A business-friendly environment and prime location have helped Dubai maintain a long-standing reputation a centre for trade. Building on a historical model that gave tax breaks to pearl traders, the emirate has attracted foreign investment by developing free zones that appeal to investors and businesses alike. Dubai’s free zones generally offer a tax-free environment coupled with modern infrastructure to facilitate manufacturing, trade and export of goods at a competitive cost.
SECTOR FULL OF GIANTS: The three major business parks in Dubai are the Jebel Ali Free Zone (JAFZA), Dubai International Financial Centre (DIFC) and Dubai Airport Free Zone (DAFZ). JAFZA consistently ranks as one of the world’s leading business free zones, and was established to strategise and steer Dubai’s investments with the aim of becoming a global centre for trade and logistics. It serves as a major gateway into Dubai and the UAE, and is also a hub for re-exports to other GCC states, the broader Middle East and North Africa (MENA) region, Africa and South Asia. The Dubai Multi Commodities Centre (DMCC) is another major contender as a mix-use business and residential development, and its Jumeirah Lakes Towers (JLT) free zone is currently the fastest-growing free zone in the UAE.
MAJOR PLAYERS: Dubai World’s Economic Zones World, a global developer and operator of economic zones and technology, logistics and industrial parks, manages JAFZA. Growing rapidly over the past two decades, JAFZA is now home to over 6400 firms with more than 160,000 employees and accounts for nearly 20% of Dubai’s GDP. JAFZA accounted for over 50% of Dubai’s exports, 25% of all containers passing through Jebel Ali Port and 12% of all air freight at Dubai International Airport. These operations made up 20% of all foreign direct investment (FDI) into the UAE in 2011.
DAFZ is located adjacent to the international airport and was ranked as one of the most efficient free zones in the world by the Financial Times’ fDi Magazine. DAFZ reported a 100% increase in client firms in 2011 and currently houses over 1600 companies. The facility caters to businesses that require rapid transport links across the world, such as those in the pharmaceutical, freight and logistics, and food and beverage sectors.
DIFC serves as a business centre for banking and financial services for the MENA region. Its location helps connect established centres in Europe, East Asia and North America with new and emerging markets in the Middle East, South Asia and Africa. FT Business ranked DIFC as one of the top 10 global business centres. The ranking is based on the level of international business, which is Dubai’s core strength, and the value offered to institutions seeking to expand global operations. This ranking placed DIFC ahead of established centres like Zurich, Tokyo and Geneva.
DIFC contributed $3.13bn to the local economy in 2011, according to DIFC’s recent “Economic Activity Survey Report”. Total DIFC assets were estimated to exceed $115bn in 2011. The report also showed financial activities accounted for about 70% of DIFC’s total output. Business services formed most of the remaining 30%, with a small share held by public administration. “Currently the DIFC represents about 1% of the UAE’s GDP. We expect that to increase as financial institutions expand their presence to capitalise not only on the economic growth in the country, but also on the growth of emerging markets in the region,” Abdulla Al Awar, former CEO of DIFC Authority, told OBG.
MEDIA NETWORK: TECOM, another major free zones operator, is a large investment group owned by the government that manages several of Dubai’s largest business parks. These include media, information and communications technology (ICT), and telecoms clusters, such as Dubai Media City, Dubai Internet City and Dubai Studio City. While Dubai has yet to compete on the scale of established centres such as Lebanon, Morocco and, to a certain extent, India, the emirate’s media and production industry is taking on increasingly more prominent roles. All three free zones are in close proximity, which enables businesses to thrive across sectors. Media houses, for example, now have cutting-edge production facilities available locally to produce and distribute content through Dubai Studio City. Similarly, IT and telecoms companies can leverage partnerships with media firms to drive growth.
“Current estimates show that ICT spend and advertising revenue in the region are flat compared to steep declines in recent years, indicating that the media industry may be turning a corner. Facebook and LinkedIn’s recent establishment of regional headquarters in Dubai Internet City demonstrate the type of confidence we are seeing return. Given this more positive sentiment, it is clear that knowledge-based industries will be the recipient of additional investment. Those free zones that are able to cater to the needs of these industries will be well positioned,” Amina Al Rustamani, group CEO of TECOM Investments, told OBG.
ICT GAINS: Facebook and LinkedIn joined global majors like Google and Microsoft already present in Dubai. These firms are proving vital for the emirate’s aspirations to evolve into a knowledge-based economy. In addition to directly developing goods and services in the emirate, these firms are invest in training and outreach facilities that catalyse the transfer of knowledge and encourage and support entrepreneurs to invest in the sector. Google, for example, hosted “g|uae”, a conference introducing and educating about Google technology, for the first time in the UAE in 2011 to connect with computer science students, software developers, small businesses and tech-entrepreneurs in the UAE.
Ari Keşişoğlu, managing director of Google’s operations in the Middle East and North Africa, highlighted Google’s commitment to the region in a recent interview with IP&TV News, commenting that, “Google is serious about the MENA region. We have been investing in many different ways and will continue to do so. We are keen on driving the Arabisation of the internet through various means, such as launching products in Arabic, including voice search, driving directions for maps and Arabic interface of Google+.”
Keşişoğlu also emphasised the importance of a local presence, such as Google’s outreach efforts to nearly 12,000 entrepreneurs and developers during g|days in the UAE, Egypt, Saudi Arabia, Morocco and Jordan.
Another TECOM operator is Dubai Industrial City, which also has the central goal of driving investment into Dubai’s industry base to continue economic diversification efforts. However, Dubai Industrial City differs from the other business parks in the emirate as it does not offer 100% ownership for foreign operators.
SERVICES IN THE ZONE: Dubai’s free zones are also uniquely utilised to help the government deliver public goods and services with private sector participation. Dubai Health Care City (DHCC), for example, was established in 2002 to draw private sector participation into the health care sector. Growing rapidly, the health care free zone features two major hospitals, more than 100 outpatient medical centres and over 3000 medical professionals, all of which combined treated over 500,000 patients between 2011 and 2012.
Similarly, TECOM has two free zones dedicated to the education sector. Dubai Knowledge Village was the first such zone to be established and was meant to offer the entire spectrum of education services in the emirate. As colleges and universities grew, however, TECOM decided to expand its offerings to the Dubai International Academic City (DIAC) in 2007. DIAC has quickly grown from 10 universities in 2007 to 27 universities from 11 different countries with over 300 degree programmes and more than 20,000 students in 2011.
The free zone model has successfully attracted private capital into the health and education sectors. However, division in oversight and regulation for services within and outside the zones has led to fragmentation in service delivery. The government established the Knowledge and Human Development Authority (KHDA) to consolidate plans for the education sector under one strategy that also serves the broader goals laid out by the UAE’s federal government. The health sector is also fragmented, since the Dubai Health Authority (DHA) and DHCC have their own licensing and regulatory departments, but the two agencies are working towards streamlining the sector under one common strategy (see Health & Education chapter).
Both sectors focus on developing strong analytical systems and processes to inform and shape policy going forward. KHDA’s schools inspections framework, for example, emphasises a qualitative assessment of a students’ personal development as well as a more quantitative assessment of academic achievement. TECOM is also trying to attract specific programmes to fill gaps in the education system. A workforce planning study is expected to identify these gaps and provide a clearer picture of the education needs in the emirate.
DHA is also modernising the health sector by implementing an e-health initiative to standardise data collected by hospitals, clinics and physicians both inside and outside the free zone. This is the first step towards harmonising a variety of systems for hospitals, clinics and insurance companies and will improve regulatory oversight over health care providers, ultimately helping improve the quality of health services in Dubai.
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