Exodus II, Sheikh Zayed Road, Dubai, UAE, 2010, by Marcus Lyon.
The New Gold Rush
Growing up in Dubai during the 80's and 90's was a bit like what the Gold Rush might have seemed to the children of enterprising folk, who literally made fortunes out of their land. We routinely encountered friends and relatives seeking a better life, hoping for a tid-bit of advice from our parents on making it in Dubai. Afterall, Dubai--not the UAE back then--was the New Land of Opportunity. Over the years, this desert oasis transitioned from being the New Land of 'Self-Made' Opportunity to the Land of 'Employed' Opportunity. Key principles on which the city had been founded (trade and entrepreneurial spirit) wore out to become ever more elitist and exclusive. As the sands blew past our ages, this city-state dwindled to become the Land of Opportunity for the 'Already Successful.'
This article is my attempt to rediscover entrepreneurship in a city called Dubai, drawn from personal experiences as an expat entrepreneur, and explore solutions for a city that is home. There is a pattern to the rise and fall of one of the world's most prolific trading cities. As the scale of development magnifies, grassroot catalysts--a breed of people that build businesses--gradually become more and more insignificant. Evidently, this has happened to Dubai. Through that last decade, I have often dwelled on the fundamental challenges that are slowly but certainly endangering entrepreneurship in Dubai.
Business Psyche
Dubai's humble beginnings as a trading hub comes as no surprise, having witnessed it's meteoric rise in less than three decades. Trade has undoubtedly been a major catalyst for the city. Over the last ten years, my experience in business has led me to believe the following: Dubai's all too evident 'trader' mindset has been disproportionately elevated to becoming the single most important tenet of the city's business psyche. Throw into the mix a colonial 'landlord' mindset -- one that has been fueled by a legendary real-estate boom -- and little else seems to be of consequence. This mindset does not help cement Dubai's vision to become a leading knowledge economy. Instead, it pulls Dubai back into the industrial era. Entrepreneurs that are not traders still find themselves on roads less traveled; essentially, outliers with little precedent to fall back on.
What Dubai needs is to fundamentally reverse this bias. It needs to genuinely value and create entrepreneurial opportunities that are neither trade nor property-centric. It must encourage knowledge-based, service-oriented business thinking. As a city, Dubai has a lot more to offer than re-exported goods and plots of land on man-made islands.
Legislative Woes
The obstacles for expatriate entrepreneurs in Dubai, aiming to emulate their role models in the West are well known. However, this is not a deviant finding, and perhaps one that is widely expected. What baffles is the plight of our Emirati counterparts, who haven't often sighed with horror at how legislation in the city does not even truly support them as nationals. A recent article by Emirati writer Sultan Al Qassemi (Emiratis listened to Bill Gates... Can they emulate him?) explores this poignantly.
For instance, within the city, a trade-license will not be issued without a registered office, whether or not of tangible use to the business. Dubai's astronomical rents do not help. Deposits and visa fees add up considerably. For foreign citizens, a national sponsor is mandatory. By law, the sponsor is entitled to 51% of all profits. It is only incidental that several back-t0-back agreements exist to allow for a different equity structure -- one that will not hold in court should things hit the fan. Within the city's several freezones, laws are certainly more fluid, but more than made up for in excessive fees and endless delays.
Is there an imminent danger in opening up home-based service licensing? Does every business need a glitzy office? Where should consultants operate from? Can the pricing of these businesses truly remain competitive when built on a foundation of exorbitant costs? What Dubai needs is to capitalize on this culture shift that is underway: individuals are daring to move from being employed to becoming self-capitalising. As with any successful business-led economy, change must ignite from the bottom. A culture of entrepreneurship leads to a culture where innovation is rewared, not thwarted.
Cost of Success
Tax is not a reality any of us have to deal with here in Dubai. But, look closer -- perhaps it's not overtly labeled 'tax' but startup costs are magnified to include several unmentioned hidden fees. Then there are innovative devices like 'knowledge fees' or 'urgent fees' (which, by the way, result in no such urgent attention), or simply rent.
I have spoken about one of city's freezones--Dubai Media City--and it's ridiculous entry-level fees in this recent Financial Times article (Cheaper Alternatives for Media Companies by Robin Wigglesworth). Naysayers often point towards Dubai Media City's 'open-office' (which is literally a desk) as a cheaper alternative for startups. A desk costing over AED 50k to run with expenses is not cheap. Is there no way an absolute boot-strap option can be made available at a quarter of that price? Why can't the emphasis of entrepreneurs be on wowing their clients with their services and products rather than worrying about unrealistic costs? Does Dubai really need to capitalise on the fledgling Branson-idolising startup entrepreneur? Does it not already service some of the world's largest firms that pay some of the world's highest rents?
Let us fix the black-hole of rent. Recently, a fellow commentator Mishaal Al Gergawi advocated in one of his pieces to open up to entrepreneurs the millions of square feet of empty commercial space in the city. These offices by virtue of their Londonesque rents sit gathering dust, yet the rents do not logically comply and adjust to levels they should. He suggested a scheme that would allow young entreprising individuals to pay incentivised rent, license-fees and start. What is critical is to nudge the start; and the government can make this happen. Dubai, in the past, has been home to brands that have grown from local establishments to global enterprises. This need not remain a story of the past.
Pillars of Support
The handful of funds in existence today have beureaucratic processes that dwarf even the most eager of Emiratis. One cannot incubate an idea within a garage; legally anyway. The laws do not allow for autonomy of thought or action. Expatriate entrepreneurs perhaps see the brunt of it. There is virtually no access to those handful of funds for foreigners. This absence makes the majority of the city's population even less likely to help catalyse the economy alongsides their Emirati hosts and counterparts.
If even one in forty were able to easily establish small home-based businesses, a monumental paradigm shift would be unquestionable. Dubai would once again regain its mantle of success stories that share one things in common: they started with a vision and not much else.
Incubators need to become legal entities that lend a helping hand to businesses that are not backed by major capital or international headquarters. A framework must be set up to allow entrepreneurs and business owners that have already established themselves, to legally and contractually help new entrants by sharing resources, knowledge and even office space. Grassroots empowerment must become a key tenet in the vision of the government. This change will inevitably float upwards.
Way Forward
This city called Dubai has gone from being an incubator of 'small ideas' that can grow 'big' to one that supports 'big ideas' that can grow even 'bigger.' We will not sense this seismic shift today, and few will care while things still seem buoyant from the outside. But soon enough, a tangible slow down of new businesses that spring up in Dubai will be unavoidable. Unless serious steps are taken to avert this, the city's incumbents will continue to grow, whilst hot-blooded innovation that is driven by brave young entrepreneurs will fade.
The hope for change lies in my generation of Emirati writers, thinkers, law makers and government officials that understand the perils of entrepreneurship from close quarters. It lies in the sensitivity and acute cultural understanding extended by an exemplary generation of Emirati brothers and sisters I call family. #dubaihashope
