Foreign investments in UAE’s 36 free zones reach AED 268bn

The total value of foreign direct investment through UAE free zones has touched Dh268 billion ($73 billion). Free zones or export processing zones and specialised economic zones have gained prominence in trade and investment over the last 30 years that help investors bypass a lot of local laws that restrict foreign investment and exports. “The total value of foreign direct investments (FDI) that have flowed into the UAE [through free zones] has reached approximately Dh268 billion, making us the second most FDI attractive country in the Arab world, according to the UN Conference on Trade and Development (Unctad),” Shaikha Lubna Al Qasimi, Minister of Foreign Trade, said.In the UAE, foreigners can obtain 100 per cent ownership in businesses. There are 36 free zones serving investors, the majority located in Dubai which hosts the Middle East’s largest free zone in Jebel Ali. There are 2,300 zones in 119 developing and transition countries clustered mainly in Asia, the Pacific and the Americas. Altogether these zones account for $200 billion (Dh734 billion) in gross exports a year and directly employ some 40 million workers and another 60 million indirectly. Oussama Al Omari, CEO and Director General of Ras Al Khaimah Free Trade Zone Authority (RAK FTZ), told Gulf News that more than 200,000 companies registered with free zones generate more than $1 billion of wealth annually. (Source: Gulf News)

Abu Dhabi’s new Industrial Free Zone

The Khalifa Industrial Zone Abu Dhabi (Kizad) will help attract foreign direct investment to Abu Dhabi and facilitate the building of new industries that will help diversify the economy of the emirate and the UAE as a whole.The industrial zone, located between Abu Dhabi and Dubai, will have an advanced seaport that is scheduled to be operational by the fourth quarter of 2012, to help ensure easy access to global markets. Kizad will also have road and rail links to the rest of the world. By 2030, Kizad is expected to contribute around 15 per cent of Abu Dhabi’s non-oil gross domestic product and between 60 per cent and 80 per cent of its manufactured goods will be exported, according to official projections. These are ambitious targets, but they can be achieved if the free zone succeeds in its aim of achieving low operational costs for companies and becoming an easy place to do business. The opening of the free zone to investors and potential tenants is also an important milestone in Abu Dhabi Economic Vision 2030, which aims to ensure the growth and development of its economy. The industries identified as important to Kizad range from heavy machinery to trade and logistics, technology and small businesses. This variety is essential to ensuring the growing diversity of the Abu Dhabi economy.

The offer of 100 per cent foreign ownership of companies in the free zone that contribute to Abu Dhabi’s strategic economic objectives will help attract the necessary investment. Foreigners tend to be reluctant to put their money into projects in which they cannot reap the full benefit of their investment. The more open the economy, and the clearer its commitment to good governance and the protection of property rights, the more it will attract foreign direct investment.

UAE’s Ras Al Khaimah eyes further expansion

The UAE emirate of Ras Al Khaimah with no oil and gas like its neighbouring emirates is planning projects worth $5 billion to 2020 with the help of foreign investors.

RAK Free Trade Zone (RAK FTZ) is currently home to around 4,000 companies aims to turn itself into a business hub for small and medium enterprises and lure more multinational investors for its infrastructure and airport expansion plans. Oussama el Omari, CEO, RAK FTZ, said: “We forecast 2,250 additional companies in 2010. In 2009, registrations and company revenue in the zone grew 10 and 11 percent respectively despite the global crisis, he added. Most new companies would come from Germany, France, Turkey, and India.
While speaking to Reuters, Omari said: “Some of the largest investments are from Knauf group from Germany, Dole Group from the ‘States, and Hyundai Group,” without giving details.
Solar power, the nuclear energy sector and education would form the bulk of projects in coming years, he said.

The authorities in the emirate, just 100 km (62 miles) away from debt-struck Dubai, are launching large scale projects such as a new international airport as a catalyst for growth.
RAK being the fourth largest emirate in the UAE is focused on industries like cement, pharmaceuticals, and glass, and building a regional manufacturing and shipping hub.

The Dubai International Financial Centre (DIFC) registered 40 new companies in the first quarter of 2010

The current number of DIFC-registered companies stands currently at almost 900, five percent higher than the 2009 total of 859 which in turn was 15 percent higher than the 744 recorded in 2008. Due to international pressure on cost of doing business DIFC is currently revamping its fee structure hoping that more competitive rents, registration fees and streamlining the overall mechanisms would make DIFC a more attractive centre for international businesses. Since its inception in 2004, the number of firms at the DIFC has grown nearly 50 times. Among the almost 900 companies based in the DIFC 20 are of the world’s top 25 banks, and six of the world’s 10 largest asset managers.

UAE Free Zones Are Moving In The Right Direction To Attract More Businesses.
The UAE has witnessed a significant down turn at the beginning of the financial crisis which resulted in less new requests for the implementation of business projects in the UAE from international investors. However, these days the demand has picked up again. Competition among free zones in the UAE is now becoming more agressive. While Dubai free zones largely still hold on to their high-price strategy models, Northern Emirates Free Zones are now coming up with a number of strategies and ideas to be more attractive for new clients. By comparisson with Dubai, setting up in a Northern Emirates Free Zone means a 50 – 70% cost saving. It is now becoming increasingly the norm that free zone no longer ask for share capital (except Dubai and Abu Dhabi).

Dubai Silicon Oasis
Silicon Oasis Free Zone Authority (DSOA) is now offering their office space at reduced and more reasonable rates including one month rent for free. Originally designed to become the Middle East’s “Silicon Valley” in an attempt to attract the semiconductor industry, they have realized that the current demand is the only important factor in business and have widened the scope of activities allowed within their boundaries. They are now offering all sorts of commercial and service licenses. Very recently DSOA has announced that they have reduced the minimum capital requirement for new companies setting up within their jurisdiction. Whilst the requirement used to be AED 1,000,000/- for Free Zone Establishments and AED 500,000/- for Free Zone Companies respectively, it is now AED 100,000/- for both.

Hamriyah Free Zone
The Hamriyah Free Zone Authority (Sharjah) has gone one step further and fully abandoned the minimum capital requirement for new companies. A new company established in Hamriyah Free Zone can announce the total amount of the company set up fees payable to the Free Zone Authority as the start up capital. In this case the company is no longer required to submit a capital letter from a bank to the Free Zone in order to receive the company license. This move makes the setting up procedure considerably faster as the opening of a bank account is not a requirement for the set up anymore. On the other hand the licensed company can open a bank account immediately with no need to wait for further formalization of its license. Competitive rates and set up packages along with a wide range of allowed activities have made Hamriyah Free Zone quite popular.

Global Office conducts guided 3 day tours presenting the key free zones in Dubai and Northern Emirates. Participants learn about the opportunities, risks, costs and challenges of setting up their business in a UAE free zone.

• Dubai: selected Free Zones
• Abu Dhabi: Media Free Zone
• Northern Emirates: Ajman Free Zone or Sharjah Airport Free Zone, Ras Al Khaimah Free Trade Zone

Target Audience: Investors & company owners who wish to handle their set up in the most cost-effective way and to familiarize themselves with the terms & conditions of UAE free zones.

Topics covered:

• Overview of UAE Free Zones
• fee structures
• advantages / disadvantages Dubai free zones vs. Northern Emirates free zones
• benefits of free zone set up vs. sponsor set up
• restrictions of free zone operations
• types of licences issued
• most cost-effective free zone
• procedures of getting registered from A-Z
• costs for setting up
• difference between FZE, FZCO, FZ-LLC, branch set up
• share capital requirements
• documents needed
• residence visa
• time frame
• dealing with changes of laws and regulations
• renting office, warehouse space, availabilities
• Virtual / E-Office office set up

INFO:
FEES (per person)
3– DAY TOUR
AED 8,500 / 1 Pers. +++ AED 6,500 / min. 2 Pers
Seminar Business Setup Session only (exclusive of tour):
USD 220 / AED 800
Location: Dubai / Northern Emirates
Registration & Info: info@dubai-business-service.com

Twofour54 recently launched its production facilities called Intaj. It also announced easy visas for international freelance journalists operating from the emirate.

INFO
For enquiries on setting up in Abu Dhabi’s new Media Free Zone, pls. contact info@dubai-business-service.com or call
+971-50-8462421 indicating business activity and how many visa needed.

The actual application and registration process can be quite tedious. Depending on the structure of the company (individual owners or corporate) a number of documents need to be notarized and UAE Consulate attested in the applicant’s home country. Also the reviewing process whether a company will be accepted can take anything from 2 weeks to 2 months. Dubai Free Zones prefer established companies with a proven track record.

Start-up companies will find it difficult to set up in a Dubai free zone. Free Zones sometimes refuse giving licenses to companies that  do not fit into their overall framework or cluster. However, there are also solutions for small and start up companies (e.g. E-Office is the cheapest solution that does not require to rent office space, however, licensed only through selected Northern Emirates Free Zones). Individuals, small companies or labor intensive businesses are highly welcome to set up their business in any of the Northern Emirates Free Zones, which are also improving and extending their infrastructure and provide the same tax benefits.

What Costs are involved setting up in a Free Zone?

Due to the heavy demand from international investors Dubai Free Zones have raised their fees over the years quite considerably, whereas the major part of the costs effectively has to be attributed to rent. However, due to global financial constraints that  businesses are facing these days a number of Free Zones have reduced their fees.

Setting up a business in a Dubai Free Zone can cost anything from AED 50.000 to AED 300.000 or more (depending on the space requirements, type of license and how many  activities/categories are combined under 1 license). Office space within the free zone boundaries currently starts at around AED 180 per sq.ft per year. New office space is usually handed over as “core & shell” and the tenant has to do the complete fit out work by hiring a fit-out company. In most cases fit-out companies as well as the drawings for the new office have to be approved by the free zone authority (Zoning Authority).

Global Office provides comprehensive set up assistance
for International Investors:

• Comprehensive company formation consultation.
• Preparation, submission of all legal & application docs.
• Negotiation and clarification of all issues between investor and the free zone.
• Set up of corporate bank account in UAE.
• Obtain business licence and all legal documentation from Free Zone.
• Assistance with all issues regarding company formation.
• Handling of visa application formalities.
• Coordination of Office fit out work.

Rents in economic free zones may drop in response to proposed legislation that would relax foreign ownership requirements elsewhere in the country. Free zones across the UAE have proved to be an effective tool in attracting foreign companies, which have been drawn by the promise of tax breaks and 100% ownership of businesses they establish.

At the moment, foreign firms setting up outside these zones must have an Emirati as a sponsor and are limited to a maximum 49% ownership of their businesses. Because free zones  shed those requirements, commercial rents there have traditionally been higher than elsewhere in the country and have not fallen as much as average rents in the wake of the financial downturn.

But the free zones’ special status could be threatened by new laws under consideration which could extend the 100% foreign ownership allowance to the entire UAE. But free zones were still  likely to command higher rents than elsewhere because of easier procedures on administration issues such as visas and licensing and the “cluster effect” benefit for firms from being located next to similar companies within the same industry.

What Kind of Licenses will be issued in Free Zones?

All businesses who wish to set up in any Dubai Free Zone will have to lease either office premises or land and acquire a business/trade license from the respective Free Zone Authority (regulated by law). Dubai Free Zones do not allow to rent office/warehouse space outside their boundaries (except: If no space is available at the time of registration some of the Free Zones issue a temporary license to rent space outside until space will be available inside the Free Zone).

Strictly speaking companies with trade and industrial licenses can only conduct business within the Free Zone or abroad. To sell their products in the UAE, a UAE service agent is required by law. For service based businesses no agent is required. All new entities such as FZE or FZC (also FZCO or FZ-LLC) have to show share capital upon registration ranging from AED 50,000 to AED 1,000.000 depending on the Free Zone requirements and the structure of the company.

All licenses are valid for 1 year and need to be renewed  prior to expiry.

A number of free zones have lowered their fees to be even more attractive to international investors!

INFO
For enquiries on setting up in any Free Zone, pls. contact info@dubai-business-service.com indicating business activity and how many visa needed.