Free zones spark innovation and growth in the UAE's start-up and SME sector

Accounting for 63.5 per cent of non-oil GDP, start-ups and SMEs are prioritised in the country’s long term vision to establish a globally competitive knowledge economy. The UAE is looking to increase the number of SMEs from 557,000 in 2022 to 1 million by the end of 2030.

Whether it’s through the development of an environment that attracts foreign direct investments (FDIs) or by implementing policy reforms to streamline business incorporation processes, free zones have always played a critical role in cultivating a culture of entrepreneurship and business growth in the UAE.

New start-ups springing to life

When British entrepreneur Aaron Henriques thought of launching his tech company Handlr VA in Dubai, he turned to one of the UAE’s top-tier free zones for its advantages and straightforward procedures.

“I’ve been an entrepreneur for over 10 years, predominantly in the UK. My background as a British police officer and magistrate has taught me the importance of thorough due diligence and I am glad I chose IFZA to operate my business in Dubai from and I have seen great results so far,” says Henriques.

Providing skilled virtual assistants in the UK, US, Australia, Canada and others, his company specialises in transforming businesses, helping them reach their full potential.

“While I faced some challenges with banking, IFZA made every other aspects of the business set-up and residency visa application smooth. The low-tax regime of the UAE allows me to keep more profits which I can then reinvest into my business and future investments,” he adds.

The UAE’s free zone benefits such as full foreign ownership, full profit repatriation, and zero corporate, import or export taxes, have enticed numerous entrepreneurs from across the world to establish their base in this thriving nation, transforming the Gulf state into a hub for business excellence.

Innovation at the forefront

Free zones have always prioritised innovation to unlock new opportunities and ensure long term sustainability. They have harnessed digital technologies, cloud system, blockchain and omnichannel strategies to enhance their products and services and create a unique, compelling customer experience.

Dubai’s premier free zone, IFZA’s focus on technology is not just about keeping up with the times, but about shaping the future of doing business which has become increasingly borderless.

“The pandemic underscored the need to support this development, and IFZA is among the first entities in the industry to implement remote assistance options,” says Jochen Knecht, CEO of IFZA.

“We want to provide a secure and immersive digital environment where businesses can thrive and connect on a global scale. Over the past few years, we have been collaborating closely with Zoho, a global technology company renowned for its online productivity, collaboration, and compliance solutions,” Knecht says.

Through this partnership, IFZA has developed hybrid systems that have now been unified under a single cloud-based platform called the IFZA Partner Portal. “Through the Partner Portal, IFZA’s professional partners have access to a range of services from anywhere in the world,” says Knecht.

Meanwhile, Dubai CommerCity, the UAE’s first free zone dedicated to the digital commerce market, is continuously strengthening its infrastructure and facilities to provide top-notch digital and physical infrastructure. This year, the free zone launched a unique system, Logi-Flow, which integrates blockchain technology with the logistics operations of SME companies.

“This aims to lower costs for companies while enhancing the overall flexibility and efficiency of their logistics, especially in digital trade. This will play a pivotal role in advancing and expanding the digital commerce sector in the future, particularly in light of the forecast that e-commerce retail sales in the UAE are expected to make up 12.6 per cent of total retail sales by 2026,” says Mitch Bittermann, Senior Vice President of Commercial at Dubai CommerCity.

Furthermore, Dubai CommerCity has planned to redesign its warehouse infrastructure to align with the requirements of a B2C-friendly environment.

“This allows us to optimise order fulfilment processes, implement advanced tracking and delivery solutions, and establish seamless last-mile delivery capabilities. By adapting our warehouse infrastructure, we aim to meet the growing needs of individual clients and their consumers while maintaining efficiency and competitiveness in the dynamic logistics landscape,” Bittermann adds.

Eyeing global markets

Supporting the UAE’s growth agenda, IFZA has recently set out on a dynamic expansion plan to connect with businesses around the world and bring them to Dubai. In addition to its offices in Dubai, Seychelles, Switzerland, and the USA, the free zone has opened an office in Spain and later this year, it will open offices in Germany, China, and Austria.

“We plan to open offices in key areas including the UK, France, India, Pakistan, as well as across Africa, in the coming months. These branch offices allow us to connect directly with partners and licensees and support them in their journey to setting up successful businesses here in the UAE,” says Knecht.

Supporting growth in diverse sectors

From fintech, edtech and biotech to logistics, manufacturing, retail and e-commerce, UAE’s start-up landscape encompasses a diverse range of sectors. This diversity reflects the nation’s drive to supporting innovation across various industries. Besides, the UAE has a conducive regulatory environment for start-ups and SMEs and ranks high in terms of ease of doing business, which further simplifies administrative processes and reduces bureaucratic hurdles.

The country has also introduced a slew of initiatives in the past few years to fuel growth of innovative, high-value businesses. This includes the Future 100 initiative, launched specifically to support start-ups in new sectors.

Initiated by the Ministry of Economy and the Government Development and the Future Office, the Future 100 initiative will support 100 start-ups that will shape the future economy of the UAE and promote its future readiness.

Amid the palpable growth in the world of technology, start-ups and SMEs in the UAE are showing equal dedication in prioritising various other key industries, such as manufacturing, logistics, retail, and creative sectors.

The region’s media sector, among others, is making a steady progress thanks to supportive policies, regulatory changes, and a strong push by the specialised free zones.

Being a foremost media free zone, Sharjah Media City (Shams) has played a significant role in attracting foreign investments to the UAE and driving innovation and sectoral development in the media and creative industries.

“We have strategic partnerships with leading global media and technology companies such as CNN, Thomson Reuters, and MBC Group, to attract investments and expertise to the free zone,” says Rashid Abdullah Al Obed, Managing Director of Sharjah Media City.

Shams has also nurtured a culture of entrepreneurship within the ecosystem. Initiatives like mentorship programmes, hackathons, and pitch competitions help promote entrepreneurship and encourage more people to pursue their start-up dreams.

“Shams Innovation Hub provides a collaborative workspace and support services to start-ups, helping them develop innovative media products and services. Sharjah Media City Hackathon is an annual event that brings together developers, designers, and entrepreneurs to create media solutions,” says Al Obed, adding, “Shams is also working with several international universities and research centres to develop new media technologies,”

The free zone has a number of new developments and expansions in the media sector lined up in 2024 and beyond. “Shams is planning to launch new innovation hubs and accelerators, and host new events and workshops that bring together industry leaders. These factors are essential to the growth and development of the media sector in Sharjah and the UAE,” Al Obed says.

Concurrently, Dubai CommerCity is broadening its partnership network as a means of encouraging foreign investments that fuel sectoral development.

“We have established strategic partnerships with key organisations, including the Telecommunications and Digital Government Regulatory Authority (TDRA), Dubai Digital Authority, and Emirates NBD. These partnerships are instrumental in advancing the integrated infrastructure and digital frameworks within our free zone, thus ensuring our clients and partners have access to the state-of-the-art technology and maintain a competitive edge in the market,” says Bittermann.

E-commerce is a rapidly growing sector, and Dubai CommerCity supports this growth by continuing to provide digital commerce companies with the state-of-the-art facilities, streamlined processes, and access to global markets.

“We are committed to fostering an environment that nurtures creativity, embraces cutting-edge technologies, and encourages sustainable practices. Our focus in 2024 and beyond will revolve around the expansion of digital commerce, sustainable initiatives, collaboration, and diversification, all while providing businesses with the necessary tools and resources to thrive regionally and globally,” says Bittermann.

Value-addition sets the distinction

In addition to infrastructural support and aiding in business incorporation, free zones also provide a range of value-added services to businesses, empowering them to flourish in the UAE’s competitive business landscape.

In a unique initiative, IFZA has entered into a partnership with Wio Bank to provider digital financial services to its clients.

“At IFZA, we deliver cutting-edge services to our partners and licensees, beyond company formation. We see digital banking as an important part of the next wave in this journey. Our strategic partnership with the region’s first platform bank, Wio Bank, was a natural extension as we aim to eliminate common challenges experienced by entrepreneurs,” says Knecht.

Anchored by a solid and supportive ecosystem, free zones are enabling businesses in the UAE to expand their horizons and venture into fresh opportunities. The success of entrepreneurs in these free zones stands as a testament to their effectiveness.

“I believe IFZA is undoubtedly the cornerstone that sets the stage for our ambitious plans. The supportive business environment here not only helps my new venture but also offers a platform for endless possibilities in future business growth,” says Henriques. ●