Entrepreneurship Policies in United Arab Emirates

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

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. 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.

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.

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.

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. 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. 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. 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%.

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