Entrepreneurship policies in the United Arab Emirates

This article covers the best practices and movement for reform in entrepreneurship policies in the United Arab Emirates.

Startup, ease of entry

For-profit companies

Best practices

The World Bank's 2010 Doing Business Report, Reforming through Difficult Times, ranks the United Arab Emirates as 33rd on the overall Ease of Doing Business, out of 183 economies worldwide. This is up from 47 on 2009, and ranks third in the Arab World and listed among the Top 10 Reformers.[1] According to GEM 2009 Global Report, UAE has the highest increase globally in new startup activity 38% (Comparing 2006-2007) results to those in 2008-2009.[2]

Needed reforms

Non-profits, NGOs, hybrids

In the UAE NGOs are known as associations or societies for public welfare. Although the sector is relatively small, it includes a number of wealthy philanthropic organisations, which work internationally. Federal Law No. (2) of 2008 in respect of National Societies and Associations of Public Welfare defines and provides the framework for public welfare organisations operating within the UAE. This has replaced Federal Law No. (6) of 1974, and its amending laws, which previously governed public welfare societies operating within the country.[5]

Best practices
Needed reforms

Foreign ownership

Despite significant barriers in creating uniformed ownership laws in United Arab Emirates, the federal government has recently set a committee to draft the investment law of the country. Drafting this law has proven to be a time consuming job as each emirate in the country has different standards for foreign investment. This is because related laws such as land ownership, company formation and many others are different in all emirates.[6]

Best practices
Needed reforms

Finances

UAE loses 3 places in this year’s Doing Business 2011 report in the ease of getting credit-from 72nd to 69th place. Access to finance continued to be one of the leading constrains in starting a business in UAE.[10] In 2006 survey conducted by Global Entrepreneurship Monitor (GEM), entrepreneurs were forced to rely on their own social networks to source funding. Business angels, in the form of work colleagues, friends, neighbors and even strangers had been a major source of funding. Accessing to funds from commercial banks remained difficult and limited in UAE.[11] In the joint survey of Union of Arab Banks and the World Bank on ‘The status of bank lending to SMEs in the MENA region,’ the average share of bank lending to small and medium enterprises (SMEs) was low- only 8% of their total lending in the MENA region. The average share of SME lending is only 2% in the GCC in 14% in the non-GCC region.[12] According to the Dun &Bradstreet “UAE SME Lending Report” report in 2008, SMEs constitute 85% of the businesses in the UAE and banks generally reject between 50% to 70% of the credit applications. According to the report, 55% of the SMEs surveyed were not able to get the financing they needed. Interest rates for unsecured loan lending are around 15%.[13]

Best practices

Seed capital, angel investing

In October 2007, HH Sheikh Mohammed bin Rashid Al Maktoum announced the opening of the Mohammed bin Rashid Al Maktoum Foundation, which was built to support future generations in devising sustainable homegrown solutions to regional challenges by spreading knowledge throughout the region and fostering ideas and innovation. the MBR Foundation is mandated to create a wealth of regional job opportunities during the next decade. his was the first step towards diversifying and growing Arab economies, and helped pave the way for the creation of the region's first Seed Capital fund and Business Angel network, the Arab Business Angel Network (ABAN).[15]

IPOs

The Initial Public Offering (IPO) of stock is how many entrepreneurs and the financiers who back them make their money, rewarding the risk of investing their capital and years of very hard work. (merger or acquisition is another "exit strategy".) A challenge in UAE and across the Arab world is that capital markets are weak, unstable, and have thin trading volumes that exacerbate volatility and the influence of non-market forces.

Bankruptcy

Best practices
Needed reforms

Ranking for the Arab Countries without iran

Economies Ease of Doing Business 2009/10[10] Global Competitiveness Index 2010/11 (GCI)[17] Economic Freedom Score 2010[18] Prosperity Index 2010[19]Information and Communication Technology Index (ICT) 2009[20] Innovation System Index 2009[20] Human Development Index (HDI) Value 2010[21] Education and Human Resources Index 2009[20] Knowledge Economy Index (KEI) 2009[20] Press Freedom Index 2010[22]
Algeria 136 86 56.9 79 3.46 3.59 0.677 3.66 3.22 133
Bahrain 28 37 76.3 n/a 7.3 4.29 0.801 5.82 6.04 144
Djibouti 158 n/a 51.0 n/a 1.32 1.68 0.402 0.88 1.47 110
Egypt 94 81 59.0 89 3.92 4.44 0.620 4.35 4.08 127
Iran is not arab = persian 129 69 43.4 92 5.65 4.56 0.702 3.80 3.75 175
Iraq 166 n/a n/a n/a n/a n/a n/a n/a n/a 130
Jordan 111 65 66.1 74 4.95 5.59 0.681 5.62 5.54 120
Kuwait 74 35 67.7 31 6.96 4.98 0.771 4.93 5.85 87
Lebanon 113 92 59.5 84 5.35 4.53 n/a 4.92 4.81 78
Morocco 114 75 59.2 62 4.37 3.72 0.567 1.95 3.54 135
Oman 57 34 67.7 n/a 4.90 4.94 n/a 4.47 5.36 124
Qatar 50 17 69.0 n/a 8.06 6.45 0.803 5.37 6.73 121
Saudi Arabia 11 21 64.1 49 6.43 3.97 0.752 4.89 5.31 157
Syrian Arab Republic 144 97 49.4 83 4.43 3.17 0.589 3.10 3.09 173
Tunisia 55 32 58.9 48 4.88 4.65 0.683 4.08 4.42 164
United Arab Emirates 40 25 67.3 30 8.59 6.69 0.815 4.90 6.73 n/a
West Bank and Gaza 135 n/a n/a n/a n/a n/a n/a n/a n/a n/a
Yemen 105 n/a 54.4 105 1.67 2.67 0.439 1.79 2.20 170

Notes:

Notes

  1. Doing Business 2010, pp. 2,10
  2. GEM 2009 Global Report
  3. Doing Business in the Arab World 2010, p. 11
  4. Federal Law No 8 of 1984, the company law, CPI Financial
  5. NGO Law and Regulation in the UAE NGO Regulation Network
  6. Foreign Investment Law
  7. Law No.7/2006 Concerning Land Registration in the Emirate of Dubai Dubailand
  8. A New property Law for Dubai Cannonway Consultants Limited
  9. Haroon Mahmood: Three cheers for the passing of the Dubai property law 7days.ae
  10. 1 2 3 World Bank 2010, Doing Business 2011 Making a Difference for Entrepreneurs, Washington D.C. World Bank Group
  11. Global Entrepreneurship Monitor UAE 2006
  12. Roberto Rocha, Subika Farazi, Rania Khouri, and Douglas Pearce 2010, The Status of Bank Lending to SMEs in the Middle and North Africa Region:The Results of a Joint Survey of the Union of Arab Banks and the World Bank, The World Bank, Washington DC, The Union of Arab Banks, Beirut
  13. Dun & Bradstreet South Asia Middle East Ltd, D&B Business Insight Series, SME Lending in the UAE:2008
  14. World Bank 2008 "Doing Business 2009", Washington D.C. World Bank Group
  15. ABAN
  16. World Bank:reform UAE insolvency lawThe National
  17. Klaus Schwab, The Global Competitiveness Report 2010–2011, World Economic Forum
  18. The Heritage Foundation and Wall Street Journal,The 2010 Index of Economic Freedom
  19. The 2010 Legatum Prosperity Index, The 2010 Legatum Prosperity Index, Legatum Institute, United Kingdom
  20. 1 2 3 4 World Bank, KAM 2009
  21. UNDP 2010, Human Development Report 2010
  22. Reporters Without Borders 2010, 2010 World Press Freedom Index
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