The Risks of UAE Free Zones During Emergency Food Supply Research Paper

Introduction

The UAE, being an economically developed country provides a lot of favorable conditions for business and global market. The country has 45 free zones, which provide wide ranger of benefits for business owners and investors. The choice of free zone should depend on the type of acidity, selected by the business owners. Dubai alone has 20 free zones. Each zone has specific business rules and favorable conditions for business.

Free zones give multiple benefits for business owners. Business owners in free zones get the opportunity to get 100% ownership of their business.

They provide favorable conditions, low taxation and simple registration. They also provide the opportunity to become the owner in the foreign country. These are only few benefits, provided by free zones. Being extremely attractive for business owners, they can create certain problems for local population. Free zones justify their name and become territories, totally free of state control. “They are designed to encourage foreign investment with easier start-up processes, labour and immigration procedures, 100 per cent ownership for all nationalities and other legal services. Each free zone has its own authority and its own rules, which are applicable to investors looking to set up firm in those zones» (Cherian, 2017). Business owners create their own conditions and appoint their own prices for goods and services they provide. Usually such situation creates little discomfort, since prices are regulated by the market and competition. The business owners have to adapt their prices to consumers. At the same time, the situation becomes complicated in the cases of disasters and emergencies. In the situations like emergencies, the state usually takes control over the situation. It can perform different measures in order to save lives and health of its citizens. At the same time, such actions are not possible in free zones, where governmental regulation is absent or very limited. This will be true for emergency cases as well. In this situation, food manufacturers and distributors, who do not undergo under state regulation may appoint any prices or terminate food supplies during emergency cases. That is the reason the situation with food supplies  in free zones should be carefully studied. Study of potential behavior of different food factories located in the free trade zones in UAE can give Abu Dhabi Food Security Centre more information about potential risks and dangers, which can take place in the cases of emergency. It is important to count risks which can emerge in the sphere of food supply during emergency situations in free zones, in order to get ready and develop appropriate precaution measures.

Hypothesis: What if food factories in the free zones of UAE don’t want to cooperate with the UAE government in order to have food supply during emergency?

Question:  Can UAE as a government own the food factories in the free zones during emergency in order to feed the people? What the opinion of International Law to the similar case!

Free Economic Zones

Free zones, or free economic  zones (FEZ)  are territories with special legislation, which creates favorable conditions for trade and other commercial activity. According to definition from the International Convention on the Simplification and Harmonization of Customs Procedures, “‘free zone’ means a part of the territory of a Contracting Party where any goods introduced are generally regarded, insofar as import duties and taxes are concerned, as being outside the Customs territory” (Agreement on Subsidies and Countervailing Measures). Different countries can define different terms for commercial organizations and investors. Free zones are created in order to attract investments and business to the country in general and certain regions in particular. Each country defines Organization Agreement on Subsidies and Countervailing Measures describes basic principles for free zones.

Kyoto Convention implemented in 1999 defines free zone as a part of the territory of a contracting party where any goods introduced are generally regarded, insofar as import duties and taxes are concerned, as being outside the customs territory» (Revised Kyoto Convetnin). There exists a lot of countries, which create free zones. Most of them aim to increase economic activity in the country and use free zones as attraction for investors. Such a policy gives positive results and a lot of investors and business owners choose free zones as a territory for their business ventures. There is not one regulation for free zones. Each country defines its personal rules for these territories. In addition, free zones inside of one country also may have different rules and regulations. Business owners should make a careful study local of local rules, peculiarities before they start their business in the regions. At the same time, free zones give a lot of benefits. They provide the opportunity of 100% foreign ownership of land and property. They also reduce or cancel taxes. Free zones also provide exemption from local taxes, as well as import and export taxes. Usually free zones are designed in a way to be easy to use for foreign investors. For this purpose they provide a lot of simplified procedures, which help to open business in this territory. The World Trade Organization   Agreement on Subsidies and Countervailing Measures regulates basic principles in free zones. At the same time, international legislation, which regulates FEZs, does not contain guidelines, aiming to regulate food supplies during emergency situations. All food manufacturers, who work in FEZs, subdue to international legislation and local governments have limited influence on them.

Free zones are free from governmental regulation, but this situation may become the reason of additional problems during emergency cases.   That is the reason situations of emergences need additional regulations in free zones. Medical institutions, transport and food provisions should be designed in a way to give necessary help in the case of emergency. In free zones without governmental regulation food provisions in the extreme situations may act according to their considerations. Moreover, necessary preliminary measures should be performed in order to provide safety and decent life conditions during emergency cases for local population. In general, federal law of the UAE requires organizations and business owners to prepare plan for emergency cases. The Law also requires to provide drills, trainings and necessary storages for the case of emergency. At the same time, this legislation does not cover free zones.

Emergency Legislation in the UAE

The guide for emergency cases, developed by the UAE government describes procedures for different natural disasters, wartime emergencies, power cuts and sabotage acts. The law also describes regulations and necessary trading for first aid, protection against fire and care for disabled people. Special attention is dedicated to terrorist threats, bombings and earthquakes and pandemic diseases.  As  Caitlin Picker, a managing director of UniTeam, notes, “Everybody should take an interest in preparedness planning so that their response to an emergency situation will be more likely to result in a positive outcome”  (First AID UAE Act). The guide provided by the government, same as Federal regulation underlines the importance of emergency training. Specialists point out that employees of different organization should get necessary training in order to be able to provide an adequate reaction in the cases of emergency. National Crisis and Emergency Management Authority (NCEMA) deals with different kinds of emergency situations in the UAE. Organization was established in 2007 and deals with all emergency cases and their prevention.  NCEMA if the leading organization, which coordinates the effort of emergency management. It also develops the national plan of emergency response. Crisis management and dealing with the emergencies are the main strategic goals of the organization.  The foundation of NCEMA became an important step in building the system of national security for the cases of different disasters and emergencies.   “The new Federal Law concerning NCEMA and its role and responsibilities is finalized. NCEMA is now completing its plans and strategies pertaining to the National Response Plan (NRP), emergency support functional plans, and plans for hazard or incident-specific events. NCEMA is currently assisting all organizations in the UAE with their readiness to perform their roles when a disaster strikes”  (National Emergency Crisis and Disaster Management Authority Book). NCEMA developed a lot of initiatives, which are designed to meet different challenges during emergency situations. The National Operations Center was established as a part of national emergency system. This organization is responsible for coordination between local and federal emergency centers and agencies.

Food Legislation and Food Manufacture in the UAE

The study of the food legislation in the UAE can give additional information about the existing system and its functioning during the emergency situation. Food safety laws and regulations are implemented in the UAE in order to provide food control and promote a safety food supply and protect consumers. There are two basic food laws, which protect food supplies in the country. Food Act and Food Regulations are basic legislations, which are designed to provide safety of food provision. The Food Act describes basic principles, which regulate food industry. Food Regulations describes detailed provisions. Two acts are designed in order to meet the high standards of the world food industry.   “In order to promote a safe, honesty food supply and to prohibit the sale of foods that are unsafe, contaminated, and adulterated every nation needs an effective food legislation and food control service. Food is governed by a complexity of laws and regulations which set out the government’s requirements to be met by people to ensure the food is safe and of adequate quality.” (Food Quality Conference, 2016). The laws are designed in a way to provide the most fair management of food industry. The system, regulated by the law creates opportunities for the practice of fair trade.

There also exists the Hazard Analysis of Critical Control Point (HACCP) concept, which was designed in order to analyze all potential risks and dangers, which can emerge in food industry and bring any kind of threat to consumers. “HACCP provides a systematic conceptual framework for identifying food hazards and focusing efforts on the proper functioning of key food production, food processing and marketing steps. The complexity of the pre-harvest, harvest, and post-harvest environments make it impossible to control all potential sources of food contamination” (Food Quality Conference, 2016).

The analysis of the food industry in the UAE can give basic information about the design, organization and functioning of this sphere in the country. The research performed in 2013 made the study of different establishments, operating in food industry of the country. According to the results of the research, there were identified about 2, 563 objects of food industry (Qaydi, 2016). “Among these are 1,641 establishments in the bakery industry, that represent 64% of the total UAE establishments in this business. Cocoa and chocolate manufacturing was second with 13.6% of the total in food manufacturing” (Qaydi, 2016, p. 158).  Such quantity of food establishments are explained by high standards of living, which exist in the country. The results of the research also illustrate distribution of food institutions in the country. “Data indicate that Dubai has almost half of all the UAE’s food processing establishments with 48%, followed by Sharjah 19%, and Ajman 13% These three Emirates combined host more than 80% of all food manufacturers in the UAE” (Qaydi, 2016, p. 158).  Food manufactures are situated close to each other in three major cities of the country. They also create so called “food manufacturing triangle”.  People, who work in food manufactures mainly reside in Ajman and Sharjah. This is explained by high cost of rent in Dubai.

 Dubai, being the center of the world trade, creates a lot of favorable conditions for major world food traders and manufacturers. At the present moment, a lot of international companies invest in the Gulf Region. Such companies as Nestle, Foodco Holding, International Fish Farming, united Food and Starbucks locate their producing potential and trading networks in this region. Dubai creates favorable conditions for goods production and goods transportation. Two international airports, situated in Dubai, and two internationally recognized free trade zones become the factors of attraction for a lot of international food manufacturers. Jebal Ali, Dubai Airport free zone and the Silicon Oasis Zone create favorable conditions for international business and several international food companies opened their business ventures in these zones.  

Table 1. Food Consumption in the  UAE.

Source: Food and Beverage in the UAE,  (2016).  Business Monitor International (BMI)

All food manufactures, situated in the region produce a lot of quality food for local population and tourists, who come to visit the country. Big international food companies, who locate their production potential in the free zones produce different food product which are not only sold on the local market, but are also exported abroad. At the same time, the policy of free zone assumes little if any state regulation of these zones. These conditions create favorable conditions for business, but, at the same time, may become the source of problem during emergency situations.

Food Supplies During the Emergency Situations in the UAE

Despite immense effort to provide security in the scope of the country in the UAE, the situation with food supplies in the free zones raises certain fears.  Free zones are not regulated by the state and food suppliers, and food retailors, who work there, are free to choose any policies during the emergency situation. Originally, the concept of food security was developed in the middle of the 20th century.

Amartya Sen (1981) in the study of famine theory expressed new approach to famine and reasons, which cause it. Sen (1981) expressed an assumption that famines occur not because there is little food,  but because people do not have access to enough food.    “Of course, the availability of food near to the household is a prerequisite of food security. Availability is influenced by factors such as a community’s proximity to centres of production and supply, or by market forces, restrictions on trade and international policies that affect food supplies. All of these are key to food-security analysis” (Food Security and Livelihoods). Sen’s work made a breakthrough in the study of emergency food supply.  He proved that accessibility of food matters not less than quantity and quality of food. Using his study, it becomes possible to speak about possible problems, which can arise during emergency situation in the free zones in the UAE. In this case it becomes possible to meet the problem, described by Sen. There will be enough food in the region, but people will not have access to this food. International business-owners and retailors can easily prohibit people access to food in the case of emergency. They may limit access to food in the emergency situation. They may also distribute food according to their consideration and, not all people may have equal access to food supplies in this case. Sen argues that his approach «concentrates on rights within the given legal structure in that society, but some transfers are illegal acts, and therefore not accommodated by the entitlement approach nor can they be measured easily» (Sen, 1981). At this point, access to food become an important factor, which can help to escape a lot of problems in the case of emergency situations.

In order to escape such possible problems, the countries, which create free zones should prepare special rules and regulations for different kinds of emergency cases. In the UAE different free zones have different regulations for emergency cases, but, at the same time, most of them  have prescribed policies for the emergency situations. For example, Dubai free zone guidelines gives detailed instructions for the cases of different emergencies.  “Accidents and Emergencies 15.3 All Licensees are required to provide the Authority with written details of an authorised person that may be contacted 24/7 in the event of any fire, flood or other emergency. Such contact may either be the Licensee’s general manager or another authorised individual» (Dubai Multi Commodities Center Authority Free Zones Rules and Regulations, 2012).  Other parts of the guidelines describe different cases of the emergencies and possible solutions. At the same time, there is not direct mention about the possible problem and solution of food supply in the Dubai free zones during different emergencies situations.  It is important to recognize the scope of the problem and in order to be able to provide an adequate response in this situation.

Moreover, free economic zones make an important part of the food supply chains. They provide a lot of food products which are consumed not only in the free zones, but also in different countries. “Free Economic Zone (FEZ) has been considered as a tool to make the flow of goods and the flow of human resources less exposed to risk. Considering the production function in activity cells of a global supply chain, the perturbations of NPV of activities in total chain are expressed in cases, where the availability of human resources and perturbations of lead time takes place, both of which are the result of activities at border crossings» (Bograti, 2011).  Being important part of the food chain, FEZ can create significant problems during the case of emergency. Since they are not guided by any state authority, they can perform any kind of actions during the emergency cases. At this point, they can perform any actions in the situations of different disasters and emergencies.

Theoretically, food manufacturers, who work in free zones in the UAE, can reject any demands from the state in the case of emergency. They can deny to sell food, implement their own prices or use any other restriction. In this case the UAE cannot influence their actions according to the international legislation, developed for free zones. That is the reason the questions of food security during emergency cases needs additional study and further reaction.

Conclusion

Food supplies is the important component of emergency policies during emergency situations.  Shortages of power, unfavorable weather conditions and other problems can significantly complicate communication during the emergency situations. That is the reason emergency plan should be developed in great detail before the emergency starts. Food and water are one of the most important components of the survival strategy during the emergency situations. That is the reason the government of the UAE should take active position concerning this issue and develop a detailed plan for food supplies during the emergency situations in all zones of the country, including FEZ. Coordination between emergency services on the local and national level, as well as food manufacturers, if extremely important in the emergency cases. It is important to recognize possible problems, which exist with food supplies in the free zones and develop strategic plan, aiming to overcome these problems. One of possible solutions would be in creating a vertically designed reserve policy in the free zones. Implementation of such initiative will require a set of measures on local and national level. Different organizations, who work in this field should be governmental unions and should be subdued to the legislations of UAE. Such a solution can provide necessary security measure for emergency cases for all territories of the country, including free economic zones. Moreover, free zones should make an integral part of the national safety program and should undergo national legislation in the cases of different emergencies. This means that national food producers and food manufacturers should get access to the market of free zones, in order to provide additional security in the cases of emergency.

References

Agreement on Subsidies and Countervailing Measures, Apr. 15, 1994, Marrakesh. Agreement Establishing the World Trade Organization, Annex 1A, 1869 U.N.T.S. 14

Bograti, D. (May 2011). The role of free economic zones in global supply chains – A case of reverse logistics, Research Gate.  https://www.researchgate.net/publication/223102339_The_role_of_free_economic_zones_in_global_supply_chains_-_A_case_of_reverselogistics

Dubai Multi Commodities Centre Authority Free Zone Rules and Regulations, (March 2012).  Dubai Multi Commodities Centre Authority. 

Cherian, D. (2017).  45 free zones in the UAE: Find the right one for your new business.

Disaster handbook launched by UAE authority

Carroll, Lindsay (January 29, 2015). The UAE’s disaster planning authority has published a 118-page guidebook on how to cope with a range of emergencies. The National.

7th International Conference on Food Safety, Quality and Policy, (2016). Food Quality 2016,  Dubai, UAE.

Knabb, Richard D; Rhome, Jamie R; Brown, Daniel P; National Hurricane Center (December 20, 2005). Hurricane Katrina: August 23 – 30, 2005 (PDF) (Tropical Cyclone Report). United States National Oceanic and Atmospheric Administration’s National Weather Service.

National Emergency Crisis and Disaster Management Authority, The United Arabian Emirates Supreme National Secuirty Counsil, https://www.ncema.gov.ae/content/documents/NCEMA%20JB%2034191%20English.pdf

Specific Annex D: Customs Warehouses and Free Zones, International Convention on the Simplication and Harmonization of Customs Procedures (1999). (Revised Kyoto Convention), World Customs Organization.

Qaydi, Al S. (2016). The Status and Prospects for Agriculture in the United Arab

Emirates (UAE) and their Potential to Contribute to Food Security,  Journal of Basic & Applied Sciences, 2016, 12, 155-163 155.

Young, H.,  Jaspars, S.,  Brown, R., Frize, J., and Khogali, H. (2001). Food-security assessments in emergencies: a livelihoods approach, Humanitarian Practice Network (HPN).

The terms offer and acceptance. (2016, May 17). Retrieved from

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[Accessed: March 29, 2024]

freeessays.club (2016) The terms offer and acceptance [Online].
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"The terms offer and acceptance." freeessays.club, 17 May 2016

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