The UAE media has given wide coverage to a recent statement by HE Sultan bin Saeed Al Mansouri, the UAE Minister of Economy, in which he confirmed that a draft federal law dealing with small and medium enterprises ("SMEs") shall soon be presented to the UAE Cabinet for approval.

The proposed federal SME law is a very positive and timely development which will go a long way in promoting the entrepreneurial skills of young and budding Emirati businessmen and women and help in further diversifying the UAE economy. This law is also expected to give a welcome shot in the arm to innovation, research and development among UAE businesses.

In the context of the proposed federal SME legislation, it is useful to take a look at the steps already taken in the Emirate of Dubai to boost the role of SME's in the UAE economy. The cornerstone of the Government of Dubai's commitment to the promotion of the SME sector was the enactment by HH Sheikh Mohammed, Vice President and Prime Minister of the UAE and Ruler of Dubai, of Law No. (23) of 2009 Concerning Mohammed Bin Rashid Establishment for Small and Medium Size Enterprises (the "Dubai SME Law"). The Mohammed Bin Rashid Establishment for Small and Medium Size Enterprises (the "SME Establishment") has been given the important responsibility of achieving the objectives of the Dubai SME Law.

The key goals that the SME Establishment aims to achieve are the enhancement of the status of the Emirate of Dubai as a hub for business, enterprise and innovation, the encouragement of innovative skills among Emirati youth, the fostering of their ability to undertake productive economic activities and the development of programs and initiatives aimed at enterprise development.

One of the major achievements of the SME Establishment has been the adoption of a comprehensive definition for micro enterprises and SMEs. A reference manual published by the SME Establishment, a copy of which can be accessed at the establishment's website ( www.sme.ae), not only provides the definition of micro enterprises and SMEs but also discusses the premises, features and industry-wise classification of such enterprises in the Emirate of Dubai. This reference manual is a very useful tool which can be relied upon by micro enterprises and SMEs to determine their eligibility for membership of the SME Establishment and for the grant of the various incentives contained in the Dubai SME Law.

The emphasis placed by the Dubai SME Law on Emirati youth as the pillars of SMEs is highlighted by the establishment of the "Hamdan Bin Mohammed Bin Rashid Program for Young Business Leaders" (the "Program") within the SME Establishment. The key features of the Program are as follows:

  • Provision of financial and technical support to members of the SME Establishment (the "Members");
  • Imparting qualifications, training and preparation to Members to assist them in undertaking economic activities and business management; and
  • Provision of consultations and studies on available opportunities and business.

In order to avoid imposing a heavy burden on Members by way of licensing fees and to encourage membership of the SME Establishment, the Dubai SME Law provides for a concession-based licensing regime. According to this regime, the only fees which can be levied under the Dubai SME Law on Members for each of the first three years of their membership of the SME Establishment is the amount of one thousand dirhams (AED 1,000). After the completion of three years' membership of the SME Establishment, the Members will make a payment of the standard trade licence fees which are imposed by the Dubai Economic Department on businesses undertaking economic activities in the Emirate.

Another key feature of the Dubai SME Law is the requirement that government agencies, institutions, and companies owned by the Government of Dubai or in which the Government of Dubai subscribes to more than fifty percent (50%) of the share capital shall:

  • Allocate 5% of their budget for goods and services to the purchase of goods and services to be provided by the Members; and
  • Give priority to Members when making bids or auctions with any of them, where the proposal made by the Member is not 5% higher or lower than the best proposal made, in terms of quantity and price.


All of the above incentives contained in the Dubai SME Law are aimed at boosting the participation of SMEs in the Dubai economy and encouraging Emirati youth to participate in the private sector as an alternative to the traditional option of employment in the public sector. It is expected that the lessons obtained from the enactment and implementation of the Dubai SME Law are likely to provide a firm basis for the future enactment of a federal law for the development of SMEs throughout the UAE.

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