Emirate remains most popular destination in MEA for the world’s largest 500 firms to set up regional HQ
Tax breaks, business transparency, low Customs fees, and favourable fiscal and economic environments are the primary reasons behind a growing number of Fortune-500 companies establishing their regional headquarters in Dubai, a new study explains.
Infomineo, a business research specialist in Middle East and Africa (MEA), said Dubai remains the most popular destination in the MEA for the world’s largest 500 companies to set up their regional headquarters.
A total of 11 Fortune-500 firms established their regional headquarters in Dubai last year, boosting its tally to 138 from 127 in 2015. Of these, 31 are MEA headquarters while 107 are Middle East headquarters (excludes Africa).
The emirate remains well ahead of Johannesburg and Casablanca, home to regional headquarters of 58 and 30 Fortune-500 companies, respectively.
The research, which examined the general data available such as type of industry, revenues and global workforce to assess the regional footprint of top multinationals in the MEA region, said Dubai keeps growing as a destination and attracting foreign companies by providing business-friendly policies.
Jitendra Gianchandani, FCA, chairman & managing partner of Jitendra Consulting Group, said multinational companies have multiple reasons to choose Dubai as their headquarters. Referring to relaxed or no tax environment, booming economy due to Expo 2020, availability of qualified workforce, extraordinary infrastructure and connectivity with global hubs, he said multinational companies have already made a large presence in the region.
“I am very positive about Dubai’s outlook for the foreseeable future,” Gianchandani told Khaleej Times.
Referring to reputable and known names such as Sumitomo Mitsui Financial Group, Credit Suisse Group, AIG and Intesa Sanpaolo, the research said the finance industry is leading in terms of presence in the city with more than 23 companies using Dubai as a regional headquarters, up from 19 in 2015.
“The large number of businesses in Dubai coupled with wealth originating from natural resources generate a considerable demand for foreign expertise, particularly in the financial sector,” the research said.
The auto industry is a close second with more than 21 companies having regional headquarters in the city, up from approximately 15 companies in 2015, it said. Notable brands that have chosen Dubai to establish their base in the region include Peugeot, SAIC Motor, ZF Friedrichshafen, Zhejiang Geely Holding, Group Volvo and Daimler, among others.
Atik Munshi, partner at Crowe Horwath UAE, said Dubai has always attracted multinationals due to excellent infrastructure, inclusive culture and most importantly the near zero tax environment.
“During the last two quarters of 2016, most business heads had a less-than-optimistic view for Dubai economy for 2017. Opinions have, however changed in this first quarter of 2017 where the sentiment for a better year is clearly visible in the market because of the increase in oil prices and Expo 2020 which is around the corner,” Munshi told Khaleej Times.
Citing economic free zones another strong reason for the Fortune 500 companies to use Dubai as a hub to expand their footprint in the MEA, the research firm said free zones make it even easier to do business in the city compared to its competitors in the region.
It also gave credit to the UAE’s consistent economic growth since 2011 (five per cent average) to sustain a strong standing in the Middle East and said large investments on infrastructure, particularly roads (1,400km highways in a small country), ports (Jebel Ali port is among the top 10 busiest ports in the world), airports (Dubai International is one of the biggest airports in the world), hotels, conference venues and Internet access play a strong role in attracting companies to Dubai rather than other destinations.
“Many times, the loss of one Middle East country is converted into a gain for Dubai. Dubai is most likely to attract more multinationals companies in 2017 as it offers the right mix of a talent pool, connectivity, favourable tax structure and proximity to a large Middle East and African market,” Munshi said.
“One other important aspect of Fortune 500 companies having their regional head office in Dubai is the multi-cultural cosmopolitan society that the city offers. Most top management would prefer to live in the UAE compared to other Middle Eastern countries because of obvious reasons,” he added.
Overall, the global Fortune 500 companies have recently begun to establish a footprint in the MEA region with 196 companies having a dedicated entity covering the region compared to 167 in 2015, reflecting a growth of 17 per cent. However, as of today, the large majority of companies (305) do not have dedicated entity covering the region.
Rakesh Pardasani, partner at audit and tax advisory firm RSM, said most international companies find that the number of issues that they have to consider while doing business in a foreign country are much less in the UAE as compared to other countries in the region.
“And although being free of corporate taxes is a huge incentive, the attraction of UAE is not limited to a tax-free status. The business and the political environment is fairly stable and offers confidence to international companies from a long-term perspective. It is also a great place to live for expats given the multi-cultural society which is a very important aspect to consider when international companies are looking to bring expats to the region,” Pardasani concluded.