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ABU DHABI, United Arab Emirates (AP) — The United Arab Emirates finance minister said Sunday that officials are finalizing a new law to boost entrepreneurship with broad incentives, part of a wider push to create jobs for a burgeoning young population.
UAE Finance Minister Sultan bin Saeed Al Mansouri told reporters at a news conference unveiling the new law that he expects it will go into effect within the next three months after Cabinet gives its approval. He said the law is aimed at encouraging job creation by helping Emiratis start small- and medium-sized businesses.
Incentives offered to citizens will include access to loans, contracts with state-owned companies, and land grants for industrial and agricultural projects, as well as exemptions on customs tax for raw material and equipment. The draft law also requires government agencies to contract at least 10 percent of their needs with these firms. Companies that the state owns more than a 25-percent stake in would have to contract at least 5 percent of their purchasing, service and consulting needs with the firms.
The law is the latest in a series of reforms the oil-rich UAE has undertaken in recent years to diversify its economy. The UAE's economy is estimated to grow by 4.5 percent this year, supported by its tourism, hospitality and real estate markets.
Across Gulf Arab countries, governments are backing similar efforts to create more private sector jobs in a region where government still employs the vast majority of citizens.
The need to create jobs is urgent. The International Monetary Fund warns that up to 1.6 million young people will enter the workforce in the next five years in Saudi Arabia, Bahrain, Oman, Kuwait, Qatar and the UAE. But, the body said that only around 600,000 will find jobs in the private sector by 2018.
While millions of private sector jobs have been created over the past decade in wealthy Gulf countries, more than three-quarters have gone to foreign workers who, for example, outnumber the local population in the UAE seven to one. More than two-thirds of UAE nationals work for the government, according to the IMF.
The UAE finance minister said the new law is important in promoting sustainable development in the country and creating new jobs, especially for young people.
"The success of any country's economy greatly depends on small and medium enterprises," Al Mansouri said, adding that in the UAE, this sector contributed to more than 60 percent to the country's non-oil economy. He said the government has a plan to boost that figure to 70 percent by 2020.
The National, the UAE's flagship daily English newspaper out of Abu Dhabi, reported that The Emirates Development Bank will have to ensure at least 10 percent of its loans are directed to small- and medium-sized firms under the new law.
Each of the seven emirates of the UAE can enhance the new scheme with additional incentives, officials said.
"Somehow, it's an open budget," Abdul Baset Al Janahi, CEO of Mohammed Bin Rashid Establishment for Small- and Medium-Size Enterprise Development, told The Associated Press. "As long as it's a national who has a dream, there's no budget limits."