While many countries vie for the “outsourcing hub of the world” title, Dubai has declined to join the competition and opts to focus on high-end transactions.
“We cannot be the outsourcing hub of the world, and we don’t want to be,” Ismail Al Naqi, Director of Dubai Outsource Zone, told Business 24|7 in an interview. Excerpts:
What is the rationale behind Dubai Outsource Zone? Doesn’t this initiative make Dubai Internet City’s goals rather redundant?
Dubai Outsource Zone is an initiative of Dubai Technology, E-Commerce and Media Free Zone or Tecom. Tecom’s strategy is to focus on five main areas – ICT or information communication and technology, media, biotechnology, energy – and integrate all these areas with education.
Dubai Outsource Zone complements the ICT cluster. The idea was studied in 2003 and 2004. The business potential for global outsourcing during that time was quite high.
Secondly, during that time, the concept of outsourcing did not exist in the Middle East, so someone had to sponsor this industry. And Tecom did.
The mandate of the zone was to build the infrastructure. The second mandate was to promote the concept of an outsourcing industry.
Some countries have carved a niche in outsourcing. Where do you want to position yourself?
We have looked at our requirements, and we also looked at the strengths and the weaknesses of our potential competitors, be it India, South Africa, East Europe or the Philippines. But we don’t position ourselves as a competitor to India although a lot of people think so. We look at different market segments and different sizes of operation. We want to position Dubai in a way that will complete the picture together with others and not to compete with them.
So what are the weaknesses of your “competitors” and how would Dubai be able to capitalise on them?
A major weakness in India is infrastructure. Number two is the regulation. Dubai, on the other hand, has good infrastructure. We have quite strong data and intellectual property law.
Countries such as South Africa have multiple challenges such as safety and security. Dubai is a safer place. The other thing is the company’s ownership. In free zones you can have, besides zero taxes, the ownership of the company.
In Dubai you have access to a multiple pool of talent and multi-lingual capability. Retaining of employees is also possible in Dubai.
With these capabilities are you prepared to be the outsourcing hub of the world?
No, we cannot be the outsourcing hub of the world, and we don’t want to be. If we have a serious problem such as a high unemployment rate, then that would be our focus. In Dubai you don’t have such a problem.
To be number one, we have to have more than 700-800,000 people working in the zone alone. And we have to be the most cost-effective place in the world, but we are not. Our target is 70-100,000 in the next 10 years.
If you don’t want to be the number one, then what do you want to achieve?
Our objective is to become the outsourcing hub that focuses on high-end, extreme high-end, transactions.
How much investment are you pumping into this project and what is the current status of the zone?
So far, we have invested close to Dh1 billion, that’s including the infrastructure. Phases one and two were completed in March and are now operational. Phase three is due for completion by the first quarter of next year. We’ve just announced phase four that is due to completion by 2008-end. Phase five will follow.
The total size of the lot is 33 million square feet and phases one to five could be just seven or eight per cent of the land, the remaining has been set aside for our future development.
Can an outsourcing company establish its offices outside the outsource zone? And what could be the repercussions?
Absolutely yes. Dubai is a place where you have multiple options. You can do it in Dubai Outsource Zone, or you can do it in different cities in the country.
Are there any criteria for a company to register in the zone? Is there any mandatory capital required?
There is a minimum capital requirement of Dh300,000, but we don’t really question how much they would invest. This capital is an amount that the company will deposit in its own bank account and once the company obtains the licence from us, they can withdraw this capital and reinvest it in their business.
It’s just a kind of minimum requirement to make sure the company at least has the minimum capital required to start its operations. We also make sure entrepreneurs know exactly what they want to do. So we go through their business plan.