How your choice of a special economic zone in the GCC can impact your manufacturing business costs

Labor costs are a critical factor in the food manufacturing sector, where they play a significant role in converting raw materials into finished products. Lower labor costs can significantly enhance a company's competitive advantage and profitability. This study utilizes proprietary data to analyze wages for 17 key occupations within the food manufacturing industry, which collectively represent 80% of the sector's employment.

This study finds that BIIP is the lowest-cost location for labor. Annually, the case study company can expect to spend US$1.01m in total wages for its 45 workers, far below the US$1.33m cost in Umm Alhoul Zone (UAZ), the highest-cost location. Total wages in BIIP are about 14% lower than the average — producing US$158,000 in expected annual savings. Labor costs are also low in SOHAR, where the total annual labor cost is only 3% above that of BIIP.

The second-most important cost for the company to consider is the cost of acquiring a manufacturing facility and commercial office space. The study assumes that the company will rent a 4,000 m² pre-built manufacturing facility and 200 m² of commercial office space. D3C is the most competitive location for rental costs. The total annual cost of rent in D3C is US$160,000, which is 63% below the average rate of US$436,000. JAFZA is the most expensive zone; at an annual cost of US$704,000, the cost of rent is 61% greater than the average.

Utilities also constitute a significant cost component for the case study company, mainly driven by the high usage of electricity for operating the facility’s machinery and the refrigeration of raw materials, followed by the sizable use of fuel in machinery and equipment. Umm Alhoul Zone (UAZ) in Qatar is the lowest-cost location for utilities, where annual cost is estimated to be US$128,000, which is 52% below the average. The UAE locations are the highest-cost locations for utilities.

Cost of living case study

Considering that in many cases companies attract global talent, this analysis also evaluates the cost of living for a family that may consider relocating near the facility. This study considers costs related to residential rent and utilities, owning a vehicle, education for dependents and domestic help for a family of four (two parents and two children) residing in a three-bedroom villa.

The cost of living for families residing near BIIP is lowest, followed by SOHAR and King Abdullah Economic City (KAEC). At an annual cost of US$44,000, the cost of living near BIIP is 32% lower than the average. This constitutes an annual savings of US$21,000 for the case study family per year. This lower cost of living is a result of relatively low costs for housing and education near BIIP. On the other hand, locations near zones in the UAE tend to be at the higher end of costs, with the exception of Ras Al Khaimah Free Zone (RAKFTZ). Dubai Investments Park (DIP) ranks highest where the cost of living is 127% greater than in BIIP.