The Dubai Airport Free Zone is now home to 1,800 companies. Image courtesy of Dafza
The Dubai Airport Free Zone is now home to 1,800 companies. Image courtesy of Dafza
The Dubai Airport Free Zone is now home to 1,800 companies. Image courtesy of Dafza
The Dubai Airport Free Zone is now home to 1,800 companies. Image courtesy of Dafza

Economy

Dubai Airport Free Zone reports jump in number of new companies

A quarter of trade generated through Dafza in the first nine months of 2020 was with Chinese entities

The National

March 21, 2021

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The Dubai Airport Free Zone Authority said it experienced a 64 per cent increase in companies registered with it in the first nine months of last year.

The free zone generated Dh87.4 billion of trade, or 10 per cent of the emirate's total, during the period.

Despite the challenges presented by the coronavirus, Dubai "maintained its role and position as a global economic and trade hub", Sheikh Ahmed bin Saeed Al Maktoum, Dafza chairman, said in a statement on Sunday.

“The results achieved by Dafza and its business community during 2020, the investors’ confidence and other various indicators give a positive outlook on the short and long term for economic recovery in the country," Sheikh Ahmed added.

Supply chains across the Middle East and Africa were upended last year as a result of the pandemic, with 96 per cent of companies in the region stating in a survey by ports operator DP World last week they were reconfiguring their supply chains.

Dafza's position next to Dubai International Airport allowed it to grow its customer base and increase sales by 7.6 per cent, the authority said without giving a revenue figure.

The free zone is now home to 1,800 companies including Airbus, Boeing, Panasonic, Richemont and Toyota.

"This year, we will also continue to enhance incentives to attract new companies, especially small and medium-sized companies," Dafza's director general Mohammed Al Zarooni said. It is looking to diversify its tenant mix in terms of sectors, targeting more technology, logistics, medical equipment and pharmaceuticals businesses, Mr Al Zarooni added.

The bulk (75.8 per cent) of exports and re-exports from the free zone during the period was made up of machinery, TVs and electronic equipment, Dafza said. Pearls, semi/precious stones and metals made up a further 17.1 per cent.

A quarter of the trade generated from Dafza was with Chinese entities, making the world's second-biggest economy its top trade partner. About 10 per cent, or Dh9bn, was generated through Iraqi partners and 8 per cent with companies from India.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

Economy