Dubai's industrial and free zones serving as economic backbone

Since Dubai’s initial forays into state-led industrial development in the 1970s and 1980s, growth in light and heavy manufacturing, logistics and other related areas has taken place almost exclusively in the context of the emirate’s numerous industrial parks and free zones. Indeed, the organisation of Dubai’s economic development into discrete geographic clusters, each dedicated to a different sector, can be hailed as a prescient decision on the part of the late Sheikh Rashid bin Saeed Al Maktoum, the ruler of Dubai from the late 1950s until 1990. Since the establishment in the mid-1980s of the Jebel Ali Free Zone Authority (JAFZA) by royal decree, zone-based industrial development has been widespread not only in Dubai, but across the Middle East.

Today, the emirate hosts a wide range of free zones and other sector-specific economic areas, including JAFZA’s eponymous zone, Dubai Investments Park (DIP), TechnoPark, the Dubai Airport Free Zone (DAFZA) and a raft of so-called development cities, including Dubai Industrial Park, Internet City, Media City and Studio City. “Dubai is a great strategic hub for the region,” Moosa Al Moosa, the president of Dow Chemical in the UAE, which has a plant in JAFZA, told OBG. “It offers exceptional logistical capabilities, provides competitive advantages and is really well connected to regional and global markets.”

Recent Growth

In 2014 and 2015 activity in Dubai’s industrial parks picked up substantially, which served to confirm a widely held belief that the extended period of slow growth that took hold after the 2008-09 global financial crisis was coming to an end. In the first five months of 2015 DIP attracted 436 new companies to the park, which translated to a 20% increase in total allotted commercial space over the same period in 2014. Companies operating out of JAFZA generated trade worth upwards of Dh321bn ($87.4bn) in 2015, according to estimates from the free zone’s authorities, which was equal to nearly 33% of Dubai’s total manufacturing trade for the year. Most local players therefore remain optimistic about the future of industrial development in Dubai.

A Bevy Of Zones

JAFZA is the oldest free zone in the UAE and bills itself as one of the largest in the world. Today, despite a slight slowdown in growth during the 2008-09 global financial crisis, the free zone is home to more than 7100 companies from over 100 nations. JAFZA-based firms employ more than 135,000 people, according to official data from the zone’s management.

DIP dates back to 1998, when Dubai Investments, a local conglomerate, announced a master plan to build a mixed-use, self-contained industrial area in Dubai. DIP now covers a total area of 2300 ha, of which some 1700 ha is leasable. The park is organised into three zones, one dedicated to housing industrial tenants, one for commercial developments and one residential area. The zone has always aimed to attract parties involved in light and medium-light industry, including construction and building materials, printing, food and beverage production, pharmaceuticals, plastics, textiles, furniture and energy.

Unlike JAFZA, DIP does not have free zone status, so foreign companies setting up shop must partner with a local player. Nonetheless, as of mid-2015, almost 4500 companies were operating in the park, including a variety of well-known local brands. “Low-cost fast-moving consumer goods are short-term business.” Nader Nashed, franchise director at Coca Cola Middle East, told OBG. “Where there is very low GDP or income, these local in-house brands are stronger.”

DIP’s key strengths in terms of attracting industrial players include its strategic location near the Expo 2020 site, within a few minutes of Al Maktoum International Airport in Jebel Ali; its connection to the city’s key business areas by road; and its internal infrastructure, which includes an internal 140-km road network, integrated utilities and telecoms, waste management and recycling, plus a wide array of warehousing, storage and commercial facilities. “DIP offers a business-friendly environment and strategic location,” Omar Al Mesmar, the park’s general manager, told local media in August 2015. “Both for local consumption and access to key transit points in order to cater to the export markets.”

Key Players

Another key player in the development of free zones in Dubai is the TECOM Group, a subsidiary of the state-owned investment firm Dubai Holding. The firm owns and operates 11 sector-specific business parks in Dubai. TECOM’s first property, Dubai Internet City, was launched in 1999 as a result of a royal decree issued by Sheikh Mohammed bin Rashid Al Maktoum, vice-president of the UAE and ruler of Dubai since 2006. In the following years, the firm launched a handful of additional business clusters, including Dubai Media City in 2000 and Dubai Industrial City in 2004, which was renamed Dubai Industrial Park (DINP) in 2016.

Since its initial launch, the latter development has grown into one of the largest industrial centres in the emirate, covering 55 sq km near Jebel Ali Port. As of mid-2016, DINP was home to over 680 companies. Key players currently either operating at the zone or in the process of setting up operations include Unilever, which in June 2015 announced a plan to construct a new Dh1bn ($272.2m) manufacturing facility at DINP; Maxsteel, a Dubai-based steel manufacturer; Al Barakah Dates; Arabtec; Arabian Automobiles; and IKEA, among others. DINP reported a 28% jump in revenue in the first three quarters of 2015, as compared to the same period the previous year.

“Given the additional considerable area of land under development, we are confident land leasing will continue to drive growth over the course of the year,” DINP’s CEO, Abdullah Belhoul, told media in early October 2015. “This will be further compounded by the accelerating demand Dubai is witnessing, not only for industrial facilities, but also for warehousing solutions, workers’ villages, vocational training centres and commercial space.”

Like DIP, DINP is not a free zone, which means that companies operating in the park must partner with a local company, which must control a minimum of 51% of the business. Nonetheless, DINP offers a variety of incentives to attract companies, including warehousing space, labour accommodation, a range of logistics, infrastructure and business services, and assistance in all aspects of facilitating the establishment of a new company in the UAE.

Recent Developments

DINP will also play an integral part in Dubai Wholesale City (DWC), a Dh30bn ($8.2bn) development launched in March 2016. The project has a 10-year development timeframe and will act as a major hub for international wholesale trade, spanning 550m sq feet. DWC is set to support vital sectors such as logistics, financial services, aviation, hospitality and business tourism.

Meanwhile, Dubai South – a 145-sq-km free zone that has been in development since 2006 – is set to eventually be one of the world’s largest logistics hubs, encompassing the site of Expo 2020 and Al Maktoum International Airport, also known as Dubai World Central. When the $32bn expansion of Al Maktoum International is complete in 2022, it will be able to handle 220m passengers annually and 100 Airbus A380 jet airliners at once. In 2015 Al Maktoum became the 19th-busiest airport in the world in terms in cargo movements after posting 42% growth of cargo volumes in the first half of 2015, according to data released by Dubai Airports. Given the focus on logistics and the development’s free zone status, Dubai South is expected to be a key area of investment by industrial firms of all kinds in the coming years.

Furthermore, in late 2014 Nestlé, announced that it would invest $120m in constructing a 175,000-sq-metre manufacturing facility in Dubai South. “The region is suffering from under-nutrition, so this is why fortification is important,” Yves Manghardt, chairman and CEO of Nestlé Middle East, told OBG. “The overall understanding of the need to embrace a healthy lifestyle is not growing fast enough. Therefore, a change in mindset is required to improve overall health.”

As the Nestlé investment suggests, activity in Dubai’s industrial and logistics free zones has increased considerably in recent years. According to a recent report by Knight Frank, a London-based real estate consultancy, in the first three quarters of 2015 rentals in these areas increased by 4%, compared to the same period the previous year, with JAFZA, DIC and Dubai South attracting particularly large investments. In an effort to shore up Dubai’s free zone segment, in May 2015 Sheikh Mohammed issued Law No. 13, which formally established a new oversight body, the Dubai Free Zone Council. The new entity has a broad mandate to boost cooperation among the emirate’s numerous free zones and industrial areas, to promote the zones’ investments and to represent Dubai at domestic and international conferences.

You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Dubai 2016

Industry chapter from The Report: Dubai 2016

Cover of The Report: Dubai 2016

The Report

This article is from the Industry chapter of The Report: Dubai 2016. Explore other chapters from this report.