The purpose of this paper is three-fold. First, the paper seeks to establish when the Dubai Airport Free Zones was established, and the main objective behind the establishment of the Free Zones. Secondly, the paper will highlight the contribution of Dubai Airport Free Zone to UAE’s economy, and then outline some of the advantages of Dubai Airport Free Zones. Finally, it will provide a comprehensive discussion on how this project promotes business in the UAE.
According to World Trade Organization, the emergence of foreign investment, as well as globalization of trade in the last few decades has considerably exposed nations to competitive pressures present in the global economy. The worldwide trading rules that are stipulated by WTO provide economies with new opportunities, and precipitous challenges, as well.
For national economies to succeed in such a competitive environment they need to pursue trade integration. One of the foremost instruments used in trade integration is the establishment of Free Trade Zones. When peace prevails among nations development will be registered in terms of smooth trade among nations and the citizens of different countries are free to exercise their knowledge and skills towards nation building.
In the year 1966, the government of Dubai adopted a strategic plan to aid in advancing economic growth. The government objective was to create an economy that is investment driven. In the plan, the government established Dubai Airport Free zone. In UAE, Dubai Airport Free Zone is the greatest free zone since it harbours more than 1500 companies from various sectors.
The industries that have established subsidiaries in the zone include aviation, manufacturing, ornaments and cosmetics, information technology, logistics and freights. In order to attract new and potential investors in the zone, the government provided an attractive package for international investors.
The incentives include tax havens, quick approval procedures, extended leases, abundant and inexpensive energy, full repatriation of profits and capital, no currency restrictions, and 100 percent foreign ownership. The zone is situated in a strategic area with state of the art facilities such as infrastructure. The Dubai Airport Free Zone borders Dubai International Airport making export of the products and import of raw materials to be utilized in the zone cost effective.
Dubai Airport Free Zone was ranked the best in Middle East and second best in the world by FDI magazine. The modern facilities that are provided in the zone include office units, light industrial units, land sites, and other services.
Contribution to the UAE’s economy
In the year 2010, Dubai Airport Free zone contributed significantly in the trade volume. The zone generated approximately AED52 billion to the total trade revenue of the government. In addition, the zone contributes 6 percent of total exports amounting to AED21.652 billion. In reference to imports, Dubai Airport Free Zone demanded 5.6 percent of the total imports representing AED30.64 billion.
This indicates the commitment of the zone towards boosting local economy, and attracting foreign direct investment through creation of a business-enabling environment. The attraction of giant multinational companies in the country is a source of revenue to the government, and at the same time household income for Dubai residents.
The strategy adopted by the government of Dubai act as a stimulus package that triggers growth momentum in different sectors of the economy. The momentum is evident both locally and regionally.
Dubai Airport Free Zones (DAFZ) is an economic pillar that enhances economic performance through creation of employment, attraction of FDI (Foreign Direct Investment), and transfer of new technologies into the country. The different free zones in UAE contribute significantly to the nation’s non-oil exports and as such rank UAE as the third most significant re-export destination in the globe.
The UAE Free Zones facilitates economic diversification through attraction of foreign investors that engage in different activities, and reduce the country’s dependence on oil, while employing nationals of the country. Furthermore, not only will Free Zones prove to be a momentum of diversification, but it will also change the face of economic doings in UAE.
The creation of employment among nationals will lead to an increase in disposal income; hence facilitating effective aggregate demand. The purchasing power of the locals will be improved, and as such, the region will witness economic growth and prosperity.
Moreover, Dubai Airport Free Zones (DAFZ) promotes innovation and entrepreneurship through DEC that facilitates business incubation. Dubai Enterprise Centre facilitates initiation, development, and management of business; hence, the business ventures grow into strong and successful enterprises that significantly contribute to the national development of the region.
The initiative seeks to retain talent and expertise in UAE, and continue to accelerate a robust economy through innovation and entrepreneurship. Business incubation provided by DEC enhances business survival in the critical business lifecycle stage. Therefore, the growth of new and competitive businesses in UAE strengthens economic growth and development.
Advantages of the Dubai Airport Free Zone (ADFZ)
The proximity to the Airport has provided a pivotal role for handling cargo and transit of goods making it the most efficient and effective free zones. This facilitates cost effective business operations and execution. As a result, companies can export their products, and import raw materials with minimal cost; hence attaining economies of scale.
The other advantage of DAFZ is that it is a tax-free zone. The companies established in the zones enjoy tax havens in relation to their imports and exports. The government also exempt taxes on personal income, and again, there is free transfer of profits and capital to home country. This is also coupled with an option to use any currency without legal restrictions.
The other benefits accrued include; subsidized annual trade license fees, registration are at less competitive charges to investors in FZE. It gives foreign investors a reason to make it a business hub worth investing in, and making it a business destination.
Furthermore, it minimizes the start-up cost for new investors; lowering the cost of doing business and attracting potential foreign investors in the region. The zone is creating specifically for establishment of companies that will facilitate diversification in the economy. The companies will also employ the nationals of UAE; hence absorbing graduates and professionals of UAE.
This will limit brain drain to other developed nations, and as such beneficial in terms of expertise and skills development. Companies established in Free Zones enjoy a competent customer service, as well as employing labour that they find suitable. Investors get assist from DAFZ in relation to visa processing for foreign employees and their families. There is also a wide range of services such as banking that are available to foreign investors.
DAFZ promotes business in the UAE
Businesses in Dubai have access to technology parks that facilitate transfer of new technologies and information handling. Information technology is the lifeblood for a competitive business entity. Technology, especially improvement in technology helps the organization through ensuring the effective management processes and strategies. In addition, information technology helps in facilitating quick decision making in the organization.
The technological aspect in business is indispensable and necessary for the accomplishment of the specified objectives. The modern business environment necessitates that organization structures should respond to the ever-changing needs of the business environment. As a result, organization structures are classified as team-based, network, and specialized. These structures ensured that organizations respond to the customer demands of flexibility, speed, quality, and efficiency.
With growing desire of businesses to undertake massive investment, in future the knowledge of the ingredients of a business environment that is conducive such as globalization can be learned and enhanced through information technology.
The concept has not only benefited countries but also individual firms through quality service, a wide range of products and expertise brought about by competition. Each country will be fighting out for a share in the world market. The quality and uniqueness of its products matters for it to withstand in the market.
With the changing customer and organizational needs, training of the workforce has become necessary in any organizational setting. Dubai knowledge village facilitate training which entails an increase in the wealth of knowledge and skills. Training will help the foreign companies to bridge the gap between job requirements and the present competence of the employee.
In addition, it will augment the behaviour and performance of an employee. Training in organization aims at growing competence and skills within an organization in order that as far as possible its prospect needs for the labour force can be met internally.
Dubai outsourcing zone ensures that businesses gain a chunk of benefits and performance from outsourcing, but as it is evident outsourcing has both positive and negative impacts. The business objective of improving efficiency in production as well as attaining competitiveness in the global market has been attained through outsourcing.
The mechanism for monitoring the strategy ensured that progress is geared towards the attainment of organizational goals and establishing whether the changes in the external environment will necessitate any change of strategy. Plans and actions should be modified to facilitate accommodation of the changes in the operating environment.
Dubai Airport Free Zones plays a pivotal role as a pillar for economic growth and development. The Free Zones contribute significantly in the regional development of UAE. The zone strives to accommodate the needs of both the investors and employees. The incorporation of information technology in the management of the activities of the business operations is crucial in ensuring effective management in the organization.
The current business world lays the ground for the establishment of an organization that is dynamic and accommodative. The organizational structures adapted should be information technology responsive and applicable in a well-managed environment. In addition, other strategic policies include development planning and protection of rights of property.
The government should be in the front line in championing planning and equitable distribution of its resources. Through planning, the government will be in a position of realizing economic growth and development. The presence of a straightforward policy regarding property rights will boost foreign investment in the country that adds to the capital accumulation of the nation. Capital accumulation is important to economic development.