Special Economic Zones in the OIC Region:
Learning from Experience
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EPZ which has contributed to national diversification away from sugar exports to the clothing
and services sector.
A further, associated benefit of SEZs is the transfer of knowledge and innovative processes from
inward investors into the wider economy. SEZs are often targeted towards investors that can
not only viably establish operations in a country but which also have the potential to transfer
new business and industrial processes into the economy, as well as more efficient business
operations and behaviours. This can occur ‘naturally’ through the procurement of inputs via
local supply chains and enhanced local competition, or proactively via complementary policies
and obligations that require the incoming investor to actively share knowledge and business
practice.
Box 2 - United Arab Emirates – SEZ Programmes and Economic Diversification10
2.6.3 Employment Creation and Skills Upgrade
A large number of SEZs have been implemented in areas of depressed economic growth and high
unemployment to stimulate significant job creation, reduce poverty rates and increase living
standards. The creation of SEZs can also facilitate human capital development, reduce social
problems, generate government revenue streams (from income taxation), reduce government
expenditure on unemployment benefits and provide markets for domestically produced goods
and services.
10 Shayah, M and Qifeng, Y (2015) Development of Free Zones in United Arab Emirates.
Economic diversification has been a primary aim of the establishment of Free Trade Zones within
the UAE and of the UAE’s Vision 2021 strategy. In the first instance, a number of FTZs were
established in the 1980s to 1990s, the most prominent example being the Jebel Ali Free Zone in
Dubai and competitive re-exporting activities quickly established themselves within the zones,
outside of the domestic controls and regulations stipulated by the traditional ‘Kafala’
(sponsorship) system.
It is now estimated that free zone trade accounts for a third of the UAE’s non-oil economy and
approximately 80% of non-oil exports. These zones have been extremely successful in stimulating
non-oil trade and investment within the emirates. Particular examples include the establishment
of the Dubai International Financial Centre, which has been crucial in increasing non-oil exports
and services within the Emirate within a sharia-compliant financial sector. Similarly Abu Dhabi
established the TwoFour 54 zone to drive investment and activity within the Emirates’ Arabic
media and entertainment industry.
It is recorded that the UAE now accommodates a total of 47 free zones with a focus on a broad
range of sectors including trade, clean energy, industry, ICT, media, finance, gold and metals and
health care.