Dubai expands membership of the Free Zones Council

The government of Dubai has restructured the Dubai Free Zones Council (DFZC) via a new Decree No. 48 of 2021, which was approved by Prime Minister of the UAE and Ruler of Dubai Sheikh Mohammed bin Rashid Al Maktoum on 6 December and will take effect on 1 January 2022. The move is to recognise the increased importance of the free zones in general and certain free zones in particular.

Free zones have been a key factor in transforming the UAE into one of the most favourable business destinations worldwide in recent years. It is now home to 45 such destinations, the highest in the world, with 10 more under construction. As of February this year, more than 60,600 companies were registered in these free zones, accounting for 8% of the total number of companies registered in the UAE.

Free zones have prospered because they have made it so easy for foreign investors to establish a base in the UAE – 100% foreign ownership, more relaxed regulations on foreign employees and exemption from taxes and other fees such as custom duties. They also allow companies up to 100% capital and profit repatriation.

By attracting businesses and investors, the free zones have brought more job opportunities, competitive salaries, a solid knowledge base and an overall level of excellence that have greatly assisted with the UAE’s diversification strategy and economic growth plans. Many free zones cater to specialised sectors including trade, industry, energy and renewable energy, media and communications, metals and commodities, finance, healthcare and IT, which have now grown to become the prominent contributors to the UAE’s private sector growth.

The UAE’s first free zone – the Jebel Ali Free Zone Authority (JAFZA) – is now one of the largest in the world, catering to over 7,500 companies, generating 150,000 jobs, and accounting for over a quarter of Dubai’s GDP. Dubai has become a free zone hub, with 30 such facilities including giants like JAFZA and the Dubai Multi Commodities Centre (DMCC). One of the largest and the fastest growing free zones in the UAE, the DMCC boasts over 7,330 active registrations, more than 200 applications per month and a 94% retention rate.

The free zones have also proved extremely robust during the Covid-19 pandemic. The Dubai Airport Free Zone (DAFZA), for instance, reached more than AED119 billion (USD32.3 billion) in 2020, contributing 10% to Dubai’s non-oil foreign trade overall and 25% to its total free zone trade. And while the UAE undertook large-scale measures to assist the private sector during the pandemic, not least by easing visa and foreign ownership restrictions, the free zones continued to attract businesses by lowering fees and introducing bespoke packages.

The Umm Al Quwain Free Trade Zone (UAQ FTZ), for instance, introduced business LYTE packages — with an exclusive up-to 50% government subsidy on set-up cost and over 1,500 business options through tailored start-up plans — to create a low-risk launch-pad for international businesses during a challenging economic period. It also provided additional months of licence validity for existing companies and increased the visa quota for all new and existing businesses.

The free zones have also assisted UAE government with political and diplomatic objectives, not least in supporting the agreement to normalise relations with Israel. The Dubai Diamond Exchange the Israel Diamond Exchange, which is part of DMCC, signed an agreement to enhance cooperation in the diamond trade, while JAFZA and DAFZA signed MoUs with the Federation of Israeli Chambers of Commerce in late September to support Israeli companies intending to establish businesses in Dubai.

The DFZC aims to drive the development of free zones in Dubai to attract investments and create an enabling environment for boosting diverse areas of the national economy, such as industry, trade, tourism and services. It also seeks to enhance collaboration between the free zones, building synergies based on the exchange of knowledge and best practices. The council’s efforts support the Dubai government’s strategic plans and contribute to establishing the emirate as a leading global investment destination.

Decree No. 48 is intended to update the constitution of the DFZC to stipulate that it must include in its membership: the Secretary General of the Free Zones Council, the President of the Ports, Customs and Free Zone Corporation, the Director General of Dubai Municipality, the Director General of the State Security Agency, the Director General of the Department of Economy and Tourism, the Director General of the Dubai Chamber of Commerce and Industry, the Governor of the Dubai International Financial Centre (DIFC), the Director General of the Dubai Development Authority, the Director General of the Dubai World Trade Centre (DWTC) Authority, and the chief executive of the Dubai Authority for Integrated Economic Zones.

According to the Decree, the council must also include in its membership: the CEO of the Dubai Aviation City Corporation, (DACC), the CEO of the Dubai Multi Commodities Centre (DMCC), the CEO of the Meydan City Corporation, the Vice Chairman of the Board of Directors of the International City for Humanitarian Services Authority and the Executive Director of the Dubai Healthcare City Authority.

This Decree annuls Decree No. 23 of 2015 relating to the formation of the Board of the DFZC, and Decrees No. 30 of 2015, No. 25 of 2018 and No. 11 of 2020 which served to add members to the DFZC Board.

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