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SME Worldwide

Showcasing Hamriyah Free Zone : Beyond Borders- Global Gateway for Indian SMEs

SME WORLD Bureau
Sep 2011

Projecting itself as a Next Generation Free Zone, HFZA is spread over an area of 22 million square meters and provides a host of Investment Incentives. HFZA claims that approximately 5500+ companies from 137 countries are part of it. It consists of 7 main zones - Oil and Gas, Perfume World, Construction World, Timber Land, Petrochemical Zone, Steel City and Maritime City. A detailed list of investors can be found on their website.

HamriyahB

What does globalization mean for Indian SMEs? Incursion of foreign companies into Indian markets with cheaper (but better quality) products and (or) services thereby rendering the indigenous enterprises uncompetitive or redundant. Steady shrinkage of the domestic market. Growth prospects getting stifled. Well, that would be the general worn out perspective.

With a slight change in outlook – it can mean chance. The chance to look beyond the parochial vista, evaluate newer options of growth and to compete at equal footing. It entails an opportunity to exist beyond the borders of the nation, chance to take advantage of new trade norms and policies, and cater to other markets.

But what about the indefinite number of documentation, permissions, legal and statutory compliances, socio-cultural issues and not to mention the cost of setting up a facility in a foreign land? The solution lies in choosing a Free Trade Zone (FTZ). Globally they have been in existence for years and are thriving. India also has its own FTZs.

A free zone or export processing zones are areas specially developed in a country where there are lot of incentives, single window clearance with minimal red tapism, minimum or no taxes (no quotas or tariffs), currency is fully convertible, ready made infrastructure with the aim of importing and processing items for the purpose of exports. Enterprises like Garments, Cosmetics, Footwear, Pharma, made to stock items, Engineering, IT, ITES, Auto can function in a cluster fashion within a free zone.

The free zones are floated with the aim of boosting the economy and employment by allowing the investors to compete globally with others who are functioning from similar setups. Proximity to roads, ports and airports are of high importance in these areas apart from availability of labor. Shenzen SEZ in China or Jebel Ali in Dubai are famous FTZs. Ireland's Shannon Free Zone was the first of its kind in the world. SEZs are present in Latin America, Middle East, Asia & South East Asia. India has Free Trade Zones in Kandla, Santa Cruz, Madras, Cochin and Noida EPZs. The SEZ Act came into effect in 2005 – 06. Indian SEZs are yet to become big. The larger problem of overall weak infrastructure hampers the prospects of the FTZs. Businesses in Free Trade Zones get a level playing field to compete with other players in the exports market.

A striking feature in many of the FTZs is the concept of Cluster. The benefit of a cluster is proximity of resources catering to similar businesses. It can include suppliers, research institutions; testing laboratories focused at say the cosmetics industry. It helps in significant improvement in productivity apart from innovation. These factors are extremely important for resource strung SMEs.

1. What do Free Trade Zones do?

2. What SMEs need and FTZs can provide?

We showcase Hamriyah Free Zone located in Sharjah, UAE in this article for SMEs to expand and tap the up-coming exports market. It has a huge geographical as well infrastructural capability which trumps it above others especially those which are in India.

SME WORLD had previously presented an overview of Hamriyah Free Zone in its June issue. One might ask why SMEs should consider a FTZ abroad when they are present in India too. The economic climate in India is not very sunny at the moment due to various factors. Inflation is steep and the Reserve Bank of India has stepped in with its own measures to curb the same. The fall–out is lower index numbers of manufacturing. Many states are also in their own phases of instability.

The government is making efforts to reach out to the large enterprises assuring of better and conducive policies. In the midst of this economic turmoil and a backdrop of instability, nothing much is being said about SMEs. As always, their issues and problems are the least of anyone's concern at the moment apart from the owners.

Things will not improve in the immediate future. Expansion or diversification projects of many SMEs have come to a halt. There is a lot of cause for worry.

It is time for SMEs to look out for greener pastures which are promising. Foreign Direct Investment can be a very good strategic move. Though FDI sounds extremely complicated and resource hungry, there are ways and means to tap growing markets with potential for more players.

This feature of Hamriyah Free Zone is focused at specific details like facilities, licenses and related details to setup business.

3. United Arab Emirates

United Arab Emirates is a federation of seven emirs ruling Abu Dhabi, Dubai, Ajman, Fujairah, Ras-al-Khaimah, Umm al Quwain and Sharjah. Sharjah is the third largest among the seven.

Source: Wikipedia (http://en.wikipedia.org/wiki/File:UAE_

en-map.png accessed on 03.08.2011)

A high income developing economy (as per IMF), that depends on oil as one of their prime produces; it is also a member of UN, OPEC as well as WTO apart from other bodies. It has a high GDP as well as enviable per capita income. The population in UAE is around 8,500,000 largely comprising of native Emiratis, Arabs and a huge chunk of expatriates. It is ranked at 32 according to Human Development Index which is considered to be very high.

The heterogeneous culture of UAE, presence of expatriates from various countries as well as its strong thrust towards a robust, vibrant economy has ensured that there are ample educational institutes with best of the facilities.

It is one of the comparatively liberal countries where women have adequate human rights and leeway. The legal system in UAE is also rapidly evolving to make it relevant for the expatriates instead of imposing Sharia uniformly on everybody.

UAE has enviable infrastructure all over the seven emirates. It thrives on real estate and tourism. Though real estates world over took a beating in the 2008 downturn, UAE remains one of the prime options for setting up offices or facilities among the Middle-Eastern countries.

According to Transparency International's 2010 Corruption Perceptions Index, UAE ranks at number 28 from the top with a score of 6.3 with Denmark being the least corrupt with a score of 9.3.

The geographical location of the country is of extreme strategic importance considering its equal proximity to Africa, Europe, Middle-East, Central as well as South Asia.

Source: Wikipedia (http://en.wikipedia.org/wiki/File:UN_Human_Development_Report_2008.svg accessed on 03.08.2011)

Sharjah

Sharjah is the third largest emirate of UAE. Dubai is 10 kilometers away and it is common for people to live in Sharjah while working in Dubai. The main industries are petrochemicals, textiles and food etc. The industrialization of this emirate is quite high and forms a dominant force in UAE.

It has very well developed infrastructure and world class airports (Sharjah International Airport), ports, roads, medical facilities, residences and education system.

Hamriyah Free Zone Authority (HFZA) -Flexible and Investor Friendly

The Mission statement of HFZA says it all:

“To add to the value of the esteemed Emirates of Sharjah by creating an environment within the Hamriyah Free Zone that attracts reputable asset based industry, quality trading and commercial organizations. We will achieve this through the provision of land, buildings, infrastructure and general support, to enable our investors to operate profitably, safely and in an environmentally and socio-economically responsible manner.”

Established in 1995, HFZA is being steered today under the able leadership of its Director General Dr. Rashid Al Leem. He has a Masters degree and a Doctorate in Management. A dynamic personality who also holds key positions in Sharjah Sea Ports and Customs, and has a glittering track record world over provides the right impetus and direction to this free zone.

“The fast changing global ecosystem calls for SMEs everywhere to broaden their outlook and shed the cult of 'localism' and move out of their shells to join the international mainstream,” says Dr. Rashid who is also deeply concerned with clean environment strategies. “If we want to ensure a secured future, awareness towards environment is of utmost importance”, he adds.

Sharjah has very well connected ports which make logistics extremely conducive. The well-knit network of roads, airports and seaports and its proximity to manufacturing location are of extreme importance today for catering to closest global markets in Europe, Africa and Asia apart from Middle East.

HFZA claims that approximately 5500+ companies are part of it. It consists of 7 main zones – Oil and Gas, Perfume World, Construction World, Timber Land, Petrochemical Zone, Steel City and Maritime city. A detailed list of investors can be found on their website.

Projecting itself as a Next Generation Free Zone, HFZA is spread over an area of 22 million square meters and provides the following Investment Incentives (as claimed in their official website):

100% Foreign company ownership is allowed
100% Import and Export tax exemption
100% Exemption from all commercial levies
100% Repatriation of capital and profits allowed
25 year leases available, renewable for a further 25 years
HFZA boasts of the following facilities available to investors:
Access to 14 meter deep water port and 7 meter deep inner harbor
Pre-built warehouses, factories and office units for lease
Executive office suites in the International Business Center for lease
On-site accommodation for investors' personnel including recreation center and health club
Transportation via road, 3 sea ports and Sharjah International airport
Highly developed infrastructure and telecommunications links
Abundant and inexpensive energy (Electricity: $0.05 per KWA, Water: $8.17 per 1000 Gallons)
Liberty for personnel recruitment and economical workforce
Visas and Accommodation
The main categories of visa are:

Employment
Family Visa for Dependents
Transfer of Sponsorship

The visas are valid for 3 years from date of issue. The visa allows one to stay anywhere in UAE.

These rates include electricity, water and air-conditioning but do not include furniture, meals, transportation or health-care.

Health, Safety and Environment (HSE)

In a bid to build a world-class facility, HFZA is very particular about HSE standards to be maintained and followed by the investing companies. There is a detailed manual explaining the type of permits and certificates that companies will have to obtain.

Types of Licenses and How to Setup a Business in HFZA

Licenses

There are 4 types of license: Industrial license, Commercial license, Service license and National Industrial License.
The Industrial License is for manufacturing, processing and (or) assembly.
The Commercial License (trading) is for import, export, storage and distribution.
The Service License is for providing any kind of service specifically within the Free Zone.
The National Trading License is equivalent to being a local company of UAE and can be availed by companies registered with any of the Arabian Gulf Cooperation Council (AGCC) countries. (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates). Apart from the criteria of share-holding pattern where majority stake should be with an AGCC citizen, at least 40% of the value addition should be accomplished within the Free Zone.

Though a person can setup multiple businesses within the free-zone.

All facilities in HFZA are on lease basis only and no financial support is provided for setting up business.

Hamriyah SME E- Office : (Executive, Economical , Efficient , Electronics)

The start up package for SMEs costs Rs.310,000 (All Rates @ Rs. 45/USD). It also includes one year commercial or service license fee, one year office rent for a 10 Square meter space and a provision to apply for 4/5 visas (visa charges extra ). The license is issued within 2 working days.

One can incorporate in HFZA as:

New Incorporation. It can be Free Zone Establishment (FZE) with single shareholder or Free Zone Company (FZC) with (2 to 5 shareholders)
Branch of an existing company Steps for setting up a company or establishing a branch are:

Required documents:

FZE / FZC – passport copy of the shareholder/s and Manager
Branch - Certificate of Incorporation, memorandum & Articles of Association, Board Resolution for opening Branch and appointment of Manager, and the passport copy.

Once the investor submits the required documents,

The License application forms are filled
After the provisional approval, the Lease Agreements are prepared.
The investor signs the agreement and makes the Payment
License is issued along with the Certificate of Incorporation, Share Certificates, and Memorandum &Articles of Associatiozn.

* The FZE/ FZC application form is again an uncomplicated 7 page form with a page for Memorandum of Association. The other information required in the form are shareholder details, manager, proposed company name, share capital, bank and auditor details. Some documents are required in original and others notarized.

The principal point here is the simplicity and straight-forwardness of the documents required to setup a business. It will be extremely easy for Indian companies to provide the details HFZA is asking for in their forms. Companies are expected to produce their audited results each year within a stipulated period of time.

Why Hamriyah Free Zone?

Strategic location to access global markets
UAE being a member of WTO and Berne Convention on IPR protection, it is committed to integrity and honesty towards foreign investments of all sizes
Investor protection is guaranteed with permission for full repatriation as per Emiri Decree
Tax free, full company ownership
Abundant and inexpensive energy
Developed infrastructure
Land for lease for investor development
Ready made offices, warehousing and factory units
Three seaports and international airport
Low cost living conditions
Flexibility of labor sourcing
No restriction on employing company's personnel if all necessary documents are clear

For more details, please contact:

Tel: +971 6 526 33 33

Fax: +971 6 526 35 55

http://www.HFZA.ae

Email info@hfza.ae

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