Tax exempted areas boost the logistics industry.
Many countries have experienced the benefits of free zones, the Middle East being the best case in point. Free zones have a direct impact on the growth of an economy as it attracts foreign investment, creates jobs, increases labour capacity and facilitates transfer of technology to local industries, says Juan Torrents, President of the Federation Mondiale des Zones Franches (FEMOZA) in a recent interview with Air Cargo Update published on the Middle East Logistics website.
The concept of free zones has been around for a long time and has gone through several changes resulting in the present one of export processing zones in different fields. They have also become very specialised and offer a wide variety of logistic services that attract an increasing number of investors from all over the world.
In the UAE, free trade zones have been set up in almost every emirate with the highest number in Dubai, where the first one, Jebel Ali Free Zone Authority (Jafza), was set up more than a quarter century ago in 1980 in Jebel Ali.
Stability, transparent regulations, key locations, cluster of international companies, warehousing facilities, easy transportation of goods and pro-business environments are the hallmarks of free zones in the UAE. They are all investor friendly granting 100 per cent foreign ownership, complete exemption of taxes from customs and commercial levies, full repatriation of capital and profits, and extended leases with minimum red tape and quick approval procedures. Goods for re-export and transhipment enjoy 100 per cent duty exemption. Companies in these free zones have no currency restrictions, no personal income taxes and no recruitment problems.
Several logistics companies have set up bases in the free zones in the UAE due to the proximity of airports and seaports and the quick turn around times of goods passing through them. Salma Hareb, Chief Executive Officer of Jafza says, "Jafza is home to 6,000 leading global companies, who together, account for half of the UAE's total non-oil exports. The benefit Jafza provides to logistics companies lies in three fronts — faster and easier of movement of goods, efficient operations and easy access to Jafza based huge client base. They also enjoys benefits such as the absence of custom duty, warehouses/plot to construct warehousing facilities, creation of companies and sponsorship of employees," She further explains, "Logistic companies deal with consolidation and distribution of physical goods. No custom duty in itself is not a great invention but Jafza integrates this with Dubai Customs by creating a bill of lading to FZ which requires zero footprint of customs which means; a speedy turn around of physical goods to logistics companies' facilities. Once goods are identified to move outside the zone, internationally, then no custom levy on these goods means reduced overall costs. Customers of logistics companies choose JAFZA because of the ease of how regulations allow movement of goods in and out. This ease allows faster turn around and less administration costs."
Setting up a logistics company in Jafza is simple and fast. Hareb points out, "To create a company in Jafza is quite hassle-free, to bring employees (human capital) is faster and simpler, to acquire pre-built facility or permit for construction of specialised facility such as cool, cold stores is quicker and simpler, all of which means more efficient operations."
Turn around times in the Dubai Airport Free Zone (DAFZ) is also quick, efficient and cost effective due to easy access to airport facilities, rapid cargo clearance and availability of cost-effective talent. The DAFZ, which is home to over 1,100 multinational companies from various sectors, was established in 1996. With flexible operations processes that meet client demands, Dafza makes up a vibrant community of industry experts honed by experience and skills.
The DAFZ was awarded the Best Airport Free Zone in Foreign Direct Investment (FDI) magazine's prestigious 'Middle East Special Economic Zone of the Future' Awards for 2006-7. During the award ceremony, Dr. Mohammed Al Zarouni, Director General, Dubai Airport Free Zone Authority (Dafza) said, "The top ranking in the Middle Eastern Special Economic Zone of the Future' Awards recognises Dubai Airport Free Zone's contribution to industry development in the region. The Zone has been a tremendous catalyst for industry growth not just in the UAE but also across the region.
Always concerned with improving the business environment of the emirate of Dubai and the country, Dubai has set up The Dubai Logistics City (DLC), a free zone, which is a world first and caters specifically to multi-modal cargo and logistics providers.
It is designed as the world's first fully integrated logistics platform by air, sea and road and will enable free movement of cargo within the sea to the air terminals within hours.
The DLC is part of the 140 square kilometre Dubai World Central airport, which will have capacity to handle 120 million passengers and 12 million tonnes of cargo a year and will provide facilities and services to the logistics industry — from transit to packaging and labelling of goods — all of which will result in its investors being offered and provided with every possible service to enable delivery in the most cost and time-effective manner.
According to chief executive officer of DLC, Michael Proffitt, more than 120 companies have committed themselves to Dubai Logistics City, which is due to open at the end of 2008. Logistics companies have reserved 3.6 million square metres out of an available 11 million, the equivalent of 30 per cent of the land area. In a press release Proffitt says, "We are delighted at the response we have had to date, which is for us a total validation of value proposition that we believe Dubai has to offer this region."
Globalisation
In this era of globalisation of economies, when time is most important, logistics experts consider airfreight a viable option and therefore the increase in airport free zones. Sharjah Airport International Free Zone, (Saif-Zone) was built to promote and enhance business in an atmosphere free of regulations and red tape and provide quick and efficient turn around times.
Perfectly positioned, accessible to both the Arabian Gulf and the Indian Ocean and the unbeatable logistical advantage of being almost in the middle of the country make the Saif-Zone an ideal business hub.
Hamriyah Free Zone in Sharjah is close to seaports and Sharjah International Airport. It is considered a next generation free zone with a flexible and dynamic management and totally investor-oriented approach. "We have witnessed strong growth in the recent past. We are now expanding the free zone for our increasing number of investors," informs Dr. Rashid Al Leem, Director General of Hamriyah Free Zone in a recent press release.
While Ajman Free Zone and Ras Al Khaimah Free Trade Zone are fast finding their own niches in a country that is quickly becoming a logistic hub, Abu Dhabi Airports Company (ADAC) is planning to construct a free trade zone at Abu Dhabi International Airport.
Built in an area of more than seven million square metres, the free zone will offer investors an impressive package of world-class facilities and services.
Highlighting the vital link between the logistics industry and free zones were the first annual Middle East Logistics Awards (Mela) 2006, that celebrated performance excellence in the Middle East logistics industry. The Award for the Best Logistics Park — Air went to Dubai Airport Free Zone Authority, and Jebel Ali Free Zone won the award for the Best Logistics Park — Sea. Ras Al Khaimah Free Trade Zone won the Best Emerging Free Zone Award.
