UAE's free zones 'crucial' for development

The continued growth of the Northern Emirates' industrial sector has shed light on the crucial importance of industrial free zones for economic development in the region. Free zones act as a catalyst for local and foreign investment by offering incentives such as 100% foreign ownership, one-stop locations for paperwork and procedures, exemption from import duties and taxes, full repatriation of capital and profits, and, in some cases, subsidised water and energy prices. The runaway success of Jebel Ali - the United Arab Emirate's first free zone, established in 1980 in Dubai - has encouraged the establishment of more free zones, unleashing an industrial revolution in the UAE.

The largest of these is Ajman's Free Zone, inaugurated in 1988, which hosted 2115 companies at the end of 2006 - a 5.75% rise from the previous year - over a total area of almost 1m sq m. But real estate pressure around the Ajman Creek is forcing it to move. A new area has been designated and, according to the authorities, industrial activities will not be allowed to spread out of the new area, in a bid to ensure that industrial and residential areas do not overlap. The Port of Ajman, which has contributed significantly to the free zone's success, is also due for a relocation. The new port will be part of the Al Zora project's master plan. It will adopt a modular design that will allow it to grow and adapt to demand.

Sharjah's efforts in this matter have also been successful. The Hamriyah Free Zone, centered around the eponymous port, is in the process of almost doubling its surface area to 22m sq m. It hosted 1565 companies at the end of 2006. A spin-off of the Sharjah Ports Authority, it caters mainly to medium- and heavy-industry. The Sharjah Airport International Free Zone, with 2738 registered companies at the end of 2006, is a 6.1 sq m area located next to the airport. While it is more focused on trade, import and export activities, it also features facilities for manufacturing, assembling and packaging of goods.

Another emirate that has done well is Ras al-Khaimah where the RAK Free Trade Zone (RAK FTZ) was established in 2000. It has grown fast and today accommodates 1430 companies over a surface area of 1.1 sq m. It has secured some high-profile deals, such as the German crane manufacturer, BTK's establishment of what will be the UAE's first tower-crane factory. The zone has been in the spotlight recently, with international-level visits from groups such as the Alexandria Business Association of Egypt. Also, RAK FTZ's CEO, Oussama El Omari, was recently appointed secretary general of the World Economic Processing Zones Association (WEPZA).

Finally, the Fujairah Free Zone, with 498 companies at the end of 2006, and a surface of 1.4m sq m, might not be the largest free zone in the Northern Emirates. But with a 24.5% increase in registered companies over 2005, it certainly is one of the most dynamic. Established in 1987, it focuses on light manufacturing, warehousing and distribution, and trading enterprises. Many oil-related enterprises have decided to set up shop there to cater to the thriving oil bunkering business in the Port of Fujairah.

But authorities believe that industrial activities have only so many added values. Free zones, as a consequence, are increasingly focusing on associated services. In late 2005, for instance, Ajman Free Zone inaugurated a complex of over 300 offices. Similarly, Ras al-Khaimah recently inaugurated the RAK Global Logistics Park, as well as an Inland Container Depot. It will support industrial activities carried out in the RAK FTZ, as well as allow RAK Global Logistics (the joint venture company set up between RAK Ceramics and Global Cargo System to run the park) to tap into the lucrative logistics market system.

Some Northern Emirates are replicating the free zone model in non-industrial sectors. Ras al-Khaimah and Fujairah, for instance, are establishing media production free zones, and Fujairah will soon be host to 28 satellite TV channels, with 12 of them going on air as soon as next month. Ras al-Khaimah has also successfully implemented the RAK Education Zone, which has attracted high-profile education institutions, such as George Mason University, based in Fairfax, Virginia. So even if service-oriented sectors come to overshadow industrial activities, free zones are set to remain crucial assets for the Northern Emirates' economic development.

Jason J. Nash is Head of Research at the Oxford Business Group
(www.oxfordbusinessgroup.com)

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UAE FREE ZONES
Posted by Rohinton Bilimoria, Dubai, UAE on 26 May 2007 at 10:00 UAE time


Setting up of FZs in various Emirates is an achievement. How about inter linking these FZs? Movement of gods between the two FZs is not simpler from Customs Procdure point of view. Customs Duty against transfer of goods from one FZ to the other (within UAE) should be abolished. Corridoors should be opened for Forwarders to do the Imports and Exports Documentation at all the UAE ports and Airports. To give you an example, at the moment, there is no unified Customs Law permitting the Forwarders established in other Emirates FZ to complete Customs Formalities in JAFZA and vice versa. Liberalisation under Unified Customs shall be completed and achieved only if the Forwarders are allowed to act as national customs brokers being able to operate in any of the ports and airports + FZs in UAE.

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