In the Zone

Free zones have become part of the commercial landscape over recent years. What can channel players gain from them and do they match their claims?

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By  Guy Mathew Published  August 8, 2002

Introduction|~||~||~|In the Zone

Free Zones. The phrase suggests ideas of getting money for nothing or being a complete business haven. It is not quite like that in reality, but there is a lot to be gained from locating in or near a free zone that confers specific business advantages on companies that fit the bill. The UAE has taken the development of free zones to new heights and made them an effective tool for spurring the growth and diversification of its economy. But it is not the first country to do so. Trade and development enclaves have a long history, from Calcutta under the East India Company, to what could be called banking free zones in the Cayman islands. But in the Middle East the phenomenon is gaining ground in a number of different forms, especially for the IT community.

There are a number of different approaches to free zones in the region. One of the approaches gaining ground internationally is that of technology parks of the type exemplified by Dubai Internet City (DIC). The customs zones like Jebel Ali are familiar to most people but it is IT-focused developments that are offering new opportunities for the channel.

DIC is well known and respected throughout the region and in the world at large. As its newly appointed CEO, Dr. Omar bin Sulaiman points out to CRN: “The technology that we have in DIC, no one else in the region can provide. Some of the technologies we have, worldwide, there isn’t anything like it. If you take the IP Telephony in Internet City, by Cisco, it’s the largest implementation worldwide.”

This technology is being backed up by an expansion that has seen the opening of more buildings that expand the development considerably. That is as well as the planned Knowledge Village that will occupy an arc of buildings stretching more than one kilometre across a dedicated site within the free zone. The aim of the venture is to provide the training and education required to supply the nearby businesses with staff that have the right skills.

Advanced communication infrastructure is useful but the there have to be other attractions to make multinationals relocate their offices there. As many of the biggest names in the ICT industry have now done so, suggests that other parts of the package have made their mark. Dr. Sulaiman sees the free zone status as critical because it allows companies the freedom to channel capital and profits in and out of the UAE easily.

“If you are an international company and you want to come to this region to do business, to do more and penetrate a new market, then you want a location, a base to start from.
Dubai as a city offers a lot of that as far as logistics is concerned, airports, ports and a good environment for business. Now when you come to develop a new project such as DIC for that specific industry, as you just mentioned, then it is the ideal situation. This the base, it’s a free zone”

||**||The Egyptian Connection|~||~||~|

Together DIC, Dubai Media City (DMC) and the recently launched joint venture, Knowledge Village, form TECOM, the free zone that encompasses all the developments. As well as the usual tax-free status, the one-stop-shop nature of the bureaucracy is intended to make life easier as well. Trade licences, visas, incorporating a company and all the details of setting up personnel like accommodation and driving licences, can be handled by a single point of contact.

But what he is also keen to promote, and is a key part of HH Sheikh Mohammed’s vision, is the idea of the ‘knowledge community’. But he emphasises that possibly the most important factor in the success of the project is the attitude of the staff and the tenants.

Putting a lot of like-minded people together to create synergies (the aforementioned ‘knowledge community’) is a key aim. “We have 7000 people and they are all knowledge workers, people who are really specialised in their field. Imagine those people talking to each other. And we see it happening now. Its not about buildings, its about minds and the people,” enthuses Dr Sulaiman.

Whether DIC is living up to its stated aim of engendering a collegiate atmosphere of collaboration is a matter of opinion but Dr Sulaiman’s defence against critics who say DIC is a real estate project, is logical and compelling. “All the names [of companies] you see whether they are big medium or small, are all here because they want to be here, they are all smart people, they are not making decisions based on fame or luxury, but because they have to cut costs all the time in order to survive,” he says.

The issue of whether there is actually any development work going on in DIC is one that has exercised critics over the past two years but a quick perusal of the company directory on the web site shows up the large number of software developers there. Software is one thing, but Dr Sulaiman thinks that now that there has been a sufficient time to build up momentum, the results in other areas will begin to be seen. Sun Microsystems has recently opened a test centre at DIC that allows channel partners and customers to specify and run different solutions before committing to purchasing any of them. It joins the centre set up by Compaq earlier this year that offers a similar function. Both are the sort of project that can spur growth in partner companies and drive sales in the channel.

If it is taken as read that the effect of DIC has been to enhance Dubai’s reputation for innovation and a pro-business attitude, it is not surprising that other governments in the region are looking to get a boost from similar projects. One of the main ones that is the subject of some scrutiny at present is the Pyramid Smart Village in Giza outside Cairo.

Part of the Egyptian government’s five-year plan to develop the ICT sector in the country, its opening schedule has slipped, due to problems with contractors according to Mohammed Naim, marketing manager for the project.

However in mid-July Alcatel became the latest company to commit to moving their offices there when it does open. It will take over 6000m2 of office space and has signed the lease. It joins Cisco, Microsoft and Oracle among others. “Deciding to move all our operations in Egypt, and the Alcatel Middle East Headquarters, to the first Smart Village of Egypt shows the importance and confidence that Alcatel places in this ambitious project. I envision that the new offices will help facilitate the sharing of Alcatel’s expertise and experience in the market and bring all our teams together under one roof. This is a win-win situation for all parties,” commented Vincenzo Nesci, chairman of Alcatel, Egypt.

||**||The Options|~||~||~|

Another company planning to move to the Smart Village is LinkdotNet, Egypt’s largest ISP. CEO Khaled Bichara is one of many who have agreed to move and build there in principle, but he admits that the lease is not yet signed. “They are planning to launch something in October, but I don’t know how optimistic that is yet,” he says.

Naim expects the first tenants to be operational by the end of this year but Phase I, which consists of 19 buildings, will not be complete until the end of 2003.

One of the key aims is to entice different sized companies into the complex. For smaller businesses, particularly software developers, the Ministry of Communications and IT (MCIT) will run an incubator set up to nurture small companies that are just starting up and want to be close to the big players in the industry, much like the First Steps programme at DIC.

Others are not sure of the progress. A well-placed media source said he did not think the Smart Village would be open by the end of the year. His point was though that a lot of work has been done to bring things up to speed in Egypt the headline projects have not yet been delivered and that is causing considerable frustration in the Egyptian ICT community.

Saudi Arabia has had the King AbdulAziz City for Science and Technology (KACST) established in 1977 but it is not an enterprise development zone. There are no free zones as such in Saudi at present. In Jordan, int@j is promising to unveil a plan that has been developed in collaboration with people from DIC but at the time of writing it was not clear what it would consist of although Dr Sulaiman believes there is a lot of potential in Jordan.

Dr Sulaiman is keen to see others emulate the success of DIC but he warns that there are more obstacles than might be at first apparent. “Let’s take DIC as it is and throw it into any of those other countries. Forget about everything else, I’ll give you one example: try to apply for a visa… That kills your entire project. Would you go open a company where no one can visit you? Would you start a project where you cannot recruit people?”

He emphasises that any other similar projects undertaken must be focused on local conditions and that attitude is a key factor.

For the channel the question must be: “What advantage can locating there give my business?” The answer to that according to Dr Sulaiman is in the larger scope of DIC. He insists that DIC will not take companies into the complex just for the extra tenancy. A company with an established market in the UAE is unlikely to benefit a great deal by being in a free zone if it is not exporting. But when it comes to services and solutions, close proximity to a large number of like-minded people should be a distinct advantage.

It is the channel companies that are adding value to their services that are going to gain most from locating in DIC. Value added distributor Magirus opted to locate in DIC when entering the market. “We are not dealing with end users, only the channel so it doesn’t really matter where we are. DIC is a good location for us because new HP is here, and Compaq is in Jebel Ali which is not too far from us,” explains Peter Weber, programme manager for Magirus Middle East.

DIC is not going to be an ideal location for resellers who need to be close to their customers and who are established, but given the range and depth of the companies that do have offices at DIC, the community that Dr Sulaiman talks about is clearly growing and developing.

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