last modified: Friday, December 16, 2005 4:12 PM
The Creation of an Information, Communication, and Technology (ICT) Industry Cluster: Dubai’s Internet City
Geoffrey T. Dancik
Dubai Internet City. Source: http://www.dubaiinternetcity.com/images/dic_lrg.jpg.
Situated on the Arabian Peninsula along the southern shoreline of the Persian Gulf, Dubai, United Arab Emirates (UAE), has long served as a major trading hub in the Middle East. For century’s commerce centered on the commodities trade: gold, spices, and pearls. With the discovery of black gold, oil became the dominant commodity for the second half of the twentieth century. Despite the economic prosperity brought along by the country’s rich oil reserves, the UAE’s first ruler, Sheikh Zayed bin Sultan Al Nahyan, who reigned from 1971 to 2004, recognized the vulnerability of the UAE’s reliance on an exhaustible resource. Sheikh Zayed initiated a series of public policy and infrastructure initiatives aimed at not only diversifying but also growing the UAE’s economy. Recognizing the importance of attracting foreign capital, these policies included religious tolerance and the adoption of moderate foreign policy. General Sheikh Mohammad bin Rashid Al Maktoum, Crown Prince of Dubai and UAE Defense Minister, shared Sheikh Zayed’s vision in restructuring the UAE’s economic base. He also believes the creation of a knowledge-based economy is a vital component to his country’s long-term economic prosperity. At the heart of General Sheikh Mohammad’s vision is a cluster initiative “aimed at the development of the ICT [Information, Communication, and Technology] industry in the region” (Sulaiman, 2005). In October of 1999, General Sheikh Mohammad’s concept came to fruition with the launch of Dubai Internet City (DIC).
MISSION STATEMENT: DIC
As articulated by General Sheikh Mohammad bin Rashid Al Maktoum, “[t]he mission of the Dubai Internet City is to create an infrastructure, environment and attitude that will enable New Economy companies to operate locally, regionally and globally out of Dubai, with significant competitive advantage. The ‘attitude’ component in our mission is an important element. It means approaching our customers and business constituents with a view to solving their problems” (Abraham, 2005).
DIC has established a first class business climate where information and communications companies can prosper. With the largest information technology (IT) infrastructure in the Middle East, built inside a free-trade zone, DIC also hosts the largest commercial Internet protocol telephony system – the routing of conversations via the Internet or IP-based networks -- in the world. Tenants are offered flexible office space, strategically located in close proximity to business partners. In effort to encourage long-term investment and stability, leaseholders are given the option of 50-year renewable land leases.
Dubai’s location makes it a prime gateway for businesses targeting the emerging markets of the Middle East, India, the Commonwealth of Independent States (CIS), and South Africa. This region presents significant growth opportunities, encompassing 1.6 billion people with a GDP of $1.1 trillion (USD).
DIC offers many services that go beyond simply providing office space. In fact, it serves as a one-stop-shop for business operations. One of the services provided is incorporation, which permits companies to secure legal protection and tax-exempt status. Incorporation is often a highly convoluted and arduous process; DIC offers a simplified and inexpensive solution. Companies can also benefit from a visa service and streamlined immigration process aimed at mitigating the inefficiencies that often plague international business travel and operations. Furthermore, the operation of advanced ICT facilities requires significant investment in infrastructure and support staff. DIC provides not only infrastructure but also support services. This reduces the operational hassles and capital drain inherently associated with the use of this technology, thus permitting companies to allocate more of their resources to their core business.
The UAE has established corporate laws within DIC intended to mitigate market inefficiencies and protect the community’s interests. Located in a free trade zone, DIC provides complete exemption from taxes on sales, corporate earnings and private income, reparation of capital and profits, no currency restrictions, easy registration and licensing, stringent cyber regulations, and the protection of intellectual property. Perhaps the greatest departure from the UAE’s past policy measures is that foreign companies are permitted 100% ownership in their businesses.
DIC also supports the marketing activities of its stakeholders on the regional market. For instance, DIC invites companies to participate in the regional and global exhibitions on the DIC platform.
While the DIC is in many respects an entity in itself, it is part of a broader economic development network --The Dubai Technology and Media Free Zone. This zone consists of the Media Free Village --a similar hub for media companies-- and a cluster of knowledge based companies known as Knowledge Village. All three synergize with each other and contribute to each other’s development (Sulaiman, 2005).
DIC actively supports the growth and welfare of companies in exploring business opportunities, expanding their operations, and setting up new businesses in the region. DIC has established strategic partnerships with ICT organizations and trade bodies of developed and developing economies to assist companies explore opportunities in the Middle East and North Africa (MENA).
Since its inception in 1999, the DIC has been highly successful in attracting some of the world’s leading ICT companies: Microsoft, Oracle, Dell, Cisco, HP, IBM, Canon, Siemens, Logica, Sony Ericsson, and Compaq to name a few. This clustering offers meaningful business interaction and networking opportunities.
The UAE has also undertaken the daunting task of establishing a university (American University in Dubai) in hopes that it will someday serve as a catalyst for innovation much in the way Stanford University has for Silicon Valley.
Traditionally, the development of research parks and technopoles such as Silicon Valley have built off of established academic research programs that could be tied to a technology initiative. DIC has deviated from this mold with staggering success. DIC’s ability to attract regional and international ICT firms can largely be attributed to the creation of an attractive business environment. Through the establishment of the American University in Dubai and Knowledge Village, DIC hopes to foster the synergistic dynamics found in California’s Silicon Valley. However, the presence of DIC’s free-trade zones, infrastructure, and transparent laws remain the leading factors in attracting ICT investment to DIC.
Other countries are following the UAE’s lead in developing specialized free trade zones. While DIC provides a comprehensive list of benefits to its community, new markets have attempted to replicate the UAE’s success. These markets often hold a competitive advantage due to a large low-cost human resources pool. It will be interesting to monitor the progress of these ventures to see if they are able to effectively duplicate the extraordinary feats of DIC.
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