It's good to be free
With companies keen to snap up the considerable advantages of working within a free zone, Construction Week looks at the increasing proliferation of these tax and restriction-free areas.
Since the 18th century, when pearl traders dominated the region, Dubai has long been synonymous with trade and commerce.
And over the last few decades, the region has, unsurprisingly, capitalised on growing trade and foreign investment by increasingly offering tax and restriction-free havens to encourage overseas firms.
While Dubai may have led the way in the early 80s with the Jebel Ali Free Zone, more recently, numerous free zones are becoming established throughout the region to exploit this investment even further. Construction Week casts an eye over the new arrivals.
Sharjah international airport free zone
Becoming operational in 1995, with 55 companies, Sharjah International Airport Freezone (SIAF) is now home to 3,187 firms, covering some of the largest names in manufacturing, trading, IT services, media and consumer durables. Sharjah is well positioned to host a free zone as it accounts for more than 48% of the UAE's industrial GDP. Sharjah Industrial Airport is home to the largest air-cargo hub in the Middle East and Africa, connecting 230 destinations worldwide. Lufthansa has its second largest cargo hub, after Frankfurt, out of the airport with 360 flights and more than 48,000 tonnes of cargo movement per month.
Adjacent to Sharjah International Airport and a few minutes from Sharjah city, Dubai and major UAE ports on the Arabian Gulf, the SAIF-zone is just 120km from Port Khorfakkan on the Indian Ocean, giving investors access to the east and west coasts. Sharjah also operate the Hamriyah free zone, which announced last year that it is doubling its size from the existing 12 million m2 of land.
Fujairah free zone
The free zone of Fujairah was established by an Emiri decree in 1987. The port of Fujairah is adjacent to the free zone to ensure investors derive maximum benefit from the emirate's strategic location. By using the shipping services available, investors have access to all Arabian Gulf ports, the Red Sea, Iran, India and Pakistan. Mainline services arrive from the UK, northern Europe, the Mediterranean, Far East and North America.
Unsurprisingly, other countries have begun to recognise the economic benefits of foreign investment. Over the last few years, Qatar has set up two free zones; The Qatar Financial Centre and Qatar Science Park (QSTP), which opened in September 2005. These will soon be accompanied by a free zone at Doha airport. In September last year, QSTP announced two venture-capital funds totalling US $130 million (AED 477 million), which will take the country closer to establishing itself as one of the world's most attractive locations for start-up technology companies.
Dubai logistics city
Soon to take over Sharjah's mantle as the emirate's logistics hub, Dubai Logistics City (DLC) is part of the massive Dubai World Central (DWC). DWC includes Dubai World Central International Airport (JXB), which when completed will be the world's largest airport with a capacity equal to that of Chicago O'Hare and London Heathrow combined (10 times larger than Dubai International Airport); and specialised free zones such as Dubai Logistics City and DWC Aviation City.
DLC's US $408 million (AED 1.5 billion) offices and infrastructure are all currently under construction. Panelpina, a major forwarding logistics company is the first customer to have mobilised and started construction. According to Michael Proffitt, CEO, DLC, he expects to go live with the runway for cargo in the last quarter of 2008, and the second quarter of 2009 for passengers. "We are in the unique position of bringing together the number nine container port in the world, with the world's largest airport when fully developed."
Jebel Ali free zone
In May 1980, HH Sheikh Rashid bin Saeed Al Maktoum signed a decree establishing JAFZA, adding to the port a major trade and industrial area. Launched in 1985, JAFZA covers three million m2 of land, incorporating one of the biggest man-made ports in the world and housing companies from over 120 countries. The advantages of setting up in JAFZA include a lack of import and re-export duty, zero corporate taxes for a 50-year renewable period and the allowance of 100% foreign ownership for a company, as opposed to UAE regulations where 51% of a company must be owned by a UAE national.
Of JAFZA's international tenants, which include Sony, Nokia and Gap, 39% are from the Middle East, 20% are from Europe, 29.4% from Asia and 7.15% from the Americas. The number of Korean companies in JAFZA has doubled in last two years. JAFZA is now home to 6,000 companies from 120 countries. Jebel Ali Port, owned and managed by DP World, handled 8.9 million TEU's last year, while approximately 120,000 people work in the free zone. Earlier this month, in its first investment ever in North America, JAFZA International, the global free zone operations arm of Economics Zone World (an umbrella organisation of JAFZA) has acquired around 5.26 million m2 of land in Orangeburg County, South Carolina, USA, to set up a world-class logistics and business park comprising light manufacturing, warehousing and distribution facilities.
Dubai maritime city
Occupying 22,7ookm2 of reclaimed land, Dubai Maritime City (DMC) will be the world's first purpose-built city for the maritime community and will offer a mixed-use environment that covers industrial, commercial and leisure requirements for maritime business. It will be located between Port Rashid and Dubai Dry Docks. When complete, the total expected population will be over 100,000. Initial investment of DMC infrastructure was US $817 million (AED 3 billion) and construction on the industrial areas began in mid-September 2006, which included civil works for berths, a ship transfer pit and other basic infrastructure works.
"Dubai Maritime City was created in response to the need to relocate Dubai's oldest ship repair facility, Jadaf Dubai. This relocation became the inspiration for an entire city to cater for the needs and requirements of not just Dubai's but all maritime business worldwide," says Amer Ali, project manager, DMC.
Ras Al Khaimah free zone
As the most northern emirate in the UAE, RAK offers swift access to neighbouring countries throughout the Gulf and beyond. It is also the closest emirate to the main shipping lane traversing the Strait Of Hormuz and to all northern markets such as Iran, Pakistan, India, CIS countries and China. It has also benefited from the Emirates Road linking it with Dubai, reducing travelling time by almost half.
In the first six months of 2007, 800 new companies registered with the zone, with a capital investment of US $272 million (AED 998 million), bringing the total number of registered companies to 3,450 by the end of last June. About 31% of these stemmed from Europe, whereas European companies were only 23% of the total number during the first half of last year. Middle Eastern and Asian companies' comprise 30% each of the new 800 companies, and North American companies followed with 6%. This growth reflects international marketing campaigns introduced by the zone, having taken part in international economic fairs, exhibitions and conventions, reaching potential investors in Egypt, India, Iran, South Korea, China and Germany.