2020, this initiative will give government capital projects worth up to Dh400 million, to SMEs and will strengthen and enhance the confidence of SME business owners. It will also reduce the financial burden with better payment terms and will definitely increase liquidity and generate growth," he added.
On March 5, Dubai's Department of Finance announced five initiatives to improve liquidity for SMEs sector. In the first phase, the government had taken a host of initiatives such as freezing school fee hike, reducing certain government fees, waiving off fines etc. during 2017-18 to reduce cost of doing business and supporting the businesses in the emirate.
Under the second phase, the first initiative was taken to pay SMEs that supply services and goods to government in 30 days instead of 90 days, which will provide Dh1.6 billion additional liquidity for the sector.
Secondly, the primary insurance for SMEs was reduced to the range of 1-3 per cent instead of 2-5 per cent, which means minimum primary insurance was reduced from Dh40 million to Dh20 million while maximum primary insurance was reduced from Dh100m to Dh60m.
Thirdly, the government reduced final insurance rate, known as "performance insurance", from 10 per cent to 5 per cent on all supplies.
Fourthly, the government will allocate 5 per cent of government capital projects to SMEs, which will allow the companies to get projects worth up to Dh400 million.
Finally, the fifth initiative covers allocation of projects Dh1 billion for the public-private partnerships to attract the private sector investment.
Pushkar Thakkar, founder and CEO, Delmont Fire & Safety, believes this is a positive step towards encouraging & supporting SMEs especially during this extremely challenging business environment. It is extremely important for SMEs to have a positive cash flow to survive & sustain with tight profit margins of a small business. This move will further boost small business and entrepreneurs to start and grow an enterprise.
Shivam Goyal and Shipra Khurana, Founders Mitra, the initiatives launched by the Dubai government are not just a welcome move for the existing businesses but also would encourage new entrepreneurs to set up their own business in this dynamic country.
"Efforts such as grace period on payments, subsidising the insurance rates and inviting SMEs to participate in public sector projects is a wonderful move. This would increase partnership of private and pPublic sectors on various fronts and both would add to the growth of the country," they said.
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