“Serfdom” in the UAE: how not to lose money when starting a business

In Ras al-Khaimah there are benefits for “women’s business”, in Ajman you can register a company for only 2 thousand US dollars, and Abu Dhabi is good for networking. Christina Tantsyura, managing partner of SKY Consulting Group, talks about the specifics of each of the seven emirates of the UAE.

In the UAE, there is a strict link between a legal entity and a specific emirate, or, as I call it, “serfdom.” I will give examples that illustrate this.

One entrepreneur decided to register a company in the UAE. We recommended opening in Abu Dhabi, but the customer chose the Dubai free zone because registration there was cheaper. Two months later, the entrepreneur returned and asked to urgently open “at least something.” in Abu Dhabi, because the mobile operator with which he was going to cooperate did not agree to contract with the Dubai company. We urgently registered a branch of a Dubai legal entity in the capital of the UAE, since only a branch could be opened within the required time frame. Now the entrepreneur has to serve two legal entities at once. And although he still has no clients from Dubai, he is forced to bear the costs of the Dubai office, since it is impossible to close it without damaging the entire business.

The second illustrative example. The entrepreneur intended to launch a manufacturing company. After analyzing the space and electricity needs, as well as the rental market for industrial premises, we recommended considering opening either in Ras Al Khaimah or Abu Dhabi — in the special industrial zone KEZAD. However, the entrepreneur decided that “these emirates are boring.” and “it’s a long drive there.” He asked to register the company in the main land of Dubai, despite our comments that it would not be easy to find a production site there. Three months later, the entrepreneur returned and said that he had already ordered equipment for production, but still had not found a premises that would fit his requirements for the size and power of electricity and cost reasonable money. As a result, the entrepreneur had to, firstly, seriously increase the budget and rent premises in Dubai; secondly, carry out expensive urgent repair work; thirdly, pay for equipment downtime at the customs warehouse.

To avoid such mistakes, you need not only to clearly understand where your clients are located, but also what specific features each emirate has.

Dubai

This is the largest population center in the UAE (more than 3.5 million people), as well as the most progressive emirate in terms of management and business environment. Entrepreneurs and investors from all over the world come here. Therefore, it is ideal for networking and communication-based businesses, such as advertising and marketing agencies, consultants and trading companies. Apart from this, Dubai has two more advantages. Firstly, the real estate market and public transport are well developed here. Secondly, there is relative freedom of behavior and choice of clothing, since about 80% of the population are expats.

The cost of registering a business in Dubai starts on average from 7.5 thousand US dollars for a company with one visa and ordinary activities that do not require additional permits and approvals (marketing, IT, trading activities outside the UAE).

If we talk about manufacturing companies, the emirate is poorly suited for this type of activity — the high cost of both registering a company and obtaining additional permits, plus it has very expensive warehouses and electricity. In addition, there is a lack of capacity.

I would like to separately note that the emirate has the highest labor costs. According to Salaryexplorer.com, the average salary is about 4.3 thousand US dollars per month. At the same time, despite the de jure oversupply of personnel, de facto it is quite difficult to find a real professional for an adequate salary.

Finally, the cost of living in Dubai is the highest in the UAE. According to Numbeo estimates, the amount of expenses for a family of four is about 5.6 thousand US dollars per month, which is almost twice as much as in Moscow.

Abu Dhabi

This is the capital of the Emirates. The headquarters of the largest local companies and sovereign investment funds, as well as government departments, are concentrated here. The emirate is ideal for businesses focused on working with the oil sector, state-owned companies and banks. I would especially like to note the twofour54 special zone for creative industries, created to attract and support this type of business. As part of the support program, you can get a subsidized (and essentially free) license when registering a company for two years, thus saving almost 10 thousand US dollars. Developers of computer games and animation can also apply for a subsidy for office rental costs, and companies creating video and film content — compensation of 30% of the cost of renting filming areas.

Abu Dhabi is also the center of the industrial development strategy and the “300 billion” initiative, the essence of which is that the Emirates government is allocating 300 billion dirhams to the development of the country’s manufacturing sector. As part of the program, a special industrial zone KEZAD was opened, ideal for opening manufacturing, trading and logistics companies. Khalifa Port connects the free zone with more than 60 international destinations, and the initially prepared complexes and developed infrastructure make it possible to reduce the time from registration to actual commercial launch for manufacturing companies by 30−50%.

Sharjah

This is the third most populous emirate (544 thousand people). Sharjah is the most popular location for commercial and manufacturing enterprises. This is facilitated by the presence of an international air harbor and a convenient seaport on the city’s territory (Sharjah is located near two bays — the Persian and Ottoman). Customs in this emirate works quite quickly and processes cargo promptly. In addition, Sharjah is located on the border with Dubai, which is an additional advantage for expats. I can note that Russian companies traditionally choose the emirate for company registration, since the cost of registering a company and its maintenance in Sharjah is 10-20% lower than in Dubai.

However, the emirate also has disadvantages in terms of convenience for expats. This is a very conservative region, where there is a prohibition law, there are no entertainments usual for tourists, such as nightclubs or bars. For women, the dress code is more strict than in Dubai: for example, wearing short skirts or deep necklines is only allowed on hotel premises and is not encouraged in public places.

Ajman

The city with a population of 260.5 thousand people is located on the shores of the Persian Gulf. Ajman has a seaport, which is convenient for trading companies. The cost of registering them here is cheaper than in many other emirates. For example, in the Ajman Free Zone you can register a company for less than 2 thousand US dollars, if you are between 20 and 30 years old, under the “business pioneers” special offer.

Among the advantages of the emirate for expats — relatively inexpensive and high-quality housing, the absence of prohibition, the presence of beaches and well-developed urban infrastructure. And Dubai is only 15 km away.

Ras Al Khaimah

Population of the emirate — less than 200 thousand people, area — only 373 sq. km. But nevertheless, it is an important administrative and financial center of the UAE. Ras Al Khaimah has a seaport and an airport, and can be reached from Dubai via the new highway in just an hour.

Ras al-Khaimah has two free economic zones, one of which — RAKEZ — is universal and provides the opportunity to register companies of any type, and the second is one of the few in the UAE where it is still possible to register offshore companies. RAKEZ offers a special tariff for opening a “women’s business” class company. — discounts on license costs and office rent. To take advantage of this, the company must be owned by a woman, and the director must also be a woman. Most often, international retailers and manufacturing companies open businesses in this emirate. It is especially loved by organizations that conduct trade operations with Iran, since from the port of Ras al-Khaimah to one of the ports of Iran is, in fact, a stone's throw away, and ferries and cargo ships sail almost daily. By the way, this is one of the routes for supplying goods from the UAE to Russia, and after the opening of railway communication through Iran, it will be one of the fastest and cheapest.

Other advantages: the cost of registering a company and renting commercial real estate, especially warehouses, is 20−30% lower than in Dubai, and the cost of labor — by 15% (average salary, according to Salaryexployer.com, is about 3.7 thousand US dollars per month). Separately, it is worth noting the good infrastructure for the residents of the emirate, a comfortable climate, and many recreation options, including beach ones.

The main disadvantage of Ras al-Khaimah — lack of public transport, with the exception of taxis. That is, without a personal car, living here will be very uncomfortable.

Umm al-Quwain

This is a very compact emirate with an area of less than 800 square meters. km on a sandy peninsula washed by the Persian Gulf. It is not at all popular among expats; the real estate market here is poorly developed — these are mainly low-rise buildings of the classical style, the real East. There is practically no business activity, there are almost no high-quality business centers, much less offices of international brands.

However, the emirate has the Ahmed bin Rashid seaport, which is currently under reconstruction, and a free trade zone, that is, there is potential for trading companies. Among the advantages — one of the lowest costs for company registration (on average 2.5 thousand US dollars per company with one visa) and labor (on average about 2.5 thousand US dollars per month).

Fujairah

A small (population - 317 thousand people) emirate on the shores of the Ottoman Gulf. Despite its modest size (1.17 thousand km), it has an international airport, including cargo flights, and a seaport with direct access to the Indian Ocean. And this is the most convenient port for trading companies focused on the markets of Pakistan and India.

Fujairah is also home to a number of large industrial enterprises, such as the largest cement plant in the UAE.

Fujairah attracts with its beautiful nature, access to the ocean, and low cost of housing and living. However, it is not at all suitable for companies from the IT, marketing or consulting sectors, since it is extremely difficult to find clients within the emirate, and a trip to any exhibition or event in Dubai takes more than two hours.

Published with permission of the author.