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Free Zones to Play Significant Role in UAE Economy

Free Zones to Play Significant Role in UAE Economy

Abu Dhabi, U.A.E. -- April 1, 2001 (WAM) -- The UAE's free zones have become an integral part of the development and diversification plans of each Emirate and they can be expected to be at the centre stage of non-oil activity and diversification of the UAE economy in the future, according to a new study by the Journal of the Emirates Industrial Bank (EIB).

Referring to the growth and significance of the free zones in the UAE , the EIB report stated: "In the immediate future, the role of the free zones can only be expected to grow, as this is a corollary of the current investments terms in the domestic economy which require a majority shareholder.

Should similar facilities be provided in the domestic economy as well, the role of such zones may decline as has happened in some regions. Meanwhile, the success of each free zone would to a great extent depend on the costs incurred in developing it. Such costs for the UAE free zones have been minimum because they centre around existing port facilities and success is more or less assured."

The EIB study noted that since the maiden inception of a free trade zone in the UAE in Jebel Ali in 1985, there has seen a spurt in such free trade zones across the entire country, particularly in the past 5-6 years.

From a minor novelty in the eighties, the free zones in the UAE have now become an integral part of the development and diversification plans of each Emirate and there are plans to build more and expand the existing ones," the EIB study said.

Currently, it is estimated that there are in excess of 3,000 companies in the various free zones across the country, with an estimated investment of Dh 15 billion. The value from the trade emanating from these zones already amounts to more than Dh 35 billion. "The advantage of the UAE free zones is that all major markets in the Middle East are within 48 steaming hours from the country and within 24 hours driving time. Virtually all existing zones have plans to expand and new ones are in the pipeline," the report said.

The EIB report noted that in the UAE, the demand for operation in the UAE free zones is primarily based on their facility for providing 100 per cent ownership to the foreign investors who can thereby retain full control over the management of their investments, operations and profits.

"Consequently, if foreign investment is to be invited into the country, such accommodation is most useful," the report stated. Free zones are particularly useful in cases where foreign investors want to access regional and global markets from an operation base in the UAE, the report added. Most free zones in the UAE offer facilities for companies engaged in trading, manufacturing and services, with the exception of the Dubai Internet City, which is a zone specialising in e-commerce ventures alone, the report said.

Abu Dhabi's planned free zone at Saadiyat island would offer storage, transportation as well as a commodity trading centre. This free zone is a major departure from the other free zones in the country as it is a dedicated free zone and not a spin-off around a sea or airport, the report added.

On the impact of the free zone economy, the EIB report said: "While the primary reason for the inception of the free zones in the UAE has been to add further facilities to the infrastructure of ports in the country, they have actually become a potential instrument for diversification. The zones have become popular among Western firms because they allow them full control over their investments and profits.

Meanwhile, the extremely liberal economic conditions attract firms from less liberal regimes (eg the Indian sub-continent) to use the UAE as the base for their international operations. In return, such investments make useful contributions to the UAE economy by paying for using the infrastructure and support facilities and bringing in technology and know-how into the country," the report said.

WAM-VV

 

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Directeur de la publication : Joël-François Dumont
Comité de rédaction : Jacques de Lestapis, Hugues Dumont, François de Vries (Bruxelles), Hans-Ulrich Helfer (Suisse), Michael Hellerforth (Allemagne).
Comité militaire : VAE Guy Labouérie (†), GAA François Mermet (2S), CF Patrice Théry (Asie).

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