Seventy-eight companies have already set up shop since the signing of the Abraham Accords.
By: David Isaac
More than 250 Israeli businesspeople and entrepreneurs gathered for the Dubai Multi Commodities Centre (DMCC) “Made for Trade” roadshow at the Tel Aviv Stock Exchange on Tuesday. Following the May signing of a free trade agreement between Israel and the UAE, the Emiratis want to attract Israeli companies to set up shop in its DMCC free zone.
Dubai’s free zone opened 20 years ago as a commodities exchange. It has since expanded to include high-tech and other industries. Composed of more than 87 towers, both business and residential, in the heart of Dubai, it boasts 22,000 companies.
Two hundred and fifty new companies are joining every month, said Marwan Saleh, DMCC’s director of sales and business development. He detailed the free zone’s many advantages, including zero corporate and income tax, a 10-year visa program, access to talent, financial support and low regulation. “You can open a company in five to 14 days,” he said.
He also noted the free zone’s quality of life, describing metro stations, nurseries, hotels, parks, a health clinic (coincidentally staffed by Israelis), shopping and an overall safe environment. “So it’s a good place, an amazing place to live, work and play.”
U.K.-based business magazine fDi Intelligence ranked the DMCC best overall among Global Free Zones for the eighth consecutive year in 2022.
Seventy-eight Israeli companies have already come to Dubai’s free zone since the signing of the Abraham Accords in Sept. 2020. Dubai is an extremely attractive business prospect given its role as an international transit hub, offering Israel access not just to the UAE market but to others as well.
Trade between Israel and the UAE (excluding software) reached $1.4 billion for the first seven months of 2022. Amir Hayek, Israeli ambassador to the UAE, said in September that the figure is expected to reach $2.2 billion by the end of the year. Diamonds make up about half of the trade.
While Israel’s high-tech industry has been most often identified as the UAE’s primary interest, DMCC Chairman and CEO Ahmed Bin Sulayem spoke about commodities. Dubai, which has operated a tea center for 17 years, re-exporting about 70% of global teas, opened a coffee center about five years ago, realizing that “80% of countries that produce teas also produce coffee,” he said.
Sulayem said he’d come to learn about Israel’s coffee culture and had met with Uri Federman, CEO of Landwer Cafe. “Their coffee brand has been in existence since the early 1900s, so there was a lot to learn from that,” he said.
Landwer Coffee was originally established in 1919 in Germany.
Sulayem revealed that a 2020 meeting at Israel’s foreign ministry convinced him to start a water center, which the DMCC opened a few months ago. The idea was that once water is listed as a commodity, like gold, diamonds or soybeans, no one will waste it. “Maybe in the near future you’ll see a listing of…water futures, water options, water spot contracts.”
Sulayem also touched on Dubai’s video gaming center and crypto center, the latter representing 40% of the crypto blockchain business in the UAE. The crypto center offers state-of-the-art facilities and various operating licenses. “We didn’t have an issue with anyone buying and selling bitcoin as long as it was their own money. Once it was utilizing other people’s money, we had a concern. We want it to be regulated. We want all the checks to be in place,” he said.
During a panel discussion, Igal Nevo, former CEO of the Israeli Blockchain Forum and currently an entrepreneur of a new gaming company, brought home why the DMCC is so valuable to Israeli startups.
He had opened the Blockchain Forum to convince Israel’s government of the industry’s potential but shuttered it two years ago when he gave up hope of overcoming Israel’s regulatory hurdles and government officialdom’s no-risk mindset. He said the UAE, through its DMCC free zone, offers the trust and infrastructure that startups need. For a company looking to scale up, Dubai is the place, he said.
Following the conference, Nevo told JNS that Israel needs to look to Dubai’s free zone as a model—a place where a company can test its proof of concept (POC), finding out whether its idea works in the real world. “Israel is very good in innovation technology in all fields. We are the tipping point of any new industry. But eventually, we need a place to do our POC. We don’t have a place really to test our technology,” he said.
Companies need regulatory relief and infrastructure for growth, something the UAE understands. “If Israel doesn’t provide it, it’ll stay a startup nation. It will never be a growth nation,” he said. “We’ll always be in first or second gear. In third gear, we’re going to move the company abroad.”
Nevo said Israeli officials understand the situation but live in a culture that fears mistakes. “The goal is for nothing to go wrong, but if nothing goes wrong, nothing can go right either,” he said, noting that venture capitalists invest in companies understanding that nine out of 10 will fail.
He said the Abraham Accords might have an unforeseen benefit. They’ve opened the way for Israeli companies to play in Dubai’s sandbox, to test their concepts. “We might have to make this little detour for Israeli officials to see what regulation works.”
“Israeli officials are smart, intelligent, up to date, but they don’t have the incentive to change. It’s going to take time,” he said. “But innovation is catching, like a pandemic. Once you start thinking about innovation, you always think about it. Eventually, in five to 10 years, Israeli technology will be part of the Israeli government’s thinking.”
Meanwhile, Nevo hasn’t decided where to take his gaming company. “It’ll be either Dubai or the United States,” he confided.