Rapid growth in the number of economic zones worldwide, from 845 in 1997 to 3500 last year, is presenting unique export and investment opportunities. The government of Dubai is keen to cash in on this growth of more than 300% in less than a decade by capitalising on its success in operating highly productive, dynamically efficient and financially lucrative free zones. It is spearheading the export of expertise on the subject and delivering on its plans to create a knowledge-based economy.

Through its holding company, Dubai World, and the subsidiary that looks after its global economic zone operations, Economic Zones World, the government is driving into emerging markets, some with strict capital controls on foreign investment. It is also tackling economies that are politically sensitive to incurrences by foreign firms backed by sovereign wealth.


Dubai currently exports much of the world’s economic zone expertise. With little competition, it is setting the agenda for the creation, management and promotion of business parks across the world that have been developed with a foreign partner.

Retaining financial control

Jafza International is the arm of Economic Zones World that is taking this knowledge abroad. The company has just restructured its mandate to include the development of business hubs by equity participation in ownership. Although Jafza International says this structure is used wherever expedient, holding a financial stake in an economic zone is in the vital interest of any developer.

Robert A Ziegler, principal at management consultants A T Kearney UAE, says retaining equity in the project allows the operator to “get in on the game”.

“They are able to pick up cheap land and turn it into real estate deals, building up a highly profitable venture. Operations are only seeing returns of say 20%; the land will generate returns of 40% to 60%,” he explains.

Equity participation is a strategy that other firms are following closely. Dubai Investments Park, part of publicly listed Dubai Investments, is studying proposals to sell its zone management skills to nations within the Gulf Co-operation Council.

Omar Al Mesmar, general manager of Dubai Investment Parks Development Company, the park’s operator, says equity participation is essential and suggests “the government-firm partnership should be 50-50” for it to be economically feasible for the foreign developer.

But he argues: “In our cases, the government’s portion is land, while we would expect to manage the master plan, concept and operations of the development. This has been financially successful here so should be successful overseas.”

Reduced state involvement

Dubai’s drive to establish free zones and industrial hubs in markets abroad is compelling governments to relinquish their hold over these major drivers of economic growth. Historically, it has been the state that sought to attract foreign investment through these commercially relaxed environments.

Mr Ziegler says that more emerging economies are working with external providers, despite the government’s central stake in achieving economic development objectives. “We are seeing a counter-trend where governments are voluntarily giving up control because they lack the expertise to make the zone work. They’ve seen the Dubai model and see the potential for success,” he says.

Economic Zones World’s flagship operation, Jebel Ali Free Zone in Dubai, is the business model that is stirring up significant interest. As the world’s fastest growing free zone, Jebel Ali’s success is enabling Jafza International to sell its experience to governments that are keen to add value by raising the standard of investors invited into the country.

According to the International Labor Organisation, the trend towards private development, often by foreign developers, is based on the premise that private zones (or those in partnership with government) usually create superior infrastructure to attract higher quality foreign investment. This is a key competitive advantage over the 3500 economic zones across the world that offer very similar incentives to lure business.

Preferential access

By relinquishing a degree of control to foreign partners, governments are able to attract cornerstone companies, key tenants that attract other firms, while controlling the type and quality of investment entering the country. They receive outstanding know-how, best practice models and a commitment to develop world-class facilities by foreign operators that have an equity stake in the project.

Both Dubai’s exporters of expertise and its government benefit immensely from the collaboration. Besides the obvious export earnings, Jafza International is allowed preferential access to markets that would otherwise have remained impenetrable through partial or fully closed capital accounts.

Mr Ziegler says that the move allows “back-door” entry into valuable markets that place restrictions on foreign investors. “These governments unilaterally decide which foreign companies can enter into their markets. In this case, they must reduce barriers for certain companies in order to access knowledge,” he says.

Jafza International, ultimately owned by the government of Dubai, is the key player in emerging markets in Asia and Africa. As a result, Dubai’s government is also able to access these lucrative markets and establish relationships before others gain entry – without necessarily negotiating bilateral or multilateral trade agreements.

India is a case in point. Jafza International recently sealed a deal to develop 27 business and logistics parks across the world’s second fastest growing economy in a 50-50 joint venture agreement with a subsidiary of India’s giant Tata Group.

Dubai’s government is also penetrating highly lucrative developed economies that are politically sensitive to mass foreign inflows from the region. Jafza International has secured land in the US state of South Carolina to develop a world-class industrial hub. The deal comes after US lawmakers objected to state-owned DP World’s takeover of six US ports in 2006.

Integrating investments

Capitalising on synergies is part of the appeal of exporting expertise. Dubai-based operators can leverage commercial and operational synergies across borders to make their investments at home and abroad more efficient, productive and financially successful.

“We use the same strategy, vision and major elements of our projects in Dubai. A successful concept of being able to work, live and entertain under one roof or in the same area is already designed so we focus on creating the same high-standard infrastructure and facilities. More than 50% of the area is used for this so we must share information to [make both operations] successful,” says Dubai Investment Park’s Mr Al Mesmar.

This exchange extends to goodwill from existing clients. According to Salma Hareb, CEO of JAFZA and Economic Zones World: “As enterprises grow, they look for opportunities to expand, preferably in familiar environments. Economic Zones World provides opportunities for its customers to grow globally in the same Jafza business environment.” As a result, the company is able to offer governments and private investors looking to establish a free zone immediate access to up to 6000 potential investors.

Successful economic zones need to leverage more than synergies, world-class facilities and quality investors to stand out in a highly competitive global field. Those exporting expertise are establishing hubs that are industry or sector specific to capitalise on unique exchanges that promote greater productivity and growth.

Mr Ziegler says that specialisation differentiates the zone and ensures it remains efficient and effective. “The operator needs to identify what the local environment needs and tailor the economic zone to that sector. Or the hub may need to optimise a particular part of the supply chain,” he says.

“Developers are recognising that specialisation ensures the zone can adapt to a changing environment. For example, if a market becomes liberalised then the advantage is lost for mixed-use zones. The way forward is specialisation to ensure highly synergistic and very well integrated clusters that can compete on a global and regional level.”

Zone watch

Among the zones to watch is Malaysia’s BioValley, with its focused investment in three key areas of the industry: genomics, pharmaceuticals/nutraceuticals and agribiotech. The project is expected to generate returns of more than $10bn over the next decade.

Nearby in Singapore, the amalgamation of seven offshore islands to create a world-class chemicals hub for the petroleum, petrochemical and chemicals industries is considered a benchmark project. Opened in 2000, Jurong Island is now home to industry heavyweights including BASF, BP, DuPont, Mitsui Chemicals and ExxonMobil.

In 2005, the chemicals cluster generated output worth $46.2bn, almost 32% of production in Singapore’s manufacturing sector and expectations are for further growth. Fuelled by Jurong Island, Singapore is currently one of the world’s top three oil-refining centres, despite not having a single drop of crude deposits.



  • The number of economic zones worldwide increased from 845 in 1997 to 3500 in 2006


  • Dubai exports most of the world’s economic zone expertise through Jafza International


  • Jebel Ali Free Zone is stirring up significant interest as a business model


  • Malaysia’s BioValley is expected to generate $10bn over the next 10 years
  • Singapore’s Jurong Island generated $46.2bn in outputs in 2005