Dubai’s Jebel Ali Free Zone positioning itself as nexus for Middle East manufacturing and trade

By: | Issue #636 | at 08:11 AM | Channel(s): International Trade  

Dubai’s JAFZA (Jebel Ali Free Zone) profiles itself as “ideal site” in the Gulf for setting up manufacturing and trading operations.

Jebel Ali Free Zone, Dubai, UAE
Jebel Ali Free Zone, Dubai, UAE

Dubai’s Jebel Ali Free Zone (JAFZA) has been using major industrial trade shows around the world to court companies, touting its attributes as the UAE’s trade and logistics hub for the wider Middle East region, and also as an “ideal site” to set up manufacturing and trading operations.
The recent Automechanika trade show of Frankfurt, rated as the world’s largest event for the auto-parts and components sector, was a prominent venue where JAFZA set up a pavilion-size booth to recruit companies to set up operations at its facility.

In an interview with the American Journal of Transportation at the Automechanika show, Ibrahim Mohamed Al Janahi, the deputy CEO and chief commercial officer of JAFZA, said that over 7,000 companies from over 120 countries had established operations in the JAFZA. These, he added, included more than 100 of the 500 Fortune companies.

“About 73% of them are in trading, storage, transhipment while some 23% are engaged in manufacturing and assembly operations. We have Nestle, Mars, Proctor and Gamble, to name a few names. The UAE (United Arab Emirates) has a population of nine million … our biggest trading partners are China, India, Middle East, Iran, Britain, France and Germany,” he explained.

Ibrahim Mohamed Al Janahi – deputy CEO and COO of JAFZA
Ibrahim Mohamed Al Janahi – deputy CEO and COO of JAFZA

Al Janahi made out a case for JAFZA as a strategic point for penetrating some of the world’s most dynamic markets such as the Middle East, Iran, India and China. “The most attractive incentive to foreign companies is 100% ownership and zero taxation … these are guaranteed for 50 years. We as the landowner and the nodal authority give this guarantee,” he maintained, adding that other incentives included zero personal income tax, zero import or re-export duties, no restriction on capital repatriation, etc. Asked to explain the reason for JAFZA’s presence at the Automechanika, Al Janahi said it was a “strategic choice”. “We do participate in trade fairs but we are here at the Automechanika for the first time because we are trying to attract the auto-parts and components industry to JAFZA. We already have about 620 companies specializing in various segments of the automotive sector in JAFZA from several countries,” he explained. JAFZA’s maiden appearance at the Automechanika was to “test the waters” and, as he put it, “we are not disappointed”. “We have been sending members of our sales team to arrange meetings for us with participating companies interested in expanding their business,” he said.

Al Janahi said that he saw good business opportunities unfolding in Iran after the shackles of international sanctions were recently lifted. “U.S. companies should find JAFZA an interesting facility to tap the business potential inherent in Iran. Iran is in our geographic proximity. We have many Iranian companies operating in JAFZA. There are also many U.S. companies in JAFZA that are eyeing the Iran market. We have been getting many enquiries about Iran from companies from other countries. Dubai airport has excellent connectivity with Iran,” he explained.

According to Al Janahi, Iranian companies in JAFZA have been doing transactions with the outside world through Dubai banks, which also do good business with the West. Dubai’s banking system is linked with the entire world. There are people from some 200 nations working and settled in Dubai. The tiny emirate which has learned to make “lemonade from a lemon despite its small size”, as one European executive put it at the Automechanika, is also busy preparing for the EXPO 2020 show which is expected to attract 25 million visitors, as Dubai’s planners organizing this event are saying.

Recruiting US Companies

But JAFZA wants to recruit more American companies because the U.S. corporate landscape is characterized by resilient and innovative players. “We are also very keen to get U.S. trading companies so that they sustain our ports and shipping lines which sustain Dubai’s economic heartbeat. We are focusing on certain industries such as capital goods, food and beverage, logistics companies, automotive, chemicals, pharma, oil and gas, etc.”

JAFZA’s Connectivity

JAFZA’s biggest asset, as its deputy chairman pointed out, was its extensive connectivity by sea, air, land and rail. Jebel Ali Port is served by 100 shipping lines, which allow the JAFZA companies to benefit from the global ocean freight connectivity. JAFZA is customs bonded with Al Makhtoum Airport, which facilitates rapid and reliable air links. An extensive regional highway network enables goods to flow to regional markets and beyond. An extensive railway network – the Etihad Railway – is being set up in the UAE, and is expected to link JAFZA with the entire Arab Peninsula, making JAFZA “ideally placed” to take full advantage of the new rail connections.

To tap the still not fully tapped business potential in the US, JAFZA recently also organized a roadshow in Seattle, Washington, attended by executives of over 40 US companies.

The UAE is the United States’ largest trading partner in the Middle East reflecting the strong economic relationships between the two nations.

At the seminar, JAFZA representatives introduced Dubai as the industrial and manufacturing hub of the region; the event highlighted the Emirate’s Industrial Strategy, and the incentives JAFZA offered to manufacturing companies.

JAFZA recently signed a MOU (Memorandum of Understanding) with the Trade Development Alliance Greater Seattle to encourage trade relations between the two cities and organisations.

The JAFZA delegation, in a meeting with John Stokes, mayor of Bellevue City, discussed ways to enhance and strengthen trade relations between the two cities. Al Janahi, who led this delegation, invited Mayor Stokes to visit Dubai and the JAFZA facility to further understand the pivotal role of the Emirate as the business hub of the region.

According to Dubai sources, JAFZA-US trade has grown at the rate of 37% over the past five years. The U.S. ranks in the top five in trade with JAFZA and sixth in terms of the number of companies employing more than 10,000 people.

Over 400 US companies are based in JAFZA, including General Motors, HP, Dow Chemicals, Ford, General Electric, Caterpillar, FedEx, Schlumberger, P&G and Johnson & Johnson.

According to figures released by the Statistics Center of the U.S. Department of Commerce, trade between the UAE and the United States during the first half of this year reached $12.84 billion, compared with $11.9 billion over the same period in 2015. U.S. trade with the UAE accounted for about 33.5% of the total trade with Gulf Cooperation Council (GCC) nations.

Al Janahi highlighted that Dubai’s “outstanding” infrastructure and integrated business community catered to trade and logistics in the entire Middle Eastern region. “JAFZA with its logistical and manufacturing hub facilities attract multinationals from around the world, including the U.S,” he said.

JAFZA has been claiming that it is the “preferred destination” of U.S. companies for their expansion in the region and has been developing close business relations with U.S. organizations. The UAE is the United States’ largest trading partner in the Middle East, reflecting the strong economic relationship between the two nations.

But how are issues resolved like intellectual property rights or other disputes that could crop up for companies and people living in the JAFZA? JAFZA representatives point out that there are mechanisms in place for dispute resolution provided to the member companies and people living, working and investing in the free zone. JAFZA has recently signed a MOU with the Dispute Resolution Authority (DRA) that gives its member companies and the residents in the free zone access to a suite of dispute resolution services, including the Small Claims Tribunal of the Dubai International Financial Courts (DIFC).

JAFZA and the DRA, an authority within the DIFC, are working together to develop initiatives to encourage greater cooperation between dispute resolution and mediation services provided by the two authorities. The agreement will provide JAFZA member companies with a more efficient means of resolving disputes.

The MOU was signed at the DIFC headquarters by Sultan Ahmed bin Sulayem, Group Chairman and CEO of DP World and Chairman of Ports, Customs and Free Zone Corporation, and Dr. Michael Hwang SC, Head of the DRA.

American Journal of Transportation