Encouraging Entrepreneurship

This is apocryphal, yet serves to make a point. Three UAE residents — call them Anwar, Vikram and John— have come up with a great business idea. These friends have invented a lawn sprinkler system that uses 50 per cent less water than conventional sprinklers. It would be a boon for homeowners and golf course operators, and 
it would contribute nicely to the country’s gre-
en credentials.

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Published: Wed 12 Aug 2009, 10:28 PM

Last updated: Mon 6 Apr 2015, 12:28 AM

The only problem is they haven’t been able to scrape together the Dh150,000 necessary to form a company that would enable them to produce and sell their ultra-efficient sprinklers. Banks, battered by the recession, refuse to finance the project. The cash-strapped inventors have feared that their clever idea will wither and die.

Until now. A long-awaited amendment to the nation’s corporate law has given new hope to these hypothetical friends – and their countless real-world counterparts. On Monday, the government removed an impediment to innovation and economic growth by decreeing that entrepreneurs no longer need to put up a pot of money before forming a limited liability company.

The newly amended corporate law frees business start-ups of the need to amass a minimum cushion of Dh150,000 – 1.5 times the UAE’s average per capita income in 2009. In Dubai, the minimum required was double that. The old rule favoured the wealthy and stifled a generation’s worth of potential business start-ups.

Now is just the time for such a change in the law. With the economy in deflation and many of the country’s biggest companies reeling from recessionary blows, the UAE needs to do all it can to kindle a recovery. Here, as in most countries, small firms count for the bulk of the economy’s output.

By amending the corporate law, the government has acted decisively to encourage entrepreneurship and stimulate fresh investment that the country needs to create jobs and wealth.What’s more, the government is helping to nourish a culture of risk-taking at a crucial time in the nation’s history. In the world’s most entrepreneurial societies, notably the US, failure in an attempt to start a business is a badge of honor, not a mark of shame.

Americans and others indulge their failed entrepreneurs, and with good reason: the Anwars, Vikrams and Johns of the world are the spark and sustenance of a healthy economy. The amended corporate law should help the UAE unleash a similar torrent of commercially sound ideas, generating benefits for all its residents.

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