Free Trade Zones (FTZs) are special economic zones set up with an objective of offering tax concessions and customs duty benefits to foreign investors. There are more than 30 FTZs operating in Dubai. FTZs in Dubai and the UAE are governed based on a special framework of rules and regulations. A Free Zone Authority offers business licenses to foreign-owned businesses. Each FTZ is designed around one or more industry categories and only offers licenses (such as, for a Free Zone Enterprise (FZE)), to companies within those categories. Most of the FTZs in Dubai broadly offer trading, services, and industrial licenses to investors looking to set up their businesses.
FTZs in Dubai are managed and operated by the relevant authority. For instance, the Jebel Ali Free Zone Authority in Dubai is responsible for managing, operating, and supervising the Jebel Ali Free Zone, one of the largest sea port FTZs in Dubai. It has a subsidized rate of 32 percent on the country’s Foreign Direct Investment (FDI). As for other FTZs in Dubai, the Dubai Multi Commodities Centre (DMCC) has 7,330 active registered companies (as per 2013), offers a retention rate of 94 percent, and estimates an application of over 200 companies every year. The Dubai International Financial Centre (DIFC) is another jurisdiction demonstrating the growth of expansion. It contributes 12 percent to the GDP of Dubai and has an estimated a growth rate of 27 percent (as per 2015). The authorities speculate that the region will triple in size by 2024. Others include the Dubai Airport Free zone (DAFZA), Dubai Internet City, and Dubai Media City.
As a leading freezone services provider in the Middle East, and home to over 1,600 global, regional and local companies, DAFZA offers integrated business solutions to the global business community looking to expand into the MENA and Asia-Pacific regions and beyond. DAFZA’s comprehensive service, well integrated world-class facilities, investment incentives, and tax exemptions enable the investor companies to achieve greater functional efficiency at lower operational cost. Established in 1996 as part of the government’s strategic plan to be an investment driven economy, it is a base for companies from diverse sectors, such as aviation, freight and logistics, IT and telecommunications, pharmaceuticals, engineering, food and beverages, jewelry, and cosmetics. Its proximity to Dubai International Airport, where more than 150 airlines connect over 220 destinations, makes good business sense as it also provides easy access to logistics and cargo handling facilities catering to import and export needs.
DAFZA Industrial Park has 33 state-of-the-art warehouses, including 10 cold-storage units, with a Total Leasable Area of 11,159 m2. A unique multi-client warehousing model allows for flexibility in storage with competitive costs. Clients can also make use of flexible leasing options in a shared warehouse space.
The case of DMCC Free Zone
DMCC was established in 2002 as a strategic initiative of the Government of Dubai with a mandate to provide the physical, market, and financial infrastructure required to establish Dubai as a hub for global commodities trade. As of March 2016, it had over 11,700 registered members including both commodities and other businesses.
Industry participants and FTZ member companies enjoy access to market infrastructure and physical facilities such as gold and diamond vaults, trading platforms such as the Dubai Gold & Commodities Exchange, Dubai Diamond Exchange, the Dubai Pearl Exchange and DMCC Tradeflow, the DMCC Tea Centre, and a range of commodities-backed financial investment tools.
DMCC success factors
The DMCC Free Zone is centrally located in Dubai and accessible to two metro stations. The DMCC Establishment Law gives complete autonomy to the Authority to define the laws and regulations governing DMCC. The Authority has complete jurisdiction over all policies and procedures.
The DMCC is spread over 200 hectares of business and residential community and offers flexible office solutions. DMCC has provision of flexi-desk facility in the business centre which can be used 5 hours weekly free of charge. It costs only $4,790 and includes 3 residency visas. The physical infrastructure comprises multiple commercial and residential towers, world-class hotels, and world-class security systems.
In terms of technology, the zone has a best-in-class digital transformation strategy – provision of business apps manager to sync and manage all business applications in one place. The DMCC rolled out the Smart District project which is centered on the four themes of mobility, community, sustainability, and productivity.
Setting up of business in a Free Zone is mostly paperless with all activities such as company formation, and licensing being fully digital, inclusive of e-pay and e-signature capabilities. The DMCC offers Web- based Shariah-compliant trade finance platform for Small and Medium Enterprises.
The DMCC also offers preferential treatment for focus industries. For gold and precious stones commodity trading markets, preferential freight rates; high-tech secure vault facilities, assaying facilities, purpose built jewelry and a Gemplex to facilitate manufacturing and a commercial tower for house trading, wholesale and banking operations are offered.
The DMCC has been successful in attracting new companies. Out of the 14,100 members, 95% of member companies are new to Dubai and 170 new companies added every year. Altogether, DMCC has about 900 different business activities.
Overall, a business-friendly environment, ease of setting up business, world-class infrastructure, and tax incentives have been successful in attracting new companies into these FTZs.