Whichever way you cut it, national budgets are important for businesses. After all, they can be of enormous benefit to SMEs and the wider business community.
Here in the UAE, the national budget embodies a government policy dedicated to helping SMEs establish themselves, grow and thrive, in a set of targeted policies designed to make the SME sector the backbone of the economy. As such, they’ve dramatically enhanced Dubai’s buzzing SME ecosystem, and its stated support for tech industries of the future such as artificial intelligence (AI) underlines the governments vision of a world-beating, knowledge-based, digital tech economy.
Both the long-term strategic plan, as well as the short-medium-term budget cycle, embody the government’s vision of the country as a major hub of innovation, digital technology and opportunity. After all, its Economic Agenda D33 sets out concrete plans to deliver on bold intentions to make Dubai one of the top 3 cities in the world to work, live and invest in.
But how, exactly, might SMEs benefit?
Thriving in a buzzing ecosystem: how will the budget directly & indirectly affect SMEs in Dubai?
In short, SMEs stand to benefit hugely from the recent budget.
The biggest measures include substantial financial measures in support of innovation and entrepreneurship, and it strengthens an already robust resolve to deliver sustainable growth. As a result, entrepreneurs and business founders now have an even greater chance of surviving and thriving.
With such a sizeable chunk of the government’s national income going to support new business innovation – 6% of the total – the budget serves to strengthen Dubai’s Vision 2030 and Economic Agenda D33, with the former seeking to foster further economic growth and tech innovation through entrepreneurship in tech, digital and AI sectors, whilst the latter lays down a roadmap to do nothing less than double Dubai’s economy by 2033.
As His Highness Sheikh Mohammed bin Rashid Al Maktoum noted, the 2024-2026 budget will “support our efforts to nurture homegrown entrepreneurship and create a high-growth environment for all sectors”. He went on to underline the fact that its financial sustainability, competitiveness and transparency will make Dubai even more appealing to investors and businesses everywhere on the look-out for new opportunities.
The recent budget has also allocated over 40% of its total spending to key infrastructure projects such as public-transport improvements, roads and airport development. That’s a massive AED 130 billion, and as Dubai’s government makes clear, it demonstrates to the private sector in the strongest possible terms, its intention to deliver yet more crucial strategic infrastructure projects through public-private finance. This presents SMEs operating anywhere along the construction and development value chain with huge opportunity to benefit from infrastructure improvements. What’s more, the wider economy will also see significant benefits from the economic activity they’ll generate.
A long history of support: what had already been done to super-charge entrepreneurship & help SMEs?
Dubai remains hugely competitive by comparison to other jurisdictions, especially for startups; by and large, startups are exempt from corporation tax, with a zero rating up to AED 375,000 per annum.
Recent further measures taken by government seek to significantly ease or remove tax contributions for SMEs. The Small Business Relief (SBR) initiative recognises the fact that SMEs must be able to scale up operations without being hindered by taxation in their early stages. This reflects the government’s determined and consistent pursuit of an economic policy whereby SMEs form the backbone of the country’s diversified economy. That’s why SBR, with certain caveats, provides an exemption from tax for businesses with revenues below AED 3 million.
For a long time now, business founders have enjoyed 100% ownership in the country’s fast-growing number of free zones – the UAE now boasts around 50 free zones – with the nation’s 500,000 SMEs employing more than 40% of its workforce. Astonishingly, they comprise a staggering 95% of all business entities. Dubai’s recent budget builds yet further on sustained efforts to diversify the economy and foster entrepreneurship and innovation. Those efforts have delivered impressive results, with SMEs now accounting for almost two-thirds of the non-oil GDP. What’s more, it’s thought that SMEs in the UAE will number around 1 million by 2030.
Development funds and agencies such as Dubai SME, Future Industries Lab and the Khalifa Fund for Enterprise Developers, among many others, continue to provide generous help and support for SMEs to further strengthen the sector’s ecosystem. In addition, the Ministry of Economy’s Entrepreneurial Nation initiative targets 20 startups for unicorn status by 2031. Expansion for SMEs into international markets is helped by a USD$100-million VC fund to stimulate the SME ecosystem. Established by Dubai’s Crown Prince Sheik Hamdan in 2021, its overarching goal is to super-charge the future success of the entire SME sector.
The 2024 budget: further indirect benefits for SMEs
Institutional agility and streamlined government services are becoming increasingly important facets of running a business for entrepreneurs and SMEs. It stands to reason, then, that anything that makes government services even more efficient is a welcome benefit. As just one example, the Department of Finance (DoF) has accelerated moves to innovate and streamline government services with the smart service-fees collection programme. This, along with its Financial Data Platform, enhances the ease of doing business in Dubai, and adds to the transparency and competitiveness of the public-finance ecosystem. In short, the budget contributes to the governments quest to further develop the creativity, excellence and innovation of the public-services sector.
Further indirect benefits come in the form of improvements to the lives of individual residents and families that have chosen to make Dubai their home; youth programmes for education and sport feature heavily, as does a renewed focus on education, health and scientific research. In total, the budget has apportioned around 35% of government expenditure – almost as much as the planned expenditure on the city’s infrastructure improvements – on a range of social-development themes, including care for women and children, senior citizens and those with disabilities (people of determination).
Yet another indirect benefit to individuals in the SME sector and their families is the announced expenditure on security, justice and safety in Dubai. A focus on enhancing the UAE’s track record and reputation as a safe and just place for its residents to live happily and work efficiently, is exemplified by the recent budget announcement that one-fifth of all government expenditure will be allocated to this sector.
Grow & thrive: exponential growth in a supportive startup ecosystem
Dubai’s latest budget focuses on direct and indirect support for sectors crucial to our transition to a phase of accelerated growth in a digital, knowledge-based economy supported by modern, well functioning and state-of-the-art infrastructure. But above all, it zeros in on the need to nurture entrepreneurship and the SME sector to further strengthen that backbone.
Given the budget’s significance and influence on the SME ecosystem, it’s perhaps appropriate that the last word goes to His Highness Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum:
“The 2024-2026 budget charts a financial roadmap for accelerating our ambitions to foster exponential economic growth and consolidate Dubai’s position as a global economic powerhouse. Guided by the vision of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, the new budget will play an instrumental role in achieving our goals to double the city’s GDP and propel it into the ranks of the world's top three urban economies.”
