SMEs account for 99.2% of businesses in Dubai

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Aden - Yasmin Abdel Azim - Dubai: Small and medium enterprises (SMEs) contribute nearly 50 per cent of Dubai’s gross domestic product while it accounts for 52 per cent of the total workforce in the emirate, according to the State of Small and Medium Enterprises (SMEs) in Dubai 2019, a report by Dubai SME, an agency of Dubai Economy.

The report unveiled on the sidelines of the second day of the UAE Economic Forum on Thursday said the SMEs in Dubai represent 99.2 per cent of the number of establishments in the emirate.

The publication is an authoritative study on the characteristics, performance and contribution of SMEs in Dubai, based on the measurement of a combination of economic, financial and business-related indicators, derived from key macroeconomic data, company financials as well as a comprehensive assessment of the state and characteristics of SMEs, operating in the emirate of Dubai.

The current state and characteristics of SMEs in Dubai have been assessed on the basis of a survey conducted on a random sample of 518 SMEs. The sample comprised enterprises belonging to a diversified cross-section of industries, under the 3 segments — trading, manufacturing, and services.

The total number of SME establishments in Dubai is estimated at 151,875 and has registered a 9 per cent compounded annual growth rate (CAGR) since 2008 when the SME business count was estimated at 72,695. Micro firms account for 61 per cent of the total business count in Dubai, followed by small and medium firms, that account for 36 per cent and 2 per cent of the total number of enterprises in Dubai, respectively.

The latest data showed the proportion of small businesses has doubled from 18 per cent in 2008 to 36 per cent in 2017. In terms of the segment-wise split, services account for a majority of SMEs (48 per cent), followed by trading (47 per cent) and manufacturing (5 per cent).

Growth trends

The trend in aggregate new business licences issued reflects a flat growth trajectory between 2015 and 2018. After a continuous period of decline between 2015 and 2017, new licences issued have grown sharply at year on year growth rate of 6.5 per cent between 2017 and 2018. The business licence renewal rate has grown at a moderate 3-year CAGR of 2.2 per cent between 2015 and 2018.

While new licences issued to manufacturing enterprises, grew at a CAGR of 5.9 per cent between 2015 and 2018, new licences issued to service enterprises grew at a sharp CAGR of 12.4 per cent during the same period.

Economic contribution

According to the latest report, the Dubai SME sector contributes an estimated Dh199.6 billion to the total Gross Value-add (GVA) of the Dubai economy, translating to a total contribution of 51 per cent to the economy. The most pronounced change in terms of segment contribution is in terms of Medium enterprises whose GVA contribution has gone up from 17 per cent in 2008 to 28 per cent in 2017.

The services segment is the highest contributor (47 per cent) to the aggregate Dubai SME sector GVA aggregate. The segment’s GVA contribution has gone up from 41 per cent in 2008 to 47 per cent in 2017. On the other hand, the proportionate GVA contribution of Trading and Manufacturing SMEs has reduced by 3 per cent each over the same period.

Job creation

Dubai’s SME sector employs 1.41 million workers, translating to a net employment contribution of 56 per cent to the Dubai economy. The total number of employees in the sector has grown by a CAGR of 6.4 per cent between 2008 and 2017, with proportionate employment contribution increasing by 14 per cent over the same period.

Compared to 2008, the proportionate employment contribution of firms across each of the Enterprise Size categories (Micro, Small and Medium) has gone up and is most pronounced in the case of small firms, whose contribution has gone up from 15 per cent in 2008 to 33 per cent in 2017. The Services Segment accounts for 58 per cent of the total employment in the SME sector last year. SMEs in Dubai generate Dh92.1 billion of compensation paid to workers, as compared to Dh77.3 billion paid by large enterprises.

While the overall SME employment contribution has gone up, the average employee headcount per firm has actually declined across the entire cross-sectional spectrum of ‘Segment’ and ‘Enterprise Size’, between 2008 and 2017.

Productivity

Labor productivity is calculated as an economic aggregate based on the estimation of Gross Value Add per employee. The productivity of the Dubai SME sector is estimated at Dh147,467; around 0.9 times the average productivity of large enterprises.

The study showed, in comparison with global benchmarks, the productivity of Dubai’s SME sector is 2.7 times that of Malaysia and 0.8 times of the EU-28 group. Singapore, which is globally ‘best in class’ in terms of productivity has around 219,000 SMEs, which, on average employ, 10 workers, contributing Dh239,501 each, of Value Add to the economy.

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