After almost 20 minutes of looking for a parking spot at the bustling hub that is Dubai Internet City (DIC), one finally surrenders to the comforts of valet parking. It’s a frustrating experience, and one that must drive DIC workers half mad on a daily basis.
And while Dubai-based SmartCity – a joint venture between TECOM Investments and Sama Dubai, both members of Dubai Holding – continues to launch global initiatives to build one SmartCity after another, perhaps addressing the parking issue might be an urgent requirement?
We want to close the gaps, and develop a bridge between Dubai, Europe, Asia Pacific, and the Levant.
But then again, there are people like Fareed Abdulrahman, executive director of SmartCity Dubai, who appears to be quite a cheerful and positive man by nature. To Abdulrahman, even parking woes could have a positive outcome.
“See? That is the point. We learn from our mistakes for other projects,” says Abdulrahman. The ‘other projects’ are the much-publicised SmartCity Malta and SmartCity Kochi. With the completion date set at 10 years from today, the two cities are only an example of what SmartCity plans to do. This is just the beginning according to Abdulrahman.
“We are planning to announce five before 2010 or 2011, but obviously Malta and Kochi will be in a very advanced stage,” he says. Whether this will be the final number of cities is not yet known, but Abdulrahman confirms that this is the plan for the next five years.
As for why the company hasn’t considered starting the implementation of its ‘Going Global’ scheme from the Middle East, Abdulrahman explains that it is a strategic decision. “First of all, we had a priority. Our priorities were to find a location in Europe and one in the sub-continent. That has already happened as per the plan.
“Two, we have a selection criteria when we look at any location. We look for certain things such as: is the place or location politically stable? Is there minimal infrastructure available in terms of internet, telecommunications companies, and how advanced are they? We also look at other infrastructure such as power, water, which is very important, and transportation for example,” he says.
Under no circumstances was SmartCity going to tap into a location to which direct flights from Dubai weren’t available, explains Abdulrahman. “We also look at time,” he says, adding that for the upcoming five years locations will be restricted to seven or eight-hour flights. “But once we have those five locations, maybe from there we can go to another seven or eight hours,” he says. Among regions under consideration for such projects are the Levant region, North Africa, and Asia Pacific.
Abdulrahman has a dream. He imagines a global network of IT and business parks. “We want to close the gaps, and develop a bridge between Dubai, Europe, Asia Pacific, and the Levant,” he says, citing an annual event called CEO Interactive, which brings together a large number of IT companies’ CEOs all under one roof.
“Today we invite 1300 CEOs. In three years we want to invite 5000 CEOs. So imagine the business synergy that happens there. I always think about this and I see it three to four years down the line. 5000 CEOs talking to each other,” he says, jokingly adding: “Someone needs to thank me for doing this.”
And perhaps someone should. At the end of the day, business is business, and SmartCity ends up with a considerable profit. But it is difficult to deny the benefits that such foreign direct investment projects bring to the economies in which they are implemented. In Malta, the project is expected to be the centerpiece of the country’s transformation from an ‘old economy’ based on low-cost manufacturing to a ‘new economy’ based on information and communication technology (ICT).
Our priorities were to find a location in Europe and one in the sub-continent. That has already happened as per the plan.
SmartCity Malta is projected to generate a 4% growth in employment in Malta, of which 65% will be new jobs in knowledge-based industries. The site for SmartCity Malta is a space where over 20 industrial structures have been demolished to make room for the new ICT and media hub. Still, the scarcity of development space in Malta leaves little room for alternatives.
And although the demolition of an old industries’ site seems like a rational choice, the ‘throw out the old and bring in the new’ philosophy did face opposition. But Abdulrahman is not about to back down.
“In international business, the term ‘smoothly’ doesn’t exist, but we never had doubts that it would not move forward in both locations,” he insists.
Doubts about finalising the deals, especially in India, have been plenty. After inking an agreement with the government of Kerala to undertake the project in May, it was only during mid-November that the foundation stone for SmartCity Kochi was laid out. Abdulrahman summarises the reasons for the delay, saying: “What happened is that within the period that we were negotiating with the government of Kerala, the election time came and the government changed. Each government has a different requirement, but the ultimate goal of both governments is to bring that Foreign Direct Investment to Kerala.”
And while this meant minimal change for SmartCity and its plans in Kerala, the same couldn’t be said with regard to the state’s government. SmartCity Kochi is a US$350m development, while about 246 acres of land have been marked for the project.
Former Kerala chief minister Oomen Chandy believes that current chief minister V.S. Achuthanandan is not playing an honest game, and recent media reports have been overflowing with his critical comments on the latest agreements. According to Chandy, the Kerala government will be entitled to 16% equity stake in the project to begin with. This will change as it will be forced to keep funds coming in to top up its share whenever DIC makes a new investment.
He has been reported as saying: “This is a clause that is detrimental to the state’s interests. And the biggest flaw in the agreement is that when the project is finally complete, the state will get an additional 10% equity participation which will be valued by independent evaluators.”
Chandy also claims that the government has yet to disclose the market value of the 246 acres of land given for the project. The cost of the land fixed by the government comes to be a mere US$264m for 246 acres of land, while the figure would be mind boggling if one calculates the actual value of land, he believes. He demands that Achuthanandan “comes clean” with regards to “the actual investment by the state” and “all aspects of the agreement and its implications”, accusing the minister of “playing hide and seek”.
To Abdulrahman, as a developer, this is a business obstacle. “I always call these international challenges. It is there. We have to adapt to those challenges, to that cultural difference.”
His disagreement with Achuthanandan aside, Chandy cannot deny the benefits of this investment to Kerala’s economy. SmartCity Kochi has the potential to create 90,000 jobs and pave the way for a community where not only leading global companies have a place to play, but small and medium businesses have a chance to flourish. As Abdulrahman likes to put it, “Such projects add a lot”. And he is not only talking about direct economic benefits.
Small and medium companies would like to expand to different parts of the world, but they need the medium — that’s what we will provide.
“One of the things we do is international marketing. For example, if we are going to an event in Italy about IT and business, we market Malta, we market Kochi and other locations if we had any. In the sense that we don’t much promote the park but the location more than anything and this is always an advantage for the government. We are doing things on their behalf. This is what drives their interest in such a project,” says Abdulrahman.
Where the local economy is concerned, Abdulrahman refuses to claim that SmartCity is creating a knowledge economy. Instead, he says, “We facilitate to create knowledge economy”. For instance, if IBM showed interest in setting up a training centre in Europe, Abdulrahman would alternatively suggest to the global blue-chip giant, “why not Malta?”
And while IBM might have reservations about such a proposal, Abdulrahman insists that they can be overcome.
But why Malta? Why choose a small island on the Mediterranean as the starting point for a global initiative? Abdulrahman has a good explanation.
“We chose Malta to tap into Europe. So that our customers in Dubai Media City can tap into Europe,” he says, adding a number of other reasons.
“There’s the eagerness of the government of Malta, the country is politically very stable, and strategically located at the heart of the Mediterranean. And in the bigger picture, Dubai Holding also had a focus to invest in the Mediterranean.”
The idea of taking DIC’s model into other parts of the world has not only been Abdulrahman’s dream. Small, medium and international players operating in DIC have also displayed great optimism towards the development plan.
This led Abdulrahman to think: “why don’t we become the preferred business providers for those companies in other parts of the world?”
And while the move certainly has benefits to big companies such as Microsoft, IBM, and Oracle, these will not be the only beneficiaries of the scheme.
“Giants exist in other regions, but what’s unique about DIC is that there are also small and medium companies that have started here. These companies would like to expand to different parts of the world but they need the medium – that’s what we will provide them with,” he says, emphasising SmartCity’s role.
The decision to go global wasn’t a very tough one. Abdulrahman remembers the decision-making time and how other local companies in Dubai such as Dubai Holding, Emaar, and Nakheel, started to go international.
“When these companies go, others follow,” he says, adding: “They always say these guys have done their homework so there must be something there; that’s why they are heading in that direction. That’s the position we were in and decided, yes we would love to.”
The challenge of attracting tech giants such as IBM to locations like Malta still remains, but Abdulrahman confirms, “It’s all about offering the right incentive and the right value proposition.”
And so far, this doesn’t seem to be a problem. According to Abdulrahman, DIC is the only IT cluster that houses 1300 companies. To Abdulrahman, “that’s success”.
The numbers in Dubai Media City (DMC) are also similar. “You see, there are lots of entrepreneurs who came to Dubai, to start from Dubai. Those entrepreneurs would like to expand,” says Abdulrahman.
Nevertheless, companies operating in DIC and DMC shouldn’t expect a mirrored practice of their businesses in the new locations. The components will be different, explains Abdulrahman, since it’s not Dubai. In Malta, for instance, SmartCity will host offices for IT and media companies, exactly what the island aims to attract. In India, on the other hand, the focus will be purely on IT.
“Basically, it is office space for the companies. And we are adding residential, hotel and retail. Four components are public space where we can offer open space for the community, road infrastructure, all in one place. That’s why we call it a self-sustained knowledge township,” says Abdulrahman.
Additionally, the cities will differ from Dubai’s depending on the local rules and regulations in each country. While the IT and media clusters in Dubai are free zones, Malta’s development is not.
“In India, this will be something called special economic zone, which will include some tax incentives, not like here. We will be identifying a target in terms of the segments and the markets and who to attract to SmartCity,” explains Abdulrahman.
Differentiating itself from the competition might not be one of SmartCity’s challenges in Malta, but that’s not the case in India. “In India there is a lot of competition in every state. We compete in terms of states and in terms of IT parks in India,” says Abdulrahman, adding that it is still too early to rank SmartCity Kochi among other IT parks in India. In five years’ time, however, Abdulrahman hopes to first “expose the state”.
“That’s the first thing in reality because in India that’s how it works – the state has to have a good reputation in order to attract two things: the companies and then the knowledge workers.
“If we succeed in attracting the knowledge workers we will succeed in attracting the companies,” says Abdulrahman. And having been with SmartCity since day one, Abdulrahman seems the right man to do just that. To him, this project is “exposing the know-how of Dubai in other regions”.
Five years down the line, Abdulrahman would like to see 5000 companies on board, and host gatherings of 5000 CEOs all in one place.
“I would love to see the global net worth that we are talking about, which is the vision, and to add value to every local economy,” he says.
Where DIC’s current parking woes are concerned, the employees of IT companies planning to expand to Malta or India shouldn’t worry. Mistakes have been learnt, insists Abdulrahman, and all parking facilities will be underground in the future. Now that’s smart thinking.
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