Business-friendly environment, tax incentives, and world-class infrastructure have been effective in attracting foreign investments

Free Trade Zones (FTZs) are special economic zones set up with an objective of offering tax concessions and customs duty benefits to foreign investors. There are more than 30 Free Zones operating in Dubai. FTZs in Dubai and the UAE are governed based on a special framework of rules and regulations. A Free Zone Authority offers business licenses to foreign-owned businesses. Each Free Zone is designed around one or more industry categories and only offers licenses (e.g. for a Free Zone Enterprise (FZE)) to companies within those categories. Most of the Free Zones in Dubai broadly offer trading services and industrial licenses to investors looking to set up their businesses.

Free Zones in Dubai are managed and operated by the relevant authority. For instance, the Jebel Ali Free Zone Authority in Dubai is responsible for managing, operating, and supervising the Jebel Ali Free Zone, one of the largest sea port Free Zones in Dubai. It has a subsidized rate of 32 percent on the country’s Foreign Direct Investment (FDI). As for other Free Zones in Dubai, the Dubai Multi Commodities Centre (DMCC) has 7,330 active registered companies (as per 2013), offers a retention rate of 94 percent, and estimates an application of more than 200 companies every year. The Dubai International Financial Centre (DIFC) is another jurisdiction demonstrating growth in the financial services business. It contributes 12 percent to the GDP of Dubai and has an estimated a growth rate of 27 percent (as per 2015). The authorities speculate that the region will triple in size by 2024. Others include the Dubai Airport Free Zone Authority (DAFZA); Dubai Internet City; and Dubai Media City.

The case of DMCC Free Zone

DMCC was established in 2002 as a strategic initiative of the Government of Dubai with a mandate to provide the physical, market, and financial infrastructures required to establish Dubai as a hub for global commodities trade. As of March 2016, it had more than 11,700 registered members, including both commodities and other businesses.

Industry participants and Free Zone member companies enjoy access to market infrastructure and physical facilities such as gold and diamond vaults, trading platforms such as the Dubai Gold & Commodities Exchange, Dubai Diamond Exchange, the Dubai Pearl Exchange and DMCC Tradeflow, the DMCC Tea Centre, and a range of commodities-backed financial investment tools.

DMCC success factors

The DMCC Free Zone is centrally located in Dubaiwith access to two metro stations. The DMCC Establishment Law gives complete autonomy to the Authority to define the laws and regulations governing DMCC.The Authority has complete jurisdiction over all policies and procedures.

The DMCC is spread over 200 hectares of business and residential community and offers flexible office solutions. DMCC has provision of flexi-desk facility in the business centerthat can be used five hours weekly free of charge. It costs only $4,790 and includes three residency visas.The physical infrastructure comprises multiple commercial and residential towers, world-class hotels, and world-class security systems.

In terms of technology, the zone has a best-in-class digital transformation strategy–provision of business apps manager to sync and manage all business applications in one place. The DMCC has rolled out the Smart District project centered on the four themes of mobility, community, sustainability, and productivity.

Setting up of business in a Free Zone is mostly paperless with all activities such as company formation and licensing being fully digital, inclusive of e-pay and e-signature capabilities. The DMCC offers a Web- based Shariah-compliant trade finance platform for Small and Medium Enterprises.

The DMCC also offers preferential treatment for focus industries. For gold and precious stones commodity trading markets, preferential freight rates, high-tech secure vault facilities, assaying facilities, purpose-built jewelry, a Gemplex to facilitate manufacturing, and a commercial tower for house trading, wholesale, and banking operations are offered.

The DMCC has been successful in attracting new companies. Out of the 14,100 members, 95% are new to Dubai and 170 new companies are added every year. Overall, DMCC has about 900 different business activities.

DMCC has been growing on an average of 33% annually and contributes to about 9.6% of Dubai’seconomy. Dubai’s gold business has grown from $6 million in 2002 to $75 billion in 2015, and the diamond business has grown from $3million in 2002 to $40 billion in 2015.

Overall, a business-friendly environment, ease of setting up business, world-class infrastructure, and tax incentives have been successful in attracting new companies into the DMCC.

About Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

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