By Ibrahim Tukan www.mondaq.com
The United Arab Emirates has an active history in relation to free zones, mostly concentrated in and around the Emirate of Dubai. In 2007, Abu Dhabi established its first free zone, twofour54, which began operations in October 2008 as a media and content creation free zone. Since then three more free zones have been established in Abu Dhabi, the most recent of which is Khalifa Industrial Zone Abu Dhabi (Kizad).
Background and Technical Information
Kizad is a 417 square kilometer special economic zone launched by Abu Dhabi Ports Company (ADPC) in Abu Dhabi’s Taweelah, the largest industrial zone in the region. Phase one is being launched with an investment of Dh26.5 billion. According to ADPC, some foreign investors will be granted 100 per cent ownership in this industrial zone. There are 267 plots in total at Kizad and the first phase is spread over 51 square kilometers and is scheduled to become operational in the fourth quarter of 2012 when the new Khalifa seaport opens to international business. Four more phases will follow. With one of the world’s most advanced deepwater seaports and world-class infrastructure including Union Rail’s network, Kizad will benefit from connectivity via sea, air, road and rail networks to ensure easy accessibility to and from the Industrial Zone.
Kizad is intended to have low operational costs and access to global markets and will be an easy place for doing business. Infrastructure at Kizad is currently being developed, which includes roads, high voltage power, general utilities and seawater cooling. ADPC said Kizad, which is strategically located between Abu Dhabi and Dubai, is now ready to receive applications from potential tenants.
ADPC considers Kizad a cornerstone of the Abu Dhabi Economic Vision 2030. It highlights the drive to diversify Abu Dhabi’s economy in pursuit of sustainable growth which is less dependent on the oil and gas industries. By 2030, Kizad will be expected to contribute around 15 per cent of Abu Dhabi’s non-oil gross domestic product.
ADPC was created in 2006 as part of the restructuring of the commercial ports sector in Abu Dhabi and given control and regulatory enforcement power over all commercial ports assets previously owned by the Abu Dhabi Seaports Authority.
The purpose of ADPC’s Khalifa Port and Industrial Zone (KPIZ) is to cater to a number of industrial clusters, including base metals, heavy machinery, transport vehicle assembly, chemicals, shipyards, building materials, processed foods and beverages, light manufacturing and assembly, small and medium enterprises, trade and logistics, information and communication technology and alternative energy.
As Kizad’s overriding aim is to support the diversification of Abu Dhabi’s industrial base in line with the provisions of the Abu Dhabi Economic Vision 2030, the industries targeted by Kizad are among those highlighted by the Economic Vision as the primary and enabling industries required to drive the UAE forward.
- Petrochemicals and Chemicals
- Paper, Print and Packaging
- Pharmaceuticals and Healthcare Equipment
- Trade and Logistics
- Engineered Metal Products
- Mixed Use and others
While not all of these industries will be housed in true vertically integrated clusters, each is expected to contribute significantly to Kizad’s success.
Kizad’s features ensure that different benefits are offered to each cluster. However, a solid core of benefits is offered to all industries who locate in the industrial zone:
- Easy access to markets
- Strategic location of Abu Dhabi
- Outstanding transportation infrastructure – sea, air, road and rail
- Low cost operating environment
- Low cost utilities
- Zero income tax environment
- Option of claiming exemption from GCC customs duties on goods manufactured in the Industrial Zone or of owning 100% of a business and avoiding UAE duties on goods imported and re-exported through the zone.
- Clustering approach
- Appealing UAE lifestyle helps to attract and retain high-quality staff
- Ease of doing business
- Kizad’s Business Development Team of trained engineers helps investors optimize their location
- One Stop Shop to facilitate business set-up and Government certification
- High quality local and expat workforce
How to Apply
Interested investors may fill out an Industrial Project Application (IPA) or a LogisticsProject Application (LPA) form. These two forms differ according to the type of facility or operation that the interested party plans to establish. After completion of the appropriate form, Kizad will review the application and it will then be sent on to the Plot Allocation Committee, which assigns the best plot of land for the applicant’s business. The next stage involves talks between the applicant and Kizad before a final agreement on the venture being established in the Industrial Zone is reached. The applicant may then opt for a Preliminary Agreement allowing time to complete the required conditions precedent or move on to signing the final agreement. For this purpose Kizad has developed a bankable instrument that enhances access to third party finance and investment.
Business owners that have completed all stages of the land leasing process may sign a Musataha Agreement. This is a long-term property right agreement that is capable of being registered at the Abu Dhabi Land Registry Department in the name of the investor. Signing the agreement ensures that investors legally own all assets developed on their plot of land within Kizad while they reside at the Industrial Zone, and guarantees tenure provided the business operates within the terms of its license.
It also acts as a supporting document for securing loans and mortgages related to an investor’s business. In certain cases, Kizad will enter into direct agreements with the investor’s lenders thereby strengthening the security package an investor is capable of offering for raising capital. Such support is offered to ensure business owners can access the capital for establishing operations in the Industrial Zone and secure long term financial stability. All companies entering into the Musataha Agreement are subject to Kizad’s rules and regulations, which are in place to ensure a safe, efficient and sustainable business environment.
For investors who wish to secure agreements to rent or lease buildings, a standard long-term lease agreement may be utilized.
Finally, the Emirate of Abu Dhabi is considering a standardized free zone regime for free zones established within its borders. The aim of this standardization is to facilitate the application process for investors, such that the choice of an investor in relation to which free zone to apply to will depend upon the sector of the business of the investor rather than the ease or difficulty of the application process in each free zone.