SEZs drive industrial boom in UAE and GCC – News


When Jafza was launched in 1985, there were only 19 companies in the area. Today, it accounts for nearly 24% of Dubai’s foreign direct investment

By Mohammed Abdul Rahman Al Mutawa

Published: Sun 30 Oct 2022, 11:05 PM

The global rise and rise of Special Economic Zones (SEZs) such as logistics hubs, free zones and industrial clusters has been remarkable. In the 1980s, there were less than 200 worldwide, but today there are more than 7,000 in more than 140 countries.

The GCC is at the forefront of this growth. And with good reason.

Global competition in SEZs to attract business may be fierce, but the geographic advantage enjoyed by GGC countries at the crossroads of East and West remains as strong as it was centuries ago.

Only now is the region seamlessly connecting to billions of people through some of the most sophisticated airports, ports and SEZs on the planet.

Currently, there are 70 SEZs in the GCC, including 47 in the United Arab Emirates alone. Saudi Arabia and Oman have 10 each, Kuwait four, Bahrain three and Qatar two, but ambitious plans, particularly in Saudi Arabia and the United Arab Emirates, will see those numbers soar.

However, when it comes to SEZs, it shouldn’t just be about quantity.

In my view, it is essential that these zones provide win-win solutions for the countries that invest in them as well as for the companies that use them.

And this means that in return for tax incentives, cost and customs advantages, transparent business processes and world-class infrastructure, it is essential that companies in the SEZ contribute to the national economy. , create jobs, inspire innovation, stimulate economic diversification and become powerful catalysts for economic development.

So what does it look like?

Well, a world-famous example is the Jebel Ali Free Zone (Jafza).

When Jafza was launched in 1985, there were only 19 companies in the area. Today, Jafza accounts for nearly 24% of Dubai‘s foreign direct investment, has 9,000 registered companies in over 130 countries, employs over 135,000 people and generated MAD 454 billion in trade in 2021, an increase of 19% year over year.

Since 1985, the region has learned a lot about maximizing the benefits of SEZs and for me, several lessons stand out. The first is to bring together interconnected companies or industries such as Dubai Media City which brings together a media community of freelancers, SMEs and global media brands, or PlasChem Park in Saudi Arabia, a cluster exclusively dedicated to the chemical and conversion industries. .

Close proximity between competing companies inevitably drives productivity and innovation as companies aim to outdo each other, but proximity also encourages replication as well as collaborations and partnerships that lead to new products, processes, services and sources of revenues that drive industry growth.

Clusters also attract high concentrations of skilled specialists and labor and, as these people share valuable knowledge, they create a targeted pool of talent.

Meanwhile, for small businesses and growing businesses, clusters offer them opportunities to thrive, learning from industry leaders, leveraging economies of scale and exploring innovative niches that could transform their industry.

Another key lesson from successful SEZs, especially in light of the pandemic supply chain shocks, is to provide near future-proof, cost-reducing access to suppliers and partners who really matter.

A striking example of this is the Khalifa Industrial Zone Metals Cluster in Abu Dhabi (Kizad). Not only does this cluster provide reliable access to raw materials, but it facilitates an innovative form of delivery. The so-called “hot metal route” transports aluminum in molten form directly to downstream companies, saving them the huge energy costs needed to smelt their own raw aluminum.

So, in the future, how can the benefits of SEZs be enhanced? Without a doubt, technology and sustainability must play a key role.

The Internet of Things, advanced robotics, 3D printing and big data are transforming our world and our global value chains and will undoubtedly be central to the transformation of the GCC SEZs.

SEZs also face the challenge of sustainability. With Oman, Bahrain, the United Arab Emirates and Saudi Arabia all committing to net zero emissions between 2050 and 2060, and industry is responsible for 30% of global CO2 emissions, clusters industries must work together to achieve these goals.

This is why we must take advantage of the proximity of companies in the industrial cluster to accelerate the transition to clean energy, better energy efficiency and new technologies such as carbon capture.

The $500 billion Neom mega project in Saudi Arabia, for example, promises to be an outstanding example of technological advancement and sustainable achievement in an unprecedented special economic zone that will cover an area of ​​the country the size of Belgium.

The area, which will eventually house nine million people, will run on 100% renewable energy and aims to become the world leader in areas such as AI, advanced robotics, data centers and virtual reality.

These are certainly fascinating times for the GCC SEZs and I look forward to the next exciting chapter in their evolution.

– The writer is the CEO of Ducab Group


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