Comprehensive Analysis: Role of Free Zones in UAE Economic Development

This report provides a detailed analysis of the role and impact of free zones in the United Arab Emirates (UAE), particularly focusing on Dubai's initiatives. It examines how free zones attract foreign direct investment (FDI) by offering favorable regulations, tax benefits, and 100% ownership opportunities for foreign investors. The report highlights the strategies employed by the UAE government, such as reducing business registration fees and focusing on sectors like technology, innovation, and e-commerce, to boost economic growth and diversify its non-oil sector. It includes insights from officials and experts, discussing the benefits of free zones for businesses and the overall economy. The report concludes that free zones are crucial for attracting FDI, promoting economic growth, and positioning the UAE as a prime destination for international business.

Running head: ROLE OF FREE ZONE IN UAE
ROLE OF FREE ZONE IN UAE
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1Role of Free Zone in UAE
Executive Summary
Free Zone helps the country to grow efficiently and effectively because it helps the foreign
investment, entrepreneurship and professionals to enter with less or no regulations. Dubai has
initiated this concept so that they can function with proper development and foreign direct
investment and that allows the country to become the best place for business. This report
explains the detail of free zone and opinions of officials upon this strategy.

2Role of Free Zone in UAE
Table of Contents
1.1 Introduction..........................................................................................................................3
1.2 Discussion............................................................................................................................3
1.3 Conclusion............................................................................................................................6

3Role of Free Zone in UAE
1.1 Introduction
Recently Dubai has decided to boost their Foreign Direct Investment by implementing
the free zone area. Dubai Airport has represented almost 18% total free zone in Dubai during
2016. They have adopted a lot of strategies to increase their FDI investment all around the
world. It is also noted that UAE had increased their inward FDI during 2017 up to $10.3
billion. The Dubai Free Zones Council have stated that the free zone also include the Dubai
Internet City, Dubai International Financial Centre and many others have decreased their
business registration fees so that new business can introduce themselves with new
regulations which will support the e-commerce. The improvement is discussed in detail
below which will reflect the initiative of the government for FDI.
1.2 Discussion
Dubai government has initialized Free zone so that it attracts new and more FDI into
the business market so that it attracts new business into their economy with new regulations.
The emirates have decided to introduce new policy into the economy and increase diversify
the growth of economy. The Dafza (Dubai Airport Free Zone) is currently working on
boosting the FDI flow to support the sectors like Islamic and Halal economies because Dafza
is considered as the home for many big companies involving the plane manufacturers. The
director general Mohammed Al Zarooni has also stated that they have initiated their focus on
technology and innovation sector along with emphasizing the blockchain & artificial
intelligence solution industries. It represented almost 18% of the total free zone trade during
2016. The country has decided to grow the non-oil sector by initiating the growth of FDI.
This will allow the country to increase that sector growth from 70% to 80% in 2021. During
this period UAE has reported almost $10.3 billion increase in inward FDI.

4Role of Free Zone in UAE
The Dubai Free Zones Council have introduces new regulations which will support
the e-commerce section of the country. This Council represents the emirate’s 30-plus
economic free zones that also includes Dubai intercity City, Dubai International Financial
Centre which have increased their Foreign Direct Investment by implementing new
regulations into the economy (Abou Hana 2017). The council also informed that they are
concentrating into centralized electronic system which will allow the people of Dubai to
make it a free zone area and also record the relevant data. A lot of free zone areas were given
low registration fees and many free zone companies were also provided with ‘no objection’
certificates form the government (Blanke 2017). The chairman of the council, Sheikh Ahmed
Bin Saeed Al Maktoum have stated that their GDP and FDI inflows have also increased due
to free zone even after global economic climate have. According to the Chairman free zone is
more than economic facilitator. They have applied many strategic investment and legislative
initiatives which resulted into more growth (Blanke 2017). Currently Dubai is the most ideal
business destination for other countries and this was possible due to their initiatives which
helped them to shape their future of economy and improve the consolidated status of Dubai
(Shayah and Qifeng 2015).
Dubai also permitted ownership for 100% by foreign investors of any company in
UAE however, only few sectors are allowed with this strategy. Many more free zones are
also trying to expand and diversify their base of the company and to attract growth which will
support the changes to foreign ownership. The Chief Executive of Tecom Group has stated
that the new regulations will support the UAE’s strategies to attract investors and to make
Dubai the best global destination for business growth (Shayah 2015). Tecom has been
following the new strategies for creating better job opportunities and adding more values to
their business to attract more multinationals and talented minds into the economy to improve
the business of UAE. The companies in DIC are enjoying a lot of facilities like 100%

5Role of Free Zone in UAE
ownership and incentives on tax along with full currency convertibility. The place also have
facilities like no restrictions over profit making or capital repatriations and no custom duties.
That area also have almost 1,600 technology companies along with many start-up incubators
(Globalbizresearch.org 2020).
Many great officials have provided their positive opinion over the changes to improve
the FDI from foreign investors. One of them Mr. Samer Qudah who is a corporate partner at
Al Tamimi & Company have stated that the sectors like health, education and retail are the
most who will benefit more from this new regulations because this sector cannot function of
make profit from just one man branch, they need to develop different branches into different
area. Abeer Jarrar who is a corporate managing associate of international law have stated that
the UAE’s economy will improve due to the free zone concept as it will attract the foreign
investors, entrepreneurs and professionals with the other offerings over legal environment
and infrastructure (Dubai free zones seek to attract FDI 2020). Jigar Sagar who is a group
general manager at Creative Zone, this helps the other businesses to set up into the free zone
has stated that the initiative of free zone will allow the companies to establish their business
in the UAE area because the owners of the companies does not have to approach for Ministry
of labor, immigration and search for different documents to submit to the government (Uae-
company-service.com 2020).
According to Jigar Sagar, other free zones must also improve their strategies so that it
attracts many other foreign investors, entrepreneurs and professionals which will improve the
growth of the economy and the sector as well. If the economy of the country improves then
the growth of the country will also improve globally. Omar Momany who is a partner and the
head of corporate & commercial practice have stated that the Free zone concept will continue
to be an important sector and contribute into the improvement of the economy of Dubai even
after the new regulations of allowance for full foreign ownership by foreign investors into

6Role of Free Zone in UAE
local companies (Ft.lk 2020). Being a practitioner at UAE law firm Baker & Mckenzie Habib
Al Mulla, they know a lot of opportunities what a free zone concept will provide to the
companies more than full ownership over any local company. He also stated that the
information is scarce and hence those sectors along with some companies will continue to get
less relaxation. The sectors and companies which are currently operating under free zone are
facing remittance over relaxation.
Every officials and the senior heads of Free zone department have stated their views
over this concept and how new regulation and policies will allow the foreign investors to take
the benefit of the legislations and the government incentives. The officials also believe that
this will stay the most important concept for the foreign investors and provide them many
more benefits (The National 2020). The economy of the Country will improve with free zone
and attract the Foreign Direct Investment more in the UAE to gain more profit.
1.3 Conclusion
From the detailed discussion it can be clearly concluded that the Free zone concept of
Dubai has attracted a lot of foreign direct investment and initiatives for 100% ownership over
any local company so that they can earn a lot of profit from the free trade and tax regulations
facility from the government. Many senior official heads have provided their opinion over the
interview conducted upon the topic of Free Zone concept. This will help the foreign business
persons to enter the most ideal pace for business and earn profit because there is no restriction
over the limit or profit earning and capital repatriations. According to the officials, this
concept will help the country to stay the ideal place for business and economic growth.

7Role of Free Zone in UAE
Referencing:
Abou Hana, M., 2017. Innovation in the UAE: from first foundations to ‘beyond oil’. Global
Policy, 8(3), pp.414-417.
Blanke, G., 2017. Free Zone Arbitration: The Mechanics. Indian J. Arb. L., 6, p.56.
Blanke, G., 2018. Free Zone Arbitration in the United Arab Emirates: DIFC v. ADGM (Part
II). Journal of International Arbitration, 35(6), pp.629-647.
Dubai free zones seek to attract FDI (2020). Dubai free zones seek to attract FDI. [online]
Khaleej Times. Available at: https://www.khaleejtimes.com/business/local/dubai-free-zones-
seek-to-attract-fdi [Accessed 27 Feb. 2020].
Ft.lk (2020). Concept of Free Zones and their economic importance | Daily FT. [online]
Ft.lk. Available at: http://www.ft.lk/columns/Concept-of-Free-Zones-and-their-economic-
importance/4-682510 [Accessed 27 Feb. 2020].
Globalbizresearch.org (2020). [online] Globalbizresearch.org. Available at:
http://globalbizresearch.org/files/d435_irrem_m-hazem-shayah_yang-qifeng-131107.pdf
[Accessed 27 Feb. 2020].
Shayah, M.H. and Qifeng, Y., 2015. Development of free zones in United Arab Emirates.
International Review of Research in Emerging Markets and the Global Economy (IRREM),
1(2), pp.286-294.
Shayah, M.H., 2015. Economic diversification by boosting non-oil exports (case of UAE). J.
Eco. Bus. Manage.(JOEBM), 3(7), pp.735-738.

8Role of Free Zone in UAE
The National (2020). Dubai free zones unite to boost foreign investment flows. [online] The
National. Available at: https://www.thenational.ae/business/economy/dubai-free-zones-unite-
to-boost-foreign-investment-flows-1.735701 [Accessed 27 Feb. 2020].
Uae-company-service.com (2020). What Is A Free Zone?. [online] Uae-company-
service.com. Available at: https://uae-company-service.com/what-is-a-free-zone/ [Accessed
27 Feb. 2020].