Dafza to develop world's first commerce platform for free zones

Dubai Airport Freezone Authority, the economic zone that encompasses Dubai International Airport and the surrounding area, is developing the world’s first commerce platform for free zones that will allow companies from around the globe to connect and trade via Dubai.

The business-to-business platform called Dubai Blink, will utilise artificial intelligence, blockchain technology and virtual business licences, that will transform the global supply chain mechanics, Dafza said in a statement on Sunday carried by the UAE’s official news agency Wam.

The initiative will enable both global companies and small and medium-sized enterprises, to set up digital businesses in Dubai free zones without the need to maintain a physical presence there, it said.

"The Dubai Blink project will be one of the most innovative models for the future of global supply chains and e-commerce across the free zones," said Sheikh Ahmed bin Saeed, the chairman of Dubai Civil Aviation Authority and chief executive of Emirates Group. "It will help boost trade for companies operating in Dubai's free zones, which have chosen the Emirate as a platform for growth and prosperity."

Dubai is pursuing its 10X futuristic agenda, an initiative designed to place the emirate 10 years ahead of time through embracing disruptive innovation. The broader strategy aims to cut bureaucracy and could save millions of man hours by employing AI and blockchain technologies in smart government operations.

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Blink is part of the government’s digitisation plans. Dafza is working closely with stakeholders and has formed a team to share expertise.

“The work that is being done between the free zones and government agencies will help create a new model for smart commerce in the international industry as well an attractive future for foreign investments within the free zones of Dubai," Sheikh Ahmed said.

Dafza, which is home to companies including aviation heavyweights Boeing and Airbus, GE Aviation, Rolls-Royce and Panasonic, is working to boost FDI flows by developing virtual platforms and some of the fast-growing sectors such as the Islamic and halal economies, director general Mohammed Al Zarooni said earlier this month.

Dafza represented 18 per cent of total free zones trade in Dubai in 2016. It is at the forefront of efforts to increase FDI as part of broader measures to boost the contribution of the non-oil sector to the UAE economy to 80 per cent by 2021, from the current 70 per cent, following sluggish economic growth on the back of low oil prices. The UAE recorded $10.3 billion of inward FDI in 2017, up 6.7 per cent from $9.6bn in 2016, according to the Federal Competitiveness and Statistics Authority.

With Blink, Dafza aims to speed up trade in free zones by providing solutions for companies to search for services and products, negotiate and make purchases online via a unified platform using blockchain smart contracts and machine learning. It will also resolve the issue of current lengthy supplier identification and validation processes, it said.

Blink will radically cut cross-border transaction costs and time. It will provide global companies with the opportunity to gain a virtual business licence, which will be known as a cloud-trading licence, enabling them to explore the commercial opportunities and to sample and test the regional market and explore the opportunities provided in Dubai, according to the statement.

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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.”