Changing the transaction-centric Free Zone experience

Free Zones (Special Economic Zones) are an integral part of the UAE's economy. Nowhere is this more evident than in Dubai. With 19 locations throughout the emirate, Free Zones account for 33% of Dubai's GDP (AED 135 billion in economic value). Starting with the Jebel Ali Free Zone (JAFZA) in the mid-1980s, Free Zones are the primary vehicle for attracting FDI and positioning Dubai as a global hub for business.

Fast forward to 2021, UAE Free Zones are facing a highly commodified and saturated competitive landscape. But instead of seeking differentiation, Free Zones' value propositions are trending towards parity.

On the surface, each of the 37+ Free Zones targets specific industry verticles, whether they be finance, commodities or logistics. A financial institution may be limited to choosing the regulatory environment of either the Abu Dhabi Global Market (ADGM) or the Dubai International Financial Centre (DIFC). Likewise, a trading company that requires direct connectivity to the ports will weigh the benefits of operating out of the Jebel Ali Free Zone (JAFZA) or Khalifa Port Free Trade Zone (KIZAD). But the vast majority of businesses are not limited in their options.

The Free Zones' indiscriminate scope is eminently practical. Given the increasing number of Free Zones and the sheer number of available offices, warehouses and plots, they can ill afford to do otherwise. This market reality leads to Free Zones positioning around a standard set of marketing themes. They will all tout a business-friendly regulatory environment, cost-effective business setup, and world-class real estate offerings.

When products within a given category do not showcase a notable difference, consumers are more likely to make cost-driven decisions. Even if they have a previous preference, it usually isn't enough to move them to pay a premium for it. This customer behavior puts Free Zones at the mercy of their physical and price attributes.

A disjointed customer journey and the transactional nature of the relationship between Free Zones and their customers only make matters worse. 

The customer journey usually begins well. Sales teams are responsive and eager to convert leads. The first breakpoint occurs once a customer has decided to set up and starts the license registration process. What is usually unbeknownst to most customers is that they are now dealing with a completely separate legal entity (Free Zone Authority) than they began their journey (Free Zone Development Company). While such internal divisions shouldn't impact the customer's experience, there is a noticeable shift in attitude.

If the sales teams were responsive and proactive, the licensing teams would be bureaucratic and non-committal. There are rarely any follow-ups, status updates or detailed guidance through the licensing processes. Many customers who have first-hand experience of this process can often feel like they are navigating through a complex labyrinth of paperwork. It doesn't take long for customers to realize that Free Zones are simply a required utility service provider rather than a true business-enabling partner.

If the customer leases the property from a third party, the relationship between customers and Free Zones gets further apart. Once a trade license has been issued, there are no real reasons for customers to engage with the Free Zone except for required administrative requirements. In the same vein, Free Zones themselves rarely communicate with their customers beyond the annual reminder to renew their licenses.

Free Zones will find it difficult get by maintaining the status quo in the new competitive environment.

We can categorize a Free Zone's target customers into three groups. The first group consists of multinational corporations. They have established brands and see the UAE as potential headquarters for the MENA region. This group has traditionally been the primary target for Free Zones.

Regional and local service and trading companies comprise the second group. There are either long-standing companies or new companies usually founded by former employees of large firms. There is an exponential growth of this category of companies after an economic crisis.

The final group is made up of startups and new ventures. They are either technology-based, follow a new business model or offer new types of services. While this group is the smallest in size by far, this is the category of companies with the highest growth potential.

Unlike large global enterprises, startups desire and demand more from Free Zones

They are not satisfied by the Free Zone's utility offering. Instead, they are looking for a trustworthy partner who actively creates a viable ecosystem and helps grow their businesses. The Free Zone's promise of a thriving ecosystem must be more than lip service.

To meet their needs, Free Zones must undergo a fundamental shift in thinking. Free Zones needs to grow into a business success-centric model rather than following a real estate-centric model.  This shift will require expanding the Free Zone's range of benefits and nurturing deeper customer engagement.