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CONTENTS

INTrOduCTION

02The property crash that hit Dubai in 2008 put an end to years of rapid growth. While these wounds arenot yet fully healed, the emirate is returning to strength and is retaining its allure to investors as a safe

haven with the finest infrastructure in the Middle East. Barbara Njau reports.

frEEzONES

09Dubai’s free zones are drawing in businesses unfamiliar with the Middle East, thanks to a combination ofan impressive infrastructure, sound business advice being on offer and low taxation. Barbara Njau reports.

SECTOrS

14Dubai’s economy has long been dependent on its real estate and tourism sectors but, in a bid todiversify, the emirate has started focusing on logistics, financial services and energy, with government-

backed initiatives – including an airport city, a financial free zone and a new solar park – driving the rapidgrowth of each of these sectors. Lucia Dore reports.

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overview

Dubaigetsbackon track

T he crowd grows and the cam-era flashes become more fren-zied, illuminating a team of

scuba divers performing tricks withvarious aquatic animals inside theDubai Aquarium, beneath the gaze ofcaged tiger sharks. Situated near theentrance of Dubai Mall, this hubbubof activity around one of the world’slargest aquariums intensifies, as peo-ple, drawn by blaring music, pause towatch the divers’ elaborate routine.

It is this kind of spectacle thatthe first time visitor to Dubai couldbe forgiven for assuming is a special

occasion. Yet far from being a one-off event, itturns out that the show is yet another gim-mick designed to entice onlookers to visit theAquarium’s underwater zoo. But it is grandi-ose displays such as these that have givenDubai a reputation of being the UnitedArab Emirates’ (UAE’s) larger-than-life city.

Indeed, the Burj Khalifa complex encapsu-lates why some refer to Dubai as ‘the city ofsuperlatives’. The complex encompasses theBurj Khalifa, the world’s tallest building, andthe Dubai Mall, the world’s largest shoppingmall in terms of area, according to Dubai’stravel website, Guide2Dubai. Home to someof the most glamorous property developments

in the world, Dubai is a popular destinationamong the world’s super rich who are drawnto its flagship seven-star Burj Al Arab Hotel andits exclusive man-made Palm Jumeirah islands.

“Dubai has been successful in creating abrand when it comes to visible icons, and thisis something that we are proud of,” says MalekSultan Al Malek, the managing director ofbusiness park Dubai Internet City. “If I sayLondon, you think of the Big Ben; if I say NewYork, you think of the Empire State Building.Dubai is different. When I say Dubai... somethink of the Palm Islands, some the Burj AlArab, and some will see Emirates Airlines.”

UAe’s hubDubai is one of seven emirates that make up theUAE, nestled between Abu Dhabi, the country’scapital, and Sharjah. Although many peopleassume that Dubai’s transformation into amajor logistics hub has occurred in the past fewdecades, it is in fact far from a recent phenome-non. Dubai’s rise as a trading hub dates back tothe 19th century, when the emirate establisheditself as a regional centre for the pearl trade.Pearl hunting in the Persian Gulf’s turquoisewaters provided Dubai with its main source ofincome and by the early 1900s, Dubai was wellknown among international merchants for itsthriving pearl industry and its liberal trading

The properTy crash ThaThiT Dubai in 2008 puT an enDTo years of rapiD growTh.while These wounDs arenoT yeT fully healeD, TheemiraTe is reTurning TosTrengTh anD is reTainingiTs allure To invesTors asa safe haven wiTh ThefinesT infrasTrucTurein The miDDle easT.BarBara Njau reporTs

www.fDiintelligence.com December 2012/January 2013

Dubai is perceiveD by internationalfirms as a gooD base fromwhichto access neighbouring markets

3

policies. Although the industry declined afterthe 1920s, following the development of artifi-cial pearls in Japan, Dubai’s low taxation on for-eigners continued to make it a draw for traders.

“Dubai has always been a flagship emirate,from a historical perspective,” says MazdakRafaty, managing partner of Germany-basedLudwar International Consultancy. “Dubai hasalways been well known as a trade destina-tion, because 200 years ago it had alreadyset about establishing its structures.”

Although the discovery of oil in 1966accelerated Dubai’s economic transformation,according to estimations from consultancyOxford Business Group, the realisation in the1980s that Dubai’s oil reserves would run dryby 2020 prompted the then ruler SheikhRashid bin Saeed Al Maktoum to engage ina large-scale diversification of the emirate’seconomy, through investing its hydrocarbonrevenues in creating an economy based onthe services sector.

DoingbusinessDubai has experienced considerable success indiversifying the main sectors of its industrialoutput. The oil and gas sector, so dominant inthe 1970s, today accounts for less than 2% ofthe emirate’s economy, according to economicintelligence provider the Business Year. Dubai’sleaders have long been keen to capitalise on itsstrategic location. Situated the crossroads of

commerce between Europe, Africa and Asia,the Oxford Business Group estimates thatapproximately 1.8 billion people live withina five-hour flying radius of the emirate.Accordingly, Dubai has worked to developits tourism and hospitality services.

“Dubai has done well in developing itselfas a base for transport and logistics,” says MarcNassim, head of clients and markets in theMiddle East at advisory firm Deloitte CorporateFinance. “The business model of Dubai is a goodillustration of this. It was developed to connectthe West with the East, and it encourages peo-ple to stay over for two to three days, on the way[to another destination]. This model has workedextremely well, as people from all over theworld come here and they spend more.”

The Business Year estimates that in 2011,the wholesale, retail, restaurant and hotelsectors represented 32.8% of Dubai’s GDP.Furthermore, these sectors are set to experi-ence further growth, as the Business Yearreports that the government expects 9 milliontourists in this year alone.

infrastructure drawDubai’s infrastructure development, which,under the leadership of Sheikh Mohammed binRashid Al Maktoum, has accelerated at a rapidpace over the past decade, has transformed thecity into a metropolis of shimmering skyscrap-ers, and has earned it a reputation among

regionAlprofile

United ArabEmirates

Dubai

DuBaiPopulation: 2millionarea: 4114 sq km

Nominal GDP: $84.7bn

Largest sector Wholesale and(% of GDP): retail

unemployment rate: 4.6%

source: The business year uae, Dubai 2012

December 2012/January 2013 www.fDiintelligence.com

reaching upwards and outwards: Dubai’s infrastructure has developed at a rapid pace over the past decade, attracting many of the world’s largestinternational companies to the city

4

investors for havingwell-connected infrastruc-ture. According toUmberto Cini, themanagingdirector of general overseasmarkets at luxurycarmanufacturerMaserati, Dubai is perceivedby international firms as a good base fromwhich to access neighbouringmarkets, and amajor reason for this is its robust infrastructure.

“Maserati started operating in Dubai in2006 and from here we cover Middle East andAfrica,” says Mr Cini. “We chose Dubai becauseit is a hub in terms of services, we are very wellconnected to the entire world, and there wasa lot of help from the [governmental] institu-tions to set up our business here. We haveinvested a lot in our future here. We see Dubaias a base fromwhere we can access other mar-kets, such as India, South Korea, Australia,New Zealand and South America. We havetwominor representative offices in Singaporeand in São Paulo, but the hub is Dubai.”

“Dubai is the regional headquarters forFedEx Express in the Middle East, the Indiansubcontinent and Africa,” says David Ross,senior vice-president of FedEx Express in theseregions. “Dubai has been, and continues tobe, at the centre of our regional operations,as a result of its access to large regional andglobal markets. Dubai differentiates itself byinvesting in its world-class infrastructure suchas global airlines connections, and its busi-ness-friendly climate.”

Managing thewobblesNonetheless, the collapse of Dubai’s real estatesector, in themidst of the global financial cri-sis in 2008, unveiled a structural weakness inthe emirate. Prior to 2008, the rapid growthof Dubai’s real estate and construction sector,which the Business Year estimates accounted

for 30% of Dubai’s GDP by 2007, powered thecity’s six-year-long economic boom, and thecity’s GDP growth reached 16% in 2006,according to Dubai’s Department of EconomicDevelopment. The announcement in late 2008that Dubai was unable to refinance its liabili-ties, worth $59bn, caused the emirate’s prop-erty sector, which was the fastest growing inthe world at the time, to collapse.

“Hard times hit Dubai doubly because wewere already in a huge property bubble thathad to burst at some point, and it burst in themiddle of a global economic crisis,” says MrRafaty at Ludwar International Consultancy.

“It hit us on all levels. The city, up until late2007, was full of activity. By late 2008, a lot ofpeople left and... it was a disaster for every-body. The real estate prices, which are a goodindicator for activity in the city, fell by 50% to70%. The [crash] revealed inherent structuralissues. Dubai’s weaknesses stemmed from alack of legal structures, which are still a seri-ous problem here. TheWorld Bank’s DoingBusiness report found that [by everymeasure],Dubai is perfect except for transparency.People got too greedy and there was a pricefor everything.”

Transparency challengeThe financial crisis exposed a systemic lackof transparency which, according to manycommentators, continues to pose a challengeto investors operating in the city. “One ofDubai’s weaknesses is transparency,” saysMr Nassim at Deloitte. “In addition, anythingrelated to the judicial system [is a challengeas] in Dubai there are two different systems.There is the Dubai International FinancialCentre [DIFC] law – applied in the DIFC andwhich is [based on] the common law – andthere is the one applied in the Dubai courts,which is inspired by sharia. The issue is thatit takes a long time and so it is not very appeal-ing for investors from the US, for example.

“The company law is also an issue, becauseas a foreigner you are not allowed to ownmorethan 49% [of a company when operatingonshore]; however, a foreign investor can own100% in a company established in a free zone,but the company will pay custom tax if it sellsits products onshore.”

Dubai’s onshore judicial system is seen ashighly biased towards locals, and there existsthe perception among foreign business ownersthat should disputes between a foreigner andan Emirati be presented before a court, the for-eigner will not operate on a level playing field.

“There are certain parts of doing businessin Dubai that are very easy; for example, estab-lishing a business is easy and the infrastruc-ture is excellent,” says Ayesha Sabavala, aneconomist at research and analysis firm theEconomist Intelligence Unit.

“Yet there are other aspects of doingbusiness that [pose challenges]. Any investorinvesting in Dubai should be confident that

Dubaioverview

the collapse of Dubai’sreal estate sector, inthe miDst of the globalfinancial crisis in 2008,unveileD a structuralweakness

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6

Dubaioverview

should they be involved in some sort of law-suit or court case with a local company, theywill get a fair trial in court. But the perceptionis that the courts favour local companies overforeign companies, and this is a big issue. Thegovernment has started addressing thisbecause there was a ruling in 2012 whichopened the DIFC courts, which are basedon UK law, to all companies in the UAE thatwant to address legal issues.”

regional unrestThe violence that erupted in Israel in Novemberwas a fresh reminder that Dubai sits in a regionwith several fault lines. According to Mr Rafaty,the threat of a possible escalation in tensionsbetween Iran and Israel mean investors operat-ing in the region remain acutely aware of thenegative effects such geopolitical tensionscould have on their operations in the emirate.

“A lot of foreign investors that come herehave an eye on Iran,” he says. “Dubai as an emir-ate has historically had a close relationship withIran. When you look at the statistics from 2005to 2007, Iran was the top trading partner interms of re-exports coming out of Dubai. Everyoffice that wants to do business with Iran camehere. If there is a war [involving] Iran, we willdefinitely go down with it. This is the risk Dubaiis facing as [the local government] is trying to

be as restrictive on trade sanctions with Iran asinternational regulations.”

Yet according to others, the probability ofinstability spilling over into Dubai is remote,and the city is perceived by many as a safehaven, mainly because all external parties haveno interest in damaging the city’s economy.“The Iranian and Israeli tension and the volatil-ity is not good for the economy,” explains MrNassim. “But no one has an interest in damag-ing Dubai’s economy. It would be a lose-losegame for everyone.”

With Dubai’s economic activity set torebound strongly in coming years, investorsremain upbeat about the emirate’s ability toreform its structural weaknesses. AlthoughDubai’s GDP dropped to a low of 0.9% in2009 and 0.5% in 2010, according to theInternational Monetary Fund, economicresearch and strategy firm Arabia Monitorpredicts Dubai’s economy will grow by 3.7%in 2012 and by up to 5.5% by 2015.

“I believe that the financial crisis actuallycleared a lot of things,” says Mr Cini at Maserati.“There is now a system where there was no sys-tem in place before. The government has reactedbrilliantly to this situation. It has been able toturn a disastrous situation into a positive one,with extremely positive results. [The Middle East]is stable and it is growing steadily.” ■

www.fDiintelligence.com December 2012/January 2013

flagship stores: the Dubai mall, the largest shopping centre in the world, is one of the attractions in the burj khalifa complex (pictured), which is helping boost Dubai’s already healthy tourism industry

ThegaTewayToThegulfDubai Airport Freezone, or DAFZA, is located withinDubai International Airport and offers companies anideal base in which to do business in the Middle East.

Established in 1996 as part of Dubai gov-ernment’s strategic plan to move theemirate towards an investment-driveneconomy, Dubai Airport Freezone(DAFZA) is now one of the fastest grow-ingpremiumfreezones in the region. It iscurrently home tomore than 1600 com-panies fromvarious industry sectors.

DafZa is located within the boundary ofDubai International airport, which is consid-ered to be one of the world’s busiest travelhubs. It is the ideal location for aviation, freightand logistics sectors and has also attractedsignificant business from the IT and telecom-munications, pharmaceuticals, engineering,food and beverages, jewellery and cosmeticssectors. Some of the world’s most recognisedbrands have chosen to establish their Middleeastern hubs in DafZa.

The free zone offers an outstandingreturn on investment through the provision of100% ownership, a tax-free environment andother unmatched benefits. It provides directaccess to a number of government services,including immigration, customs and theChamber of Commerce, helping to streamline

red-tape procedures and provide clear pro-cesses and guidelines. The free zone firmlybelieves in supporting its clients by providingthe best facilities and services that theyrequire to achieve their goals.

SAlES rESultSDafZa has reported an impressive growthrate of 82% in sales revenue during the firsthalf of 2012, with a 90% increase in the rentalof warehouse space, compared to the sameperiod in 2011.

after a successful 16 years, DafZa hasbecomeone of themost experienced author-

ities in attracting foreign capital. It generated6% of Dubai’s total exports in that period, afigure of about $14bn.

“The free zone’s results in 2012 indicatean increasing interest from foreign firms tooperate from Dubai,” says Dr Mohammed alZarooni, director-general of Dubai airportfreezone.

DafZa saw also an increase of more than100% in the number of new companies set-ting up in the free zone in 2011 when com-pared with 2010.

“as part of its strategy to attract compa-nies from across the world, DafZa strives toprovide a state-of-the-art business environ-ment from which companies from variousindustries, many of them multinational, canoperate within its vicinity,” says Dr al Zarooni.

DafZa stands as an iconof successful for-eign investment in the region, and of thestrong commercial partnerships that can bedeveloped, in particular with european andasian firms in various sectors.

The free zone anticipates even furthergrowth in 2013. Dr al Zarooni says: “Thefuture is full of aspirations and positive expec-tations, with plans to implement a numberexpansions and enhancements to be rolledout in the coming year. These includeincreasing the rental spaces for offices as wellas the addition of new services and facilitiesfor clients, such as a business centre, restau-rants and a health club.”

AwArDSDafZa has picked up a number of awards atthis year’s ninth annual International Businessawards: The International Stevies. It claimedgold, silver and bronze awards, competingagainst businesses from across the world.

DafZa is ranked first globally by fDiMagazine’s global free Zones awards for2012/13, winning as a result of its outstand-ing strategic approach and well-articulatedplans to service its investors and partners.Previous accolades with fDi include beingranked the number one Middle east freeZone of the future and the leading free zonein the united arab emirates for 2011/12.

The Richard goodman Strategic Planningaward, given by the american StrategicPlanning association in 2012, also recognisedthis distinction in strategic planning byDafZaand honoured its competence, innovationand excellence.

DafZa’s commitment to quality is recog-nized by worldwide ISo certificates for quality,environment, health and safety and its infor-mation security management system, as wellas its complaints handling system.

“DafZa STRIveS ToPRovIDea STaTe-of-The-aRT BuSIneSSenvIRonMenT fRoMwhIChCoMPanIeS fRoMvaRIouSInDuSTRIeS, Manyof TheMMulTInaTIonal, CanoPeRaTewIThIn ITS vICInITyDrMohammedal Zarooni”

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THEHOMEOFBUSINESSOver the past decade, the Ras Al Khaimah Free TradeZone has taken its pride of place as the gateway to theMiddle East, attracting top international companies byoffering unmatched facilities and privileges

Established in May 2000, the Ras AlKhaimah Free Trade Zone (RAK FTZ) hasgrown by leaps and bounds and today isthe fastest-growing and most cost-effective free trade zone in the UnitedArab Emirates (UAE) and home to morethan 6000 active companies from 106countries around the globe.

Offering a world-class business environ-ment, cutting-edge technology and custom-built support services to investors, as well as astrategic location between the East and theWest, the free zone has fast emerged as thehub for business and theMiddle Eastern gate-way for top international companies acrosssectors.

EnviAblE gRowThRAKFTZ boasts of an enviable client list, with2033 new companies registering in 2011alone, reinforcing its reputation as one of themost attractive investment zones in theregion. If 2011 was successful, 2012 has seeneven more phenomenal growth, with 1935new companies already registered in the firstthree quarters of the year.

One of the salient features of RAK FTZ’ssuccess over the years has been its strategy toassist small and medium-sized enterprises(SMEs) connect to emerging market econo-mies as well as key target markets. Backed by

its investor-friendly policies, the free zone hasprovided SMEs with a hassle-free platform toexpand their operations across the MiddleEast through innovative business solutions.

Part of an envisioned growth of HisHighness Sheikh SaudBin Saqr Al Qasimi, UAESupreme Council member and the ruler ofRas Al Khaimah, RAK FTZ has fast emergedas a trading and business hub offering strate-gic access tomajor worldmarkets.

UniqUE sERvicEsThe free trade zone offers a range of uniquevalue-added services, which include legal,human resources and marketing assistance.RAK FTZ has created a unique four park sys-tem comprised of a business park, industrialpark, technology park and academy zone,each offering a wide array of advantages toinvestors. Backed by legislations allowing100% foreign ownership, a tax-free environ-ment, transparent laws and 100% capital andprofit repatriation, the free trade zone is wellpositioned for global commerce.

Maryam Al Murshedi Al Shehhi, deputydirector general of RAK FTZ, says: “We areproud to have played pivotal roles in enhanc-ing the attractions within Ras Al Khaimah. Ourinvestment-friendly regulations, transparentpolicies and a flourishing free trade zone havedrawn foreign investment from all over the

globe. With optimistic plans, RAK FTZ willcontinue to live up to its reputation as the‘home of business’ in the region.

“The success is a clear testament of aclear-cut, visionary strategy to attract busi-nesses and investment to Ras Al Khaimah.The objectives laid down by His HighnessSheikh Faisal Bin Saqr Al Qasimi, Chairman ofRAK FTZ were focused on encouraginginvestment by reducing red tape and legalrestrictions; providing excellent customer-focused solutions; delivering simple andeffective systems and procedures; andattracting and developing a highly qualifiedmulti-cultural workforce. We are proud weticked on all the above boxes.”

EMiRATisATion dRivERAK FTZ has successfully integrated a verylarge number of UAE nationals in its work-force, and part of its vision is to develop theseemployees and encourage them in every waypossible so that they eventually attain man-agement positions. Since its inception, RAKFTZ has attracted, trained and retained top-quality UAE national talent and has under-taken numerous initiatives to develop theirexpertise. To date, more than 50% of themanagement team ofRAKFTZ are Emiratis.

No wonder, the free trade zone has beenrecognised with top industry accolades –voted the ‘Best Emerging Free Zone’ for threeconsecutive years by Middle East LogisticsAwards, ‘Industrial Area of the Year Award’ atthe Supply Chain and Transport Awards, the‘Best Website’ at the 9th World Free ZoneConvention; and was honoured at the SheikhSaqr Programme for Government ExcellenceAwards, among numerous others.

globAl FooTpRinTRAKFTZ is also theonly free zonewith officesacross the UAE and globally, underlining itsreputation as the preferred destination forbusiness. RAK FTZ currently operates busi-ness and promotion centres in Dubai and AbuDhabi, and international liaison offices inGermany (Cologne), Turkey (Istanbul), India(Mumbai), and the US (Washington DC) whichhelp spread theword aboutRAKFTZ globally.

RAK FTZ’s reputation for affordability,flexibility and broad geographical reach hasserved it well, and it is rapidly emerging as thebusiness hub in the region. In short, it hasrightly reaffirmed its slogan - The Home ofBusiness.

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9

Dubai’s free zones are Drawingin businesses unfamiliar withthe miDDle east, thanks to acombination of an impressiveinfrastructure, sounD businessaDvice being on offer anD lowtaxation. BarBara Njau reports

In thezone

I n a bid to offset the impact ofDubai’s dwindling oil reserves,the United Arab Emirates govern-

ment has been gradually developinga host of free zones that will serve todiversify the city’s competitive sec-tors. Created as clusters catering tothe needs of a specific industry, thecity’s free zones were formed to pro-vide supporting infrastructure anda host of incentives, such as com-plete foreign ownership and low tax-ation, to attract foreign companies.

“As sophisticated as they are,the free zones also present a simplemeans of doing business in Dubai,”says Fahad Al Gergawi, CEO of foreigninvestment office Dubai FDI. “Withtheir sharp focus on client needs, thefree zones help investors set up andreach out to clients with exceptionalspeed and efficiency. There are also

added benefits in the formof 100%ownership, zero tax on personal aswell as company earnings and fullrepatriation of incomes. Today, thereare 23 free zones in Dubai,many ofthem serving as specialised industryclusters. Together, the free zonesaccount for 65% to 70% of foreigninvestment in Dubai.”

Seeking to capitalise on its loca-tion as a logistics hub, the govern-ment’s initial focus was on promot-ing imports and re-exports, anddeveloping Dubai’s role as a facilita-tor in this process. The governmentbegan with the port project of JebelAli Free Zone in 1985. Offering taxadvantages to private investors, thefree zone quickly evolved to becomethe region’s capital for cargo trade,logistics and warehousing.

Dubai Airport“When the Jebel Ali Free Zonestarted up, it was successful, butit offered only one option to theinvestor, so Dubai Airport FreezoneAuthority (Dafza) was establishedto provide another option for inves-tors,” says Nasser Al Madani, assis-tant director-general of Dafza.Established in 1996, Dafza hasbecome something of an ‘aerotropo-

lis’, and is home to 1600 companiesfrom sectors as diverse as aviation,pharmaceuticals, information andcommunications technology (ICT)and cosmetics. Situated a 20-minutedrive from both the Bur Dubai dis-trict and Dubai InternationalAirport, Dafza considers itself to bethe fastest growing free zone in theMiddle East. The free zone’s locationand infrastructure have been key toits success, says Mr Madani.

“We each have different sellingpoints and for Dafza, it is the loca-tion, the quality of the facilities andservices, and the focus on the cus-tomers,” he says. “We realised thattime is an important issue for inves-tors, so our strategy was builtaround that, and we brought in thedepartment of immigration, cham-ber of commerce, customs, banksand other service providers to Dafzaso our companies will not waste alot of time when they do their dailybusiness. We have attracted $3.5bnof investment and we contribute[up to] 2.27% to Dubai’s GDP.”

According to Khader Mattar,Bombardier Business Aircraft’sregional vice-president for sales inthe Middle East and Africa, a key rea-son why the Canadian aerospace

Well-trodden path: when it was opened in 1996, the Dubai Airport Freezone Authority (pictured) was only the second free zone to be established in Dubai, now there are 23

December 2012/January 2013 www.fDiintelligence.com

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Dubaifreezones

is linked to this region,” says OsamaRinno, president of Clarins GroupMiddle East. “We were establishedabout 11 years ago [in Dafza] as asubsidiary of Clarins Group France,and we manage the Gulf region andparts of the Indian subcontinent.The services and the infrastructurehere are so advanced and everythinghappens so quickly. This is one ofthe key things about Dubai. Secondis the proximity. It is a couple ofhours’ flight to anywhere in theGulf, so it is very central.”

Jumeirah Lakes TowersAlthough the remit of Jumeirah LakesTowers (JLT) is more limited to thecity’s real estate and property sector,the free zone’s authorities maintainthat JLT is among the fastest growingfree zone developments in the UAE.They attribute this to JLT’s moderncommercial and residential proper-ties, which have increased Dubai’s

allure as a prime location for inves-tors. Situated on the arterial SheikhZayed Road in the heart of Bur Dubai,JLT is a mixed-use waterfront masterdevelopment, which caters to bothbusiness investors and private buyersby offering commercial, residentialand retail property for sale and lease.

“The Dubai Multi CommoditiesCentre is the government of Dubai’slicensing authority for JLT, and JLT isone of the largest free zone develop-ments in Dubai,” says JamesBernard, director of business devel-opment and client services at thecentre. “The mixed-use free zonecomprises 62 towers, which are amix of commercial and residentialfreehold property. In addition, thereare areas for light industry and man-ufacturing in which a range of sec-tors have set up.”

From Mr Bernard’s perspective,a key reason why Dubai’s free zoneshave been successful in attracting

company chose to set up an officein Dafza was because of its proxim-ity to a well-connected internationalairport, which increases access toneighbouring markets. “Bombardierstarted [in Dafza] back in 1996 witha small office, but now we haveexpanded and we have 20 stafflocated [here],” he says “The MiddleEastern market is very importantand our office brings us very closeto our clients. Dubai has establisheditself in terms of its infrastructureand its ability to service the market.It has the airport and the connec-tions we need, as well as the bankswe need to finance our operations.”

For the cosmetics companyClarins, an office in Dafza was essen-tial to servicing a fast-growing clientbase in more than 30 countriesacross the Middle East and theIndian subcontinent. “What led usto open up here is the importanceof the region and the growth that

Dubai Internet City (bottom right) was designed to attract technology companies to Dubai and has since become the Middle East and north Africa’s largest ICT cluster. Itssuccess led owner Tecom investments to open a number of other industry-specific parks, including Dubai Media City (top) and Dubai International Academic City (bottom left)

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AkEy rEAsonWhyDubAI’sFrEE zonEshAvE bEEnsuCCEssFul In ATTrACTIngFDI Is ThE CITy’s proACTIvEApproACh TorEFInIng ThEsErvICEsoFFErED

FDI is the city’s proactive approachto refining the services offered. As anexample, he cites JLT’s new approachto doing business with its registeredclients by offering them additionalinformation on relevant sectors andproducts as a way to develop theirbusiness within the zone. “We areconstantly striving to improve ouroverall offering,” says Mr Bernard.

“We do not just offer propertyand a trade licence. We offer our-selves as a partner to all members.We offer knowledge to specific sec-tors and we have fit-for-purposeinfrastructure, products and servicesthat make us unique and attractive.As we speak, we are running severalsurveys to find out from our mem-bers what they want from us andwhat we can do to support them. Weregistered 1357 new companies in2011 and [in total] we have [attracted]more than 2000 new member com-panies, giving us a total of morethan 5300 members to date.”

Tecom InvestmentsIn line with the government’sdrive to create a knowledge-basedeconomy, Tecom Investments wasdesigned to nurture Dubai’s technol-ogy-based industries by developinga cluster of business parks. Currentlyhome to 4500 companies, includingFortune 500 corporations such asDell, IBM and Microsoft, one ofTecom Investments’ largest portfoliocompanies is Tecom Business Parks.

“Tecom Business Parks com-prises 10 interconnected parks stra-tegically arranged under five indus-try clusters,” says Dr Amina AlRustamani, CEO of Tecom BusinessParks. “Dubai Internet City andDubai Outsource Zone form theICT cluster, while Dubai MediaCity, Dubai Studio City and theInternational Media ProductionZone make up the media cluster.Dubai Knowledge Village andDubai International Academic Cityare part of the education cluster.DuBiotech and Enpark compose thescience cluster, and Dubai IndustrialCity comes under the manufactur-ing and logistics cluster.

“[We host] a variety of firms,ranging from start-ups to Fortune500 companies. International com-panies are being joined by busi-nesses from across the Arab region,as Dubai increasingly becomes abuzzword for stability in the region.This is a trend we expect to seecontinue for the time being.”

Dubaifreezones

Launched in 2000, TecomInvestments’ oldest business park,Dubai Internet City, has evolved tobecome the Middle East and northAfrica’s largest ICT cluster.Developed with an eye on SiliconValley in California, Dubai InternetCity is a cluster of interconnectedbuildings offering state-of-the-arttechnology and infrastructure.

“We used to buy televisions, cam-eras and phones in 2000, becausethere was a lack of up-to-date tech-nology in the region,” says MalekSultan Al Malek, managing directorof Dubai Internet City. “That is whywe created an [ICT] cluster. Since webegan, we built a model based onoffering incentives for technologicalcompanies to come and have baseshere. We have been very successful,growing by 15% annually. We have alot of benefits to the region when itcomes to building the core compe-tencies in technology.”

DubaiWorldCentralDesigned to leverage Dubai’s posi-tion as a trade, business and avia-tion hub, Dubai World Central(DWC) is a masterplanned airportcity located close to the Jebel Alisea port and built around the AlMaktoum International Airport.“DWC is a strategic initiative of thegovernment of Dubai that will serveas a fully integrated hub for avi-

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Fahad Al gergawi, CEo of Dubai FDI: ‘As sophisticatedas they are, the free zones also present a simplemeans of doing business in Dubai’

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ation, air transport, commercialand logistics businesses, whileincorporating extensive residentialand leisure amenities upon comple-tion,” says Khalid Ibrahim, vice-president for strategy and corporatecommunications at DWC. “DWC is acomprehensive free zone with mul-timodal access and a business-friendly environment.”

Withmore than Dh17bn ($4.6bn)already invested in DWC’s expansion,the free zone’s authorities believe itis set to be one of theMiddle East’sleading aerotropolises, encompass-ing the airport and a business park,as well as a series of districts, whichrange from the logistics and aviationdistricts to the golf, exhibition andhumanitarian districts.

“DWC is primarily engaged increating business opportunitiesfor companies engaged in aviation,logistics and related industries,”says Mr Ibrahim. “This is all partof the aerotropolis concept, [as DWCis] a combination of an airport, aswell as a logistics and business hub.The airport is designed to accommo-date up to 120 million passengersand 12 million tonnes of air cargoper year upon completion.”

“The logistics district fills a gapin the global supply chain as it offersdirect access to air, sea and road trans-portation, including a dedicatedairport–seaport corridor that allowscargo to bemoved from the port tothe airport in just 20minutes. Theaviation district serves as a one-stop

centre for all aviation-related opera-tions. Dubai’s economy remains on agrowth path andwe have all the rightreasons to look forward tomore excit-ing possibilities in the future. Thecontinued expansion of these keycomponents of DWCwill ultimatelyboost Dubai’s ability to attract foreigndirect investments.”

offshore versus onshoreAkey selling point of operating off-shore inDubai’s free zones has beenthat companies are exempt from seek-ing a local owner, whichwould other-wise oblige foreign investors to placeat least 51%of their company underEmirati ownership. Nonetheless, YannMrazek,managing partner of the lawfirmCramer-Salamian, contends thatfar fromoffering foreign investorscontrol, operatingwithin a free zonecan actually become a constraint.

“Although free zones have a lotof incentives, I am a big believer in[operating] onshore for many rea-sons,” says Mr Mrazek. “It is moreflexible. When you are in a freezone, you basically sign up with it,so you are much less in control. Ifyou want to change offices tomor-row, you need to stay in a free zone.So from a flexibility point of view,onshore is usually much better.There are also limitations in termsof the activities you can undertakeand the geographical scope of theseactivities, whereas [operating]onshore has absolutely no geo-graphical limitations.”

Mazdak Rafaty, managingpartner of Ludwar InternationalConsultancy FZC, also acknowledgesthe limitations of free zones.However, hemaintains they areset to remain popular with foreigninvestors, as they are a gateway intoDubai for investors unfamiliar withdoing business in the city.

Additionally, free zones offerinvestors the possibility of sourcinga reliable business partner, if theydecide tomove their operationsonshore. “The legal structure [ofcompany ownership] is 51% to thelocals and 49% to the foreigners, sothis is what brought about the ideaof free zones,” says Mr Rafaty. “Thereare a variety of free zones and,depending on what your activity is,I would say they are a good way toget your foot in themarket. Whenyoumeet a suitable partner, you cango onshore. Free zones are impor-tant because they are door-openersand they will continue to do well.” ■

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living the high life: Jumeirah lakes Towers (pictured), which has a mix of commercial and residential properties, is oneof Dubai’s fastest growing free zones, according to its authorities

BiggerandBetterDubai is already an established hub for global business,but now the emirate is stepping it up a notch, with theopening of an agency to help investors in the region.

Dubai and its economicdevelopmentaredriven by strong elements of geography,history and anoutward-looking strategy,well-aligned to the contemporary globallandscape. in less than 40 years, dubai hastransformed itself froma local trading commu-nity into one of themost inspirational, excitingand successful cities in theworld.

dubai’s diverse, multicultural populationoffers its residents and businesses a uniqueenvironment, enriched with hundreds of cul-tures and a quality of life andwork unrivalled inthe Middle east. it is a bustlingmetropolis witha combination of emirati heritage, arabic vital-ity, Western spontaneity and asian ambition.

two million people from 200 nationalitieslive and work together in dubai, thanks to itslifestyle appeal and investment incentives. thetax-free policies and penalty-free repatriationof earnings have enormous benefits on both apersonal and business level, with outstandingopportunities for private savings and profes-sional profits.

among the cornerstones of dubai’s grow-ing global appeal is its expanding infrastruc-ture, aswell as the emirate’s constant efforts to

enhance its global rankings in theWorldBank’sease of doing business index. in recent yearsdubai has reinforced its capabilities to connecttrade and people by emerging as an aviationand logistics hub.

dubai international airport is the fourthlargest in the world, connecting dubai to 200destinations and served by more than 120international airlines, including emirates, theleadingglobal airline. the airport is expected tohave handled 57 million visitors by the end of2012.

TransporT hubdubai World Central (dWC), an ambitious initia-tive to build the world’s largest air and freightcorridorcapableofhandling160millionpassen-gers andmore than 12million tonnes of cargoannually is nowbeingcompleted inphases.

as thousands of new businesses are dis-covering each year, dubai is the perfect gate-way between east andWest, and the preferredhub for the region’s imports and exports mar-ket – one of the most lucrative in the world.dubai’s strategic location gives easy access to2.2 billion consumers, from a unique central-

ised time zone that combines east and Westbusiness hours.

dubai has also demonstrated remarkableresilience in the face of the recent global eco-nomic challenges, chiefly due to the initiativesand measures taken by the government tocontain the repercussions. today, traditionalsectors, such as logistics, trade and tourismlead growth but the prime investment focus ison growing sustainably.

Part of the government’s initiatives to pro-mote foreign investment in dubai, dubai Fdihas been established as the foreign invest-ment office under the department ofeconomic development in dubai, consolidat-ing efforts to enhance the emirate’s competi-tiveness and attractiveness for investors andbusinesses.

the core objective of dubai Fdi is todevelop and sustain a competitive investmentenvironment to support, stimulate and growkey economic sectors, job creation, and com-munity support in alignment with the dubaiStrategic Plan, eventually enabling dubai torealise its vision of being a preferred invest-ment destination globally.

dubai Fdi targets and attracts new for-eign direct investment projects, facilitatesgrowth of investments and looks after theretention of foreign investors in dubai, whilealso working on enhancing the overall invest-ment landscape.

the dubai Fdi team guides new investorsthrough the various stages of the investmentprocess, advising on the business location, thelegal structure that best fits their needs, aswellas linking them to government and non-gov-ernment bodies as required.

additionally, the team offers ongoing sup-port for the growth and expansion of estab-lished companies in dubai and voices investorconcerns that may be inhibiting growth ordevelopment and affecting the overall invest-ment environment.

to reachout to investorsworldwide, dubaiFdi has alsobuilt a growingnetworkof interna-tional investment promotion agencies andbusiness facilitators. investments facilitated bydubai Fdi have contributed substantially tobringing in game-changing innovations andsustainability initiatives to dubai.

“ duBai Fdi haS BeeneStaBliShed toenhanCe theeMirate’S CoMPetitiveneSSandattraCtiveneSS ForinveStorSandBuSineSSeS”

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Dubai’s economy has long beenDepenDent on its real estate anDtourism sectors but, in a biD toDiversify, the emirate has starteDfocusing on logistics, financialservices anD energy, withgovernment-backeD initiatives– incluDing an airport city, afinancial free zone anD a newsolar park – Driving the rapiDgrowth of each of these sectors.Lucia Dore reports

anewapproach

D ubai is buzzing. Traffic levelsare back to what they werepre-2008, before the global

financial crisis hit, and residentialrentals are creeping up again. Bothare signs that the emirate is recover-ing and doing what it does best –attracting investors into its key sec-tors, namely tourism and hospitality,trade and logistics, and financial ser-vices. Recent figures from the DubaiStatistics Department appear toconfirm this; they show real GDPgrowth of 4.1% in the first half of2012, the strongest half-year growthsince the first half of 2008.

Up until 2008, the real estatesector was one of the key driversof Dubai’s economy, but it was hardhit by the global economic down-turn. There are now signs, however,that the sector is starting to pick up.

Meanwhile, other sectors – health-care, education and renewableenergy, in particular solar – areplaying a greater role in the econ-omy as Dubai targets economicdiversification.

“Dubai is getting back to whatit does best: [being a] commercialtrading hub,” says Chris Williams,a Dubai-based partner at legal firmBracewell & Guiliani. He adds thatthe emirate’s “buzz and vibrancyis coming back”.

Tourism is the largest earnerfor Dubai’s economy, contributing31% to the emirate’s GDP in 2011.Although Dubai’s hotel market wasaffected by the global recession –with a drop in rates and occupancyof about 40% and 70%, respectively –it still fared better thanmany othertourism-dependent locations and,despite global economic depressionand social and political unrestacross much of the Middle East andnorth Africa (MENA), Dubai’s tour-ism industry has remained strong.

According to John Podaras, direc-tor of MENA at Dubai-based hospital-ity consultant Christie & Co, Dubaihas been a net beneficiary of thepolitical unrest across the MiddleEast. Mr Podaras does add, however,that such volatility does raise therisk premium of investing in Dubai,which can act as a barrier to entryand foreign investment.

Creating an imageDubai has spentmuch of the pasttwo decades positioning itself as acommercial and tourism hub, sell-ing the idea of what it has called‘brand Dubai’ to the rest of theworld. The success of the ‘brandDubai’ strategy is the result of anumber of initiatives, says MrPodaras. These include a collabora-tion between Emirates Airline andthe Department of Civil Aviation,the promotional work of DubaiDepartment of Tourism andCommerce Marketing and its net-work of offices, and the work of theDubai convention bureaux and theDubaiWorld Trade Centre in estab-lishing Dubai as an attractivemeet-ings, incentives, conferences andexhibitions destination.

There have also been initiativesto develop the emirate’s infrastruc-ture, which have included buildingthe world’s tallest building, theBurj Khalifa, and the world’s largestshopping centre, the Dubai Mall.Meanwhile, the emirate is improvingits viability on the global stage byholding international sports events,such as cricket matches and golftournaments. This has all contrib-uted to creating an image of Dubaias amodern and secure city whereWestern culture is tolerated. MrPodaras says that Dubai has becomean “aspirational destination”.

Still soaring: the Dubai International Financial Centre (pictured) has attracted more than 900 companies to the emirate, fuelling growth in its financial services sector

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DubaiseCtors

“The underlying strength ofDubai is the fact that it is a neutralmarketplace for countries wherecommerce cannot easily take place,such as Iran, Pakistan and India, andmany of these countries were notaffected by the financial meltdownin 2008 and 2009,” says Mr Podaras.Dubai has also been successful intapping newmarkets such as China,eastern Europe and the Asian sub-continent, andmoving away fromtraditional ones such as Europe.

Growth in the hotel industryof between 5% and 7% is predictedfor the next three years, and ifDubai wins its bid to host Expo 2020– a global exposition held every fiveyears – this will increase demand inthis sector even further. Indeed, thegovernment’s belief in Dubai’s sta-tus as a tourist destination is sobullish that it has just announcedplans to build another major touristdevelopment, Mohammed binRashid City. This will comprise agigantic ‘mall of the world’, 100hotels, a 1.85-square-kilometre parkand an international family attrac-tion in collaboration with US-basedfilmmaker Universal Studios.

At the centre of thingsAnother important industry for theemirate is the logistics sector, amainstay of Dubai’s economy thatis expected to drive GDP growth in

2012. Transport, storage and com-munication represented 14% ofDubai’s GDP in 2011, accordingto Dubai Statistics Centre. A recentstudy by the Supply Chain andLogistics Group, a non-profitorganisation established to promotethe supply chain and logistics sector,reports that 14% of the United ArabEmirates’ GDP is attributed to supplychain and logistics.

Dubai’s geographical location,with its solid connectivity to thehigh-growth economies of southand east Asia, Africa and LatinAmerica, is, arguably, its greatestasset. The connectivity providedby Emirates Airlines, Jebel Ali Portand the aerotropolis Dubai WorldCentral has created a sound businessenvironment with a strong logisticsinfrastructure that has enabledDubai to compete globally, accord-ing to the CEO of Dubai FDI, FahadAl Gergawi.

These factors, along with thecontinuous reform of Dubai’s rulesand regulations, have “allowedDubai to survive the recession andbe in an advantageous positionwhen the global economy startedstabilising”, says Mr Al Gergawi.Dubai handles 70% of annual aircargo in the Middle East and thisdominance is expected to continue,according to Mr Al Gergawi. TheInternational Air Transport

[the logIStICS SeCtor]IS amaInStayoFDubaI’SeConomy that IS expeCteDtoDrIve gDpgrowthIn 2012

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Association forecasts that the UAEwill be the sixth largest country inthe world in terms of internationalfreight, with a projected 2.75 mil-lion tonnes handled by 2014.

Jonathan Guyer, head of logisticsand supply chain practice at GrayBusiness Consulting, says that thereis ample opportunity for logisticscompanies in Dubai to expand, espe-cially regionally. He describes Dubaias a springboard into rest of the GulfCo-operation Council (GCC) and theeastern Mediterranean countries.

In Saudi Arabia, most fast-mov-ing consumer goods companies stillwork through traditional agencychannels, leavingmuch opportunityand scope for third-party logistics(3PL) companies to expand, espe-cially those based in Dubai. “Whenimplemented correctly, [3PL] canprovide a very effective cost- andservice-optimised distribution solu-tion, allowing the principal to focuson the commercial aspects of hisbusiness,” says Mr Guyer.

Where themoney isThe Dubai International FinancialCentre (DIFC), a financial free zone,is home tomore than 930 compa-nies, of which 330 are financial ser-vices companies with a combinedworkforce of 13,000 financial profes-sionals. Over the past seven years,Dubai’s financial services sector has

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witnessed unprecedented growth,making it the undisputed businesscapital of the region, says Hamed Ali,CEO of Nasdaq Dubai, the emirate’sinternational stock exchange.

Dubai has benefited from beingin a time zone strategically locatedbetween East andWest, as well asfrom establishing “best practices”,says Mr Ali. He believes that as otherjurisdictions around the region facetheir own challenges, “Dubai is anatural destination” for a companyto set up an operation.

Others agree. “Dubai is alreadyin a strong position and is veryimportant to the whole Gulfregion,” says Francesco Pavoni, asenior partner and head of GCC andTurkey financial services at consul-tancy firm Roland Berger. “Most ofthe players are already at the fore-front of innovations and develop-ments – 75% of Fortune 500 compa-nies have established their regionalheadquarters in the UAE.”

Dubai’s sound regulatory frame-work is one of the principal factorsdriving confidence in the sector.The combined action of regulatorsstrengthening the financial systemandmaking it more stable and resil-ient, as well as complying to globalstandards such as Basel III, will notonly reinforce the sector’s credibil-ity but will help to improve it, saysMr Pavoni.

All themajor financial servicesplayers are already present inDubai,he adds, thoughhe does think thereare opportunities for other entrantswith, for example, value-added ser-

vices for the front office, private bank-ing or assetmanagement services.

Similarly, Marco Rodrigues, anassociate with Bracewell & Giuliani’sbanking and finance practice inDubai, says: “There is an upswing infinancial services. For the right pro-ject and the right geography, fundsare available.”

The DIFC has been instrumentalin driving financial services, accord-ing to Mr Rodrigues. “It has givenadditional credibility to Dubai, tothe UAE and to the region. It hasbrought international lenders to thetable,” he says. While other jurisdic-tions in the region, such as Qatar,are trying to emulate Dubai’s model,Mr Rodrigues says that “the DIFCis head and shoulders above”.

Paul Maco, partner at Bracewell& Giuliani and member of the advi-sory board of the EmiratesSecurities and CommoditiesAuthority (ESCA), cites the impor-tance of a strong regulatory frame-work in positioning Dubai as afinancial services hub. ESCA hasintroduced regulation governingmutual funds and as well as shortselling and market making, he says,adding: “Regulatory sophisticationwill encourage brokers, intermedi-aries and investors to come to theemirates and has the potential tohelp increase liquidity.”

NewenergyThere are a number of other sectorsdriving Dubai’s growth, includinghealthcare, education and the solarenergy sector, with the latter also

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having the capacity to significantlyalter Dubai’s energy mix.

In January 2012, Dubai estab-lished the Sheikh Mohammed BinRashid Solar Park, the first utility-scale production capacity park of itskind in the region. It will use solarradiations that are available all yearround to produce electricity, usingthe latest technology available ininternational markets. VahidFotuhi, president of the EmiratesSolar Industry Association, whichis headquartered in Dubai, saysthat the park’s “clear structure andframework distinguishes it fromother markets in MENA, which havebeen less clear or convincing withtheir solar maps”. Investors areclear on what opportunities lieahead in the next 20 years, he says.

However, “for the sector to growthere needs to be a steady pipelineof projects. The potential is there,”adds Mr Fotuhi, who goes on to saythat in parts of Saudi Arabia alone,energy demand is growing by 11%to 12% annually.

Dubai has also embarked on aplan to install one gigawatt of solarcapacity and has already started aninitial project of 10megawatts.According toMr Fotuhi, Dubai is alsomoremotivated than AbuDhabi topush aheadwith its solar agenda,given that it currently imports 99%of its fuel. But, to ensure futuregrowth, it needs government back-ing. “Policymakers need to introducea firm and bankable framework for asustained and long-term solar projectdeployment programme,” he says.■

Centripetal force: Dubai boasts a strategic geographic location as well as its own airport and port, with an aerotropolis – Dubai world Central (pictured) – currently underdevelopment, all of which have helped the emirate to excel in the logistics sector