While working on a documentary with San Jose State’s journalism program earlier this month, I got a firsthand look at how Dubai and the other United Arab Emirates are taking an approach that has been debated by California for luring in businesses. And, for the most part, it seems to be working.

What the UAE has done is make the country tax-free.

The Emirates, and Dubai in particular, set up specific businesses parks called free zones, which are named after the particular industry they hold. The free zone that holds Silicon Valley titans such as Hewlett-Packard and Oracle along with other tech giants such as Microsoft is appropriately called Internet City.

These cities let companies operate tax-free and the major expense they’re paying is the lease on the property. And since the real-estate bubble burst, prices for the area have gone down so it’s more affordable than it was even before 2008.

If a company settles outside the free zone it needs to take on an Emirate national partner — who could take up to 51 percent of the company’s profit. So there is clear incentive for companies to stay inside the limits of these cities within cities.

On top of letting businesses settle into the area tax free, The UAE government extends the tax breaks to the settlers of the region by not taxing their income or hitting them when they shop at one of the country’s numerous malls. The shopping meccas include Mall of the Emirates in Dubai, which holds an indoor ski slope, and Dubai Mall, which is home to one of the largest fish tanks in the world.

With the incentives the UAE government is ready to throw at businesses and their employees, it’s not hard to imagine that more companies will be setting up in the country to serve the Arabian Gulf and surrounding area — as long as they’re willing to put up with all the sand.

Business Journal