Saturday, June 25, 2005

The new economy

Written by 7DAYS | Friday, 24 June 2005

7DAYS

There is no outsourcing industry in the UAE at the moment. When companies in Europe and the US are looking for a call centre operator or a coder, they think first of India, then maybe Eastern Europe; if they want manufacturing, they turn to China.

Multinationals tend to look the UAE as the gateway to the Middle East, and is full of sales and marketing offices, and regional headquarters, but few people actually make anything here. Ismail Al Naqi wants all that to change. As the head of Dubai Outsource Zone, he is leading the country’s move into a growing global industry, 17 per cent per annum, faster even that the UAE economy.

It is almost a year to the day since DOZ was announced to the world at Outsource World, a London-based trade show for the industry. Phase one of the project will be complete during the first quarter of 2006, according to Al Naqi. There are three phases in the plan, the second to be launched by the fourth quarter of 2006, the third by the third quarter of 2007.

The project will cover 750,000 square feet adjacent to Academic City, about 20 minutes out of Dubai, with more land reserved its future expansion. The Dubai government has thus far had an uncanny ability to choose a sector, make a freezone to serve it, and watch it grow; Dubai Media City, and Dubai Internet City being the most prominent examples.

But is Dubai really the right environment for outsourcing?

Inflation is tearing through the rental market, and a number of other goods are hot on its tail, as a recent cost of living survey suggested. Companies tend to outsource to save money, thus the popularity of countries that can supply low-cost labour, cheap rents, and low raw material costs. What with DOZ being a government-owned project, it is not beholden to market real estate prices.

“The cost of real estate in DOZ is half the price of the equivalent space outside,” says Al Naqi. “It is not as expensive here as people think. We are only 20 per cent more expensive than India. We did a study with a German call-centre, and if they moved here, it would be 45 per cent cheaper for them.” Even telecoms should become a great deal cheaper once a new operator is introduced, he says.

DOZ is not looking to go head-to-head with India, Al Naqi tells me. “We are targeting the medium and high end, contributing to the Dubai Vision 2010 of building a knowledge economy.” The sectors they are targeting reflect this. Engineering, accounting, healthcare, banking and finance, and insurance, all require highly-educated workers.

The strategy appears to be working thus far. Around 60 companies will be operating at DOZ by the end of the year, and 50 per cent of the first three phases have been taken by companies who want their own buildings. “Around 25 per cent of companies operating will be from the local market; 40 per cent will come from India, and the rest from Europe and the United States,” he says.

“We want five per cent of the global outsourcing market by 2010.” At current rates of growth that will be $22 billion. Not a bad little contribution to the local economy.

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