UAE Free Zone

Introduction
United Arab Emirates is built on a trading history, and business has always been at the centre
of the entire region for many years. The region enjoys abundant benefits and opportunities
meant for a contemporary age when it comes to commercial matters. Even though it is
scarcely populated apart from having most of its area being very dry, the region boasts of a
perfect business positioning that enables it to collaborate easily with financial markets in
various parts of the world. UAE has significant oil deposits and is among the top global
leaders in the production of oil in the world today.
According to recent government reports, the oil reserves in the region are about 98 billion
barrels. Abu Dhabi claims the largest portion of this amount with about 92 billion barrels.
The remaining percentage is shared among the other emirates, with Dubai and Sharjah taking
considerable portions. More importantly, the region harbors Dubai city which has been a
major attraction of foreign investment at a period of heightening economic development. As a
matter of fact, these expansive opportunities have made the region an ideal hub for modern
day commercial activities.
Dubai city is a unique destination that offers dynamic business opportunities for both local
and foreign investors, thus connecting UAE with the rest of the world (Strong and Robert
38). Apart from offering vast business opportunities, Dubai boasts of a variety of other
aspects that provide more attractions to people from other regions of the world. Some of these
attractions would include sports events, tourism, and innovative construction projects that
manifest all sorts of architectural magic. However, no matter the many resources within the
UAE region in addition to the advantage of being in a strategic point, the region is lacking in
an expansive economy that can fully utilize these opportunities. In order to address this need,
governments in the region have embarked in the idea of establishing free zones all over the
entire UAE. These are geographically placed business establishments within which business
organizations operate under special conditions.
Objectives of the study
This study analyses the idea of Free Zones as it applies in the UAE and other regions of the
world. These zones are meant to draw investors from foreign countries to help in building the
economic power of a certain country or region. The study will also examine the current
scenario of free zones in United Arab Emirates with the aim of showing how these
establishments have helped to promote economic activities in the region. More importantly,
the study also focuses on some of the common challenges associated with free zones in the
UAE. Finally, the study provides a personal opinion about the possible solutions to some of
those problems.
Current scenario in general
The idea of free zones comes with immense economic benefits to countries intending to
reduce barriers to economic success and excellence, through effective investment policies.
The establishments promote economic freedom through fair and specialized trading, among
other aspects that are significant in enhancing business success. As a matter of fact, free
zones offer an alternative avenue through which foreign investors can become free citizens of
the countries they are intending to invest in. Free zones are based on real experiences, and are
intended to bring together entrepreneurs having similar business intentions or aspirations.
This way, the establishments offer more independence and flexibility to players in today’s
dynamic business world. Normally, a free zone authority gives business licenses to
organizations that are owned by foreign investors. Each free zone is build around businesses
belonging to the same industry category, and in that case, it provides licenses and other
relevant business permits to organizations within those classifications. Free zones are
established in regions possessing vast geographic advantages and promising opportunities for
commercial activities. National frontiers and other entry points to a country are some of the
common areas that would provide suitable platforms for these economic establishments. One
notable aspect of free zones is that they are exempted from certain taxations, and for that
reason, businesses within the zones have the freedom of operating without the worry of being
interrupted by custom authorities. This special exemption from certain customs provides
businesses within free zones with the freedom needed to increase their efficiency in the
manner by which they carry out business operations in the global market.
Comparison of Two Free Zones
1. Sharjah Shams Free Zone
Sharjah Media City AKA Shams is located in the emirate of Sharjah, a cultural capital of the
UAE. It gives foreign investors a safe and progressive environment for company formation in
UAE along with special benefits to creative businesses which include,
• Big list of available activities under Trading, Service and Industrial licenses
• No physical presence in the UAE is required to incorporate your company
• No paid up share capital

• Flexible visa solutions
• Allocation of up to 6 visas on a shared desk facility
2. Ajman Free Zone
Opened in 1996, Ajman Free Zone Authority or AFZA is an accelerating free zone in Ajman
of the UAE. It is also the most affordable zone for startups to initiate their operations in the
proximity of Dubai.
• Accessible from Dubai through the E311 highway
• Trading companies can store goods in Warehouses available for duty-free storage
• Sell goods in UAE through a local trader.
• Eligible to open a bank account in Dubai
Challenges associated with free zones
Free zones experience many challenges in the course of their establishment and operation.
One of the biggest problems facing these establishments in the UAE is the heightening
competition in the market. Even though free zones operate under a particular industry or
business category, organizations within these establishments usually face great challenges
from competitors who are fighting for equal opportunities and position in the market. There is
also the challenge of strict operating conditions of free zones in the UAE.
The idea of exempting free zones from customs is said to have encouraged unethical business
practices such as smuggling of goods, customs fraud, and money laundering, among other
vices (Wong and Bo-sin 312). In order to take full control of such vices, the UAE
government has responded by enforcing strict operating conditions for the free zones.
Another common problem with the Free Zones in the UAE is the law of restraint which limits
investors in a particular free zone within the operations of that zone. This would have the
meaning that investors contained in free zones can only operate within the zones in which
they are established, and therefore cannot expand their business operations to reach other
external markets within or even outside the region. Another common problem with free zones
is that people cannot put up any type of business in the zones because they are only meant for
businesses falling within a particular industry. Cultural problems also form part of the many
challenges facing free zones in the UAE, thus limiting their success and development.
Conclusion
As it is shown in this report, free zones play a significant role in promoting economic bases
of countries. The use of free zones for the purpose of enhancing international trade has
become increasingly common in the modern world. There is no doubt that free zones come
with immense benefits to businesses, and for that reason, their contribution to the global
economy can never be overestimated. As it is shown in this paper, UAE is one of those
regions that have benefitted a lot from the use of free zones as attractions for foreign
investments that will play a crucial role in shaping its business operations. Moreover, free
zones create avenues that foreign investors can use to gain access of a country’s economic
ground without having to undergo various registration procedures. This must explain the
reason why free zones are associated with rapid growth of businesses in all the places where
they have been applied. As a matter of fact, the benefits of free zones far outweigh the
disadvantages, and for that reason, the idea of free zones is what developing countries should
embrace in their plans of building strong economies.

UAE Free Zone

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Introduction

Objectives of the study

Comparison of Two Free Zones

1. Sharjah Shams Free Zone

UAE along with special benefits to creative businesses which include,

• No physical presence in the UAE is required to incorporate your company

• No paid up share capital

• Allocation of up to 6 visas on a shared desk facility

2. Ajman Free Zone

• Accessible from Dubai through the E311 highway

• Sell goods in UAE through a local trader.

• Eligible to open a bank account in Dubai

Challenges associated with free zones

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