Free zones are common features of Gulf Arab states and their economies, but these trade and investment hubs are often understood only in a very narrow sense. Free zones sit at the nexus of some of the region’s most contentious political economy issues: foreign ownership, expatriate labor, and taxes and other commercial fees. Established entities like the Jebel Ali Free Zones have significantly improved Dubai’s commercial reputation, while nascent and aspirational megaprojects – from Saudi Arabia’s Neom to Kuwait’s Silk City – incorporate free zone characteristics. The UAE’s sprawling free zone system continues to expand, and newer leaders, such as Saudi Crown Prince Mohammed bin Salman and Omani Sultan Haitham bin Tariq al-Said, appear committed to advance free zone-led development projects.
How have free zones around the Gulf contributed to economic diversification, the strengthening of the private sector, and employment creation? Are foreign ownership reforms, workforce nationalization initiatives, and new taxes and fees threatening to diminish incentives that free zones offer prospective investors? What role do free zones play in guarding against illicit financial flows? And how do free zones feature in diplomatic relations and the opening of new markets, from Israel to China?
In this discussion focused on his book, A Political Economy of Free Zones in Gulf Arab States, Robert Mogielnicki explained why free zones are likely to remain key features of Gulf Arab economies over the coming years. He also discussed the costs and benefits of incorporating free zones into economic development strategies.
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