Free Trade Zones Concepts and Trade Marks.

As said in Part One of this topic, we are going into Free Trade Zones Concept and  Trade Marks with the  introduction of Special Economic Zones.

Special Economic Zones (“SEZs”), synonymous with free trade zones, free zones and/or export processing zones, are defined as geographical areas, governed by one oversight management body, that offer special trade incentives to firms who choose to physically locate within them. In short, they are sometimes called incubators.  They are outside the Customs Territory of the host country.  Many countries employ their own variations of these special enclaves, and in doing so, use their own terminology to describe them. For example, in Nigeria, we used to call them "export processing zones" and now, with the change of focus, are referred to as "free trade zones, in short free zones".  Mexico refers to its zones as “maquiladoras,” Ghana, Cameroon, and Jordan have “industrial free zones,” the Philippines calls its economic zones “special export processing zones,” and Russia has “free economic zones.” Despite the differences in nomenclature, each SEZ operates to increase trade throughout its respective region by offering special trade incentives to stimulate local and foreign investment within the region.

 Free Trade Zones are development growth engines that can boost manufacturing, augment exports and generate employment opportunities.  FTZs take advantage in comparative and competitive edge of a nation. They require special fiscal and regulatory regime in order to impart an unhindered free operational regime encompassing state of the art infrastructures and support services.  Free trade zones cover the concepts of the developers and co-developers, have fiscal concessions and provide for Offshore Banking Enterprises. FTZ  is therefore an ideal scheme for the development of allied manufacturing, fabrication, processing, refining, packaging, housing estates, logistic services and construction of oil and gas products that Nigeria has competitive and comparative edge in its raw form.

The objective of free trade zone in Nigeria is to take advantage and utilize our comparative and competitive edge in the oil and gas sector of the economy and also seize the opportunity of NIGERIAN OIL and GAS INDUSTRY CONTENT DEVELOPMENT ACT and PETROLEUM INDUSTRY BILL (PIB Bill) to attract oil and gas foreign enterprises into the Free trade zones in Nigeria, to use Nigerians and its resources within the Nigerian environment to add value to its raw resources especially in oil and gas commodities and related products.  Consequently, in Nigeria, the philosophy of setting up free trade zones are namely:-

(a).  To attract manufacturers, fabricators, refineries, products assembling  plants, housing estates and logistic service providers instead of exporting the commodity in its raw form and importing the end products for merchandising;
(b).  To create quality employment opportunities in engineering, technical, and scientific fields;
(c).  To adopt technology through manufacturing, fabrication and assembling of products; to make, create and innovate;
(d).  To provide enabling environment for capacity building in
           liaison with domestic universities and college of technologies;
(e).   To provide for domestic empowerment through backward integration  and linkages with domestic enterprises;
(f).   To attract Foreign Direct Investment;
(g).   To create wealth;

The strategies in attaining these goals are that free trade zones are specifically delineated duty free enclave and deem to be foreign territory for the purpose of manufacturing, fabrication, construction, refinery, banking, logistic services and trade operations.

(a)  Goods and services going into the free trade zones areas from custom territory are treated as export and goods and services  coming from the free trade zones areas into the custom territory are treated as imported;
(b)  Free zone enterprises may be set up for manufacturing, fabrication, assembling of goods and rendering logistic and business services;
Here, customs territory means Nigeria territory and free zone enterprise means also companies registered within the free trade zone.  Free trade zone, free zone and special economic zone are interchangeable.

The policy on Export and Import of Goods from and to free trade zones are that:-
(a)  Free zone enterprise export goods and services including agro-product,  partly processed goods, sub-assemblies and components except prohibited items.  The enterprise also export by-products, rejects, waste scrap arising out of the production process;
(b)  Free zone enterprise import/procures from the custom territory without payment of duty all types of goods and services, including capital goods, whether new or second hand, require by it for its activities or in connection there with, provided they are not prohibited item of import. Goods include raw material for making capital goods for use within the zones. The enterprise is also permitted to import goods require for approved activity in the zones;
(c)   Free zone enterprise procures goods require by it without payment of duty, from bonded warehouses in the custom territory;
(d)  Free zone enterprise import/procures from custom territory, without
      payment of duty, all types of goods for creating facility for use by it
      in the zone. The central facility for software development can also be accessed by enterprise in the custom territory for export of the
         software;
(e)   Free zone enterprise import/procures goods and services from custom territory without payment of duty for setting up operation and
          maintenance of the enterprise in the zone;

The first modern special economic zone was created in Puerto Rico in 1942. Since then, 135 countries, many of them emerging markets, have developed over 3,000 zones. Their development has helped to improve global trade relations and has created over 70 million jobs and hundreds of billions of dollars in trade revenue.

Free Trade Zones are generally developed to meet fiscal, social, and infrastructure policy. The most important fiscal goal of a free trade zone is to facilitate economic growth through the use of reduced tariffs and more efficient customs controls. They are also essential tools for companies seeking to cut costs and improve inventory efficiency, and they help developing nations rework poor, inefficient trade policies and dilapidated or non-existent infrastructure.


We would continue next time with the attraction of free trade zones.

Credit: Yusuf Abdullahi