As night falls, the whitewashed walls of the Al Majaz mosque comes to life, as floodlights in the building’s crevices illuminate the last few visitors filtering through its doors and on to the freshly manicured grounds of the Al Majaz waterfront. Overlooking the Corniche Al Buhaira road in central Sharjah, the intricate Islamic architecture of the Al Majaz mosque lends it an imperial yet unmistakably Arabic presence. Close to the mosque’s grounds, Western chain restaurants, including TGI Friday’s and Tim Hortons, line the man-made Khalid Lagoon. The waterfront encapsulates the delicate balance that Sharjah strikes between upholding its conservative Islamic heritage and taking a contemporary approach to doing business.

With more than 600 mosques dotted around the city, the Islamic flavour of the emirate of Sharjah is ever present. Located a few kilometres from the Al Majaz mosque is the city’s architectural centrepiece, the Al Noor mosque, which is revered by locals for the beauty of its Turkish-inspired design. It is religious landmarks such as these that have enabled Sharjah to carve out a distinct identity within the United Arab Emirates as one of its foremost Islamic destinations.

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Regional profile

For its efforts, Sharjah has garnered a host of accolades including being crowned the Capital of Islamic Culture in 2014 and the Capital of Arab Tourism in 2015, by the Organisation of the Islamic Conference. However, just across the Khalid Lagoon on the Al Majaz waterfront, a growing number of high-rise glass buildings and towering skyscrapers hosting manufacturing, hotel and real estate companies reveal that Sharjah has also worked to integrate modern businesses into its development.

“When you visit, you immediately know that you are in Sharjah,” says Khalid Jasim Al Midfa, director-general of Sharjah’s Commerce and Tourism Development Authority. “Sharjah has existed for more than 500 years and it was always a thriving city. It is well known for its culture and its heritage.”

Sharjah is one of seven emirates that make up the UAE, and its geographical positioning at the heart of the country has enabled it to develop a reputation as one of the region’s trading hubs. Its strategic ports of Kalba, Khorfakkan and Dibba along the east coast of the UAE made it a draw for seafaring vessels coming in from the Indian Ocean, and its location along the Persian Gulf have attracted merchants and Bedouins from the desert interior, who travelled to its souks to trade spices, livestock and handicrafts.

Sharjah crystallised its historic reputation as one of the Gulf’s routes of commerce when in 1932 the UK Royal Air Force opened the region’s first airport in the city, to serve as an outpost for commercial flights between the UK and India.

“People think that because we have been united as the UAE for just 41 years, there was no history beyond that, but that is not true – Sharjah has always been a major centre,” says Mr Al Midfa.

Doing business

The emirate has engaged in a considerable modernisation drive to renew its appeal to international investors through diversifying its industries. Although the UAE accounts for 10% of the world’s proven oil reserves, Sharjah holds just 1.5 billion barrels of oil. The government sought to industrialise Sharjah’s economy from the 1980s to reduce its reliance on oil, and the emirate has experienced considerable success in diversifying its economy.

Yet a large part of Sharjah’s success can also be attributed to its affiliation with the UAE, a country that has developed a reputation among international investors for its economic and political stability. Despite experiencing considerable setbacks during the 2008 financial crisis, observers have maintained that the country managed the effects of the downturn astutely, and its ability to avoid the 2010 Arab Spring uprisings which affected the political stability of some of its neighbours further boosted its status as one of the Middle East's safe havens. Thus being part of the ‘UAE Inc’ has crucially boosted FDI into Sharjah.

“The UAE was a little more shielded from the regional turbulence [of the Arab Spring] and Sharjah benefited from this,” says Bryan Plamondon, senior manager at industry and country forecasting firm IHS Global Insight. “Being within the UAE also enabled Sharjah to offer certain incentives that other countries could not offer, such as tax incentives. Sharjah has free zones where tax-free incentives are offered to companies, and the government of Sharjah subsidises utility costs, making it very attractive for [investors].”

Being part of the confederation, Sharjah’s growth model has in some ways mirrored that of the UAE. The interconnected nature of Sharjah’s infrastructure, which is also evident in other parts of the country, has boosted investment in the emirate's sectors and Shurooq, its investment agency, contends that Sharjah has maintained a solid growth rate. Between 2002 and 2009, Sharjah’s GDP grew at a compound annual growth rate of 13.3%, and official figures from Shurooq show that its GDP, following the financial crisis, rapidly grew from Dh60bn ($16.3bn) in 2009 to Dh89bn in 2012. Sharjah’s growth has been principally driven by small and medium-sized enterprises (SMEs), which have interests across the manufacturing, real estate and business services sectors. The emirate hosts more than 45,000 SMEs, and its GDP this year is expected to expand to more than Dh101bn.

Free zones

Sharjah’s economic growth is showing no signs of slipping, and for Marwan Jassim Al Sarkal, the CEO of Shurooq, its free zones have enabled the emirate to differentiate itself as one of the leading industrial centres in the UAE. “His Highness [Sheikh Sultan bin Mohammed Al-Qasimi III] has [worked] to develop Sharjah as a very strong manufacturing [hub],” says Mr Al Sarkal. “We have Sharjah Airport International Free Zone [Saif] and Hamriyah Free Zone, as well as 21 industrial zones in mainland Sharjah. The airport free zone is [oriented towards] light industry and services, and Hamriyah is for heavy industry.” 

Offering a plethora of incentives, including complete foreign ownership of companies, as well as exempting corporate firms from import and export duties, income taxes and commercial levies, Sharjah’s free zones have been a draw for foreign firms. The government’s focus on developing its manufacturing capacity through its free zones enabled Sharjah to deepen its manufacturing base, and today Sharjah's manufacturing activity represents 33% of the entire UAE’s manufacturing sector.

While Saif, which was established in 1995, hosts more than 5500 companies, including the Germany-based Lufthansa Airlines and the UK-based technology company 3M, Hamriyah Free Zone, which started operating in 1998, serves more than 5000 companies from 152 countries. The free zones have also facilitated the flow of capital into other sectors, including mining and quarrying, which combined represent 13% of Sharjah’s GDP, and real estate and construction, which account for 17% and 8% of GDP, respectively.

“The basic idea of the free zone was integration – we have worked to integrate the sector with the services that are required to support it, and we look at the supply chain that is required to make it successful,” says Saud Salim Al Mazrouei, director of commercial affairs in Hamriyah Free Zone Authority. “We look at the industry as a whole, and we try and bring those related industries to service it, so they can develop together.”

Business bottlenecks

A common gripe among the city’s business community is that, while Sharjah’s geographical centrality makes it well connected to the rest of the UAE, the absence of a developed public transportation network has resulted in a critical problem of traffic. Snaking queues of cars along some of Sharjah’s arterial highways have become a common feature of afternoons in the city, as Sharjah’s roads serve those that live in Sharjah, as well as those that work in neighbouring emirates.

“Sharjah is the only emirate which shares borders with most of the other emirates,” says Mr Al Midfa. “For example, people who live in Sharjah and work in Dubai, and others who live in Ajman and work in Abu Dhabi, all have to pass through Sharjah. There is no other way.”

In addition, an undersupply of electricity, combined with a high demand from electrical goods such as air conditioners during Sharjah’s sweltering summers, has led to power blackouts in parts of the city – an issue that Mr Al Sarkal at Shurooq says is a “weakness we cannot deny”.

Road to progress

Nevertheless, the Sharjah government has worked to address these challenges. According to officials, construction is already under way to further expand the UAE’s main highway, the Mohammed Bin Zayed road which connects all of the seven emirates, and the completion of this project by the end of 2013 will divert traffic away from Sharjah by providing an alternative route for commuters.

Additionally, Mr Al Midfa maintains that rather than investing in a costly metro system, Sharjah’s government will look to emulate Turkey’s success in establishing a bus transportation system.

“Sharjah wants a metro bus that goes through the city and reaches the Rashidiya metro station on [the outskirts of] Dubai,” says Mr Al Midfa. “Turkey’s metro bus runs on a special lane in the middle of the city’s roads in Istanbul, and it handles 600,000 passengers a day. It costs less than a metro [train] system, and it will significantly alleviate traffic congestion in Sharjah.”

Sharjah has experienced success in placing itself on the global investment maps of international businesses. Time will tell whether the government’s diversification drive will enable it to relive its heydays as one the UAE’s central hubs of trade.