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Freezone free-for-all. Making sense of the competitive landscape.

For international companies and entrepreneurs, choosing the right business license and jurisdiction in the GCC can be a confusing process. The free-zone model, initially developed in Dubai, has spread across the UAE and wider region creating a raft of choices for new entrants. So what are the key things to consider to help make the right decision?

The two most fundamental questions are; what type of business are you and what are your long-term objectives? Are you looking to build a significant regional footprint or have a simple low-overhead offshore legal presence? If you are a product-based business with logistics and cross-border trade as core elements, then the physical location of your license becomes critical. For service-based companies physical location can be less important- although sectors with high levels of regulation such as finance and legal will be more limited to zones like Dubai's DIFC and Abu Dhabi Capital Markets, especially if direct sales and management are involved.

For start-ups and entrepreneurs looking for a simple offshore corporate presence and cost-effective office space the UAE offers a multitude of choices including the lesser known emirates such as Fujairah and Ras Al Khaimah. To drive down costs many of these will offer a virtual office or hot desk option that removes the need for physical office space*.

If your business trades in high-value or perishable goods that require airfreight, The proliferation of Airport free zones has generated significant choices. Dubai World Central (DWC), the huge new airport built on the edge of city, has seen strong growth in logistic focused tenants, attracted by the relatively un-congested environment and dedicated "logistic corridors" that connect with the Jebel Ali Freezone. Dubai International, the older and busier sister, has built a reputation around the precious metals and stones trades, with an ecosystem to support it within the free zone. Abu Dhabi has recently launched an airports free zone company that also encompasses Al Ain and Al Bateen Executive Airport, whilst Sharjah, to the north of Dubai also offers similar licensing and facilities.

For companies built around sea and land-based logistics and local production, the location, accessibility and clearance processes are among the chief concerns. The daddy of GCC free zones is Jebel Ali (JAFZA). Established in 1985, JAFZA has become a key element of the Dubai economy and has expanded much beyond its original boundaries. Its well established infrastructure and connections generate sustained demand and relatively high property prices. 50km or so down the road is the much younger Khalifa Industrial Zone Abu Dhabi (KIZAD), which offers a massive deepwater port and open land or pre-built premises at a considerable discount to JAFZA and greater . To the east, Oman has been focusing on its geographical advantages and has established a new economic zone at Duqm on the east coast complete with port and airport. This is in addition to the well-established free zone and port at Sohar on the northern Gulf of Oman.

Service companies that need to recruit a significant headcount including highly-qualified staff will be well advised to look at free zones from a public transport perspective. It can be tempting to be driven by low setup and office rental costs, but choosing a location that creates long and demanding commutes will inevitably make recruiting much more challenging and increase costs to the business in the long run. On this basis, Dubai is clearly the best option with efficient mass transport systems including the metro, busses and well-priced taxis. A number of free zones have existing stops on the metro including Media City, Internet City, DMCC and DIFC. Other cities mentioned in this post have less well developed infrastructure in this respect which should be taken into account.

Essentially, there is a free zone to suit your model in the GCC. Having a clear idea of what your desired outcomes are will go along way to asking the right questions and narrowing down the options quickly. In our experience, businesses that only focus on cost at the front-end to the detriment of other important factors often end up in locations that are not optimal for their business. Decisions should be taken in the round.

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