Archives For FTZ

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Forget increasing the number of Free Trade Zones at and around UK ports, real thought should be given to whether Britain could become a nationwide FTZ, a panel discussion at Multimodal heard today.

The discussion, organised by the Chartered Institute of Logistics and Transport, weighed the advantages and disadvantages of setting up more FTZs as Britain’s starts its exit journey from the European Union.

While Geoff Lippitt, business development director at PD Ports, said that there was no “desperation for the traditional type of FTZ”, he conceded that as UK ports enter a new post-EU member era, any method that could improve the competitiveness of the nation’s exports should be considered.

Tony Shally, managing director of Espace Europe, added that FTZs would give the UK a great opportunity to bring manufacturing back to the country.

Bibby International Logistics’ managing director Neil Gould went a step further, calling for the creation of a ‘UK FTZ’, to facilitate a joined up environment in which it is easier to move trade. “We need to think how we work together as an industry and how we join everything up to make the UK more competitive,” he said.

However, Barbara Buczek, director of corporate development at Port of Dover, sounded a word of caution, warning that FTZs could actually be detrimental for ro-ros, an important cargo mode for the south UK port. “It’s a great concept, but we also have to be mindful of the guys on the other side who we have to ‘play’ with,” she said, adding that she is “a bit sceptical” about how an FTZ plan could pan out. Originally published by Port strategy.com

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A man, right, speaks to a motorbike taxi driver in front of the gate to China (Shanghai) Pilot Free Trade Zone's Pudong free trade zone in Shanghai, China, on Thursday, Oct. 24, 2013. The area is a testing ground for free-market policies that Premier Li Keqiang has signaled he may later implement more broadly in the world's second-largest economy. Photographer: Tomohiro Ohsumi/Bloomberg via Getty Images

Pilot Free Trade Zone’s Pudong free trade zone in Shanghai, China. Photographer: Tomohiro Ohsumi/Bloomberg via Getty Images

Shanghai’s pilot free trade zone unveiled several measures aimed at improving customs services for high-technology companies in the zone.

An air cargo service center will be set up in Zhangjiang High-Tech Park to provide one-stop customs services including delivery of import manifest, customs declaration and customs inspection, Shanghai Customs said yesterday.

The center will cut customs clearance time to six to eight hours from at least two working days previously.

Customs formalities for imports of reagents, samples and equipment by high-tech companies, bio-pharmaceutical firms and microelectronics manufacturers will be streamlined, benefiting about 900 companies in Zhangjiang and neighboring areas, it said. Customs has also pledged to cut the threshold for small and medium-sized firms to offer offshore outsourcing services and encourage clusters of advanced manufacturing such as aircraft and new-energy vehicles in the FTZ.

Other measures include introducing customized customs services for high-tech companies, setting up bonded warehouses for small businesses and strengthening intellectual property protection.

“These new measures are market-oriented and based on enterprises’ need, and aim to tackle actual problems and boost trade facilitation,” said Zheng Jugang, vice director of Shanghai Customs.

Also yesterday, customs unveiled another eight measures to simplify customs clearance process and boost trade facilitation for all FTZ-based enterprises. They include trading of bonded commodities in the zone and simpler customs procedures for imports of art supplies.

In the first five months of this year, trade in the FTZ totaled 287.1 billion yuan (US$46.3 billion), accounting for 26 percent of the city’s total.

Lagos Free Trade Zone

Lagos Free Trade Zone

So how come FTZs, IDZs, EPZs, etc are working in other African countries and not here in South Africa? This Day Live (Nigeria) offers some of the critical success factors which delineate such zones from the normal economic operations in a country. Are we missing the boat? The extent of economic and incentive offering can vary substantially between the different economic and trade zone models – some extremely liberal while others tend to the conservative. Obviously the more liberal and free the regulations are the more stringent the ‘guarantees’ and controls need to be. However, in today’s e-commercial world, risk to revenue can more than adequately be mitigated and managed with through risk management systems. Manufacturing and logistical supply chain operations are likewise managed in automated fashion. I guess the real issue lies in governments appetite for risk and more particularly its willingness to relax tax and labour laws within such zones. Furthermore, a sound economic roadmap demonstrating backward linkages to the local economy and outward linkages to international markets must be defined. Herein lies some of the difficulties which have plagued South African attempts at such economic offerings – no specific economic (export specific) goals. Limited financial/tax incentives for investors, and poor cooperation between the various organs of state to bring about a favourable investment climate.

Free Trade Zones (FTZs) are at the crux of the growth attributed to emerging markets. All the BRIC nations have used the FTZs as a buffer to economic meltdown particularly in the wake of the most recent financial and economic crises. The “great recession” of 2007 – 2009 saw the BRIC nations growing at the rates of 7% to 13%. Consequently, the importance of FTZs as well as maximizing opportunities therein cannot be over-emphasized. The literature defining FTZs vary, but they all have the following characteristics in common:

  • A clearly delimited and enclosed area of a national customs territory, often at an advantageous geographical location, with an infrastructure suited to the conduct of trade and industrial operations and subject to the principle of customs and fiscal segregation.
  • A clearly delineated industrial estate, which constitutes a free trade enclave in the customs and trade regime of a country, and where foreign manufacturing firms, mainly producing for export, benefit from a certain number of fiscal and financial incentives.
  • Industrial zones with special incentives set up to attract foreign investors, in which imported materials undergo some degree of processing before being re-exported.
  • Fulfilling their roles in having a positive effect on the host economy, regulators look at FTZs from a nationalist perspective. Inevitably, they seek the following benefits:
    • Creating jobs and income: one of the foremost reasons for the establishment of FTZs is the creation of employment.
    • Generating foreign exchange earnings and attracting foreign direct investment (FDI): measures designed to influence the size, location, or industry of a FDI investment project by affecting its relative cost or by altering the risks attached to it through inducements that are not available to comparable domestic investors are incentives to promoting FDI. Implicit in this statement lies the definition of FTZ. Other traits that are recognizable when discussing FDI’s include specially negotiated fiscal derogations, grants and soft loans, free land, job training, employment and infrastructure subsidies, product enhancement, R&D support and ad hoc exceptions and derogations from regulations. In addition to FDI, by promoting non-traditional exports, increased export earnings tend to have a positive impact on the exchange rate.
    • Transfer of technology: trans-national corporations (TNCs) are a dominant source of innovation and direct investment by them is a major mode of international technology transfer, possibly contributing to local innovative activities in host countries. It is a government’s primary obligation to its citizenry to provide attractive technology, innovative capacities and mastering, upgrading, and diffusing them throughout the domestic economy. Nevertheless, through national policies, international treaty making, market-friendly approaches, a host country gravitates from providing an enabling environment to stronger pro-innovation regimes that perpetually encourage technology transfer.

FTZs can be both publicly (i.e. government) and or privately owned and managed. Governments own the more traditional older zones, which tend to focus more on policy goals that are primarily socio-economic. They emphasize industry diversification, attracting FDI, job creation and the like. Privately-owned FTZs have the advantage of eliminating government bureaucracy, are more flexible, and are better prepared to deal with technological changes. The global trend towards privatization has made privately-run zones more popular and a number are highly successful. The role of government in the case of privately-run zones is to provide a competitive legal framework with attractive incentive packages that meet the World Trade Organization (WTO) requirements.

FTZ Operations in Nigeria

FTZs were established in 1991 in order to diversify Nigeria’s export activity that had been dominated by the hydrocarbon sector. By 2011, there were nine operational zones; ten under construction; and three in the planning stages. The governing legislation includes the Nigeria Export Processing Zones Act (NEPZA) and the Oil and Gas Export Free Zone Act (OGEFZA). Zones may be managed by public or private entities or a combination of both under supervision of the Authority. For the full article go to – This Day Live