Free Zone
Table of Contents
Introduction
The Concept of Free Zones
Types of Free Zones
Historical Evolution of Free Zones
Benefits and Opportunities Connected with Free Zones
Challenges of Modern Free Zones
Free Zone Experience and Domestic Preconditions: Success Factors
Failure Factors with regard to Free Zones in Africa
Other Social and Economic Challenges
Holistic Approach in the Modern World
Conclusion
Works Cited
Introduction
Today, there are about 4,300 free zones across the globe and their number is constantly increasing. They are located in different parts of the world and in different countries including developed and emerging economies. Seventy five per cent of the world’s countries have at least one free zone (“Special Economic Zones”). Various types of free zones are generally used as an easy tool for boosting economic development through foreign investment and more effective use of comparative advantages. However, as free zones spread further and global economy and society evolve, new challenges arise. While China leads the list of successful free zone experience, most African projects fail (Farole and Akinci 11). Therefore, within this paper, we consider the concept of free zones, their types, and historical development. Then, we analyze the benefits and opportunities which are associated with free zones’ functioning. We also consider social, political, and other contextual challenges which free zones may face and involve. We conclude our research with an idea that favorable contextual factors and strong ties with domestic economy are crucial aspects of free zones’ success.
The Concept and Role of Free Zones
Free zone is a part of a country’s territory where goods are generally regarded as being outside the customs territory. It is a part of customs territory of a community in which non-community goods are considered as being beyond the community’s customs area (Borozan and Klepo 77). Free zones are areas with special privileges established by a country to attract foreign businesses investments (Pakdeenurit, Suthikarnnarunai, and Rattanawong 1). Privileges concern special investment policy, infrastructure support, financial support, tax easing (Pakdeenurit, Suthikarnnarunai, and Rattanawong 1), and duty-free inputs. In particular, this concerns exporting and importing without duties and exchange controls, facilitation of licensing and other regulatory processes, and freedom from corporate, value added, and other local taxes (Farole and Akinci 6, 8). As free zones offer simplified administrative procedures, they can be even administered by a separate government authority (de Jong 1). Herewith, the majority of free zones (62%) are operated by private sectors though some of them combine private and government management (Pakdeenurit, Suthikarnnarunai, and Rattanawong 1).Generally, free zones are established to attract foreign direct investment, alleviate large-scale employment, support economic reform strategies (through development and diversification of exports), and act as experimental laboratories for new approaches and policies (Farole and Akinci …
