FREE FOR ALL

UAE, Dubai 2012 | ECONOMY | FOCUS: FREE TRADE ZONES

Dubai's expanding patchwork of free trade zones continues to provide an impetus for foreign investment across a wide range of areas.

If Dubai's strategic location is considered paramount to its investment pull, then its free zones must be considered a key component in attracting foreign-owned business to the Emirate. There are currently over 20 free zones operating or under establishment in Dubai, tailored to a number of sectors including logistics and transport, technology and renewable energy, commodities, ICT, media and film, health care and education, finance, in the form of the renowned Dubai International Financial Centre (DIFC), and even floriculture.

The Emirate's free trade zones are seen as complementary to its already liberal foreign trade scheme. The free zones, as such, are seen as crucial to “maintain [Dubai's] business-friendly environment… and [carve] for us a successful model for investment promotion," HE Sheikha Lubna Bint Khalid Al Qasimi, Minister of Foreign Trade of the UAE, told TBY. The benefits of setting up shop in one of the many free zones include 100% ownership rights, tax exemptions, and purpose-built offices and warehouse facilities. Although the majority of the free zones are designed specifically for certain industries, the Jebel Ali Free Zone (Jafza), arguably Dubai's most significant, is all-embracing, boasting 6,700 foreign companies.

JEBEL ALI FREE ZONE

Over the last five years, Jafza has accounted for 40% of the entire UAE's FDI intake, growing by over 60% and increasing its revenue by 34% year-on-year. It also represents 20% of Dubai's GDP, accounts for 50% of its exports, and sustains over 135,000 jobs through its companies.

The free zone is spread over 48 square kilometers, and hosts 6,700 foreign companies, including 120 Global Fortune 500 enterprises. First established in 1985, the zone was developed with warehousing facilities to cater to traders and by the 1990s expanded to cover industrial activities, with light industrial units (LIUs) developed for manufacturing. Demand for industrial space from the chemical and agribusiness industries later led to the development of the South Zone and hybrid clusters. The zone is not done growing, with dramatic development in the South Zone since 2003. Currently, a $600 million convention center complex is under construction that will include exhibition halls, conference facilities, and a hotel, as well as recreational and retail provisions. Its pull is hard to overlook, with 400 new companies joining in 2011 alone, including Caterpillar, Ford, and Oracle. The movement, however, is toward the “machinery and equipment segment, followed by electronics, chemicals, building materials, and food," Salma Ali Saif Bin Hareb, CEO of Jafza, told TBY. “The trend shows a growing focus on infrastructure development in the region and economic growth that has eventually driven demand for consumer goods," she added.

DUBAI INTERNATIONAL FINANCIAL CENTRE

The DIFC is arguably the second most significant free zone in the Emirate and has seen exceptional growth since it was established in 2004, now playing host to 873 companies. Originally created to bridge the gap between the financial centers of London and Singapore, the zone has attracted 21 of the world's 30 largest banks, eight of the 20 largest asset managers, six of the top 10 insurers, and six of the top 10 law firms.

The benefits to setting up at the DIFC include, in addition to standard free zone incentives, a dollar-denominated environment, freedom to repatriate capital and profits, an international stock exchange, and a variety of legal vehicles. “A good amount of time has been spent developing the legal infrastructure, including laws and regulations," Abdulla Mohammed Al Awar, CEO of DIFC, told TBY. While the DIFC Authority manages the day-to-day running of the zone, the Dubai Financial Services Authority (DFSA) regulates financial services, and the Judicial Authority has independent jurisdiction over civil and commercial matters.

As city within a city, Al Awar's ambition for the DIFC is clear. “Dubai offers unparalleled value to institutions that want to tap into emerging market areas," he commented. Its global stature can already be defined by its client base; 40% of regulated firms come from other parts of the Middle East, 42% from Europe, and 18% from the US and the rest of the world. “We have institutions that have made the DIFC their global home," Al Awar continued, “Standard Chartered started small and now has over 700 people with its own building… Bloomberg also established its 10th global office in the DIFC."

SECTOR SPECIFIC

A host of other free zones have boosted Dubai's core strengths, and none more so than the Dubai Airport Free Zone (DAFZ), which, within the boundaries of the city's airport, hosts 1,500 companies and 12,000 employees, contributing 2.2% to the Emirate's GDP. In addition to Airbus and Boeing, Rolls-Royce, UPS, and FedEx operate out of the zone, as well as leading luxury retailers such as Cartier, Mont Blanc, and Chanel. The free zone's authority has now been approached to launch similar free zones abroad. “With 15 years of experience, I strongly believe that we have the expertise to replicate the success of this free zone in other locations." Dr. Mohammed Al Zarooni, Director General of the DAFZ Authority, told TBY.

Within the ICT sector, Dubai Internet City plays host to Microsoft, HP, IBM, Dell, Siemens, and Cisco, among others, while Dubai Silicon Oasis caters to other high-tech industries, including semiconductor manufacturing. Dubai Media City and Dubai Studio City cater marketing, printing and publishing, music, film, leisure and entertainment, broadcasting, and information agencies, and Dubai Multi Commodities Center (DMCC) and Dubai Gold and Diamond Park support the specific needs of the gold and precious metals, diamonds and colored stones, energy, and other commodities industries. “Before DMCC was created, the value of the diamond trade was just $5 million annually. In 2011, the value of the diamond trade was $41 billion," Malcolm Wall Morris, CEO of DMCC, told TBY.

In health care and education, Dubai Academic City hosts 20 leading universities and colleges, and Dubai Healthcare City (DHCC) contains two hospitals as well as over 90 medical centers, serving a total of over 500,000 patients in 2011. DHCC has not only attracted foreign companies, but patients as well. “About 15% of the patients we currently see come from outside the region," Dr Ayesha Abdullah, Managing Director of DHCC, told TBY.

As Dubai continues to be supported by its core business of logistics, Dubai Maritime City is one of the Emirate's newest free zones, comprising a maritime center, an industrial precinct, academic quarter, marina district, and harbor residence and offices. Dubai's free zone list also includes the Dubai Flower Centre, boasting cool chain processes to maximize shelf life and attracting buyers, traders, producers, and exporters alike.