What Are The Barriers For SMEs Entering The Abu Dhabi Market?
26th May 2015
Gateway Group's CEO, Jenny Hunt, was interviewed by The National to share her experiences of SMEs setting up in Abu Dhabi and the obstacles that they face. The below article was featured in The National on 24th May 2015. To read the original article, CLICK HERE.
Jenny Hunt is the founder of the Gateway Group of Companies, a business she launched last September to steer companies through the process of setting up in Abu Dhabi. Before going it alone, the British entrepreneur, 38, worked in company formation in Abu Dhabi for two years - as chief executive of Both UAE, and as general manager of Links Group. Here she discusses the challenges SMEs face when starting up in the capital.
Why do SMEs use your services rather than setting up themselves?
It’s about knowing the process involved – which counters of government departments to go to and who to speak to. Unless you’ve got a personality that doesn’t mind running around in circles, it’s a lot quicker to pay somebody to do it for you. The people in the Department of Economic Development (DED) know me, which is critical in checking out activities for trade licences. We also provide a corporate sponsorship platform, which mitigates the risk of appointing an unknown individual as the local partner. I meet a lot of individuals who have set up businesses here incorrectly. The licence isn’t worth what they’re paying for it if it doesn’t cover them to do what they’re doing.
What costs are involved?
It is expensive to set up here. For an onshore company, the minimal amount around Dh100,000 but there are so many variables, such as your local sponsor agreement. Each case is bespoke. Foreign companies get frustrated because we have to do quite a bit of research to put together a specific proposal. On top of that, each trade licence has to have a commercial premise, which is dictated by the activity the business is involved in. The price of the premise depends on whether it’s an office or warehouse, its location and size. Each case is bespoke. Foreign companies get frustrated because we have to do quite a bit of research to put together a specific proposal.
Which sectors make the most inquiries about setting up in Abu Dhabi?
Engineering and oil and gas sectors. They can also be in obscure fields, such as a recent one to set up a fortune-telling business – which is totally illegal here. PR is becoming quite popular.
What’s the first step a new company should take?
Do your market research. It scares me how many companies negotiate contracts without looking into how the business environment will affect them here. I get an inquiry every week from a company which was awarded a contract and then found out they need a trade licence to operate.
Should companies always set up in a free zone?
Free zones are more attractive because businesses can retain 100 per cent ownership. It’s not always cheaper though. For companies that could operate in a free zone or onshore, it’s always worth checking what’s more cost-effective. In December, a client wanted to be based in an Abu Dhabi free zone. They needed Supreme Petroleum Council approval to work directly with the national oil and gas companies. For that, they could set up at Masdar free zone. But in relation to the Supreme Petroleum Council approval Masdar has a minimum requirement of a 100 square metres for office space at a cost of Dh240,000 a year. This company was only two men, so they didn’t need the space. Setting up onshore, on the other hand didn’t have such a large space requirement which meant they could choose a business centre option or get a cheaper office space. Lots of start-ups like free zones, but free zones don’t always cover them for the activities they’re doing. A new law is coming in so free zone companies in certain circumstances will be able to operate onshore.
What key factor can make or break an SME in Abu Dhabi?
Networking. Lots of business is done here by people getting known for what they do. For me, that’s definitely happened. Put in face-to-face time with people who could potentially be your clients, and also a referral network for you. From experience, companies that manage the business from overseas take a lot longer to get off the ground than companies with somebody on the ground here.
What are the biggest barriers to entry?
The requirement to have a commercial space. They don’t always need a premise, so sometimes it’s dead money. I’ve set up three companies for myself so I need three offices, and I don’t use any of them. That’s a big frustration. Some companies manage their operation from overseas, or from their clients’ offices. An Irish college recently wanted to provide online courses, so didn’t need any premises here but couldn’t get around that barrier. Training companies are always stumped by the need for a dedicated training centre.
How long does the setting up process take?
The government is making it easier to set up trade licenses, but it’s still a maze of processes that takes about two weeks to go through. Being a woman, I get to jump the queues at the DED, which saves a lot of time.
Thank you to Jessica Hill at The National for the above Interview. Picture accompanying this article is courtesy of The National.
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