Lockdown Economy UAE

The COVID-19 pandemic has had a huge impact on countries across the world. It has significantly impacted the United Arab Emirates economy. The Global Entrepreneurship Monitor reported that at the outbreak of the pandemic, many entrepreneurs had to lay off staff and that this could impact the future development of businesses [1]. Furthermore, data from the International Monetary Fund highlights how UAE’s GDP decreased from USD 421.14 billion in 2019 to USD 354.29 billion in 2020 [2].

The huge decrease in GDP that occurred in 2020 was caused by the lockdowns imposed in the UAE and across the world. These lockdowns meant that people could not travel to and from the UAE, they could not interact with services as they did before COVID-19. To resolve this, the UAE government implemented several policies in an attempt to revive the economy. They included the reduction of taxes in the private sector by the government, provision of consultations for Micro, small and medium-sized enterprises (MSMEs), and reductions in water, electric, and rent costs [1]. With these measures, there were positive signs of growth in the UAE, but the MSMEs had other problems that needed to be addressed. 

This article shall explore three challenges that MSMEs in the UAE have faced throughout the pandemic. These challenges are drawn from the interviews conducted by the Think Tank AlterContacts as a part of the Lockdown Economy Initiative. Each challenge shall be explored, and there shall be a direct call to action for either a local or national government intervention, or for an international body to provide assistance. These calls to action could ensure that entrepreneurship in the UAE is able to pick itself back up to survive and provide innovative ideas and concepts to empower the economy and society.

Struggling to reach customers

Many small and micro businesses struggled to create awareness among customers and the public even before COVID-19. With the pandemic and the national government attempting to prevent further outbreak cases and revitalize the economy, this issue has broadened. As a result, small and micro businesses have been struggling to gain visibility for their products and services. Combined with households not spending as much as before, it led to stagnation of the business and loss of income. 

During the Lockdown Economy interviews, small and micro businesses owners mentioned that besides the efforts to build brand awareness, they also had to invest in educating customers about the sector they work in [3], the goals they are trying to achieve [4], and even the fact they exist as a business [5]. That in turn meant that MSMEs were not able to develop further.

Call to Action: The UAE should promote small and micro businesses becoming members of representative organizations and unions

For MSMEs to create awareness about their sectors and the issues they encounter, the UAE should invite them to join organizations that benefit both parties. Unionization appears to be a slow process, particularly among the self-employed in the UAE, with only 102 thousand being union members [6].

The UAE had traditionally a limited number of trade and representative organizations but slowly began to allow more professions to organize unions with government lobby that could address workplace issues [7]. By highlighting the needs of its members to governments, business support organizations become vital for the growth of MSMEs [8].

However, if the UAE were to expand its current policy and allow MSMEs to create and join unions and representative organizations, it would help both parties immensely. Small and micro businesses would draw attention to the issues they face, while the government could use these insights to create tangible change.

Struggling to find ways to collaborate meaningfully 

The pandemic put a swift halt on any attempts for small and micro businesses to collaborate with other organizations due to the numerous lockdowns, restrictions, health and safety measures that were enforced to prevent further COVID cases. 

The interviewees in the UAE noted the difficulty in establishing collaboration with sectors they want to reach. One interviewee highlighted the desire to collaborate with more schools [4], while another tried to propagate their research [5]. Overall, none of the businesses knew how this could be achieved in the "new normal". It meant they could not grow further and develop as they wanted and needed to secure a future.

Call to Action: The UAE Government could utilize MSMEs to develop local economies as a way to facilitate collaboration and address key issues

An important way to facilitate collaboration among small and micro businesses is to focus on a local level. Mckinsey's recent survey of consumer habits in the UAE revealed that convenience was a strong motivator to shop and consume at a new place. In particular, 32% wanted more accessibility from their homes [9]. The UAE has begun to do this with their Abu Dhabi Local Content Program which aims to develop the local economy by reducing banking fees to incentifies MSMEs [10]. 

However, schemes like these need to be expanded in terms of geography. Rather than just providing financial aid, the UAE government policies can be developed to increase collaboration and address issues that different areas are facing. The report by the International Trade Centre highlighted that economies become resilient through communicating and sharing information to assist and help society [11]. Within the policy, this could include developing systems to share research with government departments or establishing partnerships to solve issues of local areas.

By taking a more considerate approach to collaboration, the UAE can ensure that small and micro businesses are not just growing, but are also tackling key local issues to help the economy thrive.

Developing MSMEs further

Like many other countries, the UAE experiences gaps in terms of what it is capable of doing to support the needs of its inhabitants. Gaps include the ability to deal with certain health issues or the ability to grow certain in-demand crops. This may be due to a number of factors such as the climate of the region, the expertise available in the country, or cultural factors. Throughout the pandemic, gaps such as these became wider as there was no option to outsource supply chains, and travel was halted for an extended period of time. With this, the UAE was not able to provide crucial services to its inhabitants. However, many MSMEs struggled throughout the pandemic to build trust with customers to help them engage with their services. 

One interview revealed that customers still needed further education on a brand’s produce [4], while other interviews showed that virtual or remote services made it harder for brands to build trust with consumers [5] and put their names at risk [3]. This overall hindered the growth of the business.

All small business owners interviewed by Think Tank AlterContacts in the UAE were women. Research by the European Commission has shown that women have been particularly hit by the pandemic due to additional childcare responsibilities, closure of schools - factors that have impacted some of the individuals in the interviews [12]. Many of the interviews also show that women who own MSMEs operate in less profitable areas when compared to men; or experience little growth when working in areas traditionally operated by men [13]. This is also emphasized by the recent research demonstrating that the female-owned MSMEs in the UAE were distributed across traditionally female-owned sectors, with 22% working in the food and interior design and others across cosmetics and beauty [14].

Call to Action: The UAE Government needs to have more targeted efforts for female-owned MSMEs to allow them to develop further.

Current UAE policies have included support for MSMEs via the Khalifa Fund, which has a range of services such as business counseling, financial advice, government help, and training [15]. These measures have mainly been targeted at male businesses owners and are not focused enough on the unique struggles that female business owners face. The research mentioned earlier noted that support given by the UAE needs to be specific enough to help female entrepreneurs grow and develop their businesses [14].

This could include ensuring that institutions provide training and development for female entrepreneurs about the unique gender-based challenges, such as their access to finance and loans, encouraging them to gain skills in areas that have traditionally been dominated by men, and providing guidance and support on how they can address key issues. Policies that take into account the unique experience of female-owned MSMEs will ensure that they grow and develop much further than through generic policies that are currently in place.

CONCLUSION

As the United Arab Emirates is recovering from the effects of the pandemic, it has been revealed that MSMEs have offered much to ensure that the economy can remain stable. The pandemic has also drawn attention to gaps within wider government policy. When addressed, they can ensure that MSMEs remain and grow to become a significant contributor to the local and nationwide economy.

Written by Dev Singh Bahra, a United Nations online volunteer 

Edited by Steffi George Manavalan

Editor-in-Chief - Julia Skupchenko

REFERENCES

1 - Global Entrepreneurship Monitor, Diagnosing COVID-19 Impacts on Entrepreneurship: Exploring Policy Remedies for Recovery

2 - Statistica International Monetary Fund World Economic Outlook Database April 2021

3 - Think Tank AlterContacts, Lockdown Economy initiative, Lockdown Economy UAE with Pediatric Sleep Consultant Rim Obeid. Available at https://www.youtube.com/watch?v=SKUazPueciI 

4 - Think Tank AlterContacts, Lockdown Economy initiative, Lockdown Economy UAE in a Yoga Studio for Children and Teens with Faten Badreddine. Available at https://www.youtube.com/watch?v=YFFk9RGLtlI  

5 - Think Tank AlterContacts, Lockdown Economy initiative, Lockdown Economy UAE in a Hydroponics Vertical Farm with Nikita Patel. Available at https://www.youtube.com/watch?v=zYU1PqMsGQA

6 - International Labour Organisation, Trade Unions in the Balance

7 - International Labour Organisation, UAE https://www.ilo.org/beirut/countries/united-arab-emirates/WCMS_533531/lang--en/index.htm

8 - International Trade Centre, COVID-19: The Great Lockdown and its Impact on Small Business, xvi

9 - McKinsey and Company, Survey: UAE consumer sentiment during the coronavirus crisis, March 29 2021

10 -  https://www.added.gov.ae/Our-Initiatives/AbuDhabi-Local-Content-Program

11 -  International Trade Centre, COVID-19: The Great Lockdown and its Impact on Small Business, p.43.

12 - European Commission, Social protection and inclusion policy responses to the COVID-19 crisis. An analysis of policies in 35 countries, 28

13 - World Bank, Innovation, Technology & Entrepreneurship Policy Note, Supporting Growth-Oriented Women Entrepreneurs: A Review of the Evidence and Key Challenges, 3

14 - Huda Saleh Abdalla AlKhayyal Al-Ali, The Experience of Female Entrepreneurs in the United Arab Emirates, 112.

15 - Small and Medium Enterprises (SMEs) in the UAE https://u.ae/en/information-and-services/business/small-and-medium-enterprises/small-and-medium-enterprises