x Abu Dhabi, UAEThursday 27 July 2017

In UAE desert, oases of free zones

Free Zones:The National examines why businesses are flocking to free zones in the UAE - and what they need to know before new companies get started within one - in a three-part series.

Malcolm Wall Morris, the chief executive of the Dubai Multi Commodities Centre, with pearls traded in one of the exchanges. Pawan Singh / The National
Malcolm Wall Morris, the chief executive of the Dubai Multi Commodities Centre, with pearls traded in one of the exchanges. Pawan Singh / The National

Even with today's economic uncertainty and fresh memories of the recent economic downturn, businesses continue flocking to free zones in the UAE.

These economic clusters have cropped up throughout the country, offering businesses benefits such as tax exemptions for 50 years, plus full foreign ownership companies - which typically is not allowed for enterprises operating "onshore" in the Emirates.

While free zone officials often do not disclose detailed figures, an investigation by The National has found these commercial centres have grown rapidly in recent times.

In the past decade in Dubai, Tecom Business Parks alone has launched no fewer than 10 free zones, including Dubai Internet City.

Its healthcare-specific hubs are currently in talks with companies about manufacturing medical products in the emirate.

"We're talking about investments of US$50 million (Dh183.6m) to $100 million," says Marwan Abdulaziz, the director of business development at Dubai Healthcare City and DuBiotech.

Today, about 40,000 businesses operate in more than 30 free zones across the Emirates.

That compares to just 19 companies when Jafza, the country's first free zone, opened in 1985 at the port of Jebel Ali. It has since been growing at an average of 18 per cent a year and hosts more than 6,500 businesses today.

"Even in the heart of the [financial] crisis we grew," says Ibrahim Al Janahi, the deputy chief executive and chief commercial officer at Jafza.

A total of 61 high-rises with 2,500 businesses have sprouted in the Jumeirah Lakes Towers (JLT) free zone, which a decade ago was "nothing but 200 hectares of desert", says Malcolm Wall Morris, the chief executive of Dubai Multi Commodities Centre, which oversees JLT.

Free zones in Fujairah and Ras Al Khaimah are also growing, and officials from the industrial free zone of Kizad in Abu Dhabi have recently taken to roadshows in countries such as China, India and South Korea to entice new businesses here. Their aim is to have this 417-square-kilometre area contributing 15 per cent of the capital's non-oil GDP by 2030.

But while authorities are quick to market business benefits and the perks of working, living and even playing within a free zone, some business owners caution that the set-up process is not always as easy as it is made out to be.

And as authorities work to make the start-up process more efficient, they also acknowledge a "grey area", where a growing number of consultants believe they can provide services outside of a free zone even when they should not be doing so.

The National's three-part series, which begins today, examines each of these issues and aims to help entrepreneurs determine what they need to know before launching infree zones.

nparmar@thenational.ae

gduncan@thenational.ae

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