Countries in the Middle East and North Africa (MENA) region are diversifying their oil-based economies to incorporate other sectors in order to create a sustainable and diversified business environment. One sector that has experienced tremendous growth is information and communications technology (ICT). Forecasts from Garner Inc., a world leader in information technology research, revealed the following data for 2013:
- IT spending in the Middle East is projected to reach USD 192.9 billion, an increase of 5.5% from 2012.
- Spending on devices such as mobile phones, media tablets, PCs and printers is projected to reach USD 29.6 billion in the Middle East.
- Between 2013 and 2016, mobile phone sales are forecast to increase by 64% to USD 32.7 billion.
- Software spending is forecast to increase by 7.1% from 2012. Some key markets in this segment include security, storage management, customer relationship management, enterprise content management, data integration tools and data quality tools.
- Telecommunications services will represent 77% of total IT spending in the Middle East in 2013.
- In addition, voicemail services and mobile data services will reach USD 88.5 billion and USD 23.3 billion respectively.
A growing young and well-educated population in the Middle East will drive the demand for IT, which is translating into handsome profits for ICT companies. The rise of mobile forms of connectivity, social networking, cloud computing and e-commence have revolutionized the way businesses work. As local organisations expand across the MENA region, the demand for hardware, software, security and data management will rise. According to the recent Global Information Technology Report 2013, developing and emerging economies are focusing on innovation to sustain high economic growth rates. Therefore, ICT can play an important role in supporting economic growth and creating jobs. ICT companies that want to gain a competitive advantage are locating closer to their customers. As reliance on ICT increases, we can expect the governments in the Middle East to further develop this sector by introducing initiatives to attract foreign expertise and investment.
There are many IT-focused free zones in the Middle East. Dubai Technology and Media Free Zone was established to promote Dubai as a global hub for knowledge-based industries, with nine business parks covering four industries, including ICT, Media, Education and Sciences. Since its establishment in the year 2000, the Free Zone has attracted over 3,600 companies in this state-of-the-art technical and community infrastructure facility. During 2012, there was a 15% increase in tenants between Dubai Internet City and Dubai Outsource Zone.
What do you need to know about setting up a business in the Free Zone? Companies located within the Free Zone are 100% foreign owned. These companies enjoy full repatriation of profit and capital, guaranteed exemption from personal, income and corporate taxes for 50 years, and exemption of customs duty for goods and services. The minimum paid-up capital requirement to incorporate a Free Zone Liability company (FZ-LLC) in Dubai Internet City is AED 50,000. Branch establishments have no minimum capital requirements. Companies operating in the Free Zone can carry out business banking in Dubai. The banks will be able to provide a range of financial products, services and advice to suit your specific needs. Under the UAE Agencies Law, a company located within the Free Zone is not permitted to sell their products or services directly to the local UAE market. However, they can do so legally through a locally appointed agent, sales representative, distributor or mother company, with a license issued by Dubai Economic Department.
For many multinational corporations, the new trend is to move your products and services closer to demand location. Companies including Google, Mastercard, Facebook and LinkedIn have increased their presence in either the Dubai Internet City or the Dubai Outsource Zone. However, innovative new start-ups or small and medium-sized enterprises (SMEs) that want a share of this pie need to start building their market share in the profitable Middle East market. As the managing director of both free zones, Malek Al Malek, has said, the aim of establishing In5 innovation hub is to foster entrepreneurship in the region. The Dubai government is committed to supporting and nurturing SMEs in 2013.