1 www.algharbia.ae الـغـربـــيــــة الـــمــنــــطـــقـــة تــــنـــمـــيــة بإسمه www.algharbia.aeمـــــجــــلـــــس الصادر العميل قبل من الحصري لإلستـخدام معلومات من به ورد ما وكل سري المستند هذا

Supporting Al Gharbia SMEs for sustainable economic development of the region

ADSG session, Masdar City

2 www.algharbia.ae الـغـربـــيــــة الـــمــنــــطـــقـــة تــــنـــمـــيــة مـــــجــــلـــــس

Introduction of Western Region Development Council -WRDC

To provide the residents of Al Gharbia with a higher quality of life through promoting employment, improving infrastructure and increasing business efficiency and investments.

Mission

To lead Al Gharbia of Abu Dhabi into becoming a model of sustainable economic and social development by setting the standard of excellence in the development of people, enhancement of infrastructure and improvement of enterprises.

Vision

People

Enterprises Infrastructure

23

4

1

• Create incentives to attract and keep qualified workforce

• Improve workforce skills/ tackle barriers to employment

• Support small and medium sized enterprises (SMEs)

• Increase participation in the knowledge economy

• Diversify region revenues by supporting new industries

• Deliver an improved infrastructure enabling future development

• Promote development of a healthy, sustainable, safe and high quality environment

Marketing &

Promotion

• Promote and support regional investment

• Market and promote Al Gharbia as a travel destination

• Enhance product / concept offerings to promote business development

Priorities

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Brief introduction of Al Gharbia

AG - 40,000 km2

AD - 67,000 km240%Area

Source: Area: Abu Dhabi Municipality, 2010 Population: SCAD, 2010 GDP: Abu Dhabi Chamber of Commerce & Industry, 2009GDP (WR) est. 90% of the AD Oil Sector GDP, 2010

60%

AG - 123,000AD - 1.57 Million

92%8%Population

50% 50%GDP AG - AED 181bn.AD - AED 362 bn.

Abu Dhabi Emirate Statistics

4 www.algharbia.ae الـغـربـــيــــة الـــمــنــــطـــقـــة تــــنـــمـــيــة مـــــجــــلـــــس

Al Gharbia is forecasted to develop rapidly

*Notes: All data exclude O&G Sales activity; ** Excludes construction workers

Sources: Team analysis; UPC Model; WRDC Model

Citizens population

0

5,000

10,000

15,000

2010

4,143

2015

5,711

2020

8,641

2030

14,402

6.9% 7.6% 9.3% 9.9%AG non-O&GGDP as % ofAG total GDP

Al Gharbia Non-O&G GDP evolution(US$ M)

7.9% 7.1% 6.6% 5.4%AG non-O&GGDP as % ofAbu Dhabinon-O&G GDP

0

100

200

300

400

500

2010

150

2015

190

2020

259

2030

451

Al Gharbia Populatioj evolution(in thousands people)

16.8% 16.5% 15.2% 13.7%% ofNationals

+5.5%p.a.

+6.4%p.a.

Non O&G GDP Population

5 www.algharbia.ae الـغـربـــيــــة الـــمــنــــطـــقـــة تــــنـــمـــيــة مـــــجــــلـــــس

Development already started as Abu Dhabi government investing heavily in the region

• Increasing refinery capacity, new oil & gas fields, expanding petrochemicals - Several projects of ADNOC group of companies - New Refinery, Green

Diesel Plant and Expansion of Sulphur Handling Terminal , other- Borouge 2 completed, Borouge 3 and Borouge 4 in planning

• Nuclear plant in Braqa- Baraka is chosen as the preferred location of the nuclear plant – first in the

Middle East. Billions of investment to satisfy country needs in electricity. Project under construction

• Desert Islands project - Project includes several island lodges, Equestrian Centre, Dive and Sport

Fishing Centre, Youth Outdoor Camp & Anantara Conference Centre

• Expansion and diversification of chemicals sector- Nafta cracker and downstream chemical plants. Planning phase

• Housing and commercial real estate development- Plans to develop residential neighborhoods throughout Al Gharbia; schools,

parks and commercial markets are parts of development. Started

• Etihad Rail- Shah-Ruwais railway planned to be build in 2011 – 2013. Starting construction - Linking Al Ghrabia with other Emirates and later GCC. Initial planning

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How can we ensure that development of Al

Gharbia is sustainable?

7 www.algharbia.ae الـغـربـــيــــة الـــمــنــــطـــقـــة تــــنـــمـــيــة مـــــجــــلـــــس

Three types of challenges of sustainable development of the region

Quality of life in small, dispersed communities

Quality of teachers, doctors, other community service sectors are lower than in

other parts of the Emirate

Young people migration to big cities with more jobs and

recreational activities

Fragile environment

Potential pressure on fragile desert, coast and marine environment from heavy

industrial and transportation development

Growing population, more guest workers and visitors

raise challenges of resources management

Limited opportunities for local business and growth

Limited business opportunities to serve local

population

Limited chances to attract private investments in

infrastructure & real estate currently

Gap in skills among local entrepreneurs

8 www.algharbia.ae الـغـربـــيــــة الـــمــنــــطـــقـــة تــــنـــمـــيــة مـــــجــــلـــــس

SME sector is key to sustainability of economic development (Example of Korea)

Share of contribution

in 2008)%( Growth

(1963-2008) 2008 1963 Criteria

46 5.4X 5,420,197 977 SMEs Production (100M Won)

54 9X 6,255,770 692 Large Companies

49 5.8X 1,895,164 325 SMEs Value added*

( 100M won)51 6.7X 1,953,567 290 Large Companies

77 8X 2,134,699 266,822 SMEs Number of employees

(Persons)23 5X 661,339 135,159 Large Companies

Note: Value Added = Sales-Costs

Strong SME sector is the major contributor to job creation and value added of the country

9 www.algharbia.ae الـغـربـــيــــة الـــمــنــــطـــقـــة تــــنـــمـــيــة مـــــجــــلـــــس

Majority of Al Gharbia SMEs are small, local services focused and dispersed

MZ

Dalma

Mirfa

Sila

Ghayathi

Liwa

55

65

50

10

26

5

15

3

16

7

12

5

female male

medium5

1

Mi-cro &

small

218

80

3391

21

1812

11 3

services manufacturingtrade & retail mixed businessescontracting oil & gas servicestransportation Other

Majority are micro and small businesses… … in retail and services … scattered across Al

Gharbia

Source: WRDC database of active National entrepreneurs in Al Gharbia (input from TAMM, DED licensing databases); total number ~280

10 www.algharbia.ae الـغـربـــيــــة الـــمــنــــطـــقـــة تــــنـــمـــيــة مـــــجــــلـــــس

For many Al Gharbia SMEs it is difficult to make money and survive

Example of typical retail shop economics in Madinat Zayed (AED)

 

Sales Monthly Annual

8 months a year 6,500 52,000

4 summer months 1,200 4,800

Total sales   56,800   

Expenses Monthly AnnualRental (2000AED/m2 for 20m2)   -40,000

Labor & Utilities 2,900 -34,800

 Total cost  -74,800

Profit   -18,000

• Al Gharbia SMEs focusing on serving local community (~70%) face challenges of making economics work

- Low volumes due to small population size

- High costs (especially rentals) due to lack of investment into real estate

11 www.algharbia.ae الـغـربـــيــــة الـــمــنــــطـــقـــة تــــنـــمـــيــة مـــــجــــلـــــس

Other challenges of Al Gharbia SME sector

• Entrepreneurs from Al Gharbia making business in traditional sectors (e.g. services, food and agriculture) are often at disadvantage vs. competitors located closer to main markets of Abu Dhabi City and Dubai (higher transportation costs, further away from technological innovations)

• ADNOC Group of companies and WR Municipality are so far major providers of real opportunities for local entrepreneurs, but opportunities are often in low value add contracting services

• There is a natural tendency from large companies to rely on their traditional, well established, often foreign suppliers and sub-contractors

• There is lack of regulation requiring big projects coming to Al Gharbia to procure from local suppliers and invest in their development

WRDC needs help from ADSG members to support entrepreneurship spirit of Al Gharbia residents

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How can members of Abu Dhabi Sustainability Group

help?

13 www.algharbia.ae الـغـربـــيــــة الـــمــنــــطـــقـــة تــــنـــمـــيــة مـــــجــــلـــــس

What do local entrepreneurs really need

Information Skills and knowledge Enablers & Funding

• Information about opportunities for sub-contracting and services around big projects

• Understanding of requirements of quality, time to deliver, etc. to win bids

• Information on government strategies (sectors, SMEs, etc.)

• Technical and business knowledge (value chain, economics, types of business models) of the sectors

• Support in enhancing business skills

• Recognition from large commercial entities and government that it takes time to develop strong SMEs

• Various options of financing solutions

• Government and semi-government procurement programs

• Real estate infrastructure (incubators, zones, offices)

Laws and regulations to support National SME sector

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Examples of government entities support

• The Republic of Kazakhstan adopted changes and amendments to the Law on public procurement in 2009, introducing a 'local clause' in the public procurement law for goods - 20%, services and construction - 15%, thus limiting the purchase of foreign goods, services and works.A company with more than 50% foreign shareholding is considered as foreign and therefore excluded from participation in public procurement tenders, unless it fulfils all of the following criteria making it a 'national producer': 

- the company is resident in Kazakhstan,- the company produces finished products in Kazakhstan,- the company uses no less than 85% of local workforce.

South Korea

Kazakhstan

• Consistent government support since 1963, growing SME share of employment to 77%• Among key success factors

- Protecting SME business areas and supporting efforts to secure domestic market- Promoting SME-only business sectors; SME product procurement system of

public organizations.- Expanding sub-contracting businesses

- Promoting policies for heavy and chemical industries from mid-1970s - more subcontracting for local companies as parts, materials and services suppliers replacing imported parts and materials (localization)

- SME Start-up Support Act (1986); Special Measures on Venture business support (1997)

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Examples of commercial entities support to local SMEs

• $12.7 B in service contracts and amendments to locally based companies

• $2.25B in material procurement to local market

• 27,000 jobs created for nationals in locally based contractors

• Entrepreneurship Support Centre established. 24 graduates and 123 currently enrolled

• Funding Ladies Projects partnering with ladies entrepreneurs foundation

• Local Content Unit within Aramco provides consultancy to local suppliers whose bids failed

ARAMCO Korean Electric Power Corporation (KEPCO)

• Procuring $3.3B worth of goods from local small- and medium-size enterprises (SMEs)

• Providing $139m in “Power and Energy Loans” to financially ailing SMEs

• Providing SME suppliers with a total of $131M worth of support divided between network and procurement.

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Preliminary ideas of how you can help (need further discussion)

• Share knowledge of your sector with your potential local SME suppliers through running seminars and courses

• Share skills development trainings that you provide to your employees with your local SME suppliers

• Review your procurement budgets, assess share of local SMEs in it today and identify areas where local SME suppliers may immediately or with time substitute foreign

• Require your procurement teams to learn about local potential suppliers and identify ways to make small guy next door your supplier with immediate effect or with time

• Encourage your existing local SME suppliers to increase quality of products and services in order to make them more competitive

• Encourage your current foreign suppliers to establish partnerships with local entrepreneurs in order to transfer knowledge and share profits with local communities

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Plus…

Make support to local SMEs (especially if you operate in Al

Gharbia) part of your Abu Dhabi sustainability efforts, monitor

and report progress in your annual reports

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يعيش ” مناسباً مكاناً الغربية تُصبح فيها أنالوطن ويتمتعواعائالتهم، اوؤوينشأبناء

عال . ٍ بمستوى وأن الكريمة الحياة تزخرمنالواعدة االقتصادية بالفرص للجميع“ المنطقة

www.algharbia.ae

المنطقة تنمية مجلس عليها يستند التي الرئيسية القاعدةالغربية