SEZs are driving industrial boom in UAE and GCC – News

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

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

The GCC is at the vanguard of this growth. And for good reason.

Competition to attract companies to SEZs around the world may be fierce, but the geographic advantage that GGC countries enjoy in their East-West linkages is still as strong as it was centuries ago.

Only now has the region been seamlessly connected to billions of people through some of the most advanced airports, ports and business-friendly special economic zones on the planet.

Currently, there are 70 special economic zones in the GCC, of ​​which the UAE alone has 47. Saudi Arabia and Oman each have 10, Kuwait 4, Bahrain 3 and Qatar 2, but with ambitious plans, especially in Saudi Arabia and the UAE, these numbers will soar.

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

In my opinion, these regions must provide win-win solutions for the countries that invest in them and the companies that use them.

This means that, in return for the financial incentives, cost and bespoke benefits, seamless business processes and world-class infrastructure they provide, SEZ companies must contribute to the national economy, create jobs, spark innovation, drive economic diversification and become a powerful driving force for economic development.

So, what does this look like?

A world-famous example is the Jebel Ali Free Zone (Jafza).

When Jafza was established in 1985, there were only 19 companies in the region. Today, Jafza accounts for nearly 24% of Dubai’s foreign direct investment, with 9,000 registered businesses from more than 130 countries, employing more than 135,000 people, and a trade value of AED454 billion in 2021, an increase of 19% year-on-year.

Since 1985, the region has learned a lot about maximizing the benefits of SEZs, and to me, several lessons stand out. The first is to bring together interconnected businesses 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, which is dedicated to A cluster of chemical and transformation industries.

Close ties between competing firms inevitably drive productivity and innovation, as companies aim to outperform each other, but proximity likewise encourages replication and collaboration and partnership, resulting in new products, processes, services and revenue streams that drive industry growth.

Clusters also attract a high concentration of skilled experts and workforces, who create a centralized talent pool as these people share valuable knowledge.

At the same time, for small and growing companies, clusters offer them the opportunity to thrive, learn from industry leaders, exploit economies of scale and explore innovative niches that can transform their industries.

Another important lesson from successful SEZs, especially given the supply chain shock of the pandemic, is to provide future-proof, cost-reduced proximity to suppliers and partners that really matter.

A prominent example is the metal cluster in the Khalifa Industrial Zone (Kizad) in Abu Dhabi. The cluster not only provides reliable access to raw materials, but also facilitates innovative delivery methods. The “hot metal road” is known to transport molten aluminium directly to downstream companies, saving the huge energy costs required to melt its own primary aluminium.

So, looking to the future, how can the benefits of SEZs be improved? There is no doubt that technology and sustainability must play a key role.

The Internet of Things, advanced robotics, 3D printing and big data are transforming our world and global value chains and will undoubtedly be at the heart of transforming the GCC SEZ.

Special economic zones must also meet the challenge of sustainable development. As Oman, Bahrain, the UAE and Saudi Arabia have all committed to achieving net-zero emissions targets between 2050 and 2060, and industry accounts for 30% of global CO2 emissions, clusters of industries must work together to achieve these goals.

This is why we need to use the close linkages of companies in industry clusters to accelerate the transition to new technologies such as clean energy, greater energy efficiency and carbon capture.

For example, Saudi Arabia’s $500 billion Neom mega-project is expected to be an outstanding example of technological progress and sustainable achievement in an unprecedented special economic zone that will cover an area the size of the country the size of Belgium.

Eventually home to 9 million people, the campus will run on 100% renewable energy and aims to lead the world in areas such as artificial intelligence, advanced robotics, data centers and virtual reality.

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

——The author is CEO of Dukab Group