AJMAN FREE ZONE

C O N F I D E N T I A L SECTION 01 OF 02 DUBAI 001068 SIPDIS SIPDIS E.O. 12958: DECL: 2/7/2016 TAGS: ECON PGOV PREL TC SUBJECT: AJMAN FREE ZONE REF: 05 DUBAI 6284; DUBAI 0003 CLASSIFIED BY: Jason L. Davis, Consul General, Dubai, UAE. REASON: 1.4 (b),(d) ¶1. (SBU) SUMMARY. Sheikh Mohamed Al Nuaimi, Director General of the Ajman Free Zone (AFZ),discussed the zone's operations with PolEconoff on January 24. AFZ has been in operation since 1986 and has registered more than 1600 companies. AFZ's registration requirements and due diligence are not stringent, making it potentially attractive to front companies. End Summary. ¶2. (U) Sheikh Mohamed Al Nuaimi, Director General of the Ajman Port and Customs and Free Zone, accompanied by Rishi Somaiya, the Ajman Free Zone's (AFZ) marketing manager, met on January 24 with PolEconoff to discuss the zone and its operations. Background -------------- ¶3. (U) AFZ was established in 1986. It was the UAE's second free zone after the Jebel Ali Free Zone. It is also the UAE's second largest free zone in terms of registered companies, with more than 1600 registered companies. Based on information provided by AFZ, 60 percent of companies registered there are trading companies, 30 percent are involved in industrial production, and the remaining 10 percent are services companies. Approximately 35 American companies are registered in the zone. Al Nuaimi did not know the number of Iranian companies registered in the zone; he said he believed that most of them shipped foodstuffs and consumer goods to Iran. By nationality, Indian owned companies are the largest group in AFZ, outnumbering Iranian companies by a wide margin. Requirements to Register -------------- ¶4. (SBU) AFZ's registration requirements are simple and easy to meet. A company must only submit a one or two-page business plan, show evidence that the company has on deposit AED 50,000 (USD 13,624),and pay a fee of USD 5000. No other documents are required by AFZ. ¶5. (C) From Somaiya's descriptions, it was clear that the requirement to show AED 50,000 on deposit was merely a formality. He said that submitting a recent bank statement showing the money was on deposit for one day was sufficient. Essentially, a company could borrow the sum, deposit it on one day, withdraw and return it to the lender the next and that would still satisfy AFZ. ¶6. (C) Companies meeting the minimum registration requirements are able to operate as an "e-office." Companies with an "e-office" in AFZ are limited to one UAE work/residence visa. AFZ offers such companies "shared" office spaces, and shared office equipment, for their occasional use. Due Diligence -------------- ¶7. (C) AFZ does not independently investigate companies seeking to register in the zone, relying instead on the Ministry of Interior (MoI) in Abu Dhabi to vet all applicants. Names and company details are sent to MoI when AFZ applies for visas for applicants. Al Nuaimi said that all financial transactions are checked by the Central Bank. He implied that reliance on MoI and the Central Bank was sufficient due diligence and AFZ couldn't be expected to do more than that. Visas -------------- ¶8. (C) It appears AFZ makes greater efforts to curb visa abuse by companies in the zone, an issue probably of greater concern to Ajman authorities than corporate financial practices. Al Nuaimi said AFZ is aware that some businesses seek to register in any of the UAE Free Zones solely to obtain UAE work visas. AFZ strictly limits the number of visas a company can get until it has established a track record in the zone and has proven a necessity for additional visas. As noted above, AFZ will only issue one employment visa for a company with the basic e-office presence. A company applying for additional visas must satisfy the zone's assessment team that the company's operations justify additional visas. Customs DUBAI 00001068 002 OF 002 -------------- ¶9. (C) Al Nuaimi claimed that customs officers inspect all containers entering AFZ, whether the goods are being transshipped to a third country or they are destined for the UAE market. Al Nuaimi claimed -- not credibly in our assessment -- that customs officers open every container and match the goods to the supporting documents. Advantages and Constraints -------------- ¶10. (SBU) Somaiya said AFZ's advantages are its proximity to Sharjah and Dubai and 20 percent lower operating expenses. He said that the main problem facing AFZ is the lack of space in Ajman for expansion. Ajman is the smallest Emirate; bordered in three directions by Sharjah and on the fourth by the Gulf, it has little available land available for a possible AFZ expansion. AFZ has one million square meters of space for office buildings, warehousing, and industry and very little of this land is vacant. Comment -------------- ¶11. (C) Ajman Free Zone, like Ras al-Khaimah Free Zone (reftel A) and Fujairah Free Zone (reftel B),has inadequate due diligence and vetting procedures, a fact that leaves the zone vulnerable to exploitation by individuals desiring to establish front companies. Al Nuaimi's claim that all financial transactions are checked by Central Bank is likely nothing more than a reference to the fact that bank transactions in general in the UAE are technically subject to CB scrutiny. His claim that customs officers open every container and match the goods to the supporting documents is likewise suspect. DAVIS