MGT 304-1 Small Business Management
Assignment: The Survival of UAE SMEs In A Post COVID-19 Digital Economy Instructor:
Read the article carefully, then answer the questions provided. /
- You must answer 2 questions in an essay format, Times New Roman, 12 points, 5 spaced.
- You must upload your assignment to the portal before the due date. Any late submission will not be accepted.
- You must state your name, ID, course name and instructor name in your cover page.
- Any assignment exceeding the plagiarism limit of 30% will get zero. If you have 21%-30% plagiarism, you will get 50%-point deduction on your overall grade.
- When you are uploading your assignment, do not copy paste the article or the questions.
- You can work on this assignment in a group of 3
- Analyze the challenges for UAE SME’s in a post Covid-19 period [minimum of 5 factors should be discussed] [600 words minimum].
- Explain how entrepreneurs can overcome these challenges to develop their businesses [discuss at least 4 consideration] [400 words minimum].
The Survival of UAE SMEs In A Post COVID-19 Digital Economy
Extracted from: https://www.entrepreneur.com/article/360387
Opinions expressed by Entrepreneur contributors are their own. This article has been co-written by Aditya Kumar Singh.
The UAE is a bountiful land where green businesses are viewed as favorable means to diversify an oil-rich economy and move away from petrochemical dependence.
It has already been repeated many times that SMEs represents more than 94% of companies in the UAE, employing about 86% of the country’s private sector workforce and generating 52% of the non-oil GDP. Plus, tech SMEs leveraging cloud computing and storage, artificial intelligence, machine learning, blockchain and the Internet of Things within strategic sectors have been key drivers of this development.
Then, the country faced a dual shock with the COVID-19 and the oil price cliff which affected the whole economic cycle. As per the PWC Middle East COVID-19 April 2020 update, SME participation and sector fragmentation was identified as one of the most vulnerable sectors.
In late April 2020, a report in the Financial Times noted that a staggering 70% of businesses in Dubai were expected to close within the next six months as the pandemic and global lockdowns ravage demand. Nearly three-quarters of those surveyed were small businesses with fewer than 20 employees. The same study also anticipated that business confidence will improve significantly in the coming weeks as businesses return to more normal operation.
Thanks to its leadership, the UAE has had one of the best turnaround stories with COVID-19. Beginning with complete remote work policy, the government was quick to respond by announcing a post COVID-19 strategy with a focus on six key sectors, including health, the economy, food security, education, the community and the government.
Below is diagram which shows the UAE measures during the COVID-19 crisis as compared to its GCC counterparts.
The UAE’s measures during the COVID-19 crisis as compared to its GCC counterparts. Source
: PWC Middle East COVID-19 April 2020
Let us look at some of these measures in detail:
- Easing cost of doing business, funding and advisory The UAE Ministry of Economy passed the Cabinet Resolution no. 20 of 2020 with the primal idea to reduce cost of establishing and conducting business slashing fees for 94 of its government service related to licensing, renewal, trademark etc. up to 98%, and in certain categories followed by an impact assessment survey to determine its effectiveness.
The Central Bank of the UAE [CBUAE] launched a phased targeted support program which reduced the capital banks hold for loaning to SMEs from 15% to 25% and mandated banks to open SME accounts within two days, with acceptable documentation and risk.
As per CBUAE’s July 18, 2020, data, banks had withdrawn AED43.6 billion of the AED 50 billion of the scheme with total amount to SMEs benefits reached AED4.1 billion and financial value of the support amounting to AED3.2 billion.
Additionally, the seven Emirates announced several interventions relieving SMEs and households through a combination of improved access to affordable credit, subsidies, fee exemptions, improved payment terms on government contracts, and additional waivers and rebates.
A noteworthy mention here was SHUAA Capital PSC which provided free expert advisory services and interest-free loans through regulated partners to UAE-based SMEs that had been directly impacted by COVID-19.
Related: A Guide For Listing Your SME On The Nasdaq Dubai Growth Market
- Consumer protection and business continuity boosting tourism and food security The government established a dedicated task force to ensure smooth and uninterrupted supply of consumer goods and enforced strict monitoring standards to prevent manipulative pricing Its Ministry of Human Resources and Emiratization also facilitated financial and administrative support packages ensuring wage protection, development of a virtual labor market and an insurance system as an alternative to bank guarantee.
Meanwhile, the UAE’s Ministry of Economy set up an interactive online tool to help companies address the impact of the COVID-19 pandemic by providing latest developments, precautionary measures for business continuity with suggestions on how to increase sales and overview of most “affected” vs “promising” sectors.
The launch of stimulus package for tourism sector with reduced operational costs of hotel establishments helped revive domestic tourism. Emphasis on security, safety and sterilization standards to enhance the confidence of tourists and reduce safety concerns helped restore international visitor traffic.
- An agile government for the agile entrepreneur empowered by Ccoud The UAE Prime Minister, in an unprecedented move reshuffled his cabinet in a shake-up meant to create a more “agile, flexible and speedy government”, and thus appointed a dedicated minister for Minister of State for Business and SMEs. The new Minister immediately met all stakeholders, confirming that SMEs were a top priority, and reiterated reducing the “cost of doing business, diversify financing options and facilitate banking “
Further, given the cloud functionality, small companies with the use of cloud can easily compete with corporate giants with their huge servers and capital outlays. Backed by UAE Cloud Strategy, SMEs suffering from data storage challenges can now boast of Microsoft established two UAE- based cloud data centers, one in Abu Dhabi and one in Dubai, to serve the Middle East market. A localized data center also ensures that customers’ data stays within the borders.
- Going local Dubai Expo 2020 awarded more than AED4.6 billion to SMEs since nearly 50% of all businesses registered with Expo 2020 and 56% of all Expo contracts have been awarded to this In addition, the government run District 2020 signed strategic partnerships with Dubai SME and Mohammed Bin Rashid Innovation Fund to support its global entrepreneur program Scale2Dubai which enables startups and small businesses access the District 2020 platform to expand locally and internationally, offering opportunities to connect with large enterprises and receive funding along with other growth enablers.
- The digital future for UAE startups In addition to the UAE-based Mohamed bin Zayed University of Artificial Intelligence [MBZUAI] empowering students, businesses, and governments to advance AI as a global positive force, HH Sheikh Mohammed bin Rashid Al Maktoum is the Vice President and Prime Minister of the United Arab Emirates [UAE], and Ruler of Dubai, created a dedicated Minister of State for Digital Economy and AI, allocated a cyber security chief and a committed Ministry of Industry and Advanced Technology.
Though the government is doing its part, SMEs need to realign their roadmaps by making technology investments in order to digitally connect with their customers, making way for interoperability, information transfer and ease of date sharing.
A key role here will be played by lenders through adopting machine learning and AI to help identify, evaluate, underwrite and monitor SMEs in a cost effective way, hence developing scalable lending portfolios that can yield substantial spreads with risk adjusted profitability than what banks currently earn on their consumer products.
A noteworthy example here is of ADCB which is working with fintech startups on “credit underwriting process, by performing document analysis and spreading of the financials, to open new channels of communication with ADCB customers.”
As we all head towards a gig economy with embedded finance, we are reminded of the famous words of Robert’s Frost: “Two roads diverged in a wood, and I took the one less traveled by, and that has made all the difference.