The UAE government should consider establishing an “SME-friendly” procurement framework, according to a report.
The report, on the future of SMEs in the UAE by the Mohammed bin Rashid School of Government, said delayed payments and “strict official conditions” worked against small businesses and to the advantage of larger corporations.
The report recommended “systems that penalise late payment for SMEs, which can be a devastating existential threat for small companies and start-ups”.
“Despite official statements, practically, SMEs and start-ups signal a lack of consideration of local start-ups’ conditions when interacting with government entities,” said the report.
“Primarily, difficulties in releasing payments and meeting strict official conditions that effectively provide an incentive for larger corporations are seen as key barriers.
“A regulatory framework for federal and local government entities designed to improve payment terms to suppliers and service providers, facilitating on-time payment to SMEs, is necessary.”
The report said SMEs made up 60% of the UAE’s GDP and prior to the pandemic they represented 94% of companies operating in the country, employing more than 85% of the private sector workforce.
A survey found a quarter of SMEs believed they were at risk of closing within six to 12 months, while one in 20 (5%) said their industry “would never recover from the ramifications of the global pandemic”.
The report said 77% of SMEs did not rely on government tenders, and of those who had bid for government work, 45% had never won a contract.
“Most SMEs do not view the government as a source of revenue of business,” the report said.
“A review of the procurement restrictions would allow an extensive range of SMEs to apply for government tenders.”
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