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

An Agency of the Department of Economic Development – Government of Dubai

DUBAI ENTREPRENEURSHIP & SME DEVELOPMENT – CREATING REAL VALUE

FOR SUSTAINABLE ECONOMIC DEVELOPMENT

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An Agency of the Department of Economic Development – Government of Dubai2

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

An Agency of the Department of Economic Development – Government of Dubai 3

Output(economicgrowth)

Inputs(Labor and capital)

Reaching minimum scale

Dubai’s current situation in key sectors, e.g.

• Real estate

Reaching optimal scale

• Decreasing returns for each additional unit of labor and capital

• Increasing macroeconomic challenges (demographics, environment,

infrastructure) → Rising cost of growth

“More” path → More labor

and capital

Need to move tonew growth path

“Better” path → Productivity

“New” path → Innovation

Moving Forward: a different economic development pathFrom “Bigger” to “Better”

The Context and Future - The New Economic Imperative

An Agency of the Department of Economic Development – Government of Dubai 4

Our Vision, Mission, Roles & Core Initiatives

SME Sector and SME Firm Development

(Groom Dubai’s Top SMEs)

Entrepreneurship & Entrepreneur Development

Foster the development of a flourishing entrepreneurial

culture and a competitive SMEs sector to support Dubai’s economic development

Foster the development of a flourishing entrepreneurial

culture and a competitive SMEs sector to support Dubai’s economic development

MissionMission

Dubai as a Global Center for

Entrepreneurship and SME

Development

Dubai as a Global Center for

Entrepreneurship and SME

Development

VisionVision

Roles

Dubai SME 100, Gov. Proc. Prog., YBL

Dubai SME 100, Gov. Proc. Prog., YBL

Corporate Governance, Access to SME Financing, Ease of Doing Business ,IP

Corporate Governance, Access to SME Financing, Ease of Doing Business ,IP

Incubation, Idea Lab, Entrepreneur Capability Development, YEC

Incubation, Idea Lab, Entrepreneur Capability Development, YEC


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)

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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,)

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Development Advisory

Development Advisory

Market Access (GPP)

Market Access (GPP)FundingFundingEntrepreneur

RelationsEntrepreneur

RelationsBusiness

IncubationBusiness

IncubationCapability

DevelopmentCapability

Development

Policy AdvocacyPolicy Advocacy

Outreach & Marketing (YBL, YEC, Road Shows, Exhibitions)Outreach & Marketing (YBL, YEC, Road Shows, Exhibitions)

Services for Entrepreneurs & SMEs

Bus. PlanStart up advisory

Bus. PlanStart up advisory

5% with local Gov.10% with Fed. Gov Private Sector

5% with local Gov.10% with Fed. Gov Private Sector

Financial AdvisoryCredit G.S MoUs

Financial AdvisoryCredit G.S MoUs

TL subsidyLabor G. MoUs

TL subsidyLabor G. MoUs

Idea LabPre incubationIncubation

Idea LabPre incubationIncubation

Training Calendar Diploma(Entrepreneurship / Intilaq / Specialized)

Training Calendar Diploma(Entrepreneurship / Intilaq / Specialized)


Less than 15 yrs

15 - 21

Ministry of Education

Entrepreneurs Established SMEs

Start Ups

Gov. Procurement Prog.

Intelaq Program

StartUp Subsidies

Incubation

Financing

Seed App

Seed Capital

Attract, Support, Celebrate


The State and Charateristics Of Dubai’s SME Sector

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The Dubai SME Definition

Micro

Small

Medium

Trading

< = 9

Employees Turnover

< = AED 9 mn&

< = 35 < = AED 50 mn&

< = 75 < = AED 250 mn&

Manufacturing

< = 20

Employees Turnover

< = AED 10 mn&

< = 100 < = AED 100 mn&

< = 250 < = AED 250 mn&

Services

< = 20

Employees Turnover

< = AED 3 mn&

< = 100 < = AED 25 mn&

< = 250 < = AED 150 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


Share of SMEs in Number of EstablishmentsSMEs 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


Value-add by Dubai’s SMEsSMEs 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.


Productivity of Dubai’s SMEs (1/2)Productivity of SMEs in Dubai is comparatively lower in comparison to other trading and service economies

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.

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

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.

Limited adoption by businesses of advanced enterprise level ICT systems (ERP, CRM)

Reasons for Low Productivity of Dubai’s SMEs

Source: Dubai Statistics Center, SMEs in New Zealand: Structure and Dynamics 2011; Department of Statistics Singapore; Small & Medium Business Administration, South Korea


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.

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

Lower average employee headcount (6 employees) as compared to Manufacturing (23 employees) and Services SMEs (16 employees)


Productivity Level of Dubai’s SMEs (2/2)

Attributes


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)


Summary – State & Characteristics of Dubai SMEsDubai 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

• 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.

Dubai SMEs

High

Moderate

Low


Sector Orientation Towards key Dimensions

Sector with Highest Orientation Sector with Lowest Orientation

Trading Services

Manufacturing Trading

Services Trading

Services Trading

Manufacturing Trading & Services

Trading Services

International Orientation

Innovation

ICT Adoption

Human Capital Development

Corporate Governance

Access to Finance


Specific Focus Areas to Enhance Support for SMEs

Moderate

Low

Dubai SMEs

Enhance Support for Specific Aspects of SMEs’ Business Operations

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)


Entrepreneurship EcosystemDubai SME is currently providing support to SMEs at varied levels of SME support ecosystem

Entrepreneur

Mentors/ Advisors

Equity Investors

Go

vern

me

nt

Pro

gra

ms

Banks

Infr

ast

ruct

ure

Lobbies & Entrepreneurial Organizations

Personal Enablers

Financial Enablers

Business Enablers

Environment Enablers

Source: Accelerating Entrepreneurship in the Arab World, World Economic Forum

Initiatives by Dubai SME


Key Gaps in the SME Support EcosystemAlthough, improvements could be made at all levels of the SME support ecosystem, a few of these aspects require a higher focus

Entrepreneur

Mentors/ Advisors

Equity Investors

Go

vern

me

nt

Pro

gra

ms

Banks

Infr

ast

ruct

ure

Lobbies & Entrepreneurial Organizations

Personal Enablers

Financial Enablers

Business Enablers

Environment Enablers

Aspects of entrepreneurship ecosystem requiring high government focus


Strategic SME Development Initiatives

•Dubai SME Corporate Governance

•Dubai SME Access to Finance (Be Bankable, Be Investable)

•Dubai SME100 Ranking and Capability Development

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Dubai SME Corporate Governance Initiative Why are we doing this? In Dubai? For SMEs? What is the business and economic case?

1.Enables a professional, quality and sustainable firm development

2.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 - 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


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

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Quality of financial

information

Informationscarcity

Costs of information verification

Supply Side Factors

Zero Taxdemand of

debts

Demand Side Factors

Psychological factors

Planning horizon

Asset light businesses

Legal Framework

Underlying Structural Factors

Information Infrastructure Auditing Standards

Skip-Risk Nature of Economy

BanksSMEs SME FinancingSME Financing

Speed of getting finance

Dubai SME Access to Finance


Dubai SME 100


Dubai SME 100 - Strategic Development GoalsOutreach 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


Development & Graduation Goal

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

Micro

AED 100m Small

AED 250mMedium

Dubai SME 500 /

SME Professionalization/ Grooming

Programme

Employees & Turnover

Time

Graduation Threshold

Towar

ds IP

O/T

rade

Sale

to In

vest

ors

Pipeline


Evaluation ThemesOverview of theme areas and key weights

50%

50%

25%

25%

15%

15%

10%

10%


5 Capability Development Tracks

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

THREE : Internationalization, Branding and Global Marketing - building your global footprint, India and China strategy, branding & marketing

ONE: Corporate Governance – Financial Governance, Financial Discipline Board and Advisory Networks, Tools and Diagnostics, success stories, development tracking


FOUR : Human Capability Development – CEO and Executive Team Leadership, Talent attraction and development

FIVE : Innovation and R & D Capability Development – Building future value, commercialization of ideas, top-line revenue strategies , protecting and leveraging your IP

5 Capability Development Tracks


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


Success Stories


SME100 Growth Plan

3 years Time

SizeDubai

Start Up 100 Dubai SME100

Dubai High Growth 50


Dimensions of Evaluation Start-Up 100 Dubai SME 100 Dubai High Growth 50

“Lions”

1. Quality of Business Plan 1. Financial Growth Performance

1 Sustainable Financial Growth (xx % CAGR)

2. Execution Premium 2. Financial Soundness 2 Financial Soundness (Key Ratios)

3. Customer engagement Strategy and Impact

3. Innovation 3. Corporate Governance & Investment Readiness

4. Scalability Potential 4. Human Capital Development

4. Emerging industry leader & market share

5. Innovation – Ability to shape new markets with products, new business models, etc

5. Corporate Governance

6. Ability to build new teams and partnerships

International Orientation


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


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

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"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

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

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