Free zones are prospering as the government aims to boost the profile of the Jebel Ali Free Zone (Jafza) and the Khalifa Industrial Zone Abu Dhabi (Kizad), in a bid to add logistics to the country’s areas of comparative advantage.
Free zone trade in the UAE increased by 7 per cent in the first six months of 2014, to Dh269.6 billion, up from Dh250.9 bn in the first half of 2013, data from the Federal Customs Authority (FCA) showed.
Mobile phones topped the list of goods imported by the free zones in the first half of last year. They accounted for Dh31.2bn or 21 per cent of total imports. Cigarettes were the number one non-oil export, valued at Dh2.2bn or 19 per cent of the total exports from the free zones in the same period.
“Free zone trade has witnessed increasing growth in recent years, as a result of the flexible trade policy of the UAE, and the facilities provided by the country to attract major companies to establish factories,” the FCA said.
In a sign of the opportunities to be had in logistics, DP World agreed to purchase Economic Zones World (EZW), which includes Jafza, for US$2.6bn in November.
DP World cited EZW’s “recurring revenues, healthy margins and strong cash generation”, as well as the potential to build “the leading integrated port hub in the Middle East” by connecting Jafza and Jebel Ali Port to the Al Maktoum Airport and the Dubai logistics corridor.
Jafza added 363 new companies to the free zone in the first half of last year, taking occupancy above 90 per cent.
The free zone has also benefited from the Arabian Gulf’s infrastructure boom, with steel output at on-site factories growing by 20 per cent in 2013, the most recent year for which data was available.
Jafza, the authority that runs the Jebel Ali zone, hosted delegations from Japan and China earlier this year as it sought to improve ties with its major Asian trading partners.
In October, the Jafza deputy chief executive Ibrahim Mohamed Aljanahi attended business seminars in Hokkaido, Tokyo and Osaka.
Jafza estimates that its trade with Japan totalled $2.7bn last year. Despite previous analyst warnings that Jafza might divert business away from its cousin in Abu Dhabi, it seems that there is more than enough trade growth for both facilities.
In October, Kizad said that the first phase of Kizad Logistics Hub had been entirely leased out, with the second phase due to come onto the market early this year.
In the past year, Kizad has welcomed a Dh660 million investment from Brasil Foods (BRF), owner of the Sadia frozen food brand, to establish a manufacturing plant in the free zone. This facility is set to create 1,400 new jobs and will produce 70,000 tonnes of frozen food a year when at peak capacity.
“Kizad was the best location for us, because it has all the stages of production in the same place: labour, our suppliers, and our ingredients,” said Patricio Rohner, the director of the Middle East and Africa at BRF. “It’s a good logistics hub for the region, and it allows us to have our research and development in the region. It will be a very good place for exports.”
BRF currently has a 40 per cent share of the Gulf’s frozen food industry.
In September, Life Pharma announced that it would open a Dh587m anti-cancer drug facility at Kizad, while Ducab Aluminium last month began construction on its Dh220m rod and conductor manufacturing facility in the free zone.
“The geographical location of the UAE [makes] it a commercial hub linking the East and West and [contributes] to facilitating … international trade and the [movement of] capital for the establishment of major investment projects,” the FCA said.
abouyamourn@thenational.ae
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