Money makers (page 1 of 3)

By Pam Dougherty DUBAI

But with most Arab states moving towards freer trade and more liberal investment conditions, it might seem as if their free zones had a limited shelf life. In fact, says Jim O'Gara of American firm The Services Group (TSG), which has acted as consultant on new free zone developments in the Arab world and elsewhere, they should be a major tool in promoting liberalization and seem set to proliferate around the region.

According to O'Gara, free zones have been considered something of a temporary phenomenon since their inception. "People working in the Shannon free zone in Ireland back in the 1950s thought it could not last, and when I came into the business 12 years ago I thought I should have an exit strategy," says O'Gara. Today, however, not only are both Shannon and O'Gara still in the free zone business, the world's largest and most sophisticated economy is awash with them. "The United States has about 300 free zones," says O'Gara, "and most of its car manufacturing takes place within them."

He points out that the real strength of free zones is that they provide an efficient, focused system for the movement of goods and people. "In modern production the percentage of value from logistics, which includes bringing in raw materials and sending out finished goods, can make up as much as 25 percent," O'Gara says, "and any efficiency that can be gained from ease of movement of goods, capital and people is vital."

Jebel Ali. The idea of free zones is hardly a new one in the Arab world. Kuwait first set up a free zone in the 1950s, and a number of other countries in the region followed suit in the 1960s and 1970s. But it was only when Dubai picked up the free zone ball - and managed to carry it further and faster than anyone else had thought possible - that they really took off.

What started with a conventional trade and industry zone at Jebel Ali Free Zone (JAFZ) has now become the accepted method for adding new elements to the economy. It is hardly surprising that Dubai looked to Jebel Ali as a model: it has turned out to be an outstanding success and has become the touchstone for economic progress throughout the region. JAFZ now covers 100 square kilometers and is home to close to 2,000 companies from over 97 countries. Jebel Ali offers almost everything big business could want: 100 percent foreign ownership, 100 percent repatriation of capital and profits, and zero corporate or personal income tax.

JAFZ has proved to be the ideal location for trading, shipping and port management company Maritime and Mercantile International (MMI). MMI is a Dubai-based company so has no need of free privileges but, according to Mike Lee, head of MMI Logistics, "Jebel Ali has the right mindset for an efficient zone, and the infrastructure and technology which allows that mindset to become reality." MMI Logistics, which handles the products of major international brand owners such as Smith Kline Beecham and Ferrero Rocher, uses JAFZ as a base for its regional business, 50 percent of which goes to the UAE, with most of the balance going to other GCC countries.

Who's who. With JAFZ running smoothly, the emirate moved on to the Dubai Airport Free Zone (DAFZ), which was set up to attract high-value, technology-driven industries needing ready access to airport facilities. After just three years of business, DAFZ's tenant list reads like a who's who of international business and includes Boeing, Rolls Royce, Porsche and a slew of luxury goods names.