Jean-Paul Gauthier (2004) stated
that this generic Free Zone concept has evolved over time, resulting in large
variety of Zones with differing objectives, markets, and activities. When discussing Free Zones, a variety of
terminologies are used interchangeably through most of the literatures,
Johansson (1994) supports such a clustering, arguing that the general concept
of all these terminologies are basically the same. The name of a Free Zone is often based on
ownership, structure of production and functions of the Free Zone. It is either public or privately owned,
medium or small scale export oriented firm or group of industries with Free
Zones status. The variants are:
that this generic Free Zone concept has evolved over time, resulting in large
variety of Zones with differing objectives, markets, and activities. When discussing Free Zones, a variety of
terminologies are used interchangeably through most of the literatures,
Johansson (1994) supports such a clustering, arguing that the general concept
of all these terminologies are basically the same. The name of a Free Zone is often based on
ownership, structure of production and functions of the Free Zone. It is either public or privately owned,
medium or small scale export oriented firm or group of industries with Free
Zones status. The variants are:
v
Free
Trade Zones, also know as Commercial Free Zones and Free Commercial Zones,
are fenced-in, duty-free areas, offering warehouses and other storage
facilities for trade, transhipment and re-export operations, located in most
parts of country entry around the world.
Leading examples are the Colon Free Zone in Panama, Jebel Ali Free Zone
in UAE and Calabar Free Trade Zone in Nigeria., Tema in Ghana.
Free
Trade Zones, also know as Commercial Free Zones and Free Commercial Zones,
are fenced-in, duty-free areas, offering warehouses and other storage
facilities for trade, transhipment and re-export operations, located in most
parts of country entry around the world.
Leading examples are the Colon Free Zone in Panama, Jebel Ali Free Zone
in UAE and Calabar Free Trade Zone in Nigeria., Tema in Ghana.
v
Export
Processing Zones are industrial estates offering special incentives and
facilities to manufacturing and related activities aimed mostly at export
markets. The World Bank (1992) defined
EPZ as “an Industrial Estate, usually a fenced-in area of 10 to 300 hectares
that specialises in manufacturing for export.
It offers firms free trade conditions and liberal regulatory
environment.” The traditional ‘pure’ EPZ model is where the entire area within
an EPZ is designated for export-oriented enterprises licensed under an EPZ
regime. Hybrid EPZ in contrast are
sub-divided into a general one open to all industries regardless of export
orientation and a Separate EPZ area reserved for wholly export-oriented EPZ
enterprises. In most Asian countries, like Thailand and the Philippines, EPZ
areas within hybrid zones are fenced-in.
In many Latin American countries – like Costa Rica and Mexico – EPZ
registered enterprises may be located in the same area as firms registered
under other regimes.
Export
Processing Zones are industrial estates offering special incentives and
facilities to manufacturing and related activities aimed mostly at export
markets. The World Bank (1992) defined
EPZ as “an Industrial Estate, usually a fenced-in area of 10 to 300 hectares
that specialises in manufacturing for export.
It offers firms free trade conditions and liberal regulatory
environment.” The traditional ‘pure’ EPZ model is where the entire area within
an EPZ is designated for export-oriented enterprises licensed under an EPZ
regime. Hybrid EPZ in contrast are
sub-divided into a general one open to all industries regardless of export
orientation and a Separate EPZ area reserved for wholly export-oriented EPZ
enterprises. In most Asian countries, like Thailand and the Philippines, EPZ
areas within hybrid zones are fenced-in.
In many Latin American countries – like Costa Rica and Mexico – EPZ
registered enterprises may be located in the same area as firms registered
under other regimes.
v
Science
& Technology Parks (STPS)
Science
& Technology Parks (STPS)
“A Science
Park is an organisation managed by specialised professionals, whose main aim is
to increase the wealth of its community by promoting the culture of innovation
and the competitiveness of its associated businesses and knowledge-based
institutions. To enable these goals to
be met, a Science Park stimulates and manages the flow of knowledge and
technology amongst Universities, Research & Development institutions,
companies and markets; it facilitates the creation and growth of
innovation-based companies through incubation and spin-off processes; and
provides other value-added services together with high quality space and facilities”
(Int. Association of Science Parks).
Park is an organisation managed by specialised professionals, whose main aim is
to increase the wealth of its community by promoting the culture of innovation
and the competitiveness of its associated businesses and knowledge-based
institutions. To enable these goals to
be met, a Science Park stimulates and manages the flow of knowledge and
technology amongst Universities, Research & Development institutions,
companies and markets; it facilitates the creation and growth of
innovation-based companies through incubation and spin-off processes; and
provides other value-added services together with high quality space and facilities”
(Int. Association of Science Parks).
This
definition encompasses not only the different models currently existing in the
world, but also other labels and expressions such as Technology Park, Research Park, Technopole which have a social
purpose.
definition encompasses not only the different models currently existing in the
world, but also other labels and expressions such as Technology Park, Research Park, Technopole which have a social
purpose.
By creating a
favourable climate for innovation, countries and regions will allow their
industries and companies to become stronger, to make more profits and to
generate more employment. And by doing
so, they will reach their most important objective in economic and industrial
policy: to increase the social welfare and the level of life of their
citizens. Science & Technology Parks have
proved to be very powerful elements for regional development, provided the
adequate model is chosen for a given region or city.
favourable climate for innovation, countries and regions will allow their
industries and companies to become stronger, to make more profits and to
generate more employment. And by doing
so, they will reach their most important objective in economic and industrial
policy: to increase the social welfare and the level of life of their
citizens. Science & Technology Parks have
proved to be very powerful elements for regional development, provided the
adequate model is chosen for a given region or city.
The main aim
of STPs is to help companies become more innovative and therefore, more
competitive and to increase the economic standing of their region or
municipality. In today’s global economy,
the key words for economic success are technology, R&D, knowledge
management and most of all Innovation.
of STPs is to help companies become more innovative and therefore, more
competitive and to increase the economic standing of their region or
municipality. In today’s global economy,
the key words for economic success are technology, R&D, knowledge
management and most of all Innovation.
v
Special
Economic Zones (SEZ) are a much broader concept – typically encompassing
much larger areas; accommodating all types of activities including tourism,
retail sales; permitting people to reside on site, and providing a much broader
set of incentives and benefits.
Special
Economic Zones (SEZ) are a much broader concept – typically encompassing
much larger areas; accommodating all types of activities including tourism,
retail sales; permitting people to reside on site, and providing a much broader
set of incentives and benefits.
v
Single
Factory EPZ Scheme (Export Processing Factories) offer EPZ incentives to
individual enterprises regardless of where they are located; factories do not
have to locate within a designated zone to receive incentive and
privileges. Single factory zone
programmes are similar to Bonded Manufacturing Warehouse Schemes, although
typically offering a broader set of benefits and more flexible controls. Leading examples of countries relying
exclusively on a single factory scheme include Mauritius, Madagascar, Mexico
and Fiji. Countries like Costa Rica, USA
and Sri Lanka allow both industrial estate-style Zones and single factory
designations. Nigeria started and
licensed about 23 single factoryzones, but cancelled to Customs MIBS after a
long debate with Nigeria Customs on the existence of such a programme. The Export Processing Factory or Single
Factory Zone usually benefits from the following:
Single
Factory EPZ Scheme (Export Processing Factories) offer EPZ incentives to
individual enterprises regardless of where they are located; factories do not
have to locate within a designated zone to receive incentive and
privileges. Single factory zone
programmes are similar to Bonded Manufacturing Warehouse Schemes, although
typically offering a broader set of benefits and more flexible controls. Leading examples of countries relying
exclusively on a single factory scheme include Mauritius, Madagascar, Mexico
and Fiji. Countries like Costa Rica, USA
and Sri Lanka allow both industrial estate-style Zones and single factory
designations. Nigeria started and
licensed about 23 single factoryzones, but cancelled to Customs MIBS after a
long debate with Nigeria Customs on the existence of such a programme. The Export Processing Factory or Single
Factory Zone usually benefits from the following:
I.
Unlimited duty-free imports of raw, intermediate input
and capital goods necessary for the production of exports.
II.
Less governmental red-tape including more flexibility
with labour laws for the firms
Less governmental red-tape including more flexibility
with labour laws for the firms
III.
Generous and long-term tax holidays and concessions to
the firms.
Generous and long-term tax holidays and concessions to
the firms.
IV.
The firms can be domestic, international on foreign
ownership
The firms can be domestic, international on foreign
ownership
V.
On the repatriation of the profits, there is no
restriction.
VI.
Just like EPZs/FZs firms, EPFs can be differentiated by
their ability to sell their
output (in part or whole) in the local market.
Just like EPZs/FZs firms, EPFs can be differentiated by
their ability to sell their
output (in part or whole) in the local market.
v Enterprise Zones are intended to
revitalise distressed urban or rural areas through the provision of tax
incentives and financial grants. Most of
these Zones are in developed countries like USA, France and UK, although South
Africa is developing similar schemes.
revitalise distressed urban or rural areas through the provision of tax
incentives and financial grants. Most of
these Zones are in developed countries like USA, France and UK, although South
Africa is developing similar schemes.
Other types of Free Zones are:
v Offshore Financial Centre (OFC): is a
low-tax jurisdiction that provides corporate and commercial services to
non-residents in the form of offshore companies’ investment of offshore funds.
In general, OFC include all economics with financial sectors disproportional to
their resident population. It means that financial services offered to
non-residents in OFC are on a scale that is disproportional with the size and
the financial services offered to non-residents in OFC are on a scale that is
disproportional with the size and the financing of its domestic economy.
low-tax jurisdiction that provides corporate and commercial services to
non-residents in the form of offshore companies’ investment of offshore funds.
In general, OFC include all economics with financial sectors disproportional to
their resident population. It means that financial services offered to
non-residents in OFC are on a scale that is disproportional with the size and
the financial services offered to non-residents in OFC are on a scale that is
disproportional with the size and the financing of its domestic economy.
v Customs Depot/bonded warehouse: This a
building or other secured area in which dutiable goods may be stored,
manipulated, or undergo manufacturing operations without payment of duty. Upon
entry of goods into the warehouse, the importer and warehouse proprietor incur
liability under a bond. This liability is generally cancelled when the goods
are:
building or other secured area in which dutiable goods may be stored,
manipulated, or undergo manufacturing operations without payment of duty. Upon
entry of goods into the warehouse, the importer and warehouse proprietor incur
liability under a bond. This liability is generally cancelled when the goods
are:
–
Exported or deemed exported;
Exported or deemed exported;
–
Withdrawn for supplies to a vessel or aircraft
in international traffic;
Withdrawn for supplies to a vessel or aircraft
in international traffic;
–
Destroyed under customs supervision;
Destroyed under customs supervision;
–
Withdrawn for consumption domestically after
payment of duty.
Withdrawn for consumption domestically after
payment of duty.
While the goods are in the bonded
warehouse, they may, under customs supervision, be manipulated by cleaning,
sorting, repacking or otherwise changing their condition by processes that do
not amount to manufacturing. After manipulation, and within the warehouse
period, the goods may be exported without the payment of duty, or they may be
withdrawn for consumption upon payment of duty at the rate applicable to the
goods in their manipulated condition at the time of withdrawal.
warehouse, they may, under customs supervision, be manipulated by cleaning,
sorting, repacking or otherwise changing their condition by processes that do
not amount to manufacturing. After manipulation, and within the warehouse
period, the goods may be exported without the payment of duty, or they may be
withdrawn for consumption upon payment of duty at the rate applicable to the
goods in their manipulated condition at the time of withdrawal.
v Tourist and Educational Free Zone: this deals
with attracting schools and universities to the zone, the same quality of
higher education institutions that are available in other parts of the world.
They must be able to provide a more cost effective tuition fee to the
population because they are offered incentives allowing them to keep their
operating costs much lower than anywhere else.
with attracting schools and universities to the zone, the same quality of
higher education institutions that are available in other parts of the world.
They must be able to provide a more cost effective tuition fee to the
population because they are offered incentives allowing them to keep their
operating costs much lower than anywhere else.
v Tourism
and Business Resort
and Business Resort
It is frequently pointed out that
Free Zones have also evolved into highly specialised facilities, configured to
the needs of specific industries and activities. There are special zones to promote high
technology- or science-based industries; petrochemical and heavy industry zones
relying on cheap energy sources and specialised facilities; offshore financial
services zones to promote offshore financial and non-financial activities;
software and ICT Zones accommodating software coding and other offshore IT
Services operations, airport-based zones, specially support aviation and
air-based activities; logistics parks, cargo villages/cities, providing
specialised facilities and support services to facilitate trade, supply chain
management and logistics; tourism zones to facilitate integrated resorts and
leisure community development, and others.
Free Zones have also evolved into highly specialised facilities, configured to
the needs of specific industries and activities. There are special zones to promote high
technology- or science-based industries; petrochemical and heavy industry zones
relying on cheap energy sources and specialised facilities; offshore financial
services zones to promote offshore financial and non-financial activities;
software and ICT Zones accommodating software coding and other offshore IT
Services operations, airport-based zones, specially support aviation and
air-based activities; logistics parks, cargo villages/cities, providing
specialised facilities and support services to facilitate trade, supply chain
management and logistics; tourism zones to facilitate integrated resorts and
leisure community development, and others.
It is important to note that free
zones are not free after all. They are
regulated environments in which the regulations are different from those in the
rest of the national economy. In most
cases, the rules are more liberal, though ironically in many cases they are
effectively more controlled environments and often follow the rules of law more
closely than the rest of the economy.
zones are not free after all. They are
regulated environments in which the regulations are different from those in the
rest of the national economy. In most
cases, the rules are more liberal, though ironically in many cases they are
effectively more controlled environments and often follow the rules of law more
closely than the rest of the economy.
For example, while many
industrial zones have no duty charged on imports or exports, they are tightly
controlled by customs to prevent smuggling into the domestic customs territory.
industrial zones have no duty charged on imports or exports, they are tightly
controlled by customs to prevent smuggling into the domestic customs territory.
Free Trade Zones are increasingly
not only about trade but rather about investment, industry, research and
development, services, education, training and logistics. In other words Free Zones are about
everything in the modern economy. Many
Free Zones are not about confined territories, but may cover entire country, or
specific industries. Robert Haywood
classified most of the countries known as tax havens as industrial specific
Free Zones. Though there are others, New
York has an insurance Free Zone; whereby the premium payment is sufficiently
large (say over $100,000), then the state insurance laws do not fully
apply. It is assumed that an individual
paying that much in premium can protect his own welfare better than a State
Insurance Commissioner. Performance specific Free Zones allow individual factories
to receive Free Zone benefits, provided they meet certain conditions. In the past these have normally included
export requirements, use of local materials, but more recently they have
included technical skill levels and employment commitments.
not only about trade but rather about investment, industry, research and
development, services, education, training and logistics. In other words Free Zones are about
everything in the modern economy. Many
Free Zones are not about confined territories, but may cover entire country, or
specific industries. Robert Haywood
classified most of the countries known as tax havens as industrial specific
Free Zones. Though there are others, New
York has an insurance Free Zone; whereby the premium payment is sufficiently
large (say over $100,000), then the state insurance laws do not fully
apply. It is assumed that an individual
paying that much in premium can protect his own welfare better than a State
Insurance Commissioner. Performance specific Free Zones allow individual factories
to receive Free Zone benefits, provided they meet certain conditions. In the past these have normally included
export requirements, use of local materials, but more recently they have
included technical skill levels and employment commitments.
A Zone may be both small in scaleand restricted to industry or performance criteria. A Typical Export Processing Zone is just such
a small scale export industry zone. The
small scale Zone is what we typically think of as a Zone, and does not present
any extraordinary difficulties in either understanding or regulation. It may cover up to a few square miles or a
few thousand hectares. Most are between
50 – 500 hectares. The wide area Zone,
on the other hand, is quite different.
One covers several thousand square kilometres and can have resident populations
that number in the millions. The Chinese
Free Trade Zones were some of the first wide area zones and have been such
spectacular successes that they have led to a number of attempted duplications.
The Chinese Model of Free Trade
Zone has been successful because of the powers and independence of these zones
in China. The Chinese Special Economic Zones have both legislative, executive
and in some cases, even judicial functions.
They are organised along the lines of an autonomous province or state. For example, most Special Economic Zones have
their own customs service, tax collection system and even department of foreign
affairs.
Zone has been successful because of the powers and independence of these zones
in China. The Chinese Special Economic Zones have both legislative, executive
and in some cases, even judicial functions.
They are organised along the lines of an autonomous province or state. For example, most Special Economic Zones have
their own customs service, tax collection system and even department of foreign
affairs.
This independence has allowed
some of the zones to succeed, but not without leaving the control of activities
in the zones with serious regulatory problems.
Nevertheless, Free Trade Zones are perhaps the most effective
development tools ever created. Many
have growth rates in excess of 20% per year and have doubled their population
income every four years for more than a decade.
some of the zones to succeed, but not without leaving the control of activities
in the zones with serious regulatory problems.
Nevertheless, Free Trade Zones are perhaps the most effective
development tools ever created. Many
have growth rates in excess of 20% per year and have doubled their population
income every four years for more than a decade.
From the above, it is important
to re-emphasise that Free Zones are a product of the countries that created
them. They are fully accountable to and
controllable by, the countries that created them. To a large extent, the Free Zone is a more
controlled environment and has a high attraction for leading countries in their
search for appropriate regulation and expected international behaviour,
attracting investments from legitimate businesses that may fear a more lawless
or docile domestic environment.
to re-emphasise that Free Zones are a product of the countries that created
them. They are fully accountable to and
controllable by, the countries that created them. To a large extent, the Free Zone is a more
controlled environment and has a high attraction for leading countries in their
search for appropriate regulation and expected international behaviour,
attracting investments from legitimate businesses that may fear a more lawless
or docile domestic environment.
Free Zones are a problem only in
those states that are also a problem outside the zones and may be a solution to
some problems even then. Different
regulations may not be inferior, but rather superior to a system that has
failed the rest of the country.
those states that are also a problem outside the zones and may be a solution to
some problems even then. Different
regulations may not be inferior, but rather superior to a system that has
failed the rest of the country.
