The Gulf is shaking off its legacy as a totally oil dependent region and is starting to turn to other sources of income to ensure the continuity of its economic strength once the last of the black gold trickles out of the sand.

Countries such as the United Arab Emirates (UAE) and Qatar are ideally placed to exploit their strategic geographical location, with a view to promoting themselves as free trade zones (FTZs) in a number of business areas.

Advertisement

It is not surprising that Dubai is taking the lead in developing its special economic zones, because income from crude oil production has declined to less than 10% of gross domestic product.

Dubai

The shift in focus from oil to new business projects has enabled Dubai to maintain double-digit economic growth – foreign trade increased by 9.1% last year to $143bn. The emirate’s FTZs cover a broad range of economic activity. Dubai Airport Free Zone Authority (DAFZA) is at the heart of the initiative, acting as a mammoth clearing house for regional commercial traffic.

“Our aim is to be a customer focused, world-class service base, readily accessible and with a competitive advantage in all business areas,” says Salah Eldin Eltayeb Farah, PR executive in charge at DAFZA. DAFZA’s client list has grown from 300 companies in 1999, the year after operations began, to more than 1250 corporates from all over the world, specialising in aviation, logistics, cargo, IT services and general trade. Last year alone the number of companies using DAFZA increased by 62%; another 400 are in the queue.

Aviation is the biggest sector, comprising 16% of the free zone’s total business. German companies are in the majority (162), with the UK and the US in second and third place. Ms Farah says DAFZA is particularly interested in attracting non-labour intensive business customers, which can expect to obtain their start-up licence in one month. “They can set up on a provisional basis awaiting office or storage space,” she says.

Dubai is building a new airport to meet the expected boom in demand for cargo as well as passenger traffic, explains Abdullah bin Suwaidan, deputy manager, missions, at the Department of Tourism and Commerce Marketing (DTCM). “Dubai World Central will be able to handle 120 million passengers a year, with the first phase due to open in June 2008,” he says. “With six runways, it will be bigger than London’s Heathrow.”

Another major project is the Jebel Ali Free Zone (JAFZA), the only facility of its kind to be located next to a world-class seaport and airport. About 6000 companies are located at JAFZA, of which 600 are Indian corporates and 415 are from the UK. JAFZA issues licences for general trading activities, industrial and service companies. Office clusters have been set up in JAFZA to ensure easy access to staff and visitors. “Most of these are trading and manufacturing enterprises,” says JAFZA spokesperson Zeina Al Muntafiq.

“We can issue a licence in two weeks from the date of application. We offer three types of facilities, from office space to pre-fabricated warehouses, to land for building purposes. Being next to the world’s ninth largest port enables JAFZA’s customers to benefit from global ocean freight connectivity. As we are 30 minutes from Dubai International Airport, sea to air trans-shipments can take as little as six hours, setting the standard for the sea-air industry.”

Fujairah

Fujairah is unique in the UAE in that it is the only one of the seven emirates without a coastline on the Arabian Gulf, being situated along the coast of the Gulf of Oman. That has not proven to be an obstacle to it setting up its own free zone operations, backed by state-of-the-art facilities such as the Port of Fujairah, which is adjacent to the free zone to ensure investors derive maximum benefit from Fujairah’s strategic location.

By using the shipping services available, investors have access to all Arabian Gulf ports, the Red Sea, Iran, India and Pakistan on weekly feeder vessels. Mainline services arrive from the UK, northern Europe, the Mediterranean, east Asia and North America on a weekly service. Modern facilities, including 800 metres of deep-water quay, six ship-to-shore gantry cranes and 11 rubber-tyred yard cranes, mean the port is ready to handle the region’s growth. The port also handles bulk dry cargos, roll-on/roll-off cargo, livestock and general cargo in addition to regular containers.

Fujairah International Airport is the only one in the emirates serving the UAE east coast as well as northern Oman. Its proximity to Fujairah seaport and its common customs facilities lead to speedy operations for sea and air cargo.

Sharjah

Another emirate, Sharjah, is playing a leading role in the UAE as the pre-eminent industrial base, with its unique strategic location making it the only UAE emirate with ports on the Arabian Gulf’s east and west coasts, connecting to 230 cities.

Hamriyah Free Zone Authority is fast becoming one of the cornerstones of the UAE’s industrial development, with its flexible management and investor-friendly business ethic. The free zone provides access to a 14-metre-deep port and seven-metre inner harbour, land lease for 25 years, pre-built warehouses, factories and office units, transportation by road, three seaports and Sharjah International Airport.

Qatar

In nearby Qatar, Energy City is set to become the Middle East’s first energy business centre, catering to the commercial, technical and human resource needs of the oil and gas industry operating in the Gulf region. It will be the world’s most technologically advanced development of its kind, with a diverse mix of energy-related companies, multiple customers and suppliers.

Located in the heart of Lusail, Energy City Qatar is being built alongside Qatar Petroleum’s new facilities. This is being hailed as the next major energy hub, the Middle East’s home for major players in the hydrocarbon value chain.

Yemen

The Aden Container Terminal is another link in the Middle East chain of free zones, a $580m project that aims to restore the port of Aden after the destruction it suffered during the past conflicts between north and south. Part of this project is the Aden Free Zone being developed by Yeminvest, 49% owned by the Port of Singapore Authority and 51% by Yemen Holdings. Yemen’s strategic and dynamic location as the mainline shipping corridor between Singapore and northern Europe, with access to the Gulf and Indian Ocean, caused it to be declared a free zone.

The container terminal at full capacity can handle 500,000 TEU. Adjacent is the Aden Industrial and Warehousing Estate (AWIE), comprising 1500 hectares of duty-free warehousing, assembly and light manufacturing, import-export processing, storage and distribution.

Ras Al Khaimah

Ras Al Khaimah Free Trade Zone (RAK FTZ) promises to be one of the largest, most effective and most environmentally friendly free zones in the Gulf region, as well as the centre of business excellence with upgrades in infrastructure, aggressive marketing, and keen interest in promoting e-commerce. As the most northern emirate in the UAE, Ras Al Khaimah offers swift and easy access to neighbouring countries throughout the Gulf and beyond.

“We are the closest emirate to the main shipping lane traversing the Strait of Hormuz and to all of the northern markets such as Iran, Pakistan, India, the CIS [Commonwealth of Independent States] countries and the fast emerging China,” says chairman Sheikh Faisal bin Saqr Al Qasimi. “The geographic location and proximity of Saqr Port positions RAK FTZ as the port for all northern markets.

“Our efficient attention to administrative procedures ensures ease of trans-shipment and swift access to countries around the world. In addition, a new, faster road to Ras Al Khaimah from Dubai has been opened. The Emirates Road will reduce the commuting time by almost half.”

Jordan

Jordan has jumped on the free zone bandwagon, too. Its Aqaba Special Economic Zone (SEZ) is a private sector-driven development initiative that maximises private sector participation in a duty-free, tax-advantaged and flexible regulatory operating environment.

The Aqaba Special Economic Zone Authority (ASEZA) is the financially and administratively autonomous institution that is responsible for the management and regulation of the SEZ. Six ministerial-level commissioners, each responsible for a major area of regulatory or operational activity, govern the zone. The ASEZA is a service-orientated organisation offering a one-stop shop covering all investment needs.

The Aqaba SEZ was launched in 2001 as a multi-sectoral development zone encompassing the entire Jordanian coastline (27km), the sea-ports of Jordan, an international airport operating under an open skies policy, and the historical city of Aqaba with a population of 86,000. It encompasses a territory of 375 square kilometres and offers global investment opportunities in areas ranging from tourism to recreational services, from professional services to multi-modal logistics, from value-added industries to light manufacturing.

The zone is strategically located at the crossroads of four countries and three continents. Situated at the Gulf of Aqaba leading to the Red Sea, it extends to the land borders of Israel and Saudi Arabia and the territorial waters of Egypt. The location, infrastructure, unique natural and human assets, broad market access and business-friendly environment offer investors a springboard to a variety of regional markets and the global economy.

The ASEZA has put forward a competitive set of incentives that compete effectively with its rivals in the Gulf, including a flat rate 5% income tax on net profit, exemption from social services tax, land and building taxes on utilised property, and taxes on distributed dividends and profits. It also allows the duty-free import of goods in commercial quantities from the National Customs Territory and from overseas.