DUBAI SME – An agency of the Department of Economic Development – Government of Dubai

1. Dubai Entrepreneurship & SME Development – Creating Real Value for Sustainable Economic Development

2. DUBAI SME – An agency of the Department of Economic Development – Government of Dubai Mission: Enhance the Economic Welfare and Prosperity of the People of Dubai Vision: Achieve Dubai’s economic development goals by 2015 for competitiveness and sustainable growth

3. The Context and Future - The New Economic Imperative Moving Forward: a different economic development pathFrom “Bigger” to “Better” “Better” path → Productivity Output (economic growth) “New” path → Innovation Need to move to new growth path “More” path → More labor and capital Dubai’s current situation in key sectors, e.g. • Real estate • Decreasing returns for each additional unit of labor and capital • Increasing macroeconomic challenges (demographics, environment, infrastructure) → Rising cost of growth Reaching optimal scale Reaching minimum scale Inputs (Labor and capital) 3

4. Our Vision, Mission, Roles & Core Initiatives Incubation, Idea Lab, Entrepreneur Capability Development, YEC Dubai SME 100, Gov. Proc. Prog., YBL Vision Dubai as a Global Center for Entrepreneurship and SME Development Corporate Governance, Access to SME Financing, Ease of Doing Business , IP Mission Roles Foster the development of a flourishing entrepreneurial culture and a competitive SMEs sector to support Dubai’s economic development Entrepreneurship & Entrepreneur Development SME Sector and SME Firm Development (Groom Dubai’s Top SMEs) 4

5. Our Roles: Dubai SME develops/enables the: - Entrepreneur as a person (domain knowledge, selling skills, business financial literacy, decision making, intelligent risk taking, business planning, forecasts, how to use different business tools, diagnostics, etc) - their business (commercial and corporate) – guidance & advisories in execution from legal set-up, formalisation & structuring, industry-based discussions, costs of execution, pricing, market demand, customer feedback)

6. Our Roles (cont’d) CEOs and Key Management Team Development – Investment & Financial Savviness, Human Capital Development, Innovation & Technology Adoption, International Orientation, Corporate Governance, risk management (via Dubai SME 100 Ranking Initiative) - SME Sector and Industry (ecosystem approach, access to finance, information on industry-based business opportunities , corporate governance for SMEs,)

7. Services for Entrepreneurs & SMEs Capability Development Market Access (GPP) Entrepreneur Relations Development Advisory Business Incubation Funding • Training Calendar • Diploma • (Entrepreneurship / Intilaq / Specialized) • 5% with local Gov. • 10% with Fed. Gov • Private Sector • TL subsidy • Labor G. • MoUs • Bus. Plan • Start up advisory • Idea Lab • Pre incubation • Incubation • Financial Advisory • Credit G.S • MoUs Policy Advocacy Outreach & Marketing (YBL, YEC, Road Shows, Exhibitions)

8. Attract, Support, Celebrate Ministry of Education Intelaq Program Financing Incubation Seed App Gov. Procurement Prog. StartUp Subsidies Seed Capital Less than 15 yrs 15 - 21 Entrepreneurs Start Ups Established SMEs

9. The State and Charateristics Of Dubai’s SME Sector

10. The Dubai SME Definition Services Trading Manufacturing Employees Employees Turnover Turnover Employees Turnover < = 20 & < = 9 & < = 20 & < = AED 3 mn Micro < = AED 9 mn < = AED 10 mn Small < = 100 & < = 35 & < = 100 & < = AED 25 mn < = AED 50 mn < = AED 100 mn Medium < = 250 & < = 75 & < = 250 & < = AED 150 mn < = AED 250 mn < = AED 250 mn According to DSC Database: • SMEs count for 95% of the total enterprise population in Dubai • SMEs employ around 42% of Dubai’s workforce • SMEs contribute 40% of Dubai’s value add

11. Share of SMEs in Number of Establishments SMEs account for 95% of the business establishments in Dubai, with a majority of these operating in the Trading sector Micro firms account for 72% of the total business count in Dubai, followed by Small and Medium firms accounting for 18% and 5% of the total business count, respectively. In terms of a sector-wise split, the Trading sector accounts for a majority of SMEs, followed by Services (35%) and subsequently by Manufacturing (8%) . Source: Dubai Statistics Center

12. Value-add by Dubai’s SMEs SMEs contribute 40% to the total value-add and 42% to the total employment in Dubai’s economy SMEs contribute 40% to the total value-add in the economy. Trading SMEs are the highest contributors to the total value add in the economy. SMEs contribute 42% to the total workforce. Majority of the workforce employed by the SMEs is in the Services sector. Source: Dubai Statistics Center

13. Productivity of Dubai’s SMEs (1/2) Productivity of SMEs in Dubai is comparatively lower in comparison to other trading and service economies The contribution of SMEs to gross value-add in Dubai’s economy is marginally lower than their contribution to employment implying that the labor productivity of SMEs is marginally lower than that of large businesses. Productivity of Dubai’s SMEs on a PPP basis is almost one-fourth of the productivity of Singapore-based SMEs and almost half the productivity levels of South Korean SMEs. Reasons for Low Productivity of Dubai’s SMEs Low focus of businesses on improvements / reengineering of business processes to improve efficiency Limited focus of businesses on training, development and up skilling of employees due to transient nature of workforce Limited adoption by businesses of advanced enterprise level ICT systems (ERP, CRM) Source: Dubai Statistics Center, SMEs in New Zealand: Structure and Dynamics 2011; Department of Statistics Singapore; Small & Medium Business Administration, South Korea

14. Productivity Level of Dubai’s SMEs (2/2) Trading SMEs reflect the highest productivity levels amongst all business sectors Trading SMEs reflect the highest productivity levels amongst all business sectors due to certain inherent characteristics of these firms in Dubai. Attributes Lower average employee headcount (6 employees) as compared to Manufacturing (23 employees) and Services SMEs (16 employees) Lower proportion of fixed costs (3-8% of total costs) as compared to Manufacturing (22-32%) and Service SMEs (15-40%) Ability to contain overall fixed cost overheads since a significant proportion of these businesses operate as re-exporters Source: Dubai Statistics Center

15. Capital Formation by Dubai’s SMEs Annual capital formation is the highest amongst SMEs in the Services sector Annual capital formation is highest amongst Service SMEs, followed by Manufacturing SMEs. The Transport & Logistics industry drives the propensity to invest in the Services sector. Source: D&B Analysis (based on financial data of a sample of 310 SMEs)

16. Summary – State & Characteristics of Dubai SMEs Dubai SMEs are highly oriented towards internationalization; however are low on orientation towards innovation and corporate governance. Scalability potential tends to be low, primarily due to high overheads High Dubai SMEs Moderate Low • Low refers to orientation on the specific theme indicated / reflected by up to 20% of the surveyed respondents • Medium refers to orientation on the specific theme indicated by 20-40% of the respondents • High refers to orientation on the specific theme indicated by more than 40% of the respondents.

17. Sector Orientation Towards key Dimensions International Orientation Trading Services Manufacturing Trading Innovation Services Trading ICT Adoption Human Capital Development Services Trading Corporate Governance Manufacturing Trading & Services Access to Finance Trading Services

18. Specific Focus Areas to Enhance Support for SMEs Enhance Support for Specific Aspects of SMEs’ Business Operations Moderate Dubai SMEs Low • Conduct training and workshops to create awareness and understanding of these themes • Provide engagement-level platforms to assist SMEs to get access to specialized consultants from specific fields (Productivity, HRM/HRD, process improvement, financial management; etc.) • Collaborate with other capability development stakeholders (such as banks, IFC, DEDC, etc.) to enhance support in specific areas and address bottlenecks (if any)

19. Entrepreneurship Ecosystem Dubai SME is currently providing support to SMEs at varied levels of SME support ecosystem Initiatives by Dubai SME Source: Accelerating Entrepreneurship in the Arab World, World Economic Forum

20. Key Gaps in the SME Support Ecosystem Although, improvements could be made at all levels of the SME support ecosystem, a few of these aspects require a higher focus Aspects of entrepreneurship ecosystem requiring high government focus

21. Strategic SME Development Initiatives Dubai SME Corporate Governance Dubai SME Access to Finance (Be Bankable, Be Investable) Dubai SME100 Ranking and Capability Development

22. Why are we doing this? In Dubai? For SMEs? What is the business and economic case? Enables a professional, quality and sustainable firm development Provides confidence and informed (better) decision-making leading to better bankability and invest-ability …enhances access to finance, raises equity value and reputation, enhances talent attraction, enhances market penetration… Dubai SME Corporate Governance Initiative

23. Confidence in lending and investment leads to sustainable business development leading to positive economic impact (hopefully more economic value creation with right policies) Hence, for SMEs: Better to start now, to start early Build foundations for long-term growth & sustainability Dubai SME Corporate Governance Initiative

24. Areas of Focus of Corporate Governance Code for SMEs Formalizing Corporate Governance policies and procedures Board of Directors Control environment (internal controls, audit and risk management) Transparency and Disclosure Stakeholder relations Family Governance

25. Dubai SME Access to Finance Demand Side Factors Supply Side Factors Psychological factors Information scarcity Quality of financial information Zero Tax demand of debts SMEs Banks SME Financing Costs of information verification Planning horizon Speed of getting finance Asset light businesses Underlying Structural Factors Legal Framework Information Infrastructure Auditing Standards Skip-Risk Nature of Economy

26. Dubai SME 100

27. Outreach to the larger Dubai SME segment (Using 100 SMEs to reach 72,000 SMEs) Spur SME performance and growth excellence via Performance Development Ranking Develop supply -side investable SMEs for encouraging demand-side investor market interest. Grow a stable of sustainable Dubai-based SMEs to have high degree of global orientation Make Dubai the destination to attract high-net-worth innovative and investable start–ups and SMEs at various stages of growth Dubai SME 100 - Strategic Development Goals

28. Employees & Turnover AED 250m Medium Graduation Threshold SME 100 to enable development of : Bigger and Better SMEs (“All Rounder”- innovative, productive, competitive, etc., ) Stable and Sustainable SMEs Graduate From Small to Medium to Large Dubai-based, globally-oriented companies Towards IPO/Trade Sale to Investors AED 100m Small Development & Graduation Goal Dubai SME 500 / SME Professionalization/ Grooming Programme Pipeline Micro Time

29. Evaluation Themes Overview of theme areas and key weights 25% 50% 25% 15% 15% 50% 10% 10%

30. ONE: Corporate Governance– Financial Governance, Financial Discipline Board and Advisory Networks, Tools and Diagnostics, success stories, development tracking TWO: Investment Capability Development – “Build your Investment Story”, Sourcing risk capital, investment readiness, tool and checklists, company valuation, IPO, success stories, links to international investors’ networks 5 Capability Development Tracks THREE: Internationalization, Branding and Global Marketing- building your global footprint, India and China strategy, branding & marketing

31. FOUR : Human Capability Development– CEO and Executive Team Leadership, Talent attraction and development 5 Capability Development Tracks FIVE: Innovation and R & D Capability Development – Building future value, commercialization of ideas, top-line revenue strategies , protecting and leveraging your IP

32. Components : 1. Seminars and Workshops 2. Diagnostic tools 3. Due Diligence (one-on-one with interested SMEs) 4. Case studies and experience sharing by CEOs’ 2013/2014 Initiatives

33. Success Stories

34. Size Dubai High Growth 50 Dubai Start Up 100 Dubai SME100 SME100 Growth Plan 3 years Time

35. Dimensions of Evaluation

36. Achievements (2002 – 2012) • More Than 13,000 entrepreneurs assisted through Development Advisory Services • More than 1650 SMEs facilitated to obtain licensing and registration services • More than AED 1.5 billion worth of Government Contracts facilitated through GPP. • 350 Start-Ups Incubated • 47 Projects funded through network of 8 Banks • 45 Service Providers co-opted into our Service Providers Network • 9,000 students with 2850 projects organized over 8 cycles of “Young Entrepreneur Competition” • 110 Arab entrepreneurs awarded the YBL Award in its 7 Cycles • 100 SMEs account –managed • 2,000 SME 100 Participated in our events /workshops, etc

37. Dubai SME 2nd 5-year Plan (2014 – 2018) Focus on Life Cycle Ecosystem Needs Be investable (Angel, PE, VC & IPO) Be Bankable (Capability Development, SME Annual Report, Best SME Bank, Financing Solutions for SME expansion) Dubai High Growth 50 Dubai Start-Up 100 Innovation and Research Development for SMEs Commercialization Strategy for research in UAE universities SMEs Development in Strategic Industries Dubai SME Financial Health Report

38. "Everyone dreams, but only the leader can change dreams into reality" His Highness Sheikh Mohammed Bin Rashid Al MaktoumVice President, Prime Minister of United Arab Emirates and Ruler of Dubai. Thank You