Sandwiched between Abu Dhabi and Sharjah, Dubai is the second largest emirate in the UAE in terms of economy
Ruler Sheikh Mohammed bin Rashid al-Maktoum
Per capita GDP $46,574
Key economic sectors Manufacturing, construction, trading, real estate
Main towns Dubai, Jebel Ali, Al-Awir, Garhoud
Throughout the 2000s, a prolonged real estate boom saw Dubai eclipse the country’s capital, establishing itself as the international face of the UAE. Its coastline underwent a dramatic transformation and increased by 78 kilometres with the development of the Palm Jumeirah, a man-made island. Headlines were made by the construction of the world’s tallest tower, Burj Khalifa, and the $20m star-studded opening of the Atlantis hotel.
Over the years, the focus of the city has shifted from the traditional business centre focused around Dubai Creek to Sheikh Zayed Road and the new business and residential communities near Dubai Marina. The construction boom was a response to a series of plans for economic development drawn up by the emirate’s ruler, Sheikh Mohammed bin Rashid al-Maktoum, which intended to give Dubai a future beyond oil.
The Al-Maktoum family led the settlement of 800 tribal members near Dubai Creek in 1831 and have ruled the emirate ever since. Sheikh Mohammed has been the leader since the death of his elder brother in 2006. He is also the vice-president and prime minister of the UAE. His second son, Sheikh Hamdan bin Mohammed bin Rashid al-Maktoum, was appointed crown prince in 2008.
Dubai has an Executive Council, which supports the ruler in policy making. Below this are government departments covering every sector of the economy.
Dubai’s economy has undergone rapid development over the past decade. Between 2002 and 2009, the emirate’s gross domestic product (GDP) nearly doubled, rising from $45bn to more than $80bn. The main boost to the economy came following the change in 2002 of the emirate’s property law that allowed foreigners to own freehold property. The resulting real estate boom triggered a surge in investment, bringing with it an influx of new residents and expatriate workers.
|GDP by sector, 2009|
|Wholesale retail trade and repair services||23,430||29|
|Transport, storage and communication||11,401||14|
|Real Estate and business services||11,382||14|
|GDP=Gross domestic product. Source: National Bureau of Statistics|
Likewise, the establishment of free zones allowing 100 per cent foreign ownership drew international businesses to set up in the emirate. The first free zone in the UAE opened near the port at Jebel Ali in 1985. Occupying more than 48 square kilometres, Jebel Ali Free Zone now hosts in excess of 6,700 companies from 120 countries and is one of the largest and most successful free zones in the world. There are 30 free zones in total in Dubai.
Today, the emirate has a diversified, service-based economy, with trade, transport and real estate being key contributors. Dubai plays a leading role in regional logistics through Jebel Ali Free Zone and Dubai International airport. It is also a major financial centre in the Middle East, hosting the headquarters of many international firms.
Oil accounts for less than 5 per cent of Dubai’s GDP. Its oil production peaked in 1991 at 410,000 barrels a day (b/d) and has steadily declined ever since. Current production is estimated to be 50,000-70,000 b/d.
|Dubai gross domestic product|
|GDP=Gross domestic product. Source: National Bureau of Statistics|
Given the emirate’s focus on real estate development, Dubai suffered greatly during the credit squeeze that began in 2008. Billions of dollars-worth of real estate projects were put on hold as speculators exited the market and developers struggled to fund their work. In November 2009, state holding company Dubai World shocked global markets with the announcement that it was seeking a restructuring of about $25bn of debt. The following month, oil-rich Abu Dhabi stepped in to bail out its neighbour and prevent a debt default.
But by last year Dubai’s position had improved significantly. “Dubai is definitely past the worst,” Monica Malik, chief economist at investment bank EFG Hermes, told MEED in September 2011. The government conducted a successful $1.25bn bond issue in September 2010. The deal was oversubscribed and attracted interest from around the world. “They couldn’t have done this [deal] even in January 2010,” says a banker close to the deal.
The change in fortune is a result of the significant progress Dubai made in addressing its debt problems in 2010. Political stability has also helped the emirate benefit from the recent Arab uprisings that damaged Bahrain’s reputation as a financial hub and made tourists wary of visiting affected countries such as Egypt and Tunisia.
Free Trade Zones
Jebel Ali Free Zone (Jafza)
Situated between the world’s seventh-largest sea port and a new cargo airport, Jafza handles more than a third of the emirate’s total trade and almost half of its exports. It was the first free zone established in the region and is still growing at a rapid rate. Jafza increased its customer base by an average of 7 per cent a year from 2008-12, during which time it contributed more than 20 per cent of Dubai’s GDP.
More than 120 nations are represented in the zone and 80 per cent of the more than 6,400 companies are engaged in trade and distribution. But there is also a significant manufacturing and service sector presence. Firms in the zone carry out work ranging from steel fabrication and computer assembly to food packaging and distribution, and include more than 100 Fortune 500 firms.
To set up in Jafza, businesses must fit into one of hundreds of categories, but these fall under three sections: industrial; services; or trading. They then need to be set up as one of four types of business:
A Free Zone Establishment (FZE) can be formed with a single shareholder and a minimum capital of AED1m ($272,000);
A Free Zone Company (FZC) can be set up with two to five shareholders and a minimum capital of AED500,000;
A branch firm can be formed if a business already has valid registration and licensing from outside the free zone;
Facilities for non-resident individuals and corporate bodies to establish offshore companies are also available.
In order to set up a company in Jafza, the following documents are required: an application form; a passport copy for each individual; a bank reference for each individual; a project summary; and a non-refundable deposit of AED500. A profile of the parent firm is required for a branch company, as are the relevant applications for an FZE or FZC.
Jafza runs a one-stop-shop service linked to other bureaucratic entities, such as government departments, to help companies establish a presence by leasing, buying or building property.
|Office rents, 2012|
|(per square foot a year*)|
|Sheikh Zayed Road||100-160|
|Dubai Industrial City||70-75|
|Area (free zone)||AED|
|Jebel Ali Free Zone||180|
|Dubai world Central||65|
|*=Prices are approximate and do not include incentives; DIFC=Dubai International Financial Centre. Source: Cluttons|
Dubai Airport Free Zone
Situated at Dubai International airport, the Dubai Airport Free Zone was opened in 1996 and now provides a base for more than 1,200 companies including Chanel, Dell, Rolex, Rolls Royce and Porsche.
The zone uses its location to its advantage, offering fast cargo clearance services, sometimes within eight hours. It is used by logistics and freight companies, as well as the aviation industry, and also by a broad range of luxury goods and electronics companies.
The free zone allows FZC, FZE and branch company registration on the same conditions as Jafza. It does not allow the establishment of offshore companies.
The free zone has office space for rent on annual leases. It offers operation-ready, 25-square-metre offices from just under $20,000 a year, inclusive of start-up and registration expenses. Every 50 square metres of office space comes with four employee visas. Light industrial units are also available on an annual basis and can be used as factories or warehouses. The zone also leases plots of land, 60 per cent of which can be developed. The minimum area available is 2,500 square metres and the lease term is 15 years.
|Lease rates, 2012|
|(AED thousand a year)|
|Area (2-bed apartment)||Rent|
Dubai International Financial Centre (DIFC)
The largest financial services hub in the vast region between London and Singapore, DIFC houses 16 of the world’s top 20 banks, four of its five largest insurance companies and six of its top 10 law firms. About 40 per cent of its businesses come from the Middle East, Africa and South Asia, and about the same proportion from Europe.
A strong lure of DIFC is its independent regulator, the Dubai Financial Services Authority (DFSA), which grants licences and regulates company activity within the zone. The DFSA’s regulatory regime was developed using primary legislation modelled on international standards, mainly those used in the UK. The zone’s regulation is based on common laws rather than sharia laws.
“We only use Dubai laws for criminal cases,” says Ghanim al-Shamsi, director of business relations at DIFC. “UK businesses can work within something they are used to.”
The regulator’s mandate covers asset management; banking and credit services; securities; collective investment funds; custody and trust services; commodities futures trading; Islamic finance; insurance; an international equities exchange; and an international commodities derivatives exchange. “The zone has a business community feel and offers excellent networking with companies from all around the world,” says Al-Shamsi.
Offices can be leased for a yearly cost of about $800 a square metre, while building ownership is also possible. There are application fees of between $10,000 and $50,000 payable to the DFSA and a registration fee starting from $12,000 payable to DIFC.
Dubai Media City
Dubai Media City was established more than 10 years ago and brings together a range of broadcasting, publishing, advertising, public relations, research and post-production companies, as well as freelancers and independent producers. It hosts about 1,400 companies including the US’ CNN and Leo Burnett, and the UK’s Reuters and MEED.
Set in the heart of new Dubai, the city covers about 93,000 square metres, including commercial space, business centres, boutique offices and loft offices.
Businesses can be set up in one of three ways:
Free Zone Limited Liability Companies, which require at least one director. Capital of AED50,000 is required;
Branch companies, which can be set up with no minimum capital;
A freelance permit, which offers the ability to operate as a sole practitioner and enables an individual to conduct business with their birth name.
Licences and permits are valid for a period of one year and are renewable on an annual basis.
Dubai Internet City (DIC)
The world’s first free zone for e-business, DIC was launched in 2000. It is now home to more than 1,400 information and communications technology companies, including the US’ Microsoft, Yahoo and Facebook, and Japan’s Canon. The idea was to create a Silicon Valley in the Middle East; an environment that would attract a cluster of software developers, multimedia businesses and related companies.
DIC has developed several programmes that can be used by its clients for channel development. Companies also benefit from retailers and other amenities.
An unfurnished office can be rented at a yearly cost of about $435 a square metre. An executive office can be rented from about $20,000 a year and comes with two to seven employment visas. There are also licence fees of about $4,000 a year and a one-off registration fee of $1,000.
Dubai Knowledge Village (DKV)
DKV is typical of the scale of ambition in Dubai. A base for human resources professionals and training initiatives, it not only brings in businesses of its own, but also aims to ensure the region can develop the talent pool needed to service all the others flooding to it.
DKV was launched in 2003 and now has more than 450 partners, including professional centres and HR firms. A business can set up in DKV as a Free Zone Limited Liability Company (FZ-LLC) or a branch company. To form an LLC, at least one director is required, along with minimum capital of AED50,000. Recruitment firms operating in DKV must have a bank guarantee of AED100,000. No capital is required to start a branch firm.
Dubai’s main airport is currently Dubai International airport. Despite construction of the world’s largest airport just a few kilometres away, Dubai International is continuing to expand to serve growing demand. This year, passenger numbers are forecast to reach 56.5 million. The airport has capacity for 60 million. The $3.3bn concourse 3, due to come online early next year, will raise this to 75 million.
In terms of cargo, volumes reached 22 million tonnes in the year to May 2012, an increase of 1.5 per cent from the previous 12 months.
Al-Maktoum International Airport/Dubai World Central
When the first phase of Dubai World Central opened for business in June 2010, it had already signed 15 cargo operators who were attracted by its links to Jebel Ali port and free zone. The first phase includes a single runway, large enough for A380 jumbo jets, a cargo terminal and a road link to the port. Upon completion in 2020, the new airport is set to be the biggest in the world, with capacity for 160 million passengers a year. The first passenger terminal has not yet opened.
Emirates is owned by the Dubai government. Established in 1985, it is the largest carrier in the region, flying to more than 110 destinations. In 2011, it posted revenues of AED62.3bn and recorded a profit of AED1.5bn, 72 per cent less than in 2010.
Jebel Ali Port
When Sheikh Rashid bin Saeed al-Maktoum announced plans to build the world’s largest man-made port at Jebel Ali in 1978, many wondered why. With Dubai already having Port Rashid, the new port would be expensive and unnecessary, they claimed.
Almost three decades later, the move has been held up as a masterstroke. Today, Jebel Ali is by far the busiest port in the region, and the 10th largest in the world in terms of throughput. The port is now talked about as being the catalyst for success in Dubai’s economic diversification. Situated 35km southwest of the centre of the city, it was complemented by the opening of Jafza in 1985, which was the template for the free zone model in the UAE.
The port is managed by DP World, which completed its second terminal at Jebel Ali in February 2009, adding capacity of 5 million 20-foot equivalent units (TEUs). Total capacity at the site is now 14 million TEUs.
Port Rashid was originally Dubai’s main port, but its general cargo operations were stopped and moved to Jebel Ali at the end of February 2007, with its container business gradually closing down over the summer. Port Rashid is now used to receive cruise ships.
Real estate prices have dropped significantly since their peak in 2008, and UK property consultant Cluttons’ October 2012 market update says apartment values are now at late 2006 prices, while villas match the prices of early 2007. Foreign investors bought AED28.3bn-worth of property in the first half of the year, up 36 per cent on the same period last year. But investment plans are now medium-to-long-term, not based on the rapid property flipping of five years ago.
Between January and October this year, rental prices increased on average 6.8 per cent, with properties close to the Dubai metro and with good leisure facilities seeing a more rapid rise.
While Dubai suffers from a shortage of good-quality office stock, recently built areas such as Jumeirah Lakes Towers, Business Bay and Dubai Silicon Oasis have an oversupply of stock.
Hotels in Dubai
Dubai has close to 600 hotels, including luxury, mid-range and hotel apartments. Facilities often include swimming pools, gyms and other sports facilities such as tennis and squash courts.
Expatriates must pay privately for healthcare, and it is only a matter of time before health insurance becomes mandatory in Dubai, as it is in Abu Dhabi. A plan proposed before the financial crisis would have required all employers to pay a flat fee, called the health benefits contribution (HBC), of between AED500 and AED800 a person a year, which would have been used to provide basic healthcare. This would be provided through a network of outpatient care practices.
The planned system called for two new health management companies (HMCs) to manage the system. The HMCs would help outpatient care practices meet cost and quality standards and negotiate financial arrangements with hospitals and specialist clinics. Implementation of the new system has been held off as the emirate battles the effects of the economic downturn. As a result, cover has risen to 70-80 per cent, from 40 per cent, over the past five years.
By 2015, the federal government wants 70 per cent of the UAE’s hospitals to be privately managed. Under Dubai’s 2015 Strategic Plan, the Dubai Healthcare Authority will spend nearly AED3.7bn on healthcare.
Dubai Economic Council
The council was established in 2003 to advise the ruler on economic development in the emirate. It is supported by the Economic Policy and Research Centre, the Dubai Competitiveness Centre and the Legal Policy and Resource Centre.
Dubai Department of Economic Development
This office issues trade licences for onshore businesses that are not in the free zones or Dubai International Financial Centre. Information on registration, licensing, company structure and regulations are available on its website. Business set-up consultants report that it is very efficient and helpful.
Fees for the three main licences (commercial, industrial and professional) range from AED400-600, but a full schedule is available online.
Tel: (+971) 4 222 9922
Ministry of Labour
Work permits are issued through the local office of the Ministry of Labour. Proof of trade licence and commercial premises are required for permits to be awarded. The permit then needs to be taken to the residency department to obtain an employee visa.
Tel: (+971) 4 702 3333
Dubai Chamber of Commerce and Industry
This chamber is an extremely proactive organisation that provides significant support to the business community. It was established in 1965 with 450 members and now has more than 100,000. New businesses must register with the chamber and they will then be listed in its directory. The main office is in Deira, but it also has offices in Jebel Ali Free Zone, Dubai Airport Free Zone, at the Land Transport Customs Building, in the Economic Development Department and Al-Twar Centre.
Main branch: Deira
Tel: (+971) 4 228 0000
Dubai Naturalisation and Residency Department
Companies setting up onshore must apply for employment visas through this department. Businesses in free zones or industrial zones should apply through their free zone authority.
Tel: (+971) 4 313 9999
Free Zone contacts
Dubai Airport Free Zone Authority
Tel: (+971) 4 299 5555
Dubai Biotechnology & Research Park
Tel: (+971) 4 390 2222
Dubai Cars & Automotive Zone
Tel: (+971) 4 333 5000
Dubai Multi Commodities Centre
Tel: (+971) 4 390 3899
The Gold & Diamond Park
Tel: (+971) 4 347 7788
Dubai Flower Centre
Tel: (+971) 4 216 3434
Dubai Healthcare City
Tel: (+971) 4 324 5555
Dubai Industrial City
Tel: (+971) 4 330 0088
Dubai International Academic City
Tel: (+971) 4 360 2060
Dubai International Financial Centre
Tel: (+971) 4 362 2222
Dubai Internet City
Tel: (+971) 4 391 1111
Dubai Media City
Tel: (+971) 4 391 4555
Dubai Outsource Zone
Tel: (+971) 4 367 6666
Dubai Silicon Oasis
Tel: (+971) 4 501 5000
Dubai Studio City
Tel: (+971) 4 391 4664
Dubai Textile City
Tel: (+971) 4 375 9077
International Media Production Zone
Tel: (+971) 4 391 1122
Jebel Ali Free Zone
Tel: (+971) 4 807 8700
Tel: (+971) 4 390 1111
Samacom Satellite & Broadcasting Solutions
Tel: (+971) 4 391 3955
Tel: (+971) 4 881 4888
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