Dubai tempts outsourcing businesses with tax breaks

Dubai is hoping the lack of red tape and tax will attract companies from Europe and elsewhere to its Outsource Zone

The world's first outsourcing free-zone opened on Tuesday. Dubai Outsourcing Zone is the latest venture from the people who four years ago launched Dubai's Internet City, which now hosts 600 companies employing 20,000 knowledge workers.

"By the term 'free-zone', we mean 100 percent ownership. You keep 100 percent of the profits, and can repatriate 100 percent of your capital," said chief executive Dr Omar Bin Sulaiman, speaking to ZDNet UK at the OutsourceWorld exhibition in London's Earls Court.

Bin Sulaiman said he was at the exhibition for the launch in London because Europe is where he expects most custom to originate. "We are targeting all outsourcing operations from simple call centres to research and development, biotech, IT and HR systems," he said. "I'm sure we will get a lot of IT outsourcing," he added.

Bin Sulaima said that four outsourcing operations currently based at Dubai Internet City are waiting to move into the new €50m facility, which he said he hopes will attract €250m of investment by the end of the year.

"We also have four banks in the pipeline who plan to spin off their IT departments into outsourcing operations, so they can turn them from a cost centre to a profit centre," said Bin Sulaiman. He would not provide details of these banks, but said two are local, one is regional and one international.

Bin Sulaiman held up the lack of overbearing regulations as a prime reason for companies to consider Dubai. His seductive pitch was in sharp contrast to the image of business in Britain painted by CBI director general Digby Jones, who earlier in the day used his keynote at the same venue to criticise UK regulations.

Jones said offshoring was no bad thing for the UK, which must move towards value-added quality at the innovative end of industry. But regulation could stand in the way of that, he said. "We need less regulation. The Financial Services Authority brought in regulations two years ago for the venture capital business. Why? We already had plenty of regulations that governed how they operated. When I asked the FSA, they said because VCs were not previously regulated. Great, so they needed something to do."

Jones used the example of a factory owner who, he said, wanted to build a two-storey extension onto his factory to cater for 50 new employees, with a panoramic window on the second floor overlooking the river. "The planning officer signed it off, the health and safety officer signed it off, but the fire officer said you have to lower the bottom of the window by three bricks," said Jones. "He did this, and fitted a new window with a new frame, but then the health and safety officer said he contravened another regulation."

The owner, who is under immense pressure to move those 50 jobs to India, said Jones, wrote to the three officers and explained his situation and asking them to just tell him what to do. "They each wrote back saying if you break this subsection of these regulations then we will prosecute. It just leads to a lack of competitiveness," said Jones.

"What makes Dubai successful is the pro-business attitude," said Bin Sulaiman. "The model is to do whatever it takes; what's good for business is good for Dubai. If it makes sense then we do it; if it's not there, then we create it."