As the UAE looks ahead to consolidate its knowledge-based economy and build the resilience to navigate the future, the nation’s start-up and SME ecosystem is projected to play an increasingly critical role in accelerating economic growth and diversification.
The UAE’s SME ecosystem has advanced significantly in the past few years, backed by an unparalleled combination of government-backed initiatives and incentives, world-class infrastructure, and tax and visa reforms. As in most fast growing economies in the world, SMEs and start-ups today dominate the UAE’s business landscape, generating employment, innovation, technology transfer, exports and new business models. The number of SMEs operating in the UAE reached 557,000 in 2022, contributing over 52 per cent of non-oil GDP.
The nation is looking to further increase the number of SMEs to 1 million by the end of 2030. And a major enabler of that ambitious target is the cohort of more than 45 multidisciplinary free zones and integrated business communities spread throughout the UAE. From infrastructural and logistical support to cost-effective business incorporation packages, legal and tax exemptions and a host of financial and non-financial benefits, free zones have been instrumental in attracting high-value and knowledge-intensive businesses to the UAE and accelerating trade and foreign investments.
“SMEs are an important part of Abu Dhabi’s business make-up, which we fully support by offering some of the most competitive free zone business set-up packages,” says Khalid Al Marzooqi, Vice President – International Business Development, KEZAD Group, which operates 12 economic zones in Abu Dhabi, Al Ain and Al Dhafra.
“In addition to the state-of-the-art infrastructure and business set-up support, KEZAD collaborates with a number of local banks, government agencies and partners to ensure that a business has all that is needed to successfully set up and operate in Abu Dhabi,” Al Marzooqi says.
KEZAD Group has also created several business incubators that provide a solid ecosystem for supporting SMEs. “These incubators are backed by the government and private agencies to ensure seamless integration and operation,” he adds.
Likewise, the Middle East’s largest customs bonded zone, Jebel Ali Free Zone (Jafza) has a business incubation centre that supports new companies in establishing their base in the free zone by lowering set-up costs by up to 60 per cent.
“Incubator companies at Jafza pay significantly discounted fees over their initial three years. In the first year, an incubator can register a company, obtain a licence for up to 7 activities, excluding manufacturing and general trading, and a workstation for only Dh14,000. They are also entitled to two visas,” says Abdulla Al Hashmi, Chief Operating Officer, Jafza.
Meanwhile, Meydan Free Zone has taken several initiatives to empower start-ups achieve success and grow their business in Dubai. “Meydan integrates logistics, finance, regulatory, and marketplace infrastructure with several key services, including company set-up, guaranteed bank account, visas and residency, customs codes, import and export services, e-commerce, and digital payment gateways in a one-stop digital platform. Our all-inclusive support services have various solutions — from identifying the right trade licence among over 3,500 business activities, conducting free company name checks to calculating the costs before incorporation,” says Hamed Ahli, Head of Meydan Free Zone.
“As the UAE’s only 100 per cent digital free zone, Meydan also offers mentorship, training, and academic guidance through its Activity Hub, alongside extensive networking opportunities with industry experts, potential customers, and channel partners,” Ahli adds.
Free zones see surge in business
Despite a slowdown in many global economies and a challenging external environment, most UAE free zones have experienced a rise in entrepreneurial and trade activities last year.
DP World’s Jafza witnessed the highest customer registrations in a decade in 2022, marking a 30 per cent year-on-year growth, while taking the total number of companies to over 9,500 last year.
Home to more than 5,000 companies from across 20 industries, Dubai Integrated Economic Zones Authority (DIEZ), which includes Dubai Airport Free Zone (DAFZ), Dubai Silicon Oasis (DSO), and Dubai CommerCity (DCC), recorded a 42 per cent increase in its operating profit in 2022, while total revenue increased by 29 per cent, compared to 2021.
Another leading free zone in Dubai, IFZA posted an increase of 177 per cent in 2022 in terms of new company registrations compared to the previous year.
“We constantly refine our products and processes to ensure that each company formed at IFZA is established efficiently, securely, and in compliance with the relevant UAE regulations,” says Jochen Knecht, CEO of IFZA, adding, “Our holistic approach through the IFZA ecosystem provides entrepreneurs and SMEs with a broad base with support throughout their business journey.”
Supporting UAE’s diversification efforts
In the past four decades, free zones have been an effective engine for industrial growth by fostering businesses that have collectively drawn significant foreign investments, talent and know-how, and helped the nation in its diversification drive.
Located in close proximity to airports in Abu Dhabi and Al Ain, Abu Dhabi Airports Free Zone (ADAFZ) is a success story when implementing the free zone ecosystems to spur growth in both investment and trade.
“All our initiatives to contribute to the UAE’s free zone landscape stem from a culture of customer centricity. We look at our offering from the eyes of the customer or business partner and then adapt to fit their needs. This is reflected by the diversity of our customer base, which includes multinational brands, SMEs and entrepreneur start-up solutions,” says Robert Sutton, SVP Free Zone Cargo and Logistics, ADAFZ.
“We have increased our investment in digitalisation across departments with a single-window solution to capture and then track customer requests and automate certain processes” he adds.
Fueling industrial growth
With their logistics, supply chain and industrial solutions, free zones have been critical in stimulating growth in the UAE’s heavy industries, advanced manufacturing, and 4IR ventures including space, biotech, agritech and medi-tech that form the basis of a knowledge-based economy. Free zones have also fostered growth of new talent and capabilities, generating new jobs, enhancing domestic production and national competitiveness.
Free zones have introduced several targeted measures to steer investments to the UAE and help new firms overcome entry barriers into the nation’s dynamic business landscape.
“In recent years, the UAE has forged strong relationships with various countries worldwide, while simultaneously developing its infrastructure to create a business-friendly environment that attracts investment and bolsters economic growth,” says Saud Salim Al Mazrouei, Director, Hamriyah Free Zone Authority (HFZA). “The nation’s strategy is defined by openness, trade facilitation, and an array of other policies, with free zones playing a pivotal role in realising these ambitions.”
Key factors that have enabled the efficient flow of goods worldwide and make HFZA a key player in the manufacturing and assembling sector encompass an ideal geographic location, proximity to major airports and ports, cutting-edge infrastructure, cooperation between public and private sectors, and the adoption of inventive, flexible supply chain solutions aimed at averting disruptions, says Al Mazrouei.
Similarly, ADAFZ’s direct link to the main airport in Abu Dhabi combined with the proximity to major cargo corridors and the Khalifa Sea Port means the free zone is perfectly positioned to support the industrial and manufacturing sectors.
“These verticals can take advantage of ADAFZ’s multiple modality solutions — air, road and sea — and this will be further enhanced once the rail link to the airport is commissioned,” says Sutton. “Additionally, our land bank ensures we can cater for scalable plots that support the current and future growth needs of the respective sectors. This not only helps directly align with the needs of the customers but also ensures we can support the ecosystems that typically co-exist with these sectors and verticals.”
Jafza also offers several benefits to draw local and international businesses for manufacturing, driving the UAE’s industrial agenda.
“Jafza is home to nearly 800 manufacturing companies across the free zone. Our manufacturing hub occupies over 13.6 million sqm, where companies operate in purpose-built facilities or light industrial units provided directly by Jafza. We support manufacturing firms in achieving their long-term goals by providing appropriate infrastructure and solutions that enable them to expand their capacities,” says Hashmi.
Last year, Conares, the UAE’s second largest private steel manufacturer, opened a Dh150 million colour-coated steel plant in Jafza with an annual manufacturing capacity of 100,000 metric tonnes, while Italian manufacturer of transformers and reactors, Legnano Teknoelectric Company (LTC) expanded their premises at Jafza by 30,000 square metres.
UAE free zones have also been quick to support disruptive and emerging technology businesses with their myriad incentives, streamlined processes and support services, consolidating the UAE’s position as a global hub for 4IR ventures.
Base for advanced tech
KEZAD Group has witnessed a surge in new-age businesses in the past few years. “In the AgTech sector, for example, companies around the world are unveiling exciting solutions that make mass production of fresh foodstuff sustainable and meet rising demand for food. Within our own client roster, we have several large and cutting-edge names such as AeroFarms, RDI, Madar Farms and RNZ that are pushing the envelope every day and unveiling impressive solutions. These will also ultimately help Abu Dhabi’s Food Index rating,” says Al Marzooqi.
Part of KEZAD Group’s innovative approach to support these businesses includes the ecosystem concept, where the free zone actively seeks out, and positions downstream and complementary industries in proximity to each other.
“Taking the example of the food sector, we have a food grade printing and packaging solution provider right next door to food processors, as well as a certification and testing lab within the food ecosystem. This helps our customers optimise their business operations,” Al Marzooqi explains.
Amid changing market dynamics, most free zones are prioritising innovation in products, services and processes to unlock new growth opportunities and stay profitable in the long run. Meydan Free Zone has introduced a multi-channel e-commerce platform, Meydan Marketplace that brings together more than 40 local and global marketplaces, providing businesses with a one-stop shop for all their e-commerce needs. “Through the range of services, the platform aims to help companies reach their optimal potential and capitalise on the flourishing e-commerce industry in Dubai.
“Along with onboarding on marketplaces, Meydan Free Zone integrates logistics and payment gateways, accelerating SMEs scalability. We leverage the expertise of top-tier third-party logistics (3PL) providers to offer a comprehensive suite of sophisticated tools, ranging from international shipping to last-mile courier services,” says Ahli.
IFZA has strengthened its hybrid processes so that business owners are not required to be physically in the UAE to complete company formation.
Advancing the UAE’s green agenda
Much like the adoption of new-age tech to streamline services, embedding sustainability initiatives in business strategy has become critical for free zones to stay competitive in the long run. Free zones have started aligning their operations, services and business processes with the UAE’s vision to catalyse sustainable development and innovation across sectors.
“Supporting sustainability is an integral part of HFZA’s strategy. The free zone has always been keen to attract companies that prioritise sustainable practices while encouraging their customers to reduce energy consumption, conserve natural resources, and decrease carbon emissions,” says Al Mazrouei.
HFZA has initiated and implemented several green projects in the areas of reduction of gas emissions and waste, water efficiency and environment and safety through various trainings targeting employees, investors and other stakeholders. Moreover, it has a strategic partnership agreement with Bee’ah Group, which facilitates the collection of solid and liquid waste in the free zone to develop optimal environmental solutions and promote sustainable growth.
“HFZA is also committed to using smart technologies to make our processes more sustainable, while optimising the use of energy, resources, and expenses,” says Al Mazrouei. ■
Addressing challenges and concerns for SMEs
“One of the initial challenges that SMEs face is how to navigate through the unfamiliar and often complex regulatory environment,” says Jochen Knecht, CEO of IFZA. “IFZA provides a simplified regulatory environment, making it easier for small businesses to set up and operate in the UAE with the support of competent teams of experts and authorised partners.
“A study by the Dubai Chamber of Commerce highlights, that 65 per cent of entrepreneurs cite setting up a bank account and overcoming complex procedures and documentation as a challenge in company set-up in the UAE. IFZA has set up a banking services division that offers expert assistance for IFZA-registered companies to set up a corporate bank account. In addition, we have also formed strategic partnerships with respected banking institutions to provide dedicated support to our licensees and partners,” Knecht adds.