Why free zones remain attractive for new businesses in the UAE

The UAE’s free zones are working to strengthen the climate for new businesses by offering lower fees and bespoke packages in an uncertain economy. Following new laws designed to improve business climate, some ecosystem players even testify to an increased number of new registrations and business expansions even during the pandemic, with technology-focused sectors seeing high traction.

As one of the first to adapt to the changes in the business environment, Hamriyah Free Zone saw several international companies announce expansion plans within the free zone, says Saud Salim Al Mazrouei, Director of the Hamriyah Free Zone Authority (HFZA).

“The pandemic did not dampen our commitment to transform the way global trade is done and you will see it in the success stories that fuelled our passion even during these unprecedented times,” he says, explaining that HFZA’s pivot to online services for investors during the pandemic proved invaluable.

To help entrepreneurs overcome the situation, Umm Al Quwain Free Trade Zone introduced the Business LYTE packages, offering up to 50 per cent off, which helped prospective investors to continue with the plans of business set-up. “We also provided additional months of licence validity for our existing companies and increased the visa quota for all our new and existing businesses,” says Johnson M. George, General Manager, Umm Al Quwain Free Trade Zone Authority.

Similarly, Creative Zone, a business advisory firm, assisted several UAE-based and global investors launch and expand their ventures in the UAE and Saudi Arabia during the pandemic, says its Head of Marketing, Neha Thomas.

This is thanks in large part to an operational shift that has seen the company’s concierge and PRO services assist clients in other countries with opening bank accounts as well as arranging visas and  licences.

“All our services are available online, and we have digitised the entire process of business set-up, right from the first consultation to delivering your licence at your doorsteps,” she says. “Owing to the adverse effects of the pandemic on business everywhere, we provide subsidised rates for all our value-added services such as insurance plans, logistics, software, sales and marketing, funding and legal assistance.”

Thriving SME ecosystem

As has been widely reported, digital and technology-focused businesses have done well during the pandemic. “Many start-ups, particularly e-commerce and other digital platforms, recorded steady growth, giving a massive boost to the country’s digitalisation efforts,” Thomas adds.

“We see a rising culture of entrepreneurship, owing to the several incentives the government has provided to the start-up and SME community. From providing healthy stimulus packages, government-led funding opportunities to 100 per cent ownership of onshore companies, the UAE’s SME ecosystem has hope written all over it.”

A series of regulatory changes to company formation and residency laws has been enacted over the past year to improve the ease of doing business within the UAE. For the first time, long-term residence visas are now available to entrepreneurs in some categories, and

they may own 100 per cent of mainland businesses in many sectors subject to minimum capital conditions or incubator approval.

Similarly, digital platforms such as Invest in Dubai are poised to simplify setting up a Dubai-based company in over 2,000 areas across various licence types, while the Dubai DED Instant Licence is now available within five minutes with no pre-approvals. Further policy changes, such as the Ministry of Industry and Advanced Technology’s new “Operation 300bn”, a new tactic aimed at supporting 13,500 industrial SMEs, will incentivise companies in specific sectors in line with strategies to establish global leadership in economic sectors built around breakthrough technologies.

Dubai CommerCity, for example, was launched last year at the height of the pandemic. A new free zone dedicated to e-commerce and logistics, the Dh3.2-billion project aims to be a hub for online retailers serving the Middle East, North Africa and beyond, where local, regional and global e-commerce players benefit from premium digital and physical infrastructure.

Grasp of market dynamics

As always, investors must understand the markets they operate in, says Syed Shuaib, Business Consultant, Capital International Group (CIG), a company formation advisor. He emphasises the competitive attractions of a free zone company within such an environment.

“Free zones provide many advantages over mainland companies in the UAE, not the least of which is faster market entry. Often, free zones will have a list of activities that are industry-specific and also have access to facilities such as seaports, airline terminals and warehousing. Another distinct advantage of free zones is the ability to combine different business activities, which can be difficult for mainland companies.”

George Hojeige, CEO, Virtuzone, which offers incorporation services across free zones in the UAE, says the day after 100 per cent ownership for mainland companies was announced, he was inundated with requests from investors asking for their companies to be restructured. “People are calling all the time, asking if they should still pay their sponsor. Hundred per cent ownership is possible in certain situations or industries only. ”

Like Shuaib, he says free zones are attractive for international investors because of several reasons, including their low entry and set-up costs, no requirement for upfront share capital, minimum paperwork, the option of a flexi-desk and zero per cent duty on import and export.

But with the intricacies of the new laws coupled with ever-changing business conditions that can prove challenging even for established businesses, companies new to the UAE are being advised to consider the services of external consultants.

“Covid-19 brought topsy-turvy conditions for businesses across the world,” says Hatem El Safty, CEO, Business Link. He cites challenges for SMEs such as legislation, operational areas of focus, information or data sorting and changes in customer behaviour. “With too many things over the head, it’s complicated to focus on business movements and this is where business set-up consultants work as a walking stick. From documentation to analysing customer trends, we do it all efficiently and right in time. Consultants are experienced and know the in and out of place. It is like being pro at every minor but impactful place.”

Company set-up firm Trade License Zone provides a free, no obligation consultation to investors in order to ensure that they are receiving accurate and comprehensive advice, says Oliver Brinsley, Senior Business Setup Consultant and Sales Manager. In addition to tax, VAT, accounting, advisory, travel and media services, the firm offers a full suite of office solutions, including co-working space, meeting room facilities, reception management and a number of other start-up-related services. “We found that these services became even more popular, mainly because it provides businesses with extensive flexibility,” he says.

Support for new entrepreneurs

Consultants can help guide new entrepreneurs, adds Meet Joshi, CEO of Flyingcolour Group. The firm offers entrepreneurs advisory services from launch through to operations. “Any new growth sectors will surely come with its own guidelines, and grey areas. Our years of work in the industry could provide a helping hand to those venturing into new sectors. Apart from setting up of the business, we can also then provide ongoing support through accounting, internal auditing, immigration, banking and any other requirements a business may need.”

The traditional post-recession bounce could augur well for companies that start businesses in the wake of the pandemic, Joshi says.

“The market has definitely faced challenges due to Covid and the SMEs are a huge part of the overall economy. However, historically, after any challenging era, a new era filled with more opportunity and prospects takes shape. I expect the same in this case, and surely over the next couple of years, the market will be in high recovery mode.” ■