Small start-ups prefer free zones outside Dubai

Dubai: Many small companies starting up in the UAE now prefer to set up business in free zones outside of Dubai, industry research shows.

According to a study by Jitendra Business Consultants (JBC), the four emirates of Fujairah, Ajman, Sharjah and Ras Al Khaimah (RAK) are offering special facilities to bring in more companies to their free zones.

Services such as virtual office, e-office and flexi-desk cater to the needs of small business by keeping operational costs to a minimum and providing accessibility by not limiting the physical presence of employees.

Jitendra Gianchandani, managing partner of JBC, said: "There is a trend amongst wannabe companies to look out for economical options and these emirates have realised that there is a huge business potential in plugging this gap."

Raju Menon, managing partner of Morison Menon Chartered Accountants told Gulf News that high operational costs are not the reason for the shift towards other emirates.

"There are some who want to start up small and then expand. Such businesses want to be in locations that suit their needs and Dubai is not necessarily the best emirate for them," Menon said.

Certain companies are only here because of taxes in their home country, he said, adding that such entities' needs are provided for by free zones outside of Dubai.

As more companies move to other emirates, Dubai's economy will not be impacted, he said.

"This is a deliberate move on Dubai's part. The government wants to target only larger businesses, which is why they stopped offering virtual offices that small and medium enterprises are attracted to," Menon said.

Comparing the free zones in different emirates, Menon said: "The immigration procedures are efficient in Dubai and Sharjah. However, in Fujairah and Ras Al Khaimah, the process is long."

He said that setting up in all free zones is easy but there are issues involved in continuity of a business in free zones other than those in Dubai and Sharjah.

According to reports, the cost of establishing a company - including first year fees and refundable deposit - in Dubai Airport Free Zone is $73,217 onwards, Jebel Ali Free Zone $18,079 onwards, Dubai Silicon Oasis $48,985 onwards and Dubai Internet City $9,487 onwards. The fee for subsequent years is $55,505 onwards, $14,605 onwards $42,174 onwards and $9487 onwards respectively.

The comparative cost of establishing a company, including first-year fees and refundable deposit, in Fujairah is $6,131, Ajman $6,934, Hamriyah (Sharjah) $5,562 and Ras Al Khaimah $6,812. The costs are further lower for subsequent years at $3,406 in Fujairah, $6,934 in Ajman, $5,562 in Hamriyah (Sharjah) and $4,087 in Ras Al Khaimah.