The Impact of Free Zones on the Economy of Dubai and the UAE

Dubai's economic position has improved significantly since its transformation from a village surrounded by endless miles of desert to one of the world's greatest business locations for startups, investors, entrepreneurs, and companies. The Emirati government's attempt to build and promote Free Zones in Dubai and other places around the UAE has been a main driver of this transformation. Do you want to learn more about these crucial economic sectors? We have all of the information.

What exactly is a UAE-free zone?

While we have a more extensive description of Free Zones in this page, the basic definition of a Free Zone in the Dubai and Emirati economy is that Free Zones are independent commercial regions that are frequently located near a port or major business hub. Each Free Zone has its own set of laws and regulations distinct from the government rules and regulations that regulate onshore or Mainland enterprises in the UAE.

Each Free Zone in Dubai and the rest of the UAE is overseen by a different Free Zone authority. There are now 45 Free Zones in the UAE, ranging from healthcare at Dubai Health City to commodities trading and technology in prime centres like the DMCC. With the most free trade zones in the country, With the most Free Zones in the country, Dubai's Free Zones provide investors with a plethora of perks, including tax breaks and incentives for corporate costs and infrastructure.

Dubai's Economic Importance of Free Zones

So, now that we've discussed the aim of having Free Zones in the economy, we need to understand why the government developed these places in the first place. The goal of establishing Free Zones was to encourage the UAE's extended economic growth. They attempted to do this by establishing a favorable corporation in each of these unique economic regions. They also provide tremendous incentives for international enterprises to set up shop in the UAE.

The Emirati economy has grown dramatically, with the creation of Free Zones playing a vital role in improving Dubai's and the United Arab Emirates' overall prominence. How does the significance of Dubai's Free Zones affect the broader economy? When it comes to Free Zones, according to 2018 estimates from the Dubai Free Zones Council, Dubai Free Zones accounted for 31.9% of Dubai's gross domestic product (GDP) during the first nine months of that year.

As Dubai and the other emirates sought to expand beyond the conventional oil and hydrocarbon industries, the Free Zones helped to fuel significant non-oil external trade development. Non-oil foreign trade in Dubai increased from 143 billion Dirhams in 2000 to 1.271 billion Dirhams in 2019.While we have yet to see the complete 2020 data, Dubai Customs announced that Dubai trade figures were around 551 billion Dirhams in the first half of 2020, with transactions jumping 24.5% to 11.2 million over the first nine months of 2020. The statistics indicate that the city will be able to recover from the COVID epidemic.

Many of the UAE's commercial centres are located within Free Zones and attract a large number of international investors. These investors provide additional employment possibilities, attractive compensation, a strong knowledge base, and an overall degree of quality to their businesses. With foreigners making up the majority of the population, Dubai is one of the most popular ex-pat destinations because to its strong development rate, safety, and quality of life, with many working in Free Zone firms.