The United Arab Emirates (UAE) have had virtually unprecedented success with their free zones programmes, which have attracted high levels of FDI and export-oriented industry and helped the country cement its reputation as a maritime trade and global financial centre. In addition to an exceptionally stable political environment and high investment ratings, the UAE’s zones are noted for their attractive fiscal incentives, as well as the ease and speed of administration.
UAE free trade zones have the complete backing of the government and the country’s private sector leaders, and as such account for a larger share of trade and FDI than almost any comparable programme in the world. The Jebel Ali Free Zone (Jafza) in Dubai alone accounts for more than 20% of the UAE’s more than $12 billion USD annual FDI, as well as more than half of all Dubai’s more than $33 billion in annual exports. Jafza was the first such zone introduced to the UAE in the 1980s. Operated by global maritime logistics leader DP World, it has become one of the largest and most widely-recognised free zones on the planet. At present, more than 40 free zones exist in the UAE, including new sites, like Umm Al Quwain Free Trade Zone and Dubai South, envisaged as fully integrated, sustainable techno-cities.
Such projects demonstrate the Emirates’ willingness to move beyond a traditional conception of free zones. In fact, the country has already had success in pushing the model forward. Its Dubai International Financial Centre operates with its own unique judicial and fiscal systems, following British Commonwealth Law, offering special incentives to financial institutions, and housing the NASDAQ Dubai stock exchange. The Dubai Silicon Oasis, founded in 2004, is a techno-park district whose aim is the development of local R&D and cutting edge high-tech.
The UAE’s free zones’ incentives include 100% foreign ownership, long-term corporate tax exemptions, full capital repatriation, personal income tax and import-export tax exemptions quick incorporation with a single point of contact for administration, and human resources services, among others.
City of tomorrow
The concepts of smart city, logistics centre, industrial centre, and free zone converge in the United Arab Emirates’ (UAE) major development projects. Dubai South is not a typical free zone.
The 145 square kilometre integrated urban centre is the UAE’s flagship development programme for the coming years. It is centred physically around the Al Maktoum International Airport, in Jebel Ali to the south of the main urban area, and strategically around special incentives and conditions to attract foreign investment and generate a half million new jobs in the already thriving emirate.
“Dubai South is a flagship urban development project … expected to be a self-sustained city that seamlessly connects a number of residential, commercial, infrastructure, and hospitality initiatives,” Aranca research analyst Apoorva Patil said of Dubai South to the Gulf News Journal in December 2016. “The site has been particularly designed to benefit from the region’s booming aviation sector and has been built around Al Maktoum International Airport, which is expected to be the world’s largest airport upon completion of all phases.”
Al Maktoum has reported steady growth in the number of international passenger arrivals. Internal projections make it the region’s, and possibly the world’s, largest air transit hub in the coming years, with Thomas Reuters’ Zawya service reporting a targeted figure of 130 million passengers by 2025. To that end, the world’s largest VIP terminal was opened January 2017.
At the terminal’s debut, His Highness Sheikh Ahmed Bin Saeed Al Maktoum said of the milestone that it is “yet another significant step towards realising Dubai’s vision of becoming the aviation capital of the world,” adding that “with the opening of the world’s largest facility for private aviation, Dubai South has raised the bar on luxury travel, redefining the passenger experience.”
Zawya also reports that Dubai South will be home to an 18.5 square kilometre logistics area connected with Jebel Ali Port, the emirate’s largest port and free zone area and home to the majority of Dubai’s exporting activities and foreign company headquarters. A similar, concurrent project is underway in the Umm Al Quwain Free Trade Zone (UAQ FTZ), with a second phase of construction set to take place as part of a long-term vision to build a tech-based, environmentally friendly urban centre in the UAE’s least-populous emirate.
The free zone announced recently that it has had a flurry of investment activity and distributed 1,500 business permits, anticipating 2,500 or more total in the coming months. UAQ FTZ is billed by the government as a smart city being built in line with the national goals of reducing fossil fuel dependence and producing home-grown industrial innovation. “Renewable energy, education, health, technology, water and space will be the primary target industries for us”, Johnson M. George, UAQ FTZ’s general manager, said of the zone’s sectoral focus.
Ambitious projects like these aim to move the UAE toward an ever more diversified economy, while fostering a reliance on the country’s logistics excellence in all of the major surrounding regions. Early reports of property investment, interest from foreign companies, and major benchmarks hit have on the whole been positive, and the world will be watching to take cues from their development trajectories.