Special Economic Zones account for 40% of UAE's non-oil exports

A Dubai Chamber report forecasts that in the next few years some 500 new economic zones will be established, representing about 10% of the current total of about 5,400 zones.

The report pointed out that in West Asia and North Africa there are a number of countries that rely heavily on oil and gas exports, where special economic zones contribute about 60% of the net non-oil exports in Morocco and 25% in Egypt, while these regions contribute about 40% In the UAE.

In detail, a recent report by the Dubai Chamber noted the remarkable expansion of the establishment of special economic zones globally, despite the recent slowdown of globalization and global production, noting that the number of special economic zones has risen globally, in defiance of the global trend of slowing trade and production.

According to the report of the United Nations Conference on Trade and Development (UNCTAD) in 2019, the special economic zones began to appear since the 1960s in different names and sizes and continued to increase since then, explaining that the reason for the expansion of special economic zones lies in the spread of development strategies Export-oriented economies adopted at the time, especially in Asia, as well as the steady development of global value-added chains.

He explained that the special economic zones are usually geographically defined areas, where the government facilitates the industrial activity of companies and investors, by providing financial and regulatory incentives and providing supportive infrastructure, pointing out that the incentives provided to the special economic zones are different from those applied in the national or sub-national economy. Diversified free zones are the most prevalent special economic zones, with separate customs boundaries.

According to the UNCTAD report in 2018, special economic zones (SEZs) have been used by more than 140 economies around the world, three-quarters of which are in developing and almost all transitional economies.

In 2018, the number of these areas was about 5,400, compared to 4,500 in 2014, an increase of more than 1,000 in the last five years. The Dubai Chamber report predicted that in the next few years about 500 new zones will be established, which have been announced and are expected to open about 10% of the current total.

The report said that the majority of special economic zones around the world are multi-economic, with areas focused on innovation in the emerging emerging markets in Asia. Developed economies also have scientific complexes but without separate regulatory authorities and therefore do not meet the definition of special economic zones, and are therefore not covered by this distribution.

The report pointed out that the majority of the regions in developed markets are exclusive free zones focused on facilitating logistical support for trade. 91% of special economic zones in developed economies are used as logistical support centers to stimulate industrial development.

He said that the special economic zones, which were established in most African countries, aim to stimulate industrialization and exports, and therefore 89% of these areas in the African continent with multiple economic activities. He pointed out that the specialized areas in the industry, is the most prevalent in the transition economies, where 59% of these areas are specialized and focused on technology.

In general, the expected economic contributions from the development of special economic zones are direct and indirect. Direct contributions include attracting foreign direct investment, creating jobs, generating income, developing and diversifying exports and foreign exchange earnings. Indirect economic benefits include linking suppliers outside the special economic zones and indirect jobs that emerge as a result, as well as stimulating income and jobs created as a result of the wages of workers in the special economic zones that they spend in the surrounding economy.

The combined effect of direct and indirect economic contributions is supposed to result in high and sustained economic growth, in order to properly assess the impact of special economic zones, the report said, pointing out that special economic zones accounted for about 80 percent of FDI accumulations in China.

In Malaysia, about 90% of investments in special economic zones came from foreign investors. In Vietnam, between 60 and 70 percent of all FDI is in SEZs. In Myanmar, 80% of SEZ investors are foreign and 15% are joint ventures with foreign companies. In Bangladesh, foreign investors account for 72% of tenants in eight publicly owned economic zones.

However, the impact of SEZs in attracting foreign direct investment (FDI) in other countries is less successful than in Asian countries, the report said, as these economic zones have failed to attract appreciated investments or have mainly attracted local investors rather than FDI. In Colombia, for example, the establishment of the Free Point project resulted in many local SMEs being granted the status of free zone companies.

Another positive impact of the special economic zones is the development of exports in terms of growth and diversification. In most countries, exports constitute the largest share of the programs of these economic zones, especially industrial exports, pointing out that in Latin America and the Caribbean, Special Economic Zones account for more than 50% of total exports for Costa Rica, Dominican Republic and Nicaragua.

He pointed out that in West Asia and North Africa there are a number of countries that rely heavily on oil and gas exports, special economic zones contribute about 60% of the net non-oil exports in Morocco, 25% in Egypt, and 40% in the UAE.

Export diversification

The Dubai Chamber's report stressed that the special economic zones played a role in diversifying exports in several countries in Central America and the Caribbean, by reducing dependence on exports of vegetables and fruits. In Costa Rica, the share of SEZs in exports of manufactured goods rose from less than 10% in 1990 to 55% in 2003. Meanwhile, SEZs have diversified production from clothing and textiles to electronic components.