The decision by the Abu Dhabi government to launch eight initiatives to boost growth and diversification away from oil will open up a new era of business growth in the emirate.
These initiatives will deliver much-needed relief and support for the market at a time of economic pressure from regional tensions and global trade wars.
The new measures, which form part of the Dh50 billion Ghadan 21 programme announced last year, will include more ways for businesses to handle administration processes online, a government-backed credit scheme administered through a local bank, a 30-day policy on payments to contractors, and a Dh4 billion fund for research and development.
The primary goal of the initiatives is to increase the contribution of the private sector by 5 per cent of the country’s gross domestic product (GDP) over the next three years.
This relatively short-term goal will lead to a long-term transformation to a non-oil, knowledge-based economy. The oil-producing countries of the world have seen the impact of relying on oil as a major economic driver. The initiatives will lead Abu Dhabi into a new era of economic growth where the private sector plays an increasingly important role.
The biggest impact immediately will likely come from the credit scheme guarantees, which will be administered by First Abu Dhabi Bank.
The small and medium business sector has been struggling due to the lack of available credit, while the banking sector has been concerned about extending credit to untested businesses during a trying economy.
The government’s involvement as an intermediary will support both sides, helping a significant bottleneck in the growth of this sector. SMEs account for 95 per cent of the registered business in the UAE and employ more than half of the country’s labor force. This initiative will make SMEs a dominant fixture in the economy.
Making sure these companies are paid via the 30-day payment policy is another important issue tackled by these new initiatives.
Governments can afford to take their time in payments, often in the name of ensuring accuracy, but small companies have struggled under this mechanism. Making sure that they have the liquidity to cover operating expenses ensures their ability to survive.