Sky's the limit without the tax man

By PETER GRIFFIN

There's a good lesson to be learned for New Zealand in the baked deserts of the United Arab Emirates - banish the tax man and the IT sector will flourish.

A combination of zero taxation and a good service infrastructure has put Dubai Internet City on the high-tech map, building a foundation for prosperity after the oil wells run dry.

The New Zealand Government has its own lofty IT goal - to build 100 new tech-sector companies with revenue exceeding $100 million by 2012.

But incentives aimed at attracting the foreign investment needed to transform New Zealand into a tech hub are less forthcoming. It is here that the Arabs have an interesting story to tell.

Internet City, brainchild of Dubai's Crown Prince, Sheikh Mohammed bin Rashid Al Maktoum, is these days a thriving technology incubator where geeks from the world's biggest IT companies rub shoulders in marble-floored cafeterias.

Its director of marketing, Wadi Ahmed, says Dubai is three years into a high-tech experiment that was designed to build the state a secure future.

"Sheikh Mohammad knew that we couldn't depend totally on oil in the future. We had to find something else."

Ahmed was this month pacing the halls of the CeBIT technology show in Sydney, seeking Antipodean recruits open to the notion of living it up in Dubai - tax-free.

Sheikh Mohammad decided a future beyond oil lay in technology. He resolved to build a "silicon oasis" to rival thriving tech centres such as Ireland and Israel.

Internet City, within Dubai's tax-free zone, was the result. Here multinationals pay zero tax and are allowed to maintain 100 per cent foreign ownership.

Workers pay no personal income tax, and the Government cuts through red tape to help firms set up shop.

The door is open to Kiwi companies, too, and small- to medium-sized enterprises are welcomed.

Sheikh Mohammad wanted to encourage big IT and communications firms to shift research and development labs to Dubai.

"That's what's happened. We're the fastest-growing IT market, " says Ahmed.

The multinationals have weighed in with their support. Microsoft's operations in the Gulf region are based at Internet City. Siemens recently built a large facility, shifting hundreds of workers.

"All of the top-30 IT and communications companies are there," says Ahmed, "from Canon, IBM and Microsoft to Oracle and Siemens. Only Lucent is missing."

Dubai, though, has advantages that New Zealand can only dream of. First, oil revenue allows the state to literally buy its way into a new industry.

Dubai is also at a strategic hub between the Middle East and North Africa. It has always been a trading entrepot, first in spices and jewels, then oil, now technology.

Oil paid for Internet City, which cost hundreds of millions of dollars to build. Companies that have moved in effectively lease building space and technology infrastructure.

"It has made a world of difference," says Ahmed. "Ten years ago the area was empty."

Dubai has modernised quickly and now boasts the best facilities in the Middle East. Its population, as a result of the influx of multinationals, is nearly 90 per cent expatriates.

"[Internet City] generates local business," Ahmed says. "Dubai has the best hotels, the best facilities. Dubai is a large tourist destination because it's very liberal compared with most parts of the Middle East."