These zones grant 100% foreign ownership and exemption from taxes, tarrifs and local regulations. Jebel Ali free zone alone is home to over 2200 companies from over 100 countries, including many European and American blue chip companies. Dubai has been at the forefront of this policy and has moved into creating dedicated industrial or service zones in an effort to attract clusters of leading companies within targeted sectors. Dubai International Financial Centre is its latest and most ambitious project, which the emirate hopes will support the development of a regional capital market.
In a region that is amongst the most expensive and time consuming to start a business, the UAE's free zones are attractive propositions. As a result over the last twenty years the UAE has become the leading business and trading hub in the Middle East. This means that when the region booms, the UAE booms even more so. This process can be visibly seen in the country's real estate sector. Although construction and real estate investment have picked up across the Middle East over the last two years, its Dubai that has seen the most activity. Investment into Dubai's real estate sector is currently running at over 20% of the emirate's GDP. The recent IPO of Abu Dhabi based Addar properties, which was over 400 times oversubscribed, shows that this boom has further to go.
However the UAE's undoubted economic strengths do not mean that it can ignore economic reality. If oil prices fall, and the region slows, the UAE is likely to slow as well. The oil sector may account for less than a third of GDP, but it is still the largest sector and provides much of the momentum for the wider economy.
That said, the outlook for the UAE remains robust. Abu Dhabi's large stock of offshore assets gives it the flexibility to absorb even a large economic or financial shock. While we expect headline growth to moderate in 2005 and 2006, alongside a fall in oil prices, thanks to its liberal business environment the medium term prospects for the country remain extremely encouraging.
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What drives the UAE's growth? (page 2 of 2)
- Sunday, December 12 - 2004 at 16:41
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Daniel Hanna, EconomistSunday, December 12 - 2004 at 16:41 UAE local time (GMT+4)
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This article was updated on Sun Apr 22 2007.
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