Free zones play a critical role in strengthening the start-up and SME ecosystem
The start-up ecosystem in the UAE has witnessed phenomenal growth in the past few years, buoyed by a series of regulatory changes to company formation, visa reforms, and a host of government-led funding and mentoring opportunities, and incentives. The country has also recorded continuous improvement in its ease of doing business, which has helped consolidate UAE’s appeal as a preferred hub for local and foreign investors.
The UAE ranked first worldwide in the Global Entrepreneurship Index 2022, climbing three spots from its fourth ranking in the last year’s report. The UAE also emerged as the number one destination for establishing and starting businesses.
A resilient start-up ecosystem
Supporting entrepreneurship is a priority in the UAE’s Fifty Economic Plan — the national strategy created in preparation for the next 50 years. As part of its National Entrepreneurship Agenda, the UAE aims to become home to 20 unicorns — start-ups valued at more than $1 billion — in the next decade, increase the number of SMEs in the country and enhance the contribution of this sector to the GDP.
With more than 350,000 businesses, SMEs currently represent over 94 per cent of all companies operating in the UAE, employing over 86 per cent of the labour force in the private sector and contributing over 60 per cent of GDP.
A major push towards driving the UAE’s start-up ecosystem comes from the nation’s over 45 free zones offering cost-effective business incorporation packages along with various incentives, infrastructural support and benefits that help entrepreneurs scale and grow their businesses.
“Free zones promote the UAE as a favourable business hub with a host of incentives to attract local and foreign investments. Their business-friendly rules and legislations provide flexibility and ease of accessibility for new entrepreneurs and experienced investors alike,” says Salim Omar Salim, Director of Sharjah Publishing City (SPC) Free Zone.
Free zones promote the UAE as a favourable business hub with a host of incentives to attract local and foreign investments. Their business-friendly rules and legislations provide flexibility and ease of accessibility for new entrepreneurs and experienced investors alike.
– Salim Omar Salim, Director of Sharjah Publishing City (SPC) Free Zone
SPC Free Zone provides a supportive platform to entrepreneurs looking to venture in the post-pandemic market with their new and innovative ideas. “We issue trade licences in just two hours, offer various business packages as well as exceptional concierge services to help entrepreneurs and investors thrive,” Salim adds.
Driver of business success
As an innovative free zone, IFZA has attracted a significant number of international investors to Dubai, contributing to its economic prosperity, while developing its business landscape and driving future economic growth.
“By fostering innovation and entrepreneurship, we attract job creators and contribute to cultivating a greater talent pool that greatly benefits Dubai,” says Jochen Knecht, CEO, IFZA.
IFZA has taken various initiatives to meet the needs of entrepreneurs and facilitate growth in their businesses.
By fostering innovation and entrepreneurship, we attract job creators and contribute to cultivating a greater talent pool that greatly benefits Dubai.
– Jochen Knecht, CEO, IFZA
“Our hybrid processes allow entrepreneurs the ease of completing their company formation while at their home countries. After company formation, the IFZA ecosystem also provides a wider range of products and services that would help them set up their operations at the IFZA Business Park quicker. These include property and warehouse solutions, office fitout, vehicle rental, health insurance, and many more,” says Knecht.
Uptick in company formation
While the pandemic has caused upheaval across every industry imaginable, forcing organisations to reassess their growth opportunities in the new normal, many free zones in the UAE have experienced increases in entrepreneurial activity, registering a rise in new business applications.
The number of registered companies at Ajman Free Zone (AFZ) grew to reach 1,792 in 2021, posting a 4 per cent increase compared to 2020. “We managed to perform strongly despite difficult market conditions due to the sustained confidence of foreign investors and companies in us,” says Eng. Ali Al Suwaidi, Director General, Ajman Free Zone.
AFZ is maintaining its relationship with the embassies, business councils and international business set-up advisors to grow the market and attract foreign investments as part of its effort to establish a competitive business hub and destination.
– Eng. Ali Al Suwaidi, Director General, Ajman Free Zone
“This is apart from our pre-pandemic efforts to strengthen and enhance our integrated business ecosystem, tech-driven infrastructure, packages of cost-effective business solutions and facilities, incentives, sustainability commitment, flexible legislation, and many more. Being responsive to market demand and maintaining our relationships with business partners also led to growth and attracting the supply chain to AFZ,” Al Suwaidi adds.
India, Pakistan, and China account for the largest share of investments at AFZ, followed by the UK, Russia, Ukraine, Egypt, Jordan, and Syria. “AFZ is maintaining its relationship with the embassies, business councils and international business set-up advisors to grow the market and attract foreign investments as part of its effort to establish a competitive business hub and destination.”
Innovating to stay ahead of the curve
Apart from offering a supportive environment that has been conducive for start-ups to flourish and grow, free zones have worked on all fronts during the pandemic to drive the nation’s agenda to promote entrepreneurship. They introduced several measures to help their existing clients cushion the blow and prospective entrepreneurs seize new opportunities.
These came in the form of simplified business set-up processes, discounted company incorporation packages, subsidised rates for value added services, mentoring services, targeted events and networking opportunities, and support in technology adoption and digital transformation. These measures helped new firms overcome several entry barriers into the UAE’s dynamic business landscape.
Adapting to the fourth industrial revolution (4IR) trends, technology has become a critical component of free zone operations. They have begun to leverage digital technology, data security and cloud systems to enhance customer engagement, automate processes, streamline operations as well as to stay agile and flexible in the changing business environment.
“At Meydan Free Zone, we share the UAE’s vision of a digital future. As the only 24/7 digital free zone, we offer a completely paperless environment. All payments, applications and documents are submitted via our virtual portal,” says a spokesperson from Meydan Free Zone.
“We’ve also modernised the corporate banking process. Instead of making new customers wait to manually open an account, our Meydan Pay service offers an instant and guaranteed IBAN – so customers can start transacting right away.
“In line with the UAE Digital Government Strategy 2025, Meydan Free Zone is committed to giving businesses the tools and technology they need to thrive in the digital age — now and in the future. With a focus on fintech and other innovative technology businesses, we aim to bring 2,500 new businesses on board in 2022,” the spokesperson adds.
Sharjah Media City (Shams), which acts as a catalyst for creative and media businesses, has always remained proactive by utilising the latest virtual and digital technology to manage its business, communicate with customers, and provide access to its services, with 99 per cent of its offerings being available on digital platforms.
“Pre-pandemic, we had utilised electronic platforms for virtual communication between employees and departments and for managing meetings. This put us at a high degree of readiness to run our operations smoothly during the lockdown,” says Dr Khalid Omar Al Midfa, Chairman, Sharjah Media City — Shams.
With a country-specific focus, we can see that the UAE has strengthened its presence with more opportunities – a sign of the economy’s flexibility and resilience.
– Dr Khalid Omar Al Midfa, Chairman, Sharjah Media City — Shams
“Shams achieved a 67 per cent growth in its number of registered companies in 2020. This proves that our preparedness was instrumental in enabling us to expand our business.”
Meanwhile, the UAE has introduced several initiatives in the past 18 months to replace hurdles to start-up growth with incentives that facilitate success. This includes a three-stage comprehensive programme, Skill up, Start up and Scale up, designed to help the nation consolidate its position as a global hub for entrepreneurs and SMEs.
While the Skill up scheme begins in schools, providing basic training in entrepreneurship, Start up is training and support for early stage investors, while Scale up is aimed at targeting growth stage companies with funding and expertise in expanding their operations within and outside the UAE.
“With a country-specific focus, we can see that the UAE has strengthened its presence with more opportunities – a sign of the economy’s flexibility and resilience. These attributes facilitate entrepreneurial activity, whether new start-ups or the expansion of existing businesses,” says Al Midfa.
Shams has recently launched a business centre to strengthen Sharjah’s entrepreneurial ecosystem. “The Shams Business Centre is the core of our community and is our first step in further developing the free zone, which lies on a two million square metre space,” says Al Midfa. “This will soon become an integrated base that will create opportunities and transform the innovative ideas of entrepreneurs into viable projects, contributing to the UAE’s media community.”
Sectors in focus
Start-ups, using innovative, emerging tech to make life easier, have seen robust growth in the past few years, driven by the UAE’s targeted measures to boost technology entrepreneurship.
Dubai has recently launched the Dubai Future District Fund, with an initial investment of Dh1 billion. The move is part of the Dubai Future District’s (DFD) ongoing efforts to support start-ups in the field of technology and encourage them to list in the Dubai Financial Markets and stock exchange.
While the pandemic-induced restrictions and increased adoption of digital technology have encouraged many entrepreneurs to start businesses in fintech, remote diagnostics, virtual fitness, cybersecurity, drone technology and delivery services, plenty of opportunity remains in traditional economic sectors, such as construction, logistics, energy, tourism and retail, as the world returns to normal and organisations look ahead to position themselves better than they were before the health crisis, say leaders of the UAE’s top free zones.
SUPPORTING START-UPS AND SMES
Ajman Free Zone implements policies and strategies designed to support SMEs and start-ups. Eng. Ali Al Suwaidi, Director General, Ajman Free Zone, says, “Our offerings include customised products and licences to suit client businesses, and our value-added AFZ+ is another competitive edge of the free zone. Under AFZ+, our more than 50 strategic partners deliver immense growth opportunities to SMEs and entrepreneurs. Licensed companies and SMEs accounted for a combined 51 per cent of our total procurement of goods and services in 2021. Our procurement policy forms part of our support to them.”