Abu Dhabi's industry sector maintains goal for industry-specific free zones

Many of Abu Dhabi’s light and heavy industrial businesses are located in its specialised economic zones (SEZs), which have proven popular because of the range of attractive benefits they offer. Although the benefits may vary from zone to zone, in general they include the possibility of 100% foreign ownership, something not currently possible elsewhere in the country; the UAE currently limits foreign entities to a 49% stake in most areas outside the zones, although this may change with the passing of a new federal investment law in 2017.

Zone Benefits

Corporate taxes may be waived for specific time periods, along with import taxes. In addition, there are no income taxes, and 100% repatriation of profits and capital is allowed. There is also a one-stop shop approach to permits, Customs and excise, visas and a host of other important administrative requirements. These are usually fast-tracked, with recruitment processes for locals and foreigners alike simplified and speeded up. SEZ-based companies benefit from attractive long-term leasing rates, and many have tailored residential complexes on-site or nearby for imported labour, cutting travel times and maximising work hours. Additionally, all the zones are located close to supporting infrastructure, such as ports, airports and highways, which makes exporting easy. The zones also benefit from strong government support. They are integral to the emirate’s industrial development strategy, as they encourage foreign direct investment and provide the business diversity the economy requires for long-term growth. Indeed, Abu Dhabi Economic Vision 2030 refers to the zones as “the primary tools to encourage foreign investment in Abu Dhabi”. They also provide expertise and services to the main industrial, financial and commercial sectors. The largest group of industrial zones is run by the government entity Higher Corporation for Specialised Economic Zones (ZonesCorp). In the decade after its launch in 2004, businesses located in ZonesCorp areas grew to represent half the emirate’s manufacturing GDP. The organisation also invested over $1bn in infrastructure and $3bn in workers’ residential cities in its first 10 years of operations.

Industry Specific

Currently, ZonesCorp operates two industry-dedicated sites – Al Ain Industrial City (AAIC), close to the city of Al Ain, and the Industrial City of Abu Dhabi (ICAD) on the outskirts of the capital. AAIC encompasses some 10 sq km, with plots designed for use by both light and heavy industry. Light manufacturing outfits work in subsectors, such as paper and wood, textiles, and small-scale service and repair shops. The heavy industry projects include chemicals, plastics and construction materials. These are grouped within clusters of related businesses on-site, all with access to well-developed infrastructure. This includes efficient and competitively priced utilities, highways and residential complexes. Workers’ residential cities are located within a 10-15 minute drive of AAIC, with these including a broad range of facilities for the benefit of employees working at the city.

At ICAD, meanwhile, the total area covers 40 sq km. Again, there is a mix of light and heavy industries on-site, also grouped into clusters. ICAD features engineering and metals, chemicals and plastics, oil and gas services companies, general industries, high-tech industries and outfits producing construction materials. The site provides well-developed infrastructure, while offering quick access to a range of transport and logistics centres. Within a short drive are both Mussafah Port and Abu Dhabi International Airport. Indeed, both ICAD and AAIC are within an hour’s drive of four international seaports and have easy connections to two international airports – Dubai International Airport being within a two-hour drive. In terms of the regional market access, AAIC is close to the border with Oman, while ICAD is located some 330 km from Saudi Arabia.

ZonesCorp is also expanding through its development of RAHAYEL, an integrated automotive hub, which aims to provide a base for auto manufacturers, distributors and service providers. Located 12 km from Abu Dhabi Island and covering an area of 12.3 sq km, the site will comprise 1800 plots and contain auction houses, showrooms, service centres and warehousing units, along with vehicle-assembly units and automotive-related light industries. Construction on the first phase, worth a total of Dh1.6bn ($435.6m), began in early 2017 and is likely to be finalised by the end of the year.

Kizad

ZonesCorp is not the only industrial zone player in Abu Dhabi. In 2010 Khalifa Industrial Zone Abu Dhabi (KIZAD) opened its doors. KIZAD is almost equidistant between Abu Dhabi and Dubai, and is adjacent to Khalifa Port. Abu Dhabi, Al Maktoum and Dubai airports are also within 85 km of the site, connected by a network of highways. KIZAD was developed by Abu Dhabi Ports, which operates all the emirate’s commercial, leisure and community port facilities. The site covers approximately 417 sq km, divided into a range of clusters. These include the aluminium cluster, where anchor heavy industrial tenant Emirates Global Aluminium is located; a base metals cluster; engineering and glass; food products and processing; logistics; metal and paper products; metal products; midstream aluminium industries; and mixed-use industries. Also on site are an office and support services cluster, and a port services cluster. “The benefits of being located at KIZAD are enormous,” Fady Antonios, CEO at the National Food Products Company, told OBG. “There is no place in the UAE where you can get hundreds of thousands of sq metres of prime industrial real estate at the prices offered and with such competitive services. This is backed up by support infrastructure like roads and rail, as well as the proximity to Khalifa Port.”

Integrated Industries

The philosophy of the industrial city is to create a vertically integrated system, in which heavy industries produce basic building blocks for midstream industries to fashion into products that downstream industries then use, all within a single site. Aluminium is the most prevalent example at KIZAD: the smelter produces the raw product, which eventually leaves the zone as a manufactured component in anything from vehicle accessories to machine parts. Molten liquid aluminium can be supplied directly to midstream customers, via KIZAD’s Hot Metal Road, saving the need for re-melting ingots – a major advantage for midstream firms. At the end of March 2017 Abu Dhabi Ports announced that the newly launched Khalifa Port Free Trade Zone (Khalifa Port FTZ), located in KIZAD, would undergo expansion to meet rising demand from foreign and local investors. At present, 40 companies operate in the zone in a variety of sectors, such as industry, trade and services. In addition to tax and leasing benefits, companies in Khalifa Port FTZ enjoy connectivity across multiple transport modes, such as roads, ports and air. Encompassing an area of 100 sq km, the zone is split into two areas. Area A houses a business park and Area B accommodates heavy, light and logistics industries, and residential and mixed-use developments. Abu Dhabi International Airport also possesses a free-zone complex, run by Abu Dhabi Airport Business City, a subsidiary of the Abu Dhabi Airport Company (ADAC). The 11-sq-km area includes five commercial districts: a logistics park, a business park, the Al Falah Free Zone, Airport City and Destination Village. The development forms part of a long-term plan to develop an Aerotropolis around the airport, integrating the current district with other local projects and creating one large-scale free zone.

Mubadala is the largest state-owned operator in the aerospace industry. The subsector is set to benefit from its own industrial zone – the 25-sq-km Nibras Al Ain Aerospace Park – currently being developed by Mubadala and ADAC. The park will host a range of maintenance, repair and overhaul businesses, along with original equipment manufacturers, an aviation college and a range of ancillary aerospace companies on site, with several already in occupation, including Strata, the emirate’s primary aerostructures manufacturer.

Abu Dhabi has also developed a private sector-led industrial real estate venture 25 km south of Abu Dhabi City called Al Markaz. Owned by Waha Capital, it has 90,000 sq metres of leasable space on a 6-sq-km site.

Clean Energy

Meanwhile, Masdar City operates at the high-tech end of special zones. This project focuses on renewable energy, with tenants generally related to renewable energy technologies, such as Siemens and the formerly titled Master Institute of Science and Technology, which now falls under the Khalifa University umbrella. As a result, Abu Dhabi is able to offer foreign investors a full suite of options when it comes to SEZs. In addition to those of interest to manufacturing and industry, there is also a financial free zone in Abu Dhabi Global Market and a media free zone at twofour54.

Free zones are, of course, a competitive business, as the region is home to a great many. Being able to provide additional value added and good customer relations are therefore vital for Abu Dhabi’s zones. At the same time, price competitiveness and access to the very best transport and logistics infrastructure are also prerequisites for success. Currently, Abu Dhabi’s free zones tick many of the right boxes for investors, however, with a busy period ahead now looking assured.